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 (811-07695)
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THE HENNESSY MUTUAL FUNDS, INC.
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(Exact name of registrant as specified in charter)
THE COURTYARD SQUARE
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750 GRANT AVENUE, SUITE 100
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NOVATO, CA 94945
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(Address of principal executive offices) (Zip code)
NEIL J. HENNESSY
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HENNESSY ADVISORS, INC.
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THE COURTYARD SQUARE
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750 GRANT AVENUE, SUITE 100
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NOVATO, CA 94945
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(Name and address of agent for service)
800-966-4354
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Registrant's telephone number, including area code
Date of fiscal year end: OCTOBER 31, 2005
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Date of reporting period: APRIL 30, 2005
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ITEM 1. REPORT TO STOCKHOLDERS.
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HENNESSY FUNDS
SEMI-ANNUAL REPORT
APRIL 30, 2005
HENNESSY CORNERSTONE GROWTH FUND(HFCGX)
HENNESSY FOCUS 30 FUND(HFTFX)
HENNESSY CORNERSTONE VALUE FUND(HFCVX)
HENNESSY TOTAL RETURN FUND(HDOGX)
HENNESSY BALANCED FUND(HBFBX)
[HENNESSY FUNDS LOGO]
FORMULAS FOR SMART INVESTING
CONTENTS
Letter to shareholders 1
Returns at a glance 2
Summary of investment portfolios
Hennessy Cornerstone Growth Fund 5
Hennessy Focus 30 Fund 9
Hennessy Cornerstone Value Fund 12
Hennessy Total Return Fund 16
Hennessy Balanced Fund 19
Financial statements
Statement of assets and liabilities 22
Statement of operations 24
Statement of changes in net assets 26
Financial highlights
Hennessy Cornerstone Growth Fund 30
Hennessy Focus 30 Fund 32
Hennessy Cornerstone Value Fund 34
Hennessy Total Return Fund 36
Hennessy Balanced Fund 38
Statement of cash flows 40
Notes to the financial statements 41
Expense example 49
Proxy voting policy 51
Board approval of continuation of investment advisory agreement 52
LETTER TO SHAREHOLDERS
Dear Hennessy Funds Shareholder: June 2005
Despite tremendous negativity and volatility in the markets, I continue to be
bullish about the economy. Interest rates remain at historic lows and inflation
is in check. Companies are hiring and annual earnings growth estimates are
rising. Yet given the strength of fundamental economic indicators, the market
has made only small gains over the past six months.
As an investor in the Hennessy Funds, you know that two criteria we use to
screen for undervalued stocks are a low price to sales ratio and a high dividend
yield. We recently used these two criteria to analyze the market overall, and we
were not surprised to find that the market appears to be undervalued versus
historical levels. The S&P 500 Index currently has a price to sales ratio of
1.4%, which is approximately 7% below the average levels over the past ten
years, and is significantly below the high of 2.2% we saw in 1999. The dividend
yield is 2.09% for the S&P 500 and 2.46% for the Dow Jones Industrial Average,
which are approximately double the yield that we saw in 1999, when the S&P 500
was yielding 1.09% and the Dow 1.23%. Couple this general market undervaluation
with the estimates for growth in corporate earnings in the S&P 500 of
approximately 20-21% and you may agree with me that the market appears poised to
run.
Of course, no one has a crystal ball that can predict the movements of the
stock market. However, history tends to repeat itself, and we continue to
believe that the market, over the long-run, should gain approximately 10-11% per
year. The intelligent investor will continue to buy and hold mutual funds that
employ strategies they understand and that have shown solid performance over
time.
We are very pleased with the performance of our funds for the first half of
the year. For the six-month period ending April 30, 2005, both the Hennessy
Cornerstone Growth Fund and Hennessy Focus 30 Fund significantly outperformed
their benchmark indices. For the period, the Hennessy Cornerstone Growth Fund
returned +8.13%, versus the S&P 500 Index at +3.28% and the Russell 2000 Index
at -0.15%. The Hennessy Focus 30 Fund returned +17.19%, versus the S&P 500 Index
at +3.28% and the S&P 400 Midcap Index at +5.68%. As reflected in these numbers,
this is the first period in some time that small cap stocks did not lead the
market; instead mid-cap stocks took the lead. Over the past six months the
performance of both the Cornerstone Growth Fund and Focus 30 Fund was fueled by
the steady rise in commodity prices, particularly oil and steel, as both funds
have a significant weighting in oil and basic material stocks. Two star
performers in both the Cornerstone Growth and Focus 30 portfolios for the six
month period ending April 30, 2005 were Valero, which returned +60%, and Tesoro,
which returned +25%. Other strong performing energy stocks in the Focus 30 Fund
were Premcor, which returned +70% in the past six months, Peabody Energy, which
returned +38%, and Consol Energy, which returned +23%. Returns of the
Cornerstone Growth Fund were helped by strong performance in the housing and
basic materials sectors, led by USG, which returned +88% in the past six months,
Cleveland Cliffs, which returned +60%, Toll Brothers, which returned +64% and
Meritage, which returned +43%.
RETURNS AT A GLANCE (as of April 30, 2005)
Six Months One Year Five Year
ending Annualized Annualized Since
4/30/05 Return Return Inception
---------- ---------- ---------- ---------
HENNESSY CORNERSTONE GROWTH FUND (Inception 11/1/96) 8.13% 16.94% 10.48% 15.32%
Russell 2000 Index (0.15%) 4.71% 4.08% 7.87%
S&P 500 Index 3.28% 6.34% (2.94%) 7.67%
HENNESSY FOCUS 30 FUND (Inception 9/17/03) 17.19% 18.97% n/a 15.20%
S&P 400 Mid-cap Index 5.68% 9.74% n/a 13.49%
S&P 500 Index 3.28% 6.34% n/a 9.58%
HENNESSY CORNERSTONE VALUE FUND (Inception 11/1/96) 2.18% 6.53% 7.79% 6.78%
Russell 1000 Index 4.04% 7.20% (2.67%) 7.86%
S&P 500 Index 3.28% 6.34% (2.94%) 7.67%
HENNESSY TOTAL RETURN FUND (Inception 7/29/98) 4.95% 2.75% 4.97% 3.10%
Dow Jones Industrial Average 2.78% 1.84% 0.96% 3.96%
S&P 500 Index 3.28% 6.34% (2.94%) 1.93%
HENNESSY BALANCED FUND (Inception 3/8/96) 2.12% (0.01%) 2.56% 4.63%
Dow Jones Industrial Average 2.78% 1.84% 0.96% 9.07%
S&P 500 Index 3.28% 6.34% (2.94%) 8.52%
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.hennessyfunds.com
Though rising commodity prices have helped oil and basic material stocks,
they have significantly hurt manufacturers that rely on these materials. This
underperformance in the manufacturing sector explains the slight
underperformance of the Hennessy Cornerstone Value Fund versus its benchmark
indices. The Hennessy Cornerstone Value Fund returned +2.18% for the six months
ending April 30, 2005, while the S&P 500 returned +3.28% and the Russell 1000
returned +4.04% for the same period. Despite strong performance from Altria
Group, which returned +37%, and Marathon Oil, which returned +24%, the poor
performance of manufacturing stocks General Motors Corp. and Ford Motor Co.,
which each returned -29%, hampered the returns of the Cornerstone Value Fund.
These same themes similarly affected the performance of the Hennessy Total
Return Fund and the Hennessy Balanced Fund. Exxon Mobil Corp. continued its
strong stock price appreciation on the back of higher oil prices, and returned
+17% for the six month period, which boosted performance in both funds. Altria
Group also made a strong positive contribution to both funds. General Motors
continued its slide, as the world's #1 auto manufacturer was coping with higher
raw material and labor costs. The Hennessy Total Return Fund returned +4.95% for
the six months ending April 30, 2005, beating both the S&P 500 Index and the Dow
Jones Industrial Average, which returned +3.28 and +2.78%, respectively. The
Balanced Fund returned +2.12 for the six-month period and was hampered by its
larger allocation to one-year government securities in the portfolio. Despite
rising interest rates, the yield on treasury securities remained relatively flat
over the six-month period.
As I look to the last six months of the year, I expect we will see
continued volatility and increasing speculation by individual investors and
analysts alike. However, with strong positive economic factors in place, I
continue to be a market bull, anticipating strong market performance over the
long run. And, as interest rates continue to rise, the returns earned on the
short-term government securities in the Hennessy Balanced and Total Return
portfolios are poised to increase.
At Hennessy Funds, we remain committed to our proven, disciplined
investment style, and foremost we are committed to our shareholders. Thank you
for your trust and confidence, and should you have any questions or need more
information, please don't hesitate to call us at (800) 966-4354 or visit our
website at www.hennessyfunds.com.
Best regards,
/s/ Neil J. Hennessy
Neil J. Hennessy
President & Portfolio Manager
Please see the following page for important disclosures.
SMALL AND MEDIUM-CAPITALIZATION COMPANIES TEND TO HAVE LIMITED LIQUIDITY AND
GREATER PRICE VOLATILITY THAN LARGE-CAPITALIZATION COMPANIES. INVESTMENTS IN
FOREIGN SECURITIES INVOLVE GREATER VOLATILITY AND POLITICAL, ECONOMIC AND
CURRENCY RISK AND DIFFERENCES IN ACCOUNTING METHODS.
THE HENNESSY TOTAL RETURN AND BALANCED FUNDS ARE NON-DIVERSIFIED, MEANING THEY
MAY CONCENTRATE THEIR ASSETS IN FEWER INDIVIDUAL HOLDINGS THAN A DIVERSIFIED
FUND, MAKING IT MORE EXPOSED TO INDIVIDUAL STOCK VOLATILITY THAN A DIVERSIFIED
FUND.
References to specific securities should not be considered a recommendation to
buy or sell any security. Fund holdings are subject to change. Please refer to
the Schedule of Investments within this semi-annual report for additional
portfolio information, including percentages of holdings.
The S&P 500, Russell 2000, Russell 1000, S&P400 Midcap and Dow Jones Industrial
Average are unmanaged indices commonly used to measure the performance of U.S.
stocks. The Dow Jones Industrial Average is an unmanaged index of common stocks
comprised of major industrial companies and assumes reinvestment of dividends.
The Russell 2000 Index is a recognized small-cap index of 2000 smallest
securities of the Russell 3000 Index, which is comprised of the 3,000 largest
U.S. securities as determined by total market capitalization. The Russell 1000
is an unmanaged Index that measures the performance of large-cap U.S. stocks.
The S&P 400 Midcap Index is an unmanaged Index that measures the performance of
mid-cap U.S. stocks. One cannot invest directly in an index.
Price-to-sales ratio is a tool for calculating a stock's valuation relative to
other companies. It is calculated by dividing a stock's current price by its
revenue per share.
Opinions expressed are those of Neil Hennessy and are subject to change, are not
guaranteed and should not be considered investment advice. 6/05
SUMMARY OF INVESTMENTS -- HENNESSY CORNERSTONE GROWTH FUND
SUMMARY OF INVESTMENT PORTFOLIOS
The following summaries of investment portfolios are designed to help investors
better understand each fund's principal holdings. Each summary is as of April
30, 2005 (unaudited).
