UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number (811-07168)
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HENNESSY FUNDS TRUST
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(Exact name of registrant as specified in charter)
7250 REDWOOD BLVD., SUITE 200
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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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7250 REDWOOD BLVD., SUITE 200
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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: JUNE 30, 2006
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Date of reporting period: DECEMBER 31, 2005
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ITEM 1. REPORT TO STOCKHOLDERS.
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HENNESSY FUNDS
SEMI-ANNUAL REPORT
DECEMBER 31, 2005
HENNESSY CORNERSTONE GROWTH FUND, SERIES II
FUND SYMBOL: HENLX
(HENNESSY FUNDS LOGO)
FORMULAS FOR SMART INVESTING
CONTENTS
Letter to shareholders 1
Summary of investments 3
Financial statements
Statement of assets and liabilities 7
Statement of operations 8
Statements of changes in net assets 9
Financial highlights 10
Notes to the financial statements 12
Expense example 16
Proxy voting policy 17
LETTER TO SHAREHOLDERS
February, 2006
DEAR HENNESSY CORNERSTONE GROWTH FUND, SERIES II SHAREHOLDER:
We continue to experience a volatile market environment, and the past six months
have certainly been no exception. During that period, the price of oil bounced
between $56 and $70 per barrel, and the Federal Reserve increased short-term
interest rates four times. However, while interest rates and inflation have
increased during the past six months, we are still experiencing relatively low
interest rates, currently at 4.25%, and core inflation (net of food and energy
costs) at 2.2%. In my opinion, these levels are in no way cause for alarm, yet
there continue to be naysayers who look at the current economic indicators and
predict doom and gloom. These market bears point to recent events, such as
terrorism and the hurricanes in the Gulf, and say that the economy is not
showing signs of growth. I believe that such a negative view of the economy just
instills a sense of fear among investors. Even these difficult events have not
been able to take the market down, and the major indices did post modest gains
for the six-month period.
I continue to be a market bull, seeing generally positive economic indicators
across the board. Companies have become leaner, meaning that any increase in
revenue is falling to the bottom line in the form of higher profits. With
increased earnings, companies are increasing capital expenditures, returning
dividends to the shareholders or buying back stock, all of which benefit
shareholders. In the coming year I see a good environment for business, and I
anticipate an increase in corporate earnings in the 10-15% range, which
translates to strong market performance over time.
We are pleased with the performance of the Hennessy Cornerstone Growth Fund,
Series II and are happy to report its results for the first six months under our
management.*<F1> For the period 7/1 through 12/31/05, the Fund outperformed its
benchmark indices; the Hennessy Cornerstone Growth Fund, Series II returned
6.35%, versus the S&P 500 Index at 5.48% and the Russell 2000 Index at 5.32%.
For the six months ending December 31, 2005, the energy sector continued to
produce strong returns. Energy stocks in the portfolio, such as Holly Corp.,
Frontier Oil, Lufkin Industries, NS Group, Stolt Offshore and Valero each
returned between 27% and 39% for the six-month period. However, Transmontaigne,
directly affected by the Gulf hurricanes, lost 37% during the same period.
Construction companies such as JLG Industries (+66%) and Shaw Group (+35%)
posted strong gains, while homebuilders, such as Hovnanian Enterprises (-24%),
Meritage Homes (-21%), KB Homes (-5%) and Ryland Group (-5%) struggled during
the six-month period ending December 31, 2005. Retail stocks in the portfolio
were mixed, with some companies performing strongly, while others struggled
during the six-month period. However, the most recent retail spending figures
report the strongest gains since May 2004, more than doubling analysts'
forecasts.
At Hennessy Funds, we adhere to our time-tested investment formulas, and we
never allow headlines, emotions, or market whims to distract us from our long-
term goals. Our primary concern is for our shareholders, and we manage the
portfolio with your best interest in mind. Thank you for your continued
confidence and investment in the Hennessy Cornerstone Growth Fund, Series II.
