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: JUNE 30, 2006
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ITEM 1. REPORT TO STOCKHOLDERS.
- ------------------------------
HENNESSY FUNDS
ANNUAL REPORT
JUNE 30, 2006
HENNESSY CORNERSTONE GROWTH FUND, SERIES II
FUND SYMBOL: HENLX
(HENNESSY FUNDS LOGO)
FORMULAS FOR SMART INVESTING
CONTENTS
Letter to shareholders 1
Change in value of $10,000 investment 3
Summary of investments 4
Financial statements
Statement of assets and liabilities 8
Statement of operations 9
Statements of changes in net assets 10
Financial highlights 12
Notes to the financial statements 14
Report of Independent Registered Public Accounting Firm 19
Change in Independent Registered Public Accounting Firm 20
Trustees and Officers of the Fund 22
Expense example 26
Proxy voting policy 27
LETTER TO SHAREHOLDERS
August, 2006
DEAR HENNESSY CORNERSTONE GROWTH FUND, SERIES II SHAREHOLDER:
The twelve months ending June 30, 2006 can be characterized as tumultuous, as we
experienced wildly fluctuating oil prices, increasing interest rates, increasing
inflation and tremendous speculation. This volatility has, in turn, caused
investors to be nervous and hesitant. Despite this, the markets were able to
produce healthy returns for the twelve-month period.
While the financial markets have recently experienced a significant correction,
I don't see any fundamental economic factors that have shifted, or anything to
suggest that the markets will not continue to perform well in the future. Core
inflation remains relatively low at 2.6%, and the Fed seems committed to keeping
interest rates in check, at least for the time being. Unemployment remains at
relatively low levels, and corporations are projecting 10-15% increases in
annual earnings. The major indices appear to be undervalued by approximately 10%
versus their historical levels. The markets will almost certainly continue to
have their short-term ups and downs, but I maintain a positive outlook for the
markets over the long run.
Rising oil prices helped to support the strong performance of energy and
commodity stocks in the twelve-month period ending June 30, 2006. Industrial and
materials stocks also generally posted strong gains. With record-high gas
prices, higher interest rates, and a slow down in the appreciation of home
prices, many consumers may be feeling a little less wealthy and pulling back on
their spending. This "wealth effect" may explain in part the poorer performance
of many consumer discretionary and retail stocks.
We are pleased with the performance of the Hennessy Cornerstone Growth Fund,
Series II for the first twelve months under our management.*<F1> For the period
7/1/05 through 6/30/06, the Fund outperformed its benchmark indices; the
Hennessy Cornerstone Growth Fund, Series II returned 16.48%, versus the S&P 500
Index at 8.33% and the Russell 2000 Index at 13.97%. For the twelve months
ending June 30, 2006, energy-related stocks generally produced strong returns,
and the top performing energy stocks in the Cornerstone Growth Fund, Series II
portfolio were Frontier Oil Corp., which returned 114% for the twelve-month
period, and Holly Corp., which returned 104%. Lufkin Industries, NS Group,
Acergy SA (formerly Stolt Offshore) and Valero also performed well for the
twelve-month period, each returning between 64% and 68%. While real estate
managers/developers such as CB Richard Ellis Group (+73%) and Trammel Crow
(+45%) posted strong gains for the twelve-month period, poor performance from
homebuilder stocks in the portfolio, such as Hovnanian Enterprises (-54%),
Ryland Group (-43%), Standard Pacific (-41%), Meritage Homes (-40%) and KB Homes
(-39%), hampered the returns of the Fund. Performance of retail and consumer
discretionary stocks in the portfolio finished mixed for the twelve-month ending
June 30, 2006.
At Hennessy Funds, we promise our shareholders that we will remain disciplined,
adhering to our time-tested investment formula, through all types of market
conditions. 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 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. 8/06
CHANGE IN VALUE OF $10,000 INVESTMENT
HENNESSY CORNERSTONE GROWTH FUND, SERIES II
Hennessy Cornerstone Russell
Date Growth Fund, Series II 2000 Index S&P 500 Index
---- ---------------------- ---------- -------------
7/1/2005*<F2> $10,000.00 $10,000.00 $10,000.00
9/30/2005 $9,973.00 $10,414.00 $10,332.00
12/31/2005 $10,634.21 $10,531.68 $10,547.94
3/31/2006 $12,334.62 $11,999.79 $10,992.01
6/30/2006 $11,647.58 $11,397.40 $10,833.72
This chart assumes an initial gross investment of $10,000 made on July 1, 2005
(inception). Returns shown include the reinvestment of all dividends. Returns
shown do not reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares.
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.
The fund imposes a 1.5% redemption fee on shares held for less than 90 days.
Performance data does not reflect redemption fee. Had the fee been included,
returns would be lower.