HENNESSY CORNERSTONE GROWTH FUND
Consumer Discretionary 26.83%
Consumer Staples 2.04%
Energy 5.52%
Financials 2.05%
Health Care 12.54%
Industrials 19.15%
Information Technology 1.95%
Materials 25.67%
Utilities 1.52%
Short Term Obligations and Other 2.73%
TOP TEN HOLDINGS % of net assets
- ---------------- ---------------
Valero Energy Corp. 3.09%
Building Material Holding Corp. 2.93%
Sears Holding Corp. 2.79%
Electronics Boutique Holdings Corp. 2.65%
Tesoro Petroleum Corp. 2.43%
Aetna, Inc. 2.40%
Sierra Health Services 2.40%
Hexcel Corp. 2.31%
Meritage Homes Corp. 2.30%
Cleveland-Cliffs, Inc. 2.28%
Number % of Net
of Shares Value Assets
--------- ----- --------
COMMON STOCKS - 97.27%
Consumer Discretionary -- 26.83%
The Black & Decker Corp. 216,100 $ 18,072,443 1.94%
Blount International, Inc.(a)<F1> 1,095,500 16,224,355 1.74%
Bluegreen Corp.(a)<F1> 962,400 13,348,488 1.43%
Building Material Holding Corp. 498,400 27,382,096 2.93%
Champion Enterprises, Inc.(a)<F1> 1,614,600 15,241,824 1.63%
Electronics Boutique
Holdings Corp.(a)<F1> 444,400 24,766,412 2.65%
Genesco, Inc.(a)<F1> 612,900 15,769,917 1.69%
Meritage Homes Corp.(a)<F1> 338,700 21,436,323 2.30%
NVR, Inc.(a)<F1> 24,800 17,815,080 1.91%
Quiksilver, Inc.(a)<F1> 640,600 17,648,530 1.89%
Sears Holding Corp.(a)<F1> 192,900 26,087,796 2.79%
Toll Brothers, Inc.(a)<F1> 278,200 21,087,560 2.26%
WESCO International, Inc.(a)<F1> 643,900 15,569,502 1.67%
------------ -------
250,450,326 26.83%
Consumer Staples -- 2.04%
Bunge Ltd.(b)<F2> 334,800 19,016,640 2.04%
Energy -- 5.52%
Tesoro Petroleum Corp.(a)<F1> 599,000 22,726,060 2.43%
Valero Energy Corp. 420,400 28,810,012 3.09%
------------ -------
51,536,072 5.52%
Financials -- 2.05%
Jones Lang LaSalle, Inc.(a)<F1> 510,100 19,128,750 2.05%
Health Care -- 12.54%
Aetna, Inc. 306,000 22,451,220 2.40%
Alliance Imaging, Inc.(a)<F1> 1,696,400 17,710,416 1.90%
AMERIGROUP Corp.(a)<F1> 504,500 17,718,040 1.90%
Centene Corp.(a)<F1> 673,200 18,748,620 2.01%
Molina Healthcare, Inc.(a)<F1> 411,500 18,003,125 1.93%
Sierra Health Services(a)<F1> 346,300 22,402,147 2.40%
------------ -------
117,033,568 12.54%
Industrials -- 19.15%3%
The Brink's Co. 482,900 15,578,354 1.67%
Greenbrier Cos., Inc. 563,800 16,462,960 1.77%
Hexcel Corp.(a)<F1> 1,316,200 21,585,680 2.31%
JB Hunt Transport Services, Inc. 425,500 16,632,795 1.78%
Landstar System, Inc.(a)<F1> 518,300 15,885,895 1.70%
McDermott
International, Inc.(a)<F1>(b)<F2> 1,039,400 21,110,214 2.26%
Old Dominion Freight Line(a)<F1> 548,400 15,410,040 1.65%
Toro Co. 469,200 19,387,344 2.08%
USG Corp.(a)<F1> 473,900 19,899,061 2.13%
Yellow Roadway Corp.(a)<F1> 342,600 16,787,400 1.80%
------------ -------
178,739,743 19.15%
Information Technology --1.95%
NCR Corp.(a)<F1> 551,300 18,192,900 1.95%
Materials -- 25.67%
AK Steel Holding Corp.(a)<F1> 1,318,900 9,562,025 1.03%
Carpenter Technology 326,400 18,049,920 1.94%
Cleveland-Cliffs, Inc. 367,500 21,318,675 2.28%
Commercial Metals Co. 754,900 19,257,499 2.06%
Consol Energy, Inc. 464,900 20,102,276 2.15%
Georgia Gulf Corp. 383,200 14,143,912 1.52%
Ipsco, Inc.(b)<F2> 399,300 18,890,883 2.02%
Lyondell Chemical Co. 659,900 16,556,891 1.77%
Nova Chemicals Corp.(b)<F2> 403,500 13,101,645 1.40%
Novamerican Steel, Inc.(a)<F1>(b)<F2> 339,900 12,236,400 1.31%
Nucor Corp. 364,600 18,631,060 2.00%
Oregon Steel Mills, Inc.(a)<F1> 940,600 15,642,178 1.68%
Terra Industries, Inc.(a)<F1> 2,149,100 14,828,790 1.59%
Texas Industries, Inc. 305,900 14,126,462 1.51%
WR Grace & Co.(a)<F1> 1,402,200 13,152,636 1.41%
------------ -------
239,601,252 25.67%
Utilities -- 1.52%
Reliant Energy, Inc.(a)<F1> 1,398,100 14,218,677 1.52%
------------ -------
TOTAL COMMON STOCKS (Cost $894,543,923) 907,917,928 97.27%
Principal
Amount
---------
SHORT-TERM OBLIGATIONS -- 2.92%
DISCOUNT NOTES -- 2.91%
Federal Home Loan Bank Discount Note,
2.5020%, due 05/02/2005 $27,202,000 27,200,109
------------ -------
Total Discount Notes
(Cost $27,200,109) 27,200,109 2.91%
VARIABLE RATE DEMAND NOTES#<F3> -- 0.01%
American Family Financial
Services, Inc., 2.6371% 30,820 30,820
Wisconsin Corporate Central
Credit Union, 2.7300% 30,801 30,801
------------ -------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $61,621) 61,621 0.01%
------------ -------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $27,261,730) 27,261,730 2.92%
------------ -------
TOTAL INVESTMENTS - 100.19%
(Cost $921,805,653) 935,179,658 100.19%
------------ -------
Other Liabilities and Assets, Net - (0.19%) (1,729,066) (0.19%)
NET ASSETS - 100% $933,450,592 100.00%
------------ -------
------------ -------
(a)<F1> Non-income producing security
(b)<F2> Foreign denominated security
#<F3> Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates change periodically on
specified dates. The rates listed are as of April 30, 2005.
See Notes to the financial statements.
SUMMARY OF INVESTMENTS -- HENNESSY FOCUS 30 FUND
HENNESSY FOCUS 30 FUND
Consumer Discretionary 28.20%
Energy 31.19%
Industrials 11.24%
Information Technology 2.82%
Materials 15.79%
Utilities 7.47%
Short Term Obligations and Other 3.29%
TOP TEN HOLDINGS % of net assets
- ---------------- ---------------
Valero Energy Corp. 4.87%
Premcor, Inc. 4.75%
Sears Holding Corp. 4.30%
Penn National Gaming, Inc. 4.25%
Allegheny Energy, Inc. 4.20%
Joy Global, Inc. 4.19%
Peabody Energy Corp. 3.99%
Sunoco, Inc. 3.79%
Tesoro Petroleum Corp. 3.52%
Massey Energy Co. 3.39%
Number % of Net
of Shares Value Assets
--------- ----- --------
COMMON STOCKS -- 96.71%
Consumer Discretionary - 28.20%
The Black & Decker Corp. 21,200 $ 1,772,956 3.00%
Brunswick Corp. 36,900 1,549,800 2.62%
Circuit City Stores, Inc. 108,100 1,707,980 2.89%
Dick's Sporting Goods, Inc.(a)<F4> 45,100 1,387,276 2.35%
The Goodyear Tire & Rubber Co.(a)<F4> 146,600 1,740,142 2.94%
Penn National Gaming, Inc.(a)<F4> 79,700 2,510,550 4.25%
Pulte Homes, Inc. 25,100 1,793,395 3.03%
Quiksilver, Inc.(a)<F4> 60,600 1,669,530 2.82%
Sears Holding Corp.(a)<F4> 18,800 2,542,512 4.30%
----------- -------
16,674,141 28.20%
Energy - 31.19%
Amerada Hess Corp. 18,400 1,723,160 2.91%
Ashland, Inc. 28,900 1,943,236 3.29%
FMC Technologies, Inc.(a)<F4> 48,400 1,467,972 2.48%
Lone Star Technologies (a)<F4> 44,800 1,744,512 2.95%
Maverick Tube Corp. (a)<F4> 53,400 1,553,406 2.63%
Premcor, Inc. 42,400 2,804,760 4.75%
Sunoco, Inc. 22,600 2,243,276 3.79%
Tesoro Petroleum Corp.(a)<F4> 54,900 2,082,906 3.52%
Valero Energy Corp. 42,000 2,878,260 4.87%
----------- -------
18,441,488 31.19%
Industrials - 11.24%
Hughes Supply, Inc. 52,100 1,359,810 2.30%
Joy Global, Inc. 73,100 2,475,897 4.19%
Ryder System, Inc. 34,600 1,277,778 2.16%
Terex Corp.(a)<F4> 41,000 1,532,580 2.59%
----------- -------
6,646,065 11.24%
Information Technology - 2.82%
Harris Corp. 59,200 1,669,440 2.82%
Materials - 15.79%
Lyondell Chemical Co. 77,500 1,944,475 3.29%
Massey Energy Co. 55,600 2,007,716 3.39%
Nucor Corp. 35,600 1,819,160 3.08%
Peabody Energy Corp. 53,800 2,354,826 3.99%
Steel Dynamics, Inc. 44,400 1,206,792 2.04%
----------- -------
9,332,969 15.79%
Utilities - 7.47%
Allegheny Energy, Inc.(a)<F4> 101,500 2,480,660 4.20%
Sierra Pacific Resources(a)<F4> 178,900 1,935,698 3.27%
----------- -------
4,416,358 7.47%
TOTAL COMMON STOCKS (Cost $48,027,258) 57,180,461 96.71%
Principal
Amount
---------
SHORT-TERM OBLIGATIONS -- 3.14%
Discount Notes - 3.10%
Federal Home Loan Bank Discount Note,
2.6500%, due 05/02/2005 $1,836,000 1,835,872
----------- -------
TOTAL DISCOUNT NOTES (Cost $1,835,872) 1,835,872 3.10%
Variable Rate Demand Notes#<F5> - 0.04%
American Family Financial
Services, Inc., 2.6371% 11,377 11,377
Wisconsin Corporate Central
Credit Union, 2.7300% 11,377 11,377
----------- -------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $22,754) 22,754 0.04%
----------- -------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $1,858,626) 1,858,626 3.14%
----------- -------
TOTAL INVESTMENTS - 99.85%
(Cost $49,885,884) 59,039,087 99.85%
----------- -------
Other Assets and Liabilities, Net - 0.15% 87,430 0.15%
NET ASSETS - 100% $59,126,517 100.00%
----------- -------
----------- -------
(a)<F4> Non-income producing security
#<F5> Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates change periodically on
specified date. The rates listed are as of April 30, 2005.
See notes to the financial statements.