Should you have any questions or want to speak with us directly, please don't
hesitate to call us at (800) 966-4354.
Best regards,
/s/Neil Hennessy
Neil Hennessy
President & Portfolio Manager
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.
*<F1> This fund has an original inception date of 12/2/92 as The Henlopen
Fund. On 7/1/05 Hennessy Advisors became the investment adviser to the
fund and implemented a new investment strategy. The performance of The
Henlopen Fund is not relevant to investors because The Henlopen Fund did
not utilize the Cornerstone Growth Strategy during that time period.
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 and
Russell 2000, are unmanaged indices commonly used to measure the performance of
U.S. stocks. The Russell 2000 Index is a recognized small-cap index of the 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. One cannot
invest directly in an index. Opinions expressed are those of Neil Hennessy and
are subject to change, are not guaranteed and should not be considered
investment advice. 2/06
SUMMARY OF INVESTMENTS
The following summary of investments is designed to help investors better
understand the Fund's principal holdings. The summary is as of December 31,
2005 (Unaudited).
INDUSTRY SECTORS AS OF DECEMBER 31, 2005
Consumer Discretionary 29.23%
Consumer Staples 6.53%
Energy 14.81%
Financials 4.38%
Health Care 9.94%
Industrials 17.65%
Information Technology 11.50%
Materials 4.16%
Short Term Obligations and Other 1.80%
TOP TEN HOLDINGS % OF NET ASSETS
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Multi-Fineline Electronix, Inc. 4.75%
JLG Industries, Inc. 3.01%
Sykes Enterprises, Inc. 2.54%
Humana, Inc. 2.53%
Western Digital Corp. 2.51%
Lufkin Industries, Inc. 2.49%
CB Richard Ellis Group, Inc. 2.48%
Pioneer Companies, Inc. 2.47%
The Shaw Group Inc. 2.46%
Amerco, Inc. 2.45%
SUMMARY OF INVESTMENTS
December 31, 2005 (Unaudited)
COMMON STOCKS - 98.20% Number % of Net
of Shares Value Assets
--------- ----- --------
CONSUMER DISCRETIONARY - 29.23%
Advance Auto Parts (a)<F2> 108,200 $ 4,702,372 1.84%
Andersons, Inc. 136,400 5,876,112 2.29%
Burlington Coat Factory Warehouse Corp. 108,200 4,350,722 1.70%
Children's Place (a)<F2> 112,800 5,574,576 2.18%
Denny's Corp. (a)<F2> 860,600 3,468,218 1.34%
Genesco, Inc. (a)<F2> 122,000 4,732,380 1.85%
Hovnanian Enterprises, Inc. (a)<F2> 71,800 3,564,152 1.39%
KB Home 63,100 4,584,846 1.79%
Luby's, Inc. (a)<F2> 386,700 5,143,110 2.01%
Men's Wearhouse, Inc. (a)<F2> 134,100 3,947,904 1.54%
Meritage Homes Corp. (a)<F2> 58,500 3,680,820 1.44%
The Pantry Inc. (a)<F2> 116,600 5,479,034 2.14%
Phillips-Van Heusen 139,800 4,529,520 1.77%
Riviera Holdings Corp. (a)<F2> 195,400 3,202,606 1.25%
Ryland Group, Inc. 62,700 4,522,551 1.77%
Sears Holdings Corp. (a)<F2> 30,800 3,558,324 1.39%
Standard-Pacific Corp. 106,800 3,930,240 1.54%
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74,847,487 29.23%
CONSUMER STAPLES - 6.53%
Great Atlantic & Pacific Tea Co. (a)<F2> 164,300 5,221,454 2.04%
Longs Drug Stores Corp. 107,600 3,915,564 1.53%
Seaboard Corp. 2,800 4,230,800 1.65%
Spartan Stores, Inc. (a)<F2> 322,200 3,357,324 1.31%
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16,725,142 6.53%
ENERGY - 14.81%
Frontier Oil Corp. 147,500 5,535,675 2.16%