CUMULATIVE TOTAL RETURN
PERIOD ENDED JUNE 30, 2006
Since Inception
7/1/05
---------------
Hennessy Cornerstone Growth Fund, Series II 16.48%
Russell 2000 Index 13.97%
S&P 500 Index 8.33%
RUSSELL 2000 INDEX - A recognized small cap index of the 2,000 smallest
securities of the Russell 3000 Index, which is comprised of the 3,000 largest
U.S. Securities as determined by total market capitalization.
S&P 500 INDEX - The Standard & Poor's Composite Index of 500 Stocks, a widely
recognized unmanaged index of common stocks.
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 June 30, 2006.
INDUSTRY SECTORS AS OF JUNE 30, 2006
Consumer Discretionary 25.17%
Consumer Staples 6.49%
Energy 19.55%
Financials 5.32%
Health Care 8.43%
Industrials 19.25%
Information Technology 9.42%
Materials 4.09%
Short Term Investments and Other 2.28%
TOP TEN HOLDINGS % OF NET ASSETS
---------------- ---------------
Anderson's, Inc. 4.10%
Holly Corp. 3.51%
Frontier Oil Corp. 3.45%
Amerco, Inc. 3.16%
Clean Harbors, Inc. 3.05%
Multi-Fineline Electronix, Inc. 3.03%
CB Richard Ellis Group, Inc. 2.91%
Sykes Enterprises, Inc. 2.83%
NS Group, Inc. 2.78%
Acergy SA - ADR 2.75%
SUMMARY OF INVESTMENTS
June 30, 2006
COMMON STOCKS - 97.72%
Number of % of
Shares Value Net Assets
--------- ----- ----------
CONSUMER DISCRETIONARY - 25.17%
Advance Auto Parts 109,100 $ 3,152,990 1.13%
Andersons, Inc. 275,000 11,442,750 4.10%
Children's Place (a)<F3> 98,400 5,908,920 2.11%
Denny's Corp. (a)<F3> 867,500 3,201,075 1.15%
Genesco, Inc. (a)<F3> 123,000 4,166,010 1.49%
Hovnanian Enterprises, Inc. (a)<F3> 72,400 2,177,792 0.78%
KB Home 63,600 2,916,060 1.04%
Luby's, Inc. (a)<F3> 389,800 4,065,614 1.46%
Men's Wearhouse, Inc. 135,200 4,096,560 1.47%
Meritage Homes Corp. (a)<F3> 59,000 2,787,750 1.00%
The Pantry, Inc. (a)<F3> 117,500 6,760,950 2.42%
Phillips-Van Heusen 140,900 5,376,744 1.92%
Riviera Holdings Corp. (a)<F3> 193,800 3,914,760 1.40%
Ryland Group, Inc. 63,200 2,753,624 0.99%
Sears Holdings Corp. (a)<F3> 31,000 4,814,300 1.72%
Standard Pacific Corp. 107,700 2,767,890 0.99%
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70,303,789 25.17%
CONSUMER STAPLES - 6.49%
Great Atlantic & Pacific Tea Co. 212,900 4,837,088 1.73%
Longs Drug Stores Corp. 108,400 4,945,208 1.77%
Seaboard Corp. 2,800 3,584,000 1.29%
Spartan Stores, Inc. 324,800 4,751,824 1.70%
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18,118,120 6.49%
ENERGY - 19.55%
Acergy SA - ADR (a)<F3>(b)<F4> 502,200 7,683,660 2.75%
Frontier Oil Corp. 297,400 9,635,760 3.45%
Holly Corp. 203,200 9,794,240 3.51%
Lufkin Industries, Inc. 128,800 7,654,584 2.74%
NS Group, Inc. (a)<F3> 140,800 7,755,264 2.78%
Transmontaigne, Inc. (a)<F3> 409,900 4,594,979 1.65%
Valero Energy Corp. 112,300 7,470,196 2.67%
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54,588,683 19.55%
FINANCIALS - 5.32%
CB Richard Ellis Group, Inc. (a)<F3> 327,000 8,142,300 2.91%
Trammell Crow Co. (a)<F3> 191,200 6,724,504 2.41%
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14,866,804 5.32%
HEALTH CARE - 8.43%
Aetna, Inc. 113,300 4,524,069 1.62%
Chemed Corp. 112,300 6,123,719 2.19%
Humana, Inc. (a)<F3> 120,400 6,465,480 2.32%
WellCare Health Plans, Inc. (a)<F3> 131,100 6,430,455 2.30%
------------ -------
23,543,723 8.43%
INDUSTRIALS - 19.25%
Amerco, Inc. (a)<F3> 87,600 8,817,816 3.16%
Badger Meter, Inc. 230,200 6,215,400 2.22%
Clean Harbors, Inc. (a)<F3> 211,100 8,509,441 3.05%
Gehl Co. (a)<F3> 180,800 4,615,824 1.65%
Healthcare Services Group 232,900 4,879,255 1.75%
JLG Industries, Inc. 340,200 7,654,500 2.74%
The Shaw Group, Inc. (a)<F3> 218,300 6,068,740 2.17%
Synagro Technologies, Inc. 954,200 3,750,006 1.34%
World Air Holdings, Inc. (a)<F3> 379,000 3,255,610 1.17%
------------ -------
53,766,592 19.25%
INFORMATION TECHNOLOGY - 9.42%
Multi-Fineline Electronix, Inc. (a)<F3> 254,600 8,450,174 3.03%
Par Technology Corp. (a)<F3> 237,500 3,032,875 1.09%
Sykes Enterprises, Inc. (a)<F3> 489,900 7,916,784 2.83%
Western Digital Corp. (a)<F3> 348,000 6,893,880 2.47%
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26,293,713 9.42%
MATERIALS - 4.09%
Pioneer Companies, Inc. (a)<F3> 212,000 5,783,360 2.07%
Quanex Corp. 131,100 5,646,477 2.02%
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11,429,837 4.09%
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TOTAL COMMON STOCKS (Cost $235,069,125) 272,911,261 97.72%