SUMMARY OF INVESTMENTS -- HENNESSY CORNERSTONE VALUE FUND
HENNESSY CORNERSTONE VALUE FUND
Consumer Discretionary 5.28%
Consumer Staples 13.85%
Energy 11.63%
Financials 32.74%
Health Care 8.76%
Industrials 4.03%
Materials 11.86%
Telecommunication Services 11.71%
Short Term Obligations and Other 0.14%
TOP TEN HOLDINGS % of net assets
- ---------------- ---------------
Kerr-McGee Corp. 2.73%
Marathon Oil Corp. 2.61%
The May Department Stores Co. 2.53%
Merck & Co., Inc. 2.37%
Altria Group, Inc. 2.21%
Bristol-Myers Squibb Co. 2.21%
Cemex S.A. de C.V. - ADR 2.19%
Total SA ADR 2.13%
BP PLC - ADR 2.13%
Eli Lilly & Co. 2.12%
Number % of Net
of Shares Value Assets
--------- ----- --------
COMMON STOCKS -- 99.86%
Consumer Discretionary - 5.28%
Ford Motor Co. 272,800 $ 2,485,208 1.32%
General Motors Corp. 101,100 2,697,348 1.43%
The May Department Stores Co. 136,300 4,781,404 2.53%
------------ -------
9,963,960 5.28%
Consumer Staples - 13.85%
Albertson's, Inc. 165,300 3,271,287 1.73%
Altria Group, Inc. 64,300 4,178,857 2.21%
ConAgra Foods, Inc. 140,700 3,763,725 2.00%
General Mills, Inc. 80,500 3,976,700 2.11%
HJ Heinz Co. 102,200 3,766,070 2.00%
Kimberly-Clark Corp. 60,200 3,759,490 1.99%
Sara Lee Corp. 160,000 3,422,400 1.81%
------------ -------
26,138,529 13.85%
Energy - 11.63%
BP PLC - ADR(b)<F7> 66,100 4,025,490 2.13%
ChevronTexaco Corp. 73,600 3,827,200 2.03%
Kerr-McGee Corp. 66,300 5,144,880 2.73%
Marathon Oil Corp. 105,500 4,913,135 2.61%
Total SA ADR(b)<F7> 36,300 4,026,033 2.13%
------------ -------
21,936,738 11.63%
Financials - 32.74%
AON Corp. 169,800 3,540,330 1.88%
Bank of America Corp. 85,200 3,837,408 2.03%
BB&T Corp. 91,500 3,587,715 1.90%
Citigroup, Inc. 83,300 3,911,768 2.07%
Fannie Mae 55,500 2,994,225 1.59%
HSBC Holdings PLC ADR(b)<F7> 46,200 3,698,310 1.96%
J.P. Morgan Chase & Co. 100,800 3,577,392 1.90%
Lincoln National Corp. 81,900 3,683,043 1.95%
Marsh & McLennan Companies, Inc. 124,000 3,475,720 1.84%
National City Corp. 105,400 3,579,384 1.90%
PNC Financial Services Group 70,600 3,758,038 1.99%
Regions Financial Corp. 111,100 3,720,739 1.97%
US Bancorp 131,500 3,668,850 1.95%
Wachovia Corp. 71,600 3,664,488 1.94%
Washington Mutual, Inc. 94,500 3,904,740 2.07%
Wells Fargo & Co. 62,000 3,716,280 1.97%
XL Capital Ltd.(b)<F7> 49,200 3,458,760 1.83%
------------ -------
61,777,190 32.74%
Health Care - 8.76%
Bristol-Myers Squibb Co. 160,600 4,175,600 2.21%
Eli Lilly & Co. 68,500 4,005,195 2.12%
Merck & Co., Inc. 131,900 4,471,410 2.37%
Pfizer, Inc. 142,900 3,882,593 2.06%
------------ -------
16,534,798 8.76%
Industrials - 4.03%
Pitney Bowes, Inc. 86,500 3,868,280 2.05%
RR Donnelley & Sons Co. 113,700 3,741,867 1.98%
------------ -------
7,610,147 4.03%
Materials - 11.86%
Cemex S.A. de C.V. - ADR(b)<F7> 115,000 4,140,000 2.19%
The Dow Chemical Co. 79,700 3,660,621 1.94%
E.I. du Pont de Nemours & Co. 82,300 3,877,153 2.06%
International Paper Co. 95,100 3,260,979 1.73%
MeadWestvaco Corp. 119,100 3,507,495 1.86%
PPG Industries, Inc. 58,200 3,931,410 2.08%
------------ -------
22,377,658 11.86%
Telecommunication Services - 11.71%
Alltel Corp. 65,900 3,753,664 1.99%
AT&T Corp. 205,500 3,931,215 2.08%
BellSouth Corp. 135,900 3,599,991 1.91%
SBC Communications, Inc. 150,500 3,581,900 1.90%
Telefonica
de Argentina SA(a)<F6>+<F9>^<F10>*<F11> 25,800 258 0.00%
Telefonos de Mexico
SA de CV - ADR(b)<F7> 112,700 3,820,530 2.02%
Verizon Communications, Inc. 95,200 3,408,160 1.81%
------------ -------
22,095,718 11.71%
TOTAL COMMON STOCKS (Cost $188,207,438) 188,434,738 99.86%
Principal
Amount
---------
SHORT-TERM OBLIGATIONS - 0.00%
VARIABLE RATE DEMAND NOTES#<F8> - 0.00%
American Family Financial
Services, Inc., 2.6371% $1,700 1,700
Wisconsin Corporate Central
Credit Union, 2.7300% 1,699 1,699
------------ -------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $3,399) 3,399 0.00%
------------ -------
TOTAL INVESTMENTS - 99.86%
(Cost $188,210,837) 188,438,137 99.86%
Other Assets and Liabilities, Net - 0.14% 258,225 0.14%
------------ -------
NET ASSETS - 100% $188,696,362 100.00%
------------ -------
------------ -------
(a)<F6> Non-income producing security
(b)<F7> Foreign denominated security
#<F8> Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates change periodically on
specified dates. The rates listed are as of April 30, 2005.
+<F9> All or a portion of this security is out on loan at April 30, 2005.
^<F10> Security is fair valued. Please see Note 2 in the accompanying Notes
to Financial Statements.
*<F11> Security is collateralized by $135,800 in cash.
ADR American Depository Receipts
See notes to the financial statements.
SUMMARY OF INVESTMENTS -- HENNESSY TOTAL RETURN FUND
HENNESSY TOTAL RETURN FUND
Consumer Discretionary 4.79%
Consumer Staples 10.48%
Energy 7.81%
Financials 14.25%
Health Care 7.84%
Industrials 6.48%
Materials 7.70%
Telecommunication Services 14.96%
Short Term Obligations and Other 25.69%
TOP TEN HOLDINGS % of net assets
- ---------------- ---------------
Altria Group, Inc. 8.64%
Exxon Mobil Corp. 7.81%
E. I. du Pont de Nemours and Co. 7.70%
SBC Communications, Inc. 7.58%
Citigroup, Inc. 7.38%
J.P. Morgan Chase & Co. 6.87%
General Electric Co. 6.48%
Merck & Co., Inc. 5.97%
AT&T Corp. 5.37%
General Motors Corp. 4.79%
Number % of Net
of Shares Value Assets
--------- ----- --------
COMMON STOCKS -- 74.31%
Consumer Discretionary - 4.79%
General Motors Corp. 165,100 $ 4,404,868 4.79%
Consumer Staples - 10.48%
Altria Group, Inc. 122,325 7,949,901 8.64%
The Coca-Cola Co. 39,000 1,694,160 1.84%
----------- -------
9,644,061 10.48%
Energy - 7.81%
Exxon Mobil Corp. 126,125 7,192,909 7.81%
Financials - 14.25%
Citigroup, Inc. 144,700 6,795,112 7.38%
J.P. Morgan Chase & Co. 178,175 6,323,431 6.87%
----------- -------
13,118,543 14.25%
Health Care - 7.84%
Merck & Co., Inc. 162,100 5,495,190 5.97%
Pfizer, Inc. 63,175 1,716,465 1.87%
----------- -------
7,211,655 7.84%
Industrials - 6.48%
General Electric Co. 164,775 5,964,855 6.48%
Materials - 7.70%
E. I. du Pont de Nemours and Co. 150,400 7,085,344 7.70%
Telecommunication Services - 14.96%
AT&T Corp. 258,375 4,942,714 5.37%
SBC Communications, Inc. 293,050 6,974,590 7.58%
Verizon Communications, Inc. 51,650 1,849,070 2.01%
----------- -------
13,766,374 14.96%
TOTAL COMMON STOCKS (Cost $70,995,466) 68,388,609 74.31%
Principal
Amount
---------
SHORT-TERM OBLIGATIONS - 61.44%
U.S. TREASURY BILLS*<F12> - 60.07%
2.4170%, 05/26/2005 $21,000,000 20,965,437
2.5506%, 06/23/2005 13,500,000 13,450,114
2.6816%, 07/21/2005 21,000,000 20,870,745
----------- -------
TOTAL U.S. TREASURY BILLS
(Cost $55,293,646) 55,286,296 60.07%
DISCOUNT NOTES - 1.35%
Federal Home Loan Bank Discount Note,
2.6500%, due 05/02/2005 1,240,000 1,239,914
----------- -------
TOTAL DISCOUNT NOTES (Cost $1,239,914) 1,239,914 1.35%
VARIABLE RATE DEMAND NOTES#<F13> - 0.02%
American Family Financial
Services, Inc., 2.6371% 11,839 11,839
Wisconsin Corporate Central
Credit Union, 2.7300% 11,810 11,810
----------- -------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $23,649) 23,649 0.02%
----------- -------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $56,557,209) 56,549,859 61.44%
----------- -------
TOTAL INVESTMENTS - 135.75%
(Cost $127,552,675) 124,938,468 135.75%
Other Liabilities and Assets, Net - (35.75%) (32,903,772) (35.75%)
----------- -------
NET ASSETS - 100% $92,034,696 100.00%
----------- -------
----------- -------
*<F12> Collateral or partial collateral for securities sold subject to
repurchase.
#<F13> Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates changed periodically on
specified dates. The rates listed are as of April 30, 2005.
See notes to the financial statements.
SUMMARY OF INVESTMENTS -- HENNESSY BALANCED FUND
HENNESSY BALANCED FUND
Consumer Staples 8.13%
Energy 1.18%
Financials 9.18%
Health Care 5.46%
Industrials 4.00%
Materials 6.59%
Telecommunication Services 9.21%
Short Term Obligations and Other 52.98%
Consumer Discretionary 3.27%
TOP TEN HOLDINGS % of net assets
- ---------------- ---------------
Altria Group, Inc. 5.84%
E.I. du Pont de Nemours & Co. 5.17%
Citigroup, Inc. 4.77%
SBC Communications, Inc. 4.60%
J.P. Morgan Chase & Co. 4.41%
Merck & Co., Inc. 4.13%
General Electric Co. 4.00%
General Motors Corp. 3.27%
Verizon Communications, Inc. 2.96%
The Coca-Cola Co. 2.29%
Number % of Net
of Shares Value Assets
--------- ----- --------
COMMON STOCKS -- 47.02%
Consumer Discretionary - 3.27%
General Motors Corp. 25,000 $ 667,000 3.27%
Consumer Staples - 8.13%
Altria Group, Inc. 18,350 1,192,566 5.84%
The Coca-Cola Co. 10,800 469,152 2.29%
----------- -------
1,661,718 8.13%
Energy - 1.18%
Exxon Mobil Corp. 4,225 240,952 1.18%
Financials - 9.18%
Citigroup, Inc. 20,750 974,420 4.77%
J.P. Morgan Chase & Co. 25,375 900,559 4.41%
----------- -------
1,874,979 9.18%
Health Care - 5.46%
Merck & Co., Inc. 24,900 844,110 4.13%
Pfizer, Inc. 10,000 271,700 1.33%
----------- -------
1,115,810 5.46%
Industrials - 4.00%
General Electric Co. 22,550 816,310 4.00%
Materials- 6.59%
E.I. du Pont de Nemours & Co. 22,425 1,056,442 5.17%
International Paper Co. 8,450 289,750 1.42%
----------- -------
1,346,192 6.59%
Telecommunication Services - 9.21%
AT&T Corp. 17,625 337,166 1.65%
SBC Communications, Inc. 39,475 939,505 4.60%
Verizon Communications, Inc. 16,875 604,125 2.96%
----------- -------
1,880,796 9.21%
TOTAL COMMON STOCKS (Cost $9,680,803) 9,603,757 47.02%
Principal
Amount
---------
SHORT-TERM OBLIGATIONS - 52.72%
U.S. TREASURY NOTES - 30.60%
1.625%, 4/30/2005 $ 250,000 250,000
1.125%, 6/30/2005 1,000,000 997,344
1.500%, 7/31/2005 650,000 647,791
2.000%, 8/31/2005 950,000 946,920
1.625%, 9/30/2005 800,000 795,344
1.625%, 10/31/2005 350,000 347,402
1.875%, 11/30/2005 500,000 496,250
1.875%, 1/31/2006 151,000 149,443
1.625%, 2/28/2006 815,000 803,635
1.500%, 3/31/2006 830,000 816,123
----------- -------
TOTAL U.S. TREASURY NOTES
(Cost $6,254,944) 6,250,252 30.60%
----------- -------
DISCOUNT NOTES - 21.93%
Federal Home Loan Bank Discount Note,
2.6500%, due 05/02/2005 4,481,000 4,480,689
----------- -------
TOTAL DISCOUNT NOTES (Cost $4,480,689) 4,480,689 21.93%
----------- -------
VARIABLE RATE DEMAND NOTES#<F14> - 0.19%
American Family Financial
Services, Inc., 2.6371% 19,439 19,439
Wisconsin Corporate Central
Credit Union, 2.7300% 19,432 19,432
----------- -------
TOTAL VARIABLE RATE DEMAND NOTES
(Cost $38,871) 38,871 0.19%
----------- -------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $10,774,504) 10,769,812 52.72%
----------- -------
TOTAL INVESTMENTS - 99.74%
(Cost $20,455,307) 20,373,569 99.74%
Other Assets and Liabilities, Net - 0.26% 53,509 0.26%
----------- -------
NET ASSETS - 100% $20,427,078 100.00%
----------- -------
----------- -------
#<F14> Variable rate demand notes are considered short-term obligations and
are payable on demand. Interest rates changed periodically on
specified dates. The rates listed are as of April 30, 2005.