Holly Corp. 100,800 5,934,096 2.32%
Lufkin Industries, Inc. 127,800 6,373,386 2.49%
NS Group, Inc. (a)<F2> 139,700 5,840,857 2.28%
Stolt Offshore S A - ADR (a)<F2>(b)<F3> 498,200 5,809,012 2.27%
Transmontaigne, Inc. (a)<F2> 406,600 2,683,560 1.05%
Valero Energy Corp. 111,400 5,748,240 2.24%
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37,924,826 14.81%
FINANCIALS - 4.38%
CB Richard Ellis Group, Inc. (a)<F2> 108,100 6,361,685 2.48%
Trammell Crow Co. (a)<F2> 189,600 4,863,240 1.90%
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11,224,925 4.38%
HEALTH CARE - 9.94%
Aetna, Inc. 56,200 5,300,222 2.07%
Chemed Corp. 111,400 5,534,352 2.16%
Humana, Inc. (a)<F2> 119,400 6,487,002 2.53%
WellCare Health Plans, Inc. (a)<F2> 130,100 5,314,585 2.08%
Wellpoint, Inc. (a)<F2> 35,195 2,808,207 1.10%
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25,444,368 9.94%
INDUSTRIALS - 17.65%
Amerco, Inc. (a)<F2> 86,900 6,261,145 2.45%
Badger Meter, Inc. 114,200 4,481,208 1.75%
Clean Harbors, Inc. (a)<F2> 115,200 3,318,912 1.30%
Gehl Co. (a)<F2> 179,300 4,706,625 1.84%
Healthcare Services Group 231,000 4,784,010 1.87%
JLG Industries, Inc. 168,700 7,702,842 3.01%
The Shaw Group Inc. (a)<F2> 216,500 6,297,985 2.46%
Synagro Technologies, Inc. 946,600 4,004,118 1.56%
World Air Holdings, Inc. (a)<F2> 376,000 3,617,120 1.41%
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45,173,965 17.65%
INFORMATION TECHNOLOGY - 11.50%
Multi-Fineline Electronix, Inc. (a)<F2> 252,600 12,167,742 4.75%
Par Technology Corp. (a)<F2> 157,100 4,361,096 1.70%
Sykes Enterprises, Inc. (a)<F2> 486,000 6,497,820 2.54%
Western Digital Corp. (a)<F2> 345,200 6,424,172 2.51%
------------ -------
29,450,830 11.50%
MATERIALS - 4.16%
Pioneer Companies, Inc. (a)<F2> 210,300 6,302,691 2.47%
Quanex Corp. 86,700 4,332,399 1.69%
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10,635,090 4.16%
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TOTAL COMMON STOCKS (Cost $237,059,693) 251,426,633 98.20%
SHORT-TERM OBLIGATIONS - 2.00% Principal
Amount
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DISCOUNT NOTES - 1.99%
Federal Home Loan Bank Discount Note,
2.6500%, due 01/03/2006 $5,101,000 5,100,107 1.99%
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TOTAL DISCOUNT NOTES (Cost $5,100,107) 5,100,107 1.99%
VARIABLE RATE DEMAND NOTES#<F4> - 0.01%
American Family Financial
Services, Inc., 4.025% 12,640 12,640 0.01%
Wisconsin Corporate Central
Credit Union, 4.050% 9,345 9,345 0.00%
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TOTAL VARIABLE RATE DEMAND NOTES
(Cost $21,985) 21,985 0.01%
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TOTAL SHORT-TERM OBLIGATIONS
(Cost $5,122,092) 5,122,092 2.00%
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TOTAL INVESTMENTS - 100.20%
(Cost $242,181,785) 256,548,725 100.20%
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Other Liabilities and Assets, Net - (0.20%) (512,364) (0.20%)
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NET ASSETS - 100.00% $256,036,361 100.00%
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(a)<F2> Non-income producing security
(b)<F3> Foreign issued security
#<F4> 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 December 31, 2005.