See notes to the financial statements.
FINANCIAL STATEMENTS - STATEMENT OF ASSETS AND LIABILITIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES As of April 30, 2005 (unaudited)
HENNESSY HENNESSY HENNESSY HENNESSY HENNESSY
CORNERSTONE FOCUS 30 CORNERSTONE TOTAL RETURN BALANCED
GROWTH FUND FUND VALUE FUND FUND FUND
----------- -------- ----------- ------------ --------
ASSETS
Investments, at value (cost $921,805,653,
$49,885,884, $188,210,837, $127,552,675
and $20,455,307, respectively)(1)<F15> $935,179,658 $59,039,087 $188,438,137 $124,938,468 $20,373,569
Cash 742 - - - -
Dividends and interest receivable 258,369 19,603 716,144 300,147 66,312
Receivable for fund shares sold 1,317,670 143,024 14,939 85,600 -
Receivable for securities sold - - - - -
Prepaid expenses and other assets 43,232 14,412 23,491 8,996 12,675
-------------- -------------- -------------- ------------ ------------
Total Assets 936,799,671 59,216,126 189,192,711 125,333,211 20,452,556
-------------- -------------- -------------- ------------ ------------
LIABILITIES
Collateral for securities loaned - - - - -
Payable for fund shares redeemed 2,145,198 9,382 175,723 24,560 -
Payable to Adviser 590,200 49,837 115,598 45,576 10,141
Payable to Administrator 422,220 27,124 87,267 41,335 9,363
Payable to Custodian - - 16,298 - -
Payable to Distributor - - - 27,156 4,225
Reverse repurchase agreement - - - 33,070,000 -
Accrued expenses and other payables 191,461 3,266 - 89,888 1,749
Other liabilities(2)<F16> - - 101,463 - -
-------------- -------------- -------------- ------------ ------------
Total Liabilities 3,349,079 89,609 496,349 33,298,515 25,478
-------------- -------------- -------------- ------------ ------------
NET ASSETS $933,450,592 $59,126,517 $188,696,362 $92,034,696 $20,427,078
-------------- -------------- -------------- ------------ ------------
-------------- -------------- -------------- ------------ ------------
NET ASSETS CONSIST OF
Capital stock $860,909,287 $57,930,988 $329,642,195 $189,705,766 $23,867,178
Accumulated undistributed
net investment income (loss) (3,760,429) (194,266) 1,846,223 180,947 31,397
Accumulated undistributed net realized
gain (loss) on investments 62,927,729 (7,763,408) (143,019,356) (95,237,810) (3,389,759)
Unrealized net appreciation (depreciation)
on investments 13,374,005 9,153,203 227,300 (2,614,207) (81,738)
-------------- -------------- -------------- ------------ ------------
Total Net Assets $933,450,592 $59,126,517 $188,696,362 $92,034,696 $20,427,078
-------------- -------------- -------------- ------------ ------------
-------------- -------------- -------------- ------------ ------------
Shares authorized ($.0001 par value) 25,000,000,000 25,000,000,000 25,000,000,000 100,000,000 100,000,000
Shares issued and outstanding 54,561,068 5,818,494 15,068,876 8,515,921 1,897,212
-------------- -------------- -------------- ------------ ------------
Net asset value, offering price
and redemption price per share $17.11 $10.16 $12.52 $10.81 $10.77
-------------- -------------- -------------- ------------ ------------
-------------- -------------- -------------- ------------ ------------
(1)<F15> Market value of securities on loan $0, $0, $258, $0 and $0,
respectively.
(2)<F16> Prior to the merger, the Lindner Growth & Income Fund had an other
liabilities balance of $101,463 on its books due to an underlying
shareholder claim. As a result of the merger that transacted on
February 27, 2004, the Value Fund assumed this balance.
See notes to the financial statements.
FINANCIAL STATEMENTS - STATEMENT OF OPERATIONS
STATEMENT OF OPERATIONS Six months ended April 30, 2005 (unaudited)
HENNESSY HENNESSY HENNESSY HENNESSY HENNESSY
CORNERSTONE FOCUS 30 CORNERSTONE TOTAL RETURN BALANCED
GROWTH FUND FUND VALUE FUND FUND FUND
----------- -------- ----------- ------------ --------
INVESTMENT INCOME
Dividend income $1,951,789 $203,698 $3,286,191 $1,367,190 $206,511
Interest income 162,507 13,423 11,067 544,649 78,324
Securities lending income 105,890 -- 1,555 -- --
Other income -- -- 3,309 -- --
----------- ---------- ---------- ---------- --------
Total investment income 2,220,186 217,121 3,302,122 1,911,839 284,835
----------- ---------- ---------- ---------- --------
EXPENSES
Investment advisory fees 3,576,213 287,350 729,644 279,232 63,895
Administration, fund accounting,
custody and transfer agent fees 1,234,870 77,584 266,221 125,654 28,753
Distribution fees -- -- -- 124,513 26,623
Service fees 483,272 -- 98,600 -- --
Federal and state registration fees 21,844 10,388 17,024 9,274 9,781
Audit fees 12,390 4,283 9,044 13,029 9,990
Legal fees 9,777 8,282 9,757 6,541 6,166
Reports to shareholders 33,485 2,418 5,823 3,716 2,106
Directors' fees and expenses 5,517 5,060 5,198 3,723 3,688
Sub-transfer agent expenses 526,100 13,200 19,208 -- --
Insurance expense 31,017 1,914 6,822 3,569 915
Interest expense (See Note 7) 45,406 365 2,495 403,040 --
Other 724 543 207 540 543
----------- ---------- ---------- ---------- --------
Total expenses 5,980,615 411,387 1,170,043 972,831 152,460
Expense Reimbursement by Adviser -- -- -- -- --
----------- ---------- ---------- ---------- --------
Net expenses 5,980,615 411,387 1,170,043 972,831 152,460
----------- ---------- ---------- ---------- --------
NET INVESTMENT INCOME (LOSS) $(3,760,429) $(194,266) $2,132,079 $939,008 $132,375
----------- ---------- ---------- ---------- --------
REALIZED AND UNREALIZED GAINS (LOSSES)
Net realized gain (loss) on investments $67,276,970 $277,488 $5,657,759 $1,230,743 $83,228
Change in unrealized
appreciation (depreciation) on investments 3,856,005 8,391,935 (3,239,912) 2,313,650 235,451
----------- ---------- ---------- ---------- --------
Net gain (loss) on investments 71,132,975 8,669,423 2,417,847 3,544,393 318,679
----------- ---------- ---------- ---------- --------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $67,372,546 $8,475,157 $4,549,926 $4,483,401 $451,054
----------- ---------- ---------- ---------- --------
----------- ---------- ---------- ---------- --------
See notes to the financial statements.
FINANCIAL STATEMENTS - STATEMENT OF CHANGES IN NET ASSETS
STATEMENT OF CHANGES IN NET ASSETS
HENNESSY CORNERSTONE GROWTH FUND
-----------------------------------------------------
Six Months
Ended Period Ended Year Ended
April 30, 2005 October 31, September 30,
(Unaudited) 2004(1)<F17> 2004
-------------- ------------ -------------
OPERATIONS
Net investment income (loss) ($3,760,429) ($798,823) ($6,045,256)
Net realized gain (loss) on securities 67,276,970 (519,598) 260,819,119
Change in unrealized appreciation (depreciation) on securities 3,856,005 15,254,630 (178,544,729)
------------ ------------ ------------
Net increase (decrease) in net assets resulting from operations 67,372,546 13,936,209 76,229,134
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income -- -- --
From net realized gains (173,840,684) -- --
Return of capital -- -- --
------------ ------------ ------------
(173,840,684) -- --
------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares subscribed 164,034,640 8,450,760 278,038,137
Proceeds from shares issued in connection with the Lindner Funds merger -- -- 15,352,072
Dividends reinvested 168,579,703 -- --
Redemption fees retained 76,438 4,497 171,968
Cost of shares redeemed (161,765,470) (19,434,245) (255,741,417)
------------ ------------ ------------
Net increase (decrease) in net assets derived
from capital share transactions 170,925,311 (10,978,988) 37,820,760
------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 64,457,173 2,957,221 114,049,894
------------ ------------ ------------
NET ASSETS:
Beginning of period 868,993,419 866,036,198 751,986,304
------------ ------------ ------------
End of period $933,450,592 $868,993,419 $866,036,198
------------ ------------ ------------
------------ ------------ ------------
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS), END OF PERIOD ($3,760,429) $ -- $ --
CHANGES IN SHARES OUTSTANDING
Shares sold 8,832,527 437,895 14,598,984
Shares issued in connection to the acquisition of Lindner Funds -- -- 795,750
Shares issued to holders as reinvestment of dividends 9,772,737 -- --
Shares redeemed (8,875,021) (1,007,572) (13,629,312)
------------ ------------ ------------
Net increase (decrease) in shares outstanding 9,730,243 (569,677) 1,765,422
------------ ------------ ------------
------------ ------------ ------------
HENNESSY FOCUS 30 FUND HENNESSY CORNERSTONE VALUE FUND
-------------------------------------------- --------------------------------------------
Six Months Six Months
Ended Period Ended Year Ended Ended Period Ended Year Ended
April 30, 2005 October 31, September 30, April 30, 2005 October 31, September 30,
(Unaudited) 2004(1)<F17> 2004 (Unaudited) 2004(1)<F17> 2004
-------------- ------------ ------------- -------------- ------------ -------------
OPERATIONS
Net investment income (loss) ($194,266) ($57,161) ($450,015) $2,132,079 $280,943 $3,216,832
Net realized gain (loss) on securities 277,488 -- 1,712,086 5,657,759 -- 976,738
Change in unrealized appreciation
(depreciation) on securities 8,391,935 (625,572) 3,113,471 (3,239,912) 1,489,282 1,071,719
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 8,475,157 (682,733) 4,375,542 4,549,926 1,770,225 5,265,289
----------- ----------- ----------- ------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income -- -- -- (3,734,561) -- (421,282)
From net realized gains -- -- -- -- -- --
Return of capital -- -- -- -- -- --
----------- ----------- ----------- ------------ ------------ ------------
-- -- -- (3,734,561) -- (421,282)
----------- ----------- ----------- ------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares subscribed 17,738,207 738,948 24,923,015 4,182,221 925,168 7,462,844
Proceeds from shares issued in
connection with the Lindner Funds merger -- -- -- -- -- 179,367,979
Dividends reinvested -- -- -- 3,276,633 -- 407,298
Redemption fees retained 7,346 59 11,733 3,894 -- 4,089
Cost of shares redeemed (17,453,875) (790,514) (11,503,642) (15,227,461) (1,535,375) (17,914,176)
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease) in net assets
derived from capital share transactions 291,678 (51,507) 13,431,106 (7,764,713) (610,207) 169,328,034
----------- ----------- ----------- ------------ ------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 8,766,835 (734,240) 17,806,648 (6,949,348) 1,160,018 174,172,041
----------- ----------- ----------- ------------ ------------ ------------
NET ASSETS:
Beginning of period 50,359,682 51,093,922 33,287,274 195,645,710 194,485,692 20,313,651
----------- ----------- ----------- ------------ ------------ ------------
End of period $59,126,517 $50,359,682 $51,093,922 $188,696,362 $195,645,710 $194,485,692
----------- ----------- ----------- ------------ ------------ ------------
----------- ----------- ----------- ------------ ------------ ------------
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS), END OF PERIOD ($194,266) $-- $-- $1,846,223 $3,448,705 $3,167,762
CHANGES IN SHARES OUTSTANDING
Shares sold 1,751,023 84,638 2,846,070 325,038 74,555 624,832
Shares issued in connection to
the acquisition of Lindner Funds -- -- -- -- -- 14,615,807
Shares issued to holders
as reinvestment of dividends -- -- -- 251,469 -- 34,871
Shares redeemed (1,742,804) (91,797) (1,340,339) (1,185,451) (124,102) (1,480,254)
----------- ----------- ----------- ------------ ------------ ------------
Net increase (decrease)
in shares outstanding 8,219 (7,159) 1,505,731 (608,944) (49,547) 13,795,256
----------- ----------- ----------- ------------ ------------ ------------
----------- ----------- ----------- ------------ ------------ ------------
(1)<F17> For the one month ended October 31, 2004. Effective October 31, 2004,
the Fund changed its fiscal year end to October 31st from September
30th.
See notes to the financial statements.
FINANCIAL STATEMENTS - STATEMENT OF CHANGES IN NET ASSETS
STATEMENT OF CHANGES IN NET ASSETS
HENNESSY TOTAL RETURN FUND HENNESSY BALANCED FUND
-------------------------------------------- --------------------------------------------
Six Months Six Months
Ended Period Ended Ended Period Ended
April 30, 2005 October 31, Year Ended April 30, 2005 October 31, Year Ended
(Unaudited) 2004(1)<F18> June 30, 2004 (Unaudited) 2004(1)<F18> June 30, 2004
-------------- ------------ ------------- -------------- ------------ -------------
OPERATIONS
Net investment income (loss) $939,008 $587,197 $600,144 $132,375 $85,156 $197,328
Net realized gain (loss) on securities 1,230,743 13,282 272,805 83,228 (86,296) 32,241
Change in unrealized appreciation
(depreciation) on securities 2,313,650 (2,158,098) (3,087,326) 235,451 (441,020) 673,215
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations 4,483,401 (1,557,619) (2,214,377) 451,054 (442,160) 902,784
----------- ----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income (899,155) (446,103) (600,144) (126,315) (59,819) (197,328)
From net realized gains -- -- -- -- -- (93,788)
Return of capital -- -- (109,324) -- -- (42,438)
----------- ----------- ----------- ----------- ----------- -----------
(899,155) (446,103) (709,468) (126,315) (59,819) (333,554)
----------- ----------- ----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares subscribed 3,012,897 459,224 2,789,770 739,480 857,432 3,350,098
Proceeds from shares issued in
connection with the Lindner Funds merger -- -- 96,447,508 -- -- 10,051,535
Dividends reinvested 836,472 415,778 657,552 121,770 57,564 323,188
Redemption fees retained 320 482 514 1,088 239 5,244
Cost of shares redeemed (7,298,025) (3,935,847) (6,030,399) (2,524,674) (2,041,113) (6,976,348)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in net assets
derived from capital share transactions (3,448,336) (3,060,363) 93,864,945 (1,662,336) (1,125,878) 6,753,717
----------- ----------- ----------- ----------- ----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 135,910 (5,064,085) 90,941,100 (1,337,597) (1,627,857) 7,322,947
----------- ----------- ----------- ----------- ----------- -----------
NET ASSETS:
Beginning of period 91,898,786 96,962,871 6,021,771 21,764,675 23,392,532 16,069,585
----------- ----------- ----------- ----------- ----------- -----------
End of period $92,034,696 $91,898,786 $96,962,871 $20,427,078 $21,764,675 $23,392,532
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
UNDISTRIBUTED NET INVESTMENT
INCOME (LOSS), END OF PERIOD $180,947 $141,094 $-- $31,397 $25,337 $--
CHANGES IN SHARES OUTSTANDING
Shares sold 273,278 43,941 271,039 67,693 80,155 308,593
Shares issued in connection to the
acquisition of Lindner Funds -- -- 8,736,232 -- -- 919,731
Shares issued to holders as
reinvestment of dividends 76,904 39,448 61,715 11,241 5,355 30,224
Shares redeemed (669,611) (376,366) (564,409) (231,950) (190,755) (643,030)
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease)
in shares outstanding (319,429) (292,977) 8,504,577 (153,016) (105,245) 615,518
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
(1)<F18> For the four months ended October 31, 2004. Effective October 31,
2004, the Fund changed its fiscal year end to October 31st from June
30th.
See notes to the financial statements.
FINANCIAL HIGHLIGHTS - HENNESSY CORNERSTONE GROWTH FUND
FINANCIAL HIGHLIGHTS
HENNESSY CORNERSTONE GROWTH FUND
Six Months Ended Period Ended Year Ended September 30,
April 30, 2005 October 31, -------------------------------------------------
(Unaudited)(2)<F20> 2004(1)<F19>(2)<F20> 2004 2003 2002 2001 2000
------------------ -------------------- ---- ---- ---- ---- ----
PER SHARE DATA
Net asset value,
beginning of period $19.38 $19.08 $17.23 $13.55 $13.98 $19.48 $12.36
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment gain (loss)(3)<F21> (0.07) (0.02) (0.13) (0.07) (0.07) (0.09) (0.16)
Net realized and unrealized
gains (losses)on securities 1.68 0.32 1.98 4.23 0.67 (1.91) 7.28
------ ------ ------ ------ ------ ------ ------
Total from investment operations 1.61 0.30 1.85 4.16 0.60 (2.00) 7.12
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income - - - - - - -
Dividends from net realized gains (3.88) - - (0.48) (1.03) (3.50) -
------ ------ ------ ------ ------ ------ ------
Total distributions (3.88) - - (0.48) (1.03) (3.50) -
------ ------ ------ ------ ------ ------ ------
Redemption fees retained(4)<F22> - - - - - - -
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $17.11 $19.38 $19.08 $17.23 $13.55 $13.98 $19.48
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL RETURN 8.13% 1.57% 10.74% 31.67% 4.47% (10.95%) 57.61%
SUPPLEMENTAL DATA AND RATIOS
Net assets,
end of period (millions) $933.5 $869.0 $866.0 $752.0 $342.4 $155.5 $182.5
Ratio of expenses to
average net assets 1.24% 1.25% 1.25% 1.27% 1.10% 1.11% 1.18%
Ratio of net investment income to
average net assets (0.78%) (1.08%) (0.68%) (0.60%) (0.73%) (0.60%) (0.90%)
Portfolio turnover rate 88.75% 0.00% 106.97% 74.80% 70.33% 103.33% 95.28%
(1)<F19> For the one month ended October 31, 2004. Effective October 31, 2004,
the Fund changed its fiscal year end to October 31st from September
30th.
(2)<F20> All ratios for the period have been annualized, except portfolio
turnover and total return.
(3)<F21> Net investment loss per share is calculated using ending balances
prior to consideration for adjustments for permanent book and tax
differences.
(4)<F22> Amount is less than $0.01.
See notes to the financial statements.
FINANCIAL HIGHLIGHTS - HENNESSY FOCUS 30 FUND
FINANCIAL HIGHLIGHTS
HENNESSY FOCUS 30 FUND
Six Months January 1, January 2,
Ended Period Year 2003 Year 2001*<F23>
April 30, Ended Ended through Ended through
2005 October 31, September 30, September 30, December 31, December 31,
(Unaudited)(3)<F26> 2004(2)<F25>(3)<F26> 2004 2003 (1)<F24> 2002 2001
------------------- -------------------- ------------- ------------- ------------ ------------
PER SHARE DATA
Net asset value, beginning of period $8.67 $8.78 $7.72 $6.63 $9.27 $10.00
------ ----- ----- ----- ----- ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.03) (0.01) (0.08) (0.03) (0.02) (0.02)
Net realized and unrealized
gains (losses) on investments 1.52 (0.10) 1.14 1.12 (2.62) (0.71)
------ ----- ----- ----- ----- ------
Total from investment operations 1.49 (0.11) 1.06 1.09 (2.64) (0.73)
------ ----- ----- ----- ----- ------
LESS DISTRIBUTIONS
Dividends from net investment income - - - - - -
Dividends from net realized gains - - - - - -
------ ----- ----- ----- ----- ------
Total distributions - - - - - -
------ ----- ----- ----- ----- ------
Redemption fees retained(4)<F27> - - - - - -
------ ----- ----- ----- ----- ------
Net asset value, end of period $10.16 $8.67 $8.78 $7.72 $6.63 $9.27
------ ----- ----- ----- ----- ------
------ ----- ----- ----- ----- ------
TOTAL RETURN 17.19% (1.25%) 13.73% 16.44% (28.48%) (7.30%)
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions) $59.1 $50.4 $51.1 $33.3 $28.5 $43.2
Ratio of net expenses
to average net assets:
Before expense reimbursement 1.43% 1.45% 1.41% 1.59% 1.54% 1.80%
After expense reimbursement 1.43%(5) 1.45%(5) 1.41%(5) 1.49%(5) 1.50% 1.50%
<F28> <F28> <F28> <F28>
Ratio of net investment loss
to average net assets:
Before expense reimbursement (0.68%) (1.33%) (0.92%) (0.67%) (0.24%) (0.62%)
After expense reimbursement (0.68%) (1.33%) (0.92%) (0.57%) (0.20%) (0.32%)
Portfolio turnover rate 8.41% 0.00% 113.13% 356.77% 291.00% 210.00%
*<F23> Commencement of operations.
(1)<F24> The financial highlights set forth herein include the historical
financial highlights of the SYM Select Growth Fund. The assets of the
SYM Select Growth Fund were acquired by the Hennessy Focus 30 Fund on
September 17, 2003. At the time of the merger the Adviser also
changed from SYM Financial Corporation to Hennessy Advisors, Inc.
Effective September 30, 2003 the Fund changed it's fiscal year end to
September from December.
(2)<F25> For the one month ended October 31, 2004. Effective October 31, 2004,
the Fund changed its fiscal year end to October 31st from September
30th.
(3)<F26> All ratios for the period have been annualized, except portfolio
turnover and total return.
(4)<F27> Amount is less than $0.01.
(5)<F28> On September 17, 2003 the Hennessy Focus 30 Fund instituted an expense
cap of 1.45% of the average daily net assets of the Focus 30 Fund
until such contractual limitation is terminated by the Board of
Directors of the Hennessy Mutual Funds, Inc.
See notes to the financial statements.
FINANCIAL HIGHLIGHTS - HENNESSY CORNERSTONE VALUE FUND
FINANCIAL HIGHLIGHTS
HENNESSY CORNERSTONE VALUE FUND
Six Months Period
Ended Ended Year Ended September 30
April 30, 2005 October 31, --------------------------------------------
(Unaudited)(2)<F30> 2004(1)<F29>(2)<F30> 2004 2003 2002 2001 2000
------------------- -------------------- ---- ---- ---- ---- ----
PER SHARE DATA:
Net asset value, beginning of period $12.48 $12.37 $10.51 $8.95 $10.91 $10.29 $11.90
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.14 0.02 0.31(3) 0.21 0.25 0.24 0.32
<F31>
Net realized and unrealized
gains (losses) on investments 0.14 0.09 1.76 1.55 (1.95) 0.52 (0.18)
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.28 0.11 2.07 1.76 (1.70) 0.76 0.14
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.24) -- (0.21) (0.20) (0.26) (0.14) (0.47)
Dividends from net realized gains -- -- -- -- -- -- (1.28)
------ ------ ------ ------ ------ ------ ------
Total distributions (0.24) -- (0.21) (0.20) (0.26) (0.14) (1.75)
------ ------ ------ ------ ------ ------ ------
Redemption fees retained(4)<F32> -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $12.52 $12.48 $12.37 $10.51 $8.95 $10.91 $10.29
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL RETURN 2.18% 0.89% 19.83% 19.88% (16.05%) 7.38% 1.30%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions) $188.7 $195.6 $194.5 $20.3 $15.8 $20.4 $17.5
Ratio of net expenses
to average net assets 1.19% 1.18% 1.18% 1.51% 1.43% 1.74% 1.85%
Ratio of net investment income
to average net assets 2.16% 1.70% 2.56% 2.10% 2.12% 2.12% 2.36%
Portfolio turnover rate 31.38% 0.00% 8.20% 57.29% 76.93% 78.01% 86.13%
(1)<F29> For the one month ended October 31, 2004. Effective October 31, 2004,
the Fund changed its fiscal year end to October 31st from September
30th.
(2)<F30> All ratios for the period have been annualized, except portfolio
turnover and total return.
(3)<F31> Calculated using average shares outstanding during period.
(4)<F32> Amount is less than $0.01.
See notes to the financial statements.