ADR - American Depository Receipt
See notes to the financial statements.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES December 31, 2005 (Unaudited)
ASSETS:
Investments, at value (cost $242,181,785) $256,548,725
Dividends and interest receivable 195,895
Receivable for fund shares sold 193,200
Prepaid expenses and other assets 56,126
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Total Assets 256,993,946
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LIABILITIES:
Payable for fund shares redeemed 562,346
Payable to Advisor 153,473
Payable to Administrator 155,508
Payable to Auditor 17,644
Payable for reports to shareholders 12,569
Accrued expenses and other payables 56,045
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Total Liabilities 957,585
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NET ASSETS $256,036,361
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NET ASSETS CONSIST OF:
Capital stock $239,841,711
Accumulated undistributed net investment loss (2,676,336)
Accumulated undistributed net realized gain (loss) on investments 4,504,046
Unrealized net appreciation (depreciation) on investments 14,366,940
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Total Net Assets $256,036,361
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Shares issued and outstanding
(Unlimited number of shares authorized, no par value) 8,710,405
Net asset value, offering price and redemption price per share $29.39
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See notes to the financial statements.
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS For the Six Months Ended December 31, 2005 (Unaudited)
INVESTMENT INCOME:
Dividend income(1)<F5> $ 772,938
Interest income 110,159
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Total investment income 883,097
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EXPENSES:
Investment advisory fees 1,000,532
Administration, fund accounting, custody and transfer agent fees 323,735
Sub-transfer agent expenses 171,266
Service fees 135,207
Reports to shareholders 25,206
Audit fees 17,644
Federal and state registration fees 16,383
Legal fees 15,193
Insurance expense 7,019
Directors' fees and expenses 5,923
Other 756
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Total expenses before reimbursement from Advisor 1,718,864
Expense reimbursement by Advisor (31,302)
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Net expenses 1,687,562
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NET INVESTMENT INCOME (LOSS) $ (804,465)
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REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gain on investments $29,344,666
Change in unrealized
appreciation (depreciation) on investments (13,532,404)
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Net gain (loss) on investments 15,812,262
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $15,007,797
-----------
-----------
(1)<F5> Net of foreign taxes withheld of $181.
See notes to the financial statements.
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended
December 31, 2005 Year Ended
(Unaudited) June 30, 2005
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OPERATIONS:
Net investment income (loss) $ (804,465) $ (1,520,993)
Net realized gain (loss) on securities 29,344,666 16,052,260
Change in unrealized
appreciation (depreciation) on securities (13,532,404) 18,659,508
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Net increase (decrease) in net assets
resulting from operations 15,007,797 33,190,775
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (108,497)*<F6>
From net realized gains (30,994,058) --
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(30,994,058) (108,497)
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CAPITAL SHARE TRANSACTIONS:
Proceeds from shares subscribed 21,365,598 108,849,934
Dividends reinvested 30,743,332 107,365
Redemption fees retained 8,134 23,301
Cost of shares redeemed (79,063,909) (190,917,296)
------------ ------------
Net increase (decrease) in net assets derived
from capital share transactions (26,946,845) (81,936,696)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (42,933,106) (48,854,418)
NET ASSETS:
Beginning of period 298,969,467 347,823,885
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End of period $256,036,361 $298,969,467
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ACCUMULATED NET INVESTMENT
INCOME (LOSS), END OF PERIOD $ (2,676,336) $ (1,871,871)
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CHANGES IN SHARES OUTSTANDING:
Shares sold 704,757 3,865,585
Shares issued to holders as
reinvestment of dividends 1,080,467 3,532
Shares redeemed (2,630,410) (6,875,515)
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Net increase (decrease) in shares outstanding (845,186) (3,006,398)
------------ ------------
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*<F6> See Footnote 5
See notes to the financial statements.