FINANCIAL HIGHLIGHTS - HENNESSY TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS
HENNESSY TOTAL RETURN FUND
Six Months Period
Ended Ended Year Ended June 30,
April 30, October 31, --------------------------------------------
2005(Unaudited)(2)<F34> 2004(1)<F33>(2)<F34> 2004 2003 2002 2001 2000
----------------------- -------------------- ---- ---- ---- ---- ----
PER SHARE DATA
Net asset value,
beginning of period $10.40 $10.62 $9.65 $9.78 $10.49 $8.62 $10.70
------ ------ ------ ----- ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.11 0.07 0.17(3) 0.12 0.11 0.24 0.22
<F35>
Net realized and unrealized
gains (losses) on securities 0.40 (0.24) 0.92 (0.13) (0.71) 1.87 (2.08)
------ ------ ------ ----- ------ ------ ------
Total from investment operations 0.51 (0.17) 1.09 (0.01) (0.60) 2.11 (1.86)
------ ------ ------ ----- ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net
investment income (0.10) (0.05) (0.10) (0.12) (0.11) (0.24) (0.22)
Dividends from
realized capital gains -- -- -- -- -- -- --
Return of capital -- -- (0.02) -- -- -- --
------ ------ ------ ----- ------ ------ ------
Total distributions (0.10) (0.05) (0.12) (0.12) (0.11) (0.24) (0.22)
------ ------ ------ ----- ------ ------ ------
Redemption fees retained(4)<F36> -- -- -- -- -- -- --
------ ------ ------ ----- ------ ------ ------
Net asset value, end of period $10.81 $10.40 $10.62 $9.65 $9.78 $10.49 $8.62
------ ------ ------ ----- ------ ------ ------
------ ------ ------ ----- ------ ------ ------
TOTAL RETURN 4.95% (1.61%) 11.36% (0.04%) (5.73%) 24.66% (17.50%)
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions) $92.0 $91.9 $97.0 $6.0 $3.5 $3.1 $3.4
Ratio of net expenses to average
net assets, excluding interest expense:
Before expense reimbursement 1.22% 1.20% 1.27% 2.12% 4.35% 4.54% 2.76%
After expense reimbursement 1.22%(5) 1.20%(5) 1.27%(5) 1.95%(6) 1.71%(6) 1.20%(6) 1.20%(6)
<F37> <F37> <F37> <F38> <F38> <F38> <F38>
Ratio of net expenses to average
net assets, including interest expense:
Before expense reimbursement 2.09% 1.78% 1.66% 2.50% 4.97% 6.06% 4.44%
After expense reimbursement 2.09% 1.78% 1.66% 2.33% 2.33% 2.72% 2.88%
Ratio of interest expense
to average net assets 0.87% 0.58% 0.39% 0.38% 0.62% 1.52% 1.68%
Ratio of net investment
income (loss) to average net assets:
Before expense reimbursement 0.39% 1.85% 1.55% 1.25% (1.58%) (1.06%) 0.56%
After expense reimbursement 0.39% 1.85% 1.55% 1.42% 1.06% 2.28% 2.12%
Portfolio turnover rate 7.87% 0.30% 8.37% 17.60% 34.76% 48.80% 33.58%
(1)<F33> For the four months ended October 31, 2004. Effective October 31,
2004, the Fund changed its fiscal year end to October 31st from June
30th.
(2)<F34> All ratios for the period have been annualized, except portfolio
turnover and total return.
(3)<F35> Calculated using average shares outstanding during period.
(4)<F36> Amount is less than $0.01.
(5)<F37> On February 27, 2004, the Hennessy Total Return Fund instituted an
expense cap, excluding interest expense, of 1.35% of the average daily
net assets of the Total Return Fund. This expense cap will be in
effect through June 30, 2005.
(6)<F38> The Hennessy Total Return Fund instituted an expense cap, excluding
interest expense of 1.95%.
See notes to the financial statements.
FINANCIAL HIGHLIGHTS - HENNESSY BALANCED FUND
FINANCIAL HIGHLIGHTS
HENNESSY BALANCED FUND
Six Months
Ended Period
April 30, Ended Year Ended June 30,
2005 October 31, --------------------------------------------
(Unaudited)(2)<F40> 2004(1)<F39>(2)<F40> 2004 2003 2002 2001 2000
------------------- -------------------- ---- ---- ---- ---- ----
PER SHARE DATA
Net asset value, beginning of period $10.62 $10.85 $10.44 $10.62 $11.50 $10.37 $12.56
------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.07 0.04 0.11 0.14 0.15 0.27 0.28
Net realized and unrealized
gains (losses) on securities 0.15 (0.24) 0.50 (0.12) (0.50) 1.25 (1.53)
------ ------ ------ ------ ------ ------ ------
Total from investment operations 0.22 (0.20) 0.61 0.02 (0.35) 1.52 (1.25)
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends from net investment income (0.07) (0.03) (0.12) (0.14) (0.15) (0.27) (0.28)
Dividends from realized capital gains -- -- (0.06) (0.06) (0.38) (0.12) (0.66)
Return of capital -- -- (0.02) -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total distributions (0.07) (0.03) (0.20) (0.20) (0.53) (0.39) (0.94)
------ ------ ------ ------ ------ ------ ------
Redemption fees retained(3)<F41> -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $10.77 $10.62 $10.85 $10.44 $10.62 $11.50 $10.37
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL RETURN 2.12% (1.86%) 5.81% 0.24% (3.12%) 14.85% (10.40%)
SUPPLEMENTAL DATA AND RATIOS
Net assets, end of period (millions) $20.4 $21.8 $23.4 $16.1 $15.3 $15.2 $16.1
Ratio of net expenses
to average net assets 1.43% 1.41% 1.41% 1.50% 1.84% 1.87% 1.61%
Ratio of net investment income
to average net assets 1.24% 1.12% 1.01% 1.40% 1.33% 2.39% 2.36%
Portfolio turnover rate 8.06% 8.55% 45.17% 21.79% 45.95% 46.91% 31.16%
(1)<F39> For the four months ended October 31, 2004. Effective October 31,
2004, the Fund changed its fiscal year end to October 31st from June
30th.
(2)<F40> All ratios for the period have been annualized, except portfolio
turnover and total return.
(3)<F41> Amount is less than $0.01.
See notes to the financial statements.
STATEMENT OF CASH FLOWS
HENNESSY TOTAL RETURN FUND Six months ended April 30, 2005 (unaudited)
Cash Flows From Operating Activities:
Net increase in net assets from operations $4,483,401
Adjustments to reconcile net increase in net assets
from operations to net cash provided by operating activities:
Purchase of investment securities (276,090,379)
Proceeds on sale of securities 281,050,123
Increase in other receivables, net (72,625)
Increase in other assets 5,371
Increase in accrued expenses and other payables (89,485)
Net accretion of discount on securities (544,522)
Net realized gain on investments (1,230,743)
Unrealized appreciation on securities (2,313,650)
-------------
Net cash used by operating activities $5,197,491
-------------
Cash Flows From Financing Activities:
Decrease in reverse repurchase agreements $(850,000)
Proceeds on shares sold 3,012,897
Payment on shares repurchased (7,297,705)
Cash dividends paid (62,683)
-------------
Net cash provided by financing activities $(5,197,491)
-------------
Net increase (decrease) in cash --
Cash at beginning of period --
-------------
Cash at end of period $--
-------------
-------------
Cash paid for interest $364,886
-------------
-------------
See notes to the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2005 (Unaudited)
1). ORGANIZATION
The Hennessy Mutual Funds, Inc. was organized as a Maryland corporation on May
20, 1996 and consists of three separate series: Hennessy Cornerstone Growth Fund
(the "Growth Fund"), and Hennessy Cornerstone Value Fund (the "Value Fund"), the
Hennessy Focus 30 Fund (the "Focus 30 Fund"), formerly SYM Select Growth Fund.
The Funds are open-end, diversified management investment companies registered
under the Investment Company Act of 1940, as amended. The Growth Fund and Value
Fund commenced operations on November 1, 1996. On September 17, 2003, the Focus
30 Fund acquired the assets, and assumed the liabilities, of the SYM Select
Growth Fund, a former series of Advisors Series Trust. Hence, the Focus 30 Fund
commenced operations on September 17, 2003.
The Hennessy Funds, Inc. was organized as a Maryland corporation on January
11, 1996, consists of two separate portfolios: Hennessy Balanced Fund (the
"Balanced Fund") and Hennessy Total Return Fund (the "Total Return Fund," and
together with the Growth Fund, Value Fund, Focus 30 Fund and Balanced Fund, the
"Funds"). The Balanced and Total Return Funds are open-end, non-diversified
companies registered under the Investment Company Act of 1940, as amended. The
Balanced Fund and Total Return Fund commenced operations on March 8, 1996 and
July 29, 1998, respectively.
2). SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of the financial statements. These
policies are in conformity with accounting principles generally accepted in the
United States of America ("GAAP").
a). Investment Valuation - Securities which are traded on a national or
recognized stock exchange are valued at the last sale price on the
securities exchange on which such securities are primarily traded.
Exchange-traded securities for which there were no transactions that day
and debt securities are valued at the most recent bid prices. Instruments
with a remaining maturity of 60 days or less are valued on an amortized
cost basis. When a price for an underlying security is not readily
available or if a significant event has occurred that indicates the closing
price of a security no longer represents the true value of that security,
procedures have been put in place to determine a fair value of a security.
There are numerous criteria that will be given consideration in determining
a fair value of a security. Some of these criteria are: size of holding,
trading volume of security and markets, value of other like securities and
news events with direct bearing to security or market.
b). Federal Income Taxes - Provision for federal income taxes or excise taxes
has not been made since the Funds have elected to be taxed as "regulated
investment companies" and intend to distribute substantially all taxable
income to shareholders and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. Net
investment income and realized gains and losses for federal income tax
purposes may differ from that reported on the financial statements because
of temporary book and tax basis differences. Temporary differences are
primarily the result of the treatment of wash sales and deferred post-
October losses for tax reporting purposes. Distributions from net realized
gains for book purposes may include short-term capital gains, which are
included as ordinary income to shareholders for tax purposes.
c). Income and Expenses - Dividend income is recognized on the ex-dividend date
and interest income is recognized on an accrual basis. The Funds are
charged for those expenses that are directly attributable to the portfolio,
such as advisory, administration and certain shareowner service fees.
d). Distributions to Shareowners - Dividends from net investment income for the
Growth, Focus 30 and Value Funds, if any, are declared and paid out
annually, usually in November or December of each year. Dividends from net
investment income for the Total Return and Balanced Funds are declared and
paid on a calendar quarter basis. Distributions of net realized capital
gains, if any, are declared and paid annually, usually in November or
December of each year, for all of the Funds.
e). Security Transactions - Investment and shareowner transactions are recorded
on the trade date. The Funds determine the gain or loss realized from the
investment transactions by comparing the original cost of the security lot
sold with the net sale proceeds. Discounts and premiums on securities
purchased are accreted/amortized over the life of the respective security.
f). Use of Estimates - 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 change in net assets during the reporting period. Actual results
could differ from those estimates.
g). Share Valuation - The net asset value ("NAV") per share of each Fund is
calculated by dividing the sum of the value of the securities held by each
Fund, plus cash or other assets, minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding for each Fund,
rounded to the nearest cent. The Funds' shares will not be priced on the
days on which the NYSE is closed for trading. The offering and redemption
price per share for each Fund is equal to each Fund's net asset value per
share. The Funds charge a 1.50% redemption fee on shares held less than 90
calendar days. These fees are deducted from the redemption proceeds
otherwise payable to the shareholder. The Funds will retain the fee charged
as paid-in capital and such fees become part of that Fund's daily NAV
calculation.
h). Repurchase Agreements - Each Fund may enter into repurchase agreements with
member banks or security dealers of the Federal Reserve whom the investment
advisor deems creditworthy. The repurchase price generally equals the price
paid by the Fund plus interest negotiated on the basis of current short-
term rates.
Securities pledged as collateral for repurchase agreements are held by the
custodian bank until the respective agreements mature. Provisions of the
repurchase agreements ensure that the market value of the collateral, including
accrued interest thereon, is sufficient, in the event of default of the
counterparty. If the counterparty defaults and the value of the collateral
declines or if the counterparty enters an insolvency proceeding, realization of
the collateral by the Fund may be delayed or limited.