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
Six Months Ended Year Ended June 30,
December 31, 2005 --------------------------------------------------------
(Unaudited) 2005(2) 2004 2003 2002 2001
<F8>
----------- ------- ---- ---- ---- ----
PER SHARE DATA:
Net asset value, beginning of period $31.29 $27.69 $18.13 $16.79 $19.15 $28.39
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment gain (loss)(1)<F7> (0.09) (0.14) (0.23) (0.16) (0.18) (0.16)
Net realized and unrealized
gains (losses) on securities 1.87 3.75 9.79 1.50 (2.14) (7.85)
------ ------ ------ ------ ------ ------
Total from investment operations 1.78 3.61 9.56 1.34 (2.32) (8.01)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (0.01) -- -- -- --
Dividends from net realized gains (3.68) -- -- -- (0.04) (1.23)
------ ------ ------ ------ ------ ------
Total distributions (3.68) (0.01) -- -- (0.04) (1.23)
------ ------ ------ ------ ------ ------
Net asset value, end of period $29.39 $31.29 $27.69 $18.13 $16.79 $19.15
------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------
TOTAL RETURN 6.35% 13.04% 52.73% 7.98% (12.11%) (27.96%)
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions) $256,036 $298,969 $347,824 $77,957 $95,317 $150,872
Ratio of expenses to average net assets:
Before expense reimbursement 1.27% 1.33% 1.38% 1.58% 1.39% 1.28%
After expense reimbursement 1.25% 1.33% 1.38% 1.58% 1.39% 1.28%
Ratio of net investment income to average net assets:
Before expense reimbursement (0.60%) (0.49%) (0.90%) (1.04%) (0.98%) (0.74%)
After expense reimbursement (0.62%) (0.49%) (0.90%) (1.04%) (0.98%) (0.74%)
Portfolio turnover rate 105.28% 192.24% 113.27% 90.06% 132.21% 287.66%
(1)<F7> Net investment gain (loss) per share is calculated using average
shares outstanding.
(2)<F8> The financial highlights set forth herein include the historical
financial highlights of The Henlopen Fund. The assets of The
Henlopen Fund were acquired by Hennessy Advisors, Inc. on July 1,
2005. At the time of the acquisition the Advisor changed from
Landis Associates LLC to Hennessy Advisors, Inc., and the new
advisor changed the Fund's name to the Hennessy Cornerstone Growth
Fund, Series II.
See notes to the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2005 (Unaudited)
1). ORGANIZATION
The Hennessy Funds Trust (the "Trust") was organized as a Delaware Statutory
Trust on September 17, 1992 and consists of a sole series: Hennessy Cornerstone
Growth Fund, Series II (the "Fund"). Prior to July 1, 2005, both the Trust and
Fund were known as The Henlopen Fund. On July 1, 2005, Hennessy Advisors, Inc.,
acquired the assets, and assumed the liabilities, of The Henlopen Fund. Hence,
the Fund commenced operations as the Hennessy Cornerstone Growth Fund, Series II
on July 1, 2005. The Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended. The
investment objective of the Fund is long-term capital appreciation.
2). SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund 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. Fair value pricing
results in an estimated price that reasonably reflects the current market
conditions in order to rate the portfolio holdings such that shareholder
transactions receive a fair net asset value.
b). Federal Income Taxes - Provision for federal income taxes or excise taxes
has not been made since the Fund has elected to be taxed as a "regulated
investment company" and intends 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 Fund is 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 and net
realized gains for the Fund, if any, are declared and paid out annually,
usually in November or December of each year.
e). Security Transactions - Investment and shareowner transactions are recorded
on the trade date. The Fund determines 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 the Fund is
calculated by dividing the sum of the value of the securities held by the
Fund, plus cash or other assets, minus all liabilities (including estimated
accrued expenses) by the total number of shares outstanding for the Fund,
rounded to the nearest cent. The Fund's shares will not be priced on the
days on which the NYSE is closed for trading. The offering and redemption
price per share for the Fund is equal to the Fund's net asset value per
share. The Fund charges a 1.50% redemption fee on shares held less than 90
days. These fees are deducted from the redemption proceeds otherwise
payable to the shareholder. The Fund will retain the fee charged as paid-in
capital and such fees become part of the Fund's daily NAV calculation.
h). Repurchase Agreements - The 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). INVESTMENT TRANSACTIONS
During the six months ended December 31, 2005, purchases and sales of investment
securities (excluding short-term investments) were $275,337,994 and
$305,879,383, respectively.
4). INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Hennessy Advisors, Inc. (the "Manager") is the manager of the Fund. 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 Fund. As
compensation for its services, the Manager is entitled to a monthly fee from the
Fund. The fee is based upon the average daily net assets of the Fund at the
annual rate of 0.74%.
The Fund is responsible for its own operating expenses. The Manager has
agreed to reimburse the Fund to the extent necessary to ensure that the "Total
Annual Fund Operating Expense" does not exceed 1.25%. This expense cap will be
in effect through June 30, 2006.
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 Fund. 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 Fund.
U.S. Bancorp Fund Services, LLC (the "Administrator") acts as the Fund's
Administrator under an Administration Agreement. The Administrator prepares
various federal and state regulatory filings, reports and returns for the Fund;
prepares reports and materials to be supplied to the directors; monitors the
activities of the Fund's custodian, transfer agent and accountants; coordinates
the preparation and payment of the Fund's expenses and reviews the Fund's
expense accruals. Fees paid to U.S. Bancorp Fund Services, LLC for the six
months ended December 31, 2005, were $323,735.
Quasar Distributors, LLC (the "Distributor") acts as the Fund's principal
underwriter in a continuous public offering of the Fund's shares. The
Distributor is an affiliated company of U.S. Bank, N.A.
5). FEDERAL TAX INFORMATION
The following information for the Fund is presented on an income tax basis as of
June 30, 2005, the Fund's most recent fiscal year end:
GROSS GROSS NET UNREALIZED DISTRIBUTABLE DISTRIBUTABLE
COST OF UNREALIZED UNREALIZED APPRECIATION ORDINARY LONG-TERM
INVESTMENTS APPRECIATION DEPRECIATION ON INVESTMENTS INCOME CAPITAL GAINS
----------- ------------ ------------ -------------- ------------- -------------
$273,107,627 $41,540,016 $15,512,755 $26,027,261 $6,598,182 $ --
The difference, if any, between the cost amount for financial statement and
federal income tax purposes is due primarily to timing differences in
recognizing certain gains and losses in security transactions and for mark to
market for Passive Foreign Investment Companies ("PFICs").
The tax components of dividends paid during the years ended June 30, 2005 and
2004, capital loss carryovers, which may be used to offset future capital gains,
subject to Internal Revenue Code limitations, as of June 30, 2005, and tax basis
post-October losses as of June 30, 2005, which are not recognized for tax
purposes until the first day of the following fiscal year are:
JUNE 30, 2005 JUNE 30, 2004
------------------------------------------------------------ ------------------------------
ORDINARY LONG-TERM NET CAPITAL ORDINARY LONG-TERM
INCOME CAPITAL GAINS LOSS POST-OCTOBER INCOME CAPITAL GAINS
DISTRIBUTIONS DISTRIBUTIONS CARRYOVERS LOSSES DISTRIBUTIONS DISTRIBUTIONS
------------- ------------- ----------- ------------ ------------- -------------
$108,497 $ -- $ -- $444,531 $ -- $ --
The Fund utilized $8,943,326 of its capital loss carryovers during the year
ended June 30, 2005.
For corporate shareholders in the Fund, the percentage of dividend income
distributed for the year ended June 30, 2005, which is designated as qualifying
for the dividends received deduction, is 4.6% (unaudited).
For shareholders in the Fund, the percentage of dividend income distributed
for the year ended June 30, 2005, which is designated as qualified dividend
income under the Jobs and Growth Tax Relief Act of 2003, is 100% (unaudited).