3). REVERSE REPURCHASE AGREEMENTS
The Total Return Fund has entered into reverse repurchase agreements with UBS
PaineWebber, Inc., under which the Total Return Fund sells securities and agrees
to repurchase them later at a mutually agreed upon price. For the six months
ended April 30, 2005, the average daily balance and average interest rate in
effect for reverse repurchase agreements was $33,280,608 and 2.472%,
respectively. At April 30, 2005, the interest rate in effect for the outstanding
reverse repurchase agreement, scheduled to mature on May 26, 2005 ($12,600,000),
June 23, 2005 ($8,010,000) and July 21, 2005 ($12,460,000) were 2.85%, 3.20% and
3.20% and represented 26.39% of the Total Return Fund's total assets. For the
period ended October 31, 2004, the average daily balance and average interest
rate in effect for reverse repurchase agreements was $33,962,914 and 1.58%,
respectively. At October 31, 2004, the interest rate in effect for the
outstanding reverse repurchase agreement, scheduled to mature on November 26,
2004 ($10,680,000), December 30, 2004 ($9,000,000) and January 27, 2005
($14,240,000) were 1.80%, 1.93% and 2.10% and represented 26.89% of the Total
Return Fund's total assets.
4). INVESTMENT TRANSACTIONS
During the six months ended April 30, 2005, purchases and sales of investment
securities (excluding short-term investments) were as follows:
Growth Fund Focus 30 Fund Value Fund Total Return Fund Balanced Fund
----------- ------------- ---------- ----------------- -------------
Purchases $846,135,368 $4,761,421 $61,686,960 $5,497,296 $834,214
Sales $879,943,556 $5,547,380 $69,841,897 $9,807,200 $1,931,823
5). INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Hennessy Advisors, Inc. (the "Manager") is the manager of the Funds. The Manager
provides the Funds with investment management services under a Management
Agreement. The Manager furnishes all investment advice, office space,
facilities, and provides most of the personnel needed by the Funds. As
compensation for its services, the Manager is entitled to a monthly fee from
each Fund. The fee is based upon the average daily net assets of the Funds at
the annual rate of:
Growth Fund 0.74%
Focus 30 Fund 1.00%*<F42>
Value Fund 0.74%
Total Return Fund 0.60%
Balanced Fund 0.60%
*<F42> Effective June 30, 2005, the Manager has agreed to reduce the
investment management fee for the Focus 30 Fund to 0.74% annually based on the
average net assets of the fund.
Each Fund is responsible for its own operating expenses. The Manager has
agreed to reimburse the Total Return Fund to the extent necessary to ensure that
the "Total Annual Fund Operating Expense, excluding Interest Expense" does not
exceed 1.35%. This expense cap, will be in effect through June 30, 2005. The
Manager has agreed to reimburse the Growth, Value and Balanced Funds to the
extent necessary to ensure that the "Total Annual Operating Expense" does not
exceed 1.50%, 1.25% and 1.50%, respectively, through June 30, 2005. The Manager
has also agreed to reimburse the Focus 30 Fund to the extent necessary to ensure
that the "Total Annual Fund Operating Expense" does not exceed 1.45%. This
expense cap will be in effect until such contractual limitation is terminated by
the Board of Directors of Hennessy Mutual Funds, Inc.
The Board of Directors has approved a Shareholder Servicing Plan which was
instituted to compensate the Manager for the non-investment management services
it provides the Growth and Value Funds. The Plan provides for a monthly fee paid
to the Manager at an annual rate of 0.10% of the average daily net assets of the
Growth and Value Funds.
The Total Return and Balanced Funds have adopted a plan pursuant to Rule
12b-1 which authorizes payments in connection with the distribution of the Total
Return and Balanced Fund shares at an annual rate not to exceed 0.25% of each
Fund's average daily net assets. Amounts paid under the Plan may be spent on any
activities or expenses primarily intended to result in the sale of shares,
including but not limited to, advertising, compensation for sales and marketing
activities or financial institutions and others such as dealers and
distributors, shareholder account servicing, the printing and mailing of
prospectuses to other than current shareowners and the printing and mailing of
sales literature.
U.S. Bancorp Fund Services, LLC (the "Administrator") acts as the Funds'
Administrator under an Administration Agreement. The Administrator prepares
various federal and state regulatory filings, reports and returns for the Funds;
prepares reports and materials to be supplied to the directors; monitors the
activities of the Funds' custodian, transfer agent and accountants; coordinates
the preparation and payment of the Funds' expenses and reviews the Funds'
expense accruals. Fees paid to U.S. Bancorp Fund Services, LLC for the six
months ended April 30, 2005, were $1,234,870, $77,584, $266,221, $125,654 and
$28,753 for Growth, Focus 30, Value, Total Return and Balanced Funds,
respectively.
The SYM Select Growth Fund was the predecessor fund of the Focus 30 Fund.
All performance and operations reported for periods before September 17, 2003,
represent the activity of the SYM Select Growth Fund.
Quasar Distributors, LLC (the "Distributor") acts as the Funds' principal
underwriter in a continuous public offering of the Funds' shares. The
Distributor is an affiliated company of U.S. Bank, N.A.
6). SECURITIES LENDING
The Value Fund has entered into a securities lending arrangement with the
custodian. Under the terms of the agreement, the custodian is authorized to loan
securities on behalf of the Fund to approved brokers against the receipt of cash
collateral at least 102% of the value of the securities loaned. The cash
collateral is invested by the custodian in a money market pooled account
approved by the Adviser. Although risk is mitigated by the collateral, the Fund
could experience a delay in recovering its securities and possible loss of
income or value if the borrower fails to return them. The agreement provides
that after predetermined rebates to the brokers, the income generated from
lending transactions is allocated 60% to the Fund and 40% to the custodian. As
of April 30, 2005, the Value Fund had on loan a security valued at $258 and
collateral of $135,800. Once the Adviser disposes of the current securities on
loan, the Fund will discontinue securities lending.
7). LINE OF CREDIT
The Growth, Focus 30, and Value Funds have $20,000,000, $500,000 and $500,000
lines of credit, respectively, intended to provide short-term financing, if
necessary, subject to certain restrictions, in connection with shareholder
redemptions. The credit facility is with its custodian bank, U.S. Bank, N.A.
During the six months ended April 30, 2005, the Growth Fund had an outstanding
average daily balance and a weighed average interest rate of $1,502,166 and
5.35%, respectively. The maximum amount outstanding for the Growth Fund during
the period was $20,000,000. During the six months ended April 30, 2005, the
Focus 30 Fund had an outstanding average daily balance and a weighed average
interest rate of $13,889 and 5.35%, respectively. The maximum amount outstanding
for the Focus 30 Fund during the period was $500,000. During the six months
ended April 30, 2005, the Value Fund had an outstanding average daily balance
and a weighed average interest rate of $74,591 and 5.35%, respectively. The
maximum amount outstanding for the Value Fund during the period was $500,000.
8). FEDERAL TAX INFORMATION
The following balances for the Funds are as of October 31, 2004:
Hennessy Hennessy Hennessy Hennessy Hennessy
Growth Focus 30 Value Total Return Balanced
Fund Fund Fund Fund Fund
-------- -------- -------- ------------ --------
Cost of investments (a)<F43> $1,304,136,594 $49,580,368 $192,225,560 $130,773,742 $21,730,776
-------------- ----------- ------------- ------------- -----------
Gross unrealized appreciation 117,031,606 2,245,808 12,723,267 2,482,813 735,178
Gross unrealized depreciation (107,513,606) (1,484,540) (9,320,380) (7,447,258) (1,100,797)
-------------- ----------- ------------- ------------- -----------
Net unrealized appreciation (depreciation) $9,518,000 $761,268 $3,402,887 ($4,964,445) ($365,619)
-------------- ----------- ------------- ------------- -----------
-------------- ----------- ------------- ------------- -----------
Undistributed ordinary income $-- $-- $3,448,705 $141,094 $25,337
Undistributed long-term capital gain 173,840,519 -- -- -- --
-------------- ----------- ------------- ------------- -----------
Total distributable earnings $173,840,519 $-- $3,448,705 $141,094 $25,337
-------------- ----------- ------------- ------------- -----------
-------------- ----------- ------------- ------------- -----------
Accumulated realized losses ($4,349,076) ($8,040,896) ($148,612,790) ($96,431,965) ($3,424,557)
-------------- ----------- ------------- ------------- -----------
Total accumulated realized
and unrealizedgains (losses) $179,009,443 ($7,279,628) ($141,761,198) ($101,255,316) ($3,764,839)
-------------- ----------- ------------- ------------- -----------
-------------- ----------- ------------- ------------- -----------
(a)<F43> Represents cost for federal income tax purposes and differs from the
cost for financial reporting purposes primarily due to wash sale
adjustments.
At October 31, 2004, the Growth Fund had tax basis capital losses of $4,349,076
from the Lindner merger, which is limited by IRS regulations to offset future
capital gains. Of such losses, $102,197 expire September 30, 2008, $2,532,547
expire September 30, 2009, $1,194,734 expire September 30, 2010 and $519,598
expire on October 31, 2012. Additionally, the Growth Fund had no post-October
loss deferrals as of October 31, 2004. Further, as a result of a permanent book-
to-tax difference relating to a net operating loss, accumulated undistributed
net investment loss has been decreased by $798,823 and capital stock has been
decreased by $798,823.
At October 31, 2004, the Focus 30 Fund had tax basis capital losses of
$8,040,896, which may be carried over to offset future capital gains. Of such
losses, $8,040,896 expire on December 31, 2010. Additionally, the Focus 30 Fund
had no post-October loss deferrals as of October 31, 2004. Further, as result of
a permanent book-to-tax difference relating to a net operating loss, accumulated
undistributed net investment loss has been decreased by $57,161 and capital
stock has been decreased by $57,161.
At October 31, the Value Fund had tax basis capital losses of $148,612,790,
which may be carried over to offset future capital gains. Of such losses,
$5,629,440 expire September 30, 2006, $45,899,693 expire September 30, 2007,
$57,383,495 expire September 30, 2008, $11,505,303 expire September 30, 2009,
$27,482,264 expire September 30, 2011 and $712,595 will expire on September 30,
2012. Additionally, the Value Fund had no post-October loss deferrals as of
October 31, 2004.
At October 31, 2004, the Total Return Fund had tax basis capital losses of
$96,431,965, which may be carried over to offset future capital gains. Of such
losses, $61,773,386 expire on June 30, 2009 and $34,658,579 expire June 30,
2012. Additionally, the Total Return Fund had no post-October loss deferrals as
of October 31, 2004.
At October 31, 2004, the Balanced Fund had tax basis capital losses of
$3,424,557, which may be carried over to offset future capital gains. Of such
losses, $447,964 expire on June 30, 2005, $447,964 expire June 30, 2006,
$610,892 expire June 30, 2008, $732,997 expire June 30, 2009, $447,964 expire
June 30, 2010, $447,964 expire June 30, 2011 and $288,812 expire October 31,
2012. Additionally, the Balanced Fund had no post-October loss deferrals as of
October 31, 2004.
The tax character of distributions paid during 2005 and 2004 for the Growth Fund
were as follows:
Six Months Ended
April 30, 2005 Period Ended Year Ended
(unaudited) October 31, 2004 September 30, 2004
---------------- ---------------- ------------------
Distributions paid from:
Ordinary income $-- $-- $--
Long-term capital gain 173,840,684 -- --
------------ --- ---
$173,840,684 $-- $--
------------ --- ---
------------ --- ---
The tax character of distributions paid during 2005 and 2004 for the Focus 30
Fund were as follows:
Six Months Ended
April 30, 2005 Period Ended Year Ended
(unaudited) October 31, 2004 September 30, 2004
---------------- ---------------- ------------------
Distributions paid from:
Ordinary income $-- $-- $--
Long-term capital gain -- -- --
--- --- ---
$-- $-- $--
--- --- ---
--- --- ---
The tax character of distributions paid during 2005 and 2004 for the Value Fund
were as follows:
Six Months Ended
April 30, 2005 Period Ended Year Ended
(unaudited) October 31, 2004 September 30, 2004
---------------- ---------------- ------------------
Distributions paid from:
Ordinary income $3,734,561 $-- $421,282
Long-term capital gain -- -- --
---------- --- --------
$3,734,561 $-- $421,282
---------- --- --------
---------- --- --------
The tax character of distributions paid during 2005 and 2004 for the Total
Return Fund were as follows:
Six Months Ended
April 30, 2005 Period Ended Year Ended
(unaudited) October 31, 2004 September 30, 2004
---------------- ---------------- ------------------
Distributions paid from:
Ordinary income $899,155 $446,103 $600,144
Long-term capital gain -- -- --
Return of capital -- -- 109,324
-------- -------- --------
$899,155 $446,103 $709,468
-------- -------- --------
-------- -------- --------
The tax character of distributions paid during 2005 and 2004 for the Balanced
Fund were as follows:
Six Months Ended
April 30, 2005 Period Ended Year Ended
(unaudited) October 31, 2004 September 30, 2004
---------------- ---------------- ------------------
Distributions paid from:
Ordinary income $126,315 $59,819 $197,328
Long-term capital gain -- -- 93,788
Return of capital -- -- 42,438
-------- ------- --------
$126,315 $59,819 $333,554
-------- ------- --------
-------- ------- --------
9). FEDERAL TAX DISTRIBUTION INFORMATION (Unaudited)
The Total Return and Balanced Funds designate 100% of the dividends declared
from net investment income during the period ended October 31, 2004, as
qualified dividend income under the Jobs Growth and Tax Reconciliation Act of
2003.