EXPENSE EXAMPLE December 31, 2005 (Unaudited)
As a shareholder of the Fund you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments, reinvested
dividends, or other distributions; redemption fees; and exchange fees; and (2)
ongoing costs, including management fees and other Fund expenses. This example
is intended to help you understand your ongoing costs (in dollars) of investing
in the Hennessy Cornerstone Growth Fund, Series II 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 July 1, 2005 through December 31,
2005.
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
In addition to the costs highlighted and described below, the only Fund
transaction costs you might currently incur would be wire fees ($15 per wire),
if you choose to have proceeds from a redemption wired to your bank account
instead of receiving a check. Additionally, U.S. Bank charges an annual
processing fee of $15 if you maintain an IRA account with the Fund. To determine
your total costs of investing in the Fund, you would need to add any applicable
wire or IRA processing fees you've incurred during the period to the costs
provided in the example at the end of this section.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption or exchange fees. Therefore, the second line of the
table is useful in comparing ongoing costs only, and will not help you determine
the relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING PERIOD*<F9>
VALUE 7/1/05 VALUE 12/31/05 7/1/05-12/31/05
------------ -------------- ------------------
Hennessy Cornerstone
Growth Fund, Series II Actual $1,000 $1,000.00 $1,063.50 $6.49
Hypothetical (5% return before expenses) $1,000.00 $1,018.91 $6.35
*<F9> Expenses are equal to the Fund's annualized expense ratio of 1.248%,
multiplied by the average account value over the period, multiplied by
184/365 (to reflect the one-half year period between July 1, 2005 and
December 31, 2005).
HOW TO OBTAIN A COPY OF THE FUND'S PROXY VOTING POLICY AND PROXY VOTING RECORDS
A description of the policies and procedures that the Fund uses 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. The Hennessy Cornerstone Growth Fund, Series II proxy
voting record will be 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 Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q
will be available on the SEC's website at www.sec.gov. The Fund's 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 Fund's N-Q will also be
available upon request by calling 1-800-966-4354.
FUND
Hennessy Cornerstone Growth Fund, Series II
7250 Redwood Blvd., Suite 200
Novato, California 94945
INVESTMENT MANAGER
Hennessy Advisors, Inc.
7250 Redwood Blvd., Suite 200
Novato, California 94945
(800) 966-4354
ADMINISTRATOR, TRANSFER AGENT,
DIVIDEND PAYING AGENT &
SHAREHOLDER SERVICING AGENT
U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
(800) 261-6950
CUSTODIAN
U.S. Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
TRUSTEES
J. Dennis DeSousa
Robert T. Doyle
Neil J. Hennessy
Gerald P. Richardson
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG, LLP
303 East Wacker Drive
Chicago, Illinois 60601
LEGAL COUNSEL
Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5306
DISTRIBUTOR
Quasar Distributors, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
FOR INFORMATION,
QUESTIONS OR ASSISTANCE,
PLEASE CALL
THE HENNESSY FUNDS
1-800-966-4354 OR
1-415-899-1555
(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 reviewed the Registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940 (the "Act")) as of a date within 90 days of the filing of this report,
as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b)
under the Securities Exchange Act of 1934. Based on their review, such
officers have concluded that the disclosure controls and procedures are
effective in ensuring that information required to be disclosed in this
report is appropriately recorded, processed, summarized and reported and
made known to them by others within the Registrant and by the Registrant's
service provider.
(b) There were no significant changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act) that
occurred during the second fiscal quarter of the period covered by this
report 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) Hennessy Funds Trust
--------------------------
By (Signature and Title) /s/ Neil J. Hennessy
---------------------------
Neil J. Hennessy, President
Date 3/6/2006
----------------
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)*<F10> /s/ Neil J. Hennessy
---------------------------
Neil J. Hennessy, President
Date 3/6/2006
--------------
By (Signature and Title)*<F10> /s/ Teresa M. Nilsen
---------------------------
Teresa M. Nilsen, Treasurer
Date 3/6/2006
--------------
*<F10> Print the name and title of each signing officer under his or her
signature.