For the period ended October 31, 2004, 100% of the ordinary distributions
paid by the Total Return and Balanced Funds qualify for the dividends received
deduction available to corporate shareholders.
10). SUBSEQUENT EVENTS
On June 7, 2005, the Board of Directors (the "Board") of The Hennessy Mutual
Funds, Inc. (the "Company") approved an amendment to the Management Agreement
between the Company and Hennessy Advisors, Inc. to reduce the annual management
fee payable by the Focus 30 Fund from 1.00% to 0.74%, effective June 30, 2005.
The Board also approved an amendment to the Servicing Agreement between the
Company and Hennessy Advisors, Inc. to add the Focus 30 Fund to the Servicing
Agreement. A description of the Servicing Agreement can be found on page 27 of
the prospectus dated March 4, 2005. In exchange for services provided by
Hennessy Advisors, Inc. to the Focus 30 Fund under the Servicing Agreement, the
Focus 30 Fund will pay an annual fee of 0.10% to Hennessy Advisors, Inc. As a
cumulative result of these changes, the annual fees and expenses of the Focus 30
Fund should decrease by 0.16%.
EXPENSE EXAMPLE
EXPENSE EXAMPLE April 30, 2005 (Unaudited)
As a shareholder of the Funds, 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; service fees; and other Fund expenses.
This Example is intended to help you understand your ongoing costs (in dollars)
of investing in each of the Funds 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 November 1, 2005, through April 30, 2005.
ACTUAL EXPENSES
The first set of lines of the table below provide information about actual
account values and actual expenses. Although the Funds charge no sales loads or
transaction fees, you will be assessed fees for outgoing wire transfers,
returned checks and stop payment orders at prevailing rates charged by U.S.
Bancorp Fund Services, LLC, the Funds' transfer agent. If you request that a
redemption be made by wire transfer, currently a $15.00 fee is charged by the
Funds' transfer agent. You will be charged a redemption fee equal to 1.50% of
the net amount of the redemption if you redeem your shares less than 90 calendar
days after you purchase them. IRA accounts will be charged a $15.00 annual
maintenance fee. The example below includes, but is not limited to, management
fees, shareholder servicing fees, fund accounting, custody and transfer agent
fees. However, the example below does not include portfolio trading commissions
and related expenses, interest expense or dividends on short position taken by
the Fund and other extraordinary expenses as determined under generally accepted
accounting principles. You may use the information within these lines, together
with the amount you invested, to estimate the expenses that you paid over the
six-month 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.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second set of lines within the table below provide information about
hypothetical account values and hypothetical expenses based on the Funds' actual
expense ratios and an assumed rate of return of 5% per year before expenses,
which is not the Funds' 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 Funds 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 fees, 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 Value Account Value During Period(1)<F44>
11/1/04 4/30/05 11/1/04-4/30/05
------------- ------------- ---------------------
ACTUAL
Growth Fund $1,000.00 $1,081.30 $6.40
Focus 30 Fund $1,000.00 $1,171.90 $7.70
Value Fund $1,000.00 $1,021.80 $5.97
Total Return Fund $1,000.00 $1,049.50 $10.62
Balanced Fund $1,000.00 $1,021.20 $7.17
HYPOTHETICAL
(5% RETURN BEFORE EXPENSES)
Growth Fund $1,000.00 $1,018.65 $6.21
Focus 30 Fund $1,000.00 $1,017.70 $7.15
Value Fund $1,000.00 $1,018.89 $5.96
Total Return Fund $1,000.00 $1,014.43 $10.44
Balanced Fund $1,000.00 $1,017.70 $7.15
(1)<F44> Expenses are equal to the Growth Fund's, Focus 30 Fund's, Value
Fund's, Total Return Fund's and Balanced Fund's expense ratios of
1.24%, 1.43%, 1.19%, 2.09% and 1.43%, respectively, multiplied by the
average account value over the period, multiplied by the number of
days in the most recent half-year/365 days (to reflect one-half year
period).
PROXY VOTING POLICY
HOW TO OBTAIN A COPY OF THE FUNDS' PROXY VOTING POLICY AND PROXY VOTING RECORDS
A description of the policies and procedures that the Funds use to determine how
to vote proxies relating to portfolio securities is available without charge:
(1) by calling 1-800-966-4354; (2) on the Hennessy funds website at
www.hennessyfunds.com; or (3) on the U.S. Securities and Exchange Commission's
website at www.sec.gov. Hennessy Funds' proxy voting record is available on the
SEC's website at www.sec.gov no later than August 31 for the prior 12 months
ending June 30.
QUARTERLY FILINGS ON FORM N-Q
The Funds file their complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. The Funds' Form N-
Q will be available on the SEC's website at www.sec.gov. The Funds' Form N-Q may
be reviewed and copied at the SEC's Public Reference Room in Washington, DC and
information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. Information included in the Funds' N-Q will also be
available upon request by calling 1-800-966-4354.
BOARD APPROVAL OF CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
BOARD APPROVAL OF CONTINUATION OF INVESTMENT ADVISORY AGREEMENT
At its meeting on March 8, 2005, the Board of Directors (the "Board") of The
Hennessy Funds, Inc. (the "Company") and its two series, the Hennessy Balanced
Fund (the "Balanced Fund") and the Hennessy Total Return Fund (the "Total Return
Fund") (each a "Fund" or collectively the "Funds") and The Hennessy Mutual
Funds, Inc. (the "Company") and its three series, the Hennessy Cornerstone
Growth Fund (the "Growth Fund"), the Hennessy Cornerstone Value Fund (the "Value
Fund"), and the Hennessy Focus 30 Fund (the "Focus 30 Fund") (each a "Fund" or
collectively the "Funds"), including the Directors who are not "interested
persons" (as defined in the Investment Company Act of 1940) of the Funds' voted
to re-approve the current investment advisory agreement (the "Advisory
Agreement") between the Funds and Hennessy Advisors, Inc. (the "Advisor"). In
connection with its re-approval of the Advisory Agreement, the Board considered
the following factors:
The Board reviewed and discussed the specific services provided by the
Advisor. The Advisor:
1) Provides formula driven investment management for The Funds. Hennessy
Advisors, Inc. holds the rights to the formulas used for The Cornerstone
Growth, Value and Focus 30. In providing investment management, Hennessy
Advisors, Inc. directs and oversees the trading of securities within and
the rebalancing of the portfolios of the Funds.
2) Continues to retain the services of the Funds' Chief Compliance Officer and
makes all reasonable efforts to insure that The Funds are in compliance
with the securities laws.
3) Provides responsive customer and shareholder servicing which consists of
providing a call center to respond to shareholder inquiries, including
specific mutual fund account information.
4) Oversees distribution of the Funds through third-party broker/dealers and
independent financial institutions such as Charles Schwab, Inc., Fidelity,
TD Waterhouse and Pershing. Hennessy Advisors participates in "no
transaction fee" ("NTF") programs with these companies, which allows
customers to purchase the Hennessy Funds through third party distribution
channels without paying a transaction fee. Hennessy Advisors compensates
these third party distributors under a pre-determined contractual
agreement.
5) Oversees those third party service providers that support the Funds in
providing fund accounting, fund administration, fund distribution, transfer
agency and custodial services.
The Board also: (i) compared the performance of each Fund to benchmark
indices over various periods of time and concluded that the performance of each
Fund warranted the continuation of the Advisory Agreement; (ii) compared the
expense ratios of funds similar in asset size and investment objective to each
of the Funds and concluded the expenses of each Fund were reasonable and
warranted continuation of the Advisory Agreement; (iii) considered the fees
charged by Hennessy Advisors, Inc. to those of funds similar in asset size and
investment objective to each of the Funds and concluded the advisory fees of
each Fund were reasonable and warranted continuation of the Advisory Agreement;
and (iv) considered the profitability of Hennessy Advisors, Inc. with respect to
each Fund, the profits were reasonable and not excessive when compared to
profitability guidelines set forth in relevant court cases.
The Board then discussed economies of a scale and breakpoints and
determined that the Funds managed by Hennessy Advisors, Inc. have not yet grown
in size, nor has their marketplace demonstrated significantly rapid potential
growth to any extent that would warrant the use of breakpoints by the manager.
The Board reviewed the Funds' expense ratios and comparable expense ratios
for funds like the five funds now managed by Hennessy Advisors, Inc. The Board
used data from Lipper showing funds similar in nature to the Funds (Mid-Cap
Blend, Small Cap Blend, etc.). The Board determined that the expense ratios of
the Funds fall within the range of the ratios of other funds in their
classification. Based on the factors discussed above, the Board, including all
Independent Directors, recommended continuation of the Advisory Agreement.
For information,
questions or assistance,
please call
The Hennessy Funds
1-800-966-4354 or 1-415-899-1555
INVESTMENT ADVISOR
Hennessy Advisors, Inc.
The Courtyard Square
750 Grant Avenue, Suite 100
Novato, California 94945
ADMINISTRATOR,
TRANSFER AGENT,
DIVIDEND PAYING AGENT &
SHAREHOLDER SERVICING
AGENT
U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
CUSTODIAN
U.S. Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
DIRECTORS
Neil J. Hennessy
Robert T. Doyle
J. Dennis DeSousa
Gerald P. Richardson
COUNSEL
Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5306
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP
303 East Wacker Drive
Chicago, Illinois 60601
DISTRIBUTOR
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
(Hennessy Funds Logo)
Formulas for Smart Investing
WWW.HENNESSYFUNDS.COM
This report has been prepared for shareholders and may be distributed to others
only if preceded or accompanied by a current prospectus.
ITEM 2. CODE OF ETHICS.
- -----------------------
Not applicable for semi-annual reports
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ----------------------------------------
Not applicable for semi-annual reports
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
Not applicable for semi-annual reports
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable to open-end investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS.
- --------------------------------
Schedule of Investments is included as part of the report to shareholders filed
under Item 1 of this Form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- -------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------
Not applicable to open-end investment companies.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
- ------------------------------------------------------------------------
Not applicable to open-end investment companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
- ---------------------------------------------------------------------------
COMPANY AND AFFILIATED PURCHASES.
- ---------------------------------
Not applicable to open-end investment companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
Not Applicable.
ITEM 11. CONTROLS AND PROCEDURES.
- ---------------------------------
(a) The Registrant's President/Chief Executive Officer and Treasurer/Chief
Financial Officer have concluded that the Registrant's disclosure controls
and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940 (the "1940 Act")) are effective as of a date within 90 days of
the filing date of this report that includes the disclosure required by
this paragraph, based on the evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act and Rules 15d-15(b) under the
Securities Exchange Act of 1934, as amended
(b) There were no significant changes in the Registrant's internal controls
over financial reporting that occurred during the Registrant's last fiscal
half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 12. EXHIBITS.
- -----------------
(a) (1) Any code of ethics or amendment thereto, that is subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy Item 2 requirements through filing an exhibit. Not Applicable
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the registrant to 10 or more persons. Not applicable to open-end
investment companies.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished 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.
(Registrant) The Hennessy Mutual Funds, Inc.
--------------------------------------
By (Signature and Title) /s/ Neil J. Hennessy
---------------------------
Neil J. Hennessy, President
Date 6/29/05
-------------------
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.
By (Signature and Title)* /s/ Neil J. Hennessy
---------------------------
Neil J. Hennessy, President
Date 6/29/05
-------------------
By (Signature and Title)* /s/ Teresa M. Nilsen
---------------------------
Teresa M. Nilsen, Treasurer
Date 7/1/05
-------------------