SHORT-TERM INVESTMENTS - 2.31%
Principal % of
Amount Value Net Assets
--------- ----- ----------
DISCOUNT NOTES - 2.24%
Federal Home Loan Bank Discount Note,
4.950%, due 7/3/2006 $6,243,000 6,241,334 2.24%
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TOTAL DISCOUNT NOTES (Cost $6,241,334) 6,241,334 2.24%
VARIABLE RATE DEMAND NOTES#<F5> - 0.07%
American Family Financial
Services, 4.807% 101,748 101,748 0.04%
Wisconsin Corporate Central
Credit Union, 5.020% 97,939 97,939 0.03%
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TOTAL VARIABLE RATE DEMAND NOTES
(Cost $199,687) 199,687 0.07%
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TOTAL SHORT-TERM INVESTMENTS
(Cost $6,441,021) 6,441,021 2.31%
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TOTAL INVESTMENTS - 100.03%
(Cost $241,510,146) 279,352,282 100.03%
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Liabilities in Excess of Other Assets - (0.03)% (74,303) (0.03)%
TOTAL NET ASSETS - 100.00% $279,277,979 100.00%
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ADR - American Depository Receipt
(a)<F3> Non income producing
(b)<F4> Foreign issued security
#<F5> 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 June 30, 2006.
See notes to the financial statements.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES June 30, 2006
ASSETS:
Investments, at value (cost $241,510,146) $279,352,282
Dividends and interest receivable 59,993
Receivable for fund shares sold 545,901
Prepaid expenses and other assets 60,353
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Total Assets 280,018,529
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LIABILITIES:
Payable for fund shares redeemed 287,627
Payable to Advisor 168,360
Payable to Administrator 162,435
Payable for professional services 42,320
Payable for reports to shareholders 17,488
Accrued expenses and other payables 62,320
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Total Liabilities 740,550
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NET ASSETS $279,277,979
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NET ASSETS CONSIST OF:
Capital stock $240,542,246
Accumulated undistributed net realized gain (loss) on investments 893,597
Unrealized net appreciation (depreciation) on investments 37,842,136
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Total Net Assets $279,277,979
------------
------------
Shares issued and outstanding
(Unlimited number of shares authorized, no par value) 8,676,138
Net asset value, offering price and redemption price per share $32.19
------------
------------
See notes to the financial statements.
FINANCIAL STATEMENTS
STATEMENT OF OPERATIONS For the Year Ended June 30, 2006
INVESTMENT INCOME:
Dividend income(1)<F6> $ 2,506,465
Interest income 310,552
-----------
Total investment income 2,817,017
-----------
EXPENSES:
Investment advisory fees 2,029,091
Administration, fund accounting, custody and transfer agent fees 634,136
Sub-transfer agent expenses 340,607
Service fees 274,201
Reports to shareholders 42,275
Audit fees 35,000
Legal fees 27,982
Federal and state registration fees 27,788
Insurance expense 11,654
Directors' fees and expenses 10,374
Other 1,311
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Total expenses before reimbursement from Advisor 3,434,419
Expense reimbursement by Advisor (7,214)
-----------
Net expenses 3,427,205
-----------
NET INVESTMENT INCOME (LOSS) $ (610,188)
-----------
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gain on investments $28,215,988
Change in unrealized appreciation (depreciation) on investments 9,942,792
-----------
Net gain (loss) on investments 38,158,780
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $37,548,592
-----------
-----------
(1)<F6> Net of foreign taxes withheld of $181.
See notes to the financial statements.
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
June 30, 2006 June 30, 2005
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OPERATIONS:
Net investment income (loss) $ (610,188) $ (1,520,993)
Net realized gain (loss) on securities 28,215,988 16,052,260
Change in unrealized
appreciation (depreciation) on securities 9,942,792 18,659,508
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Net increase (decrease) in net assets
resulting from operations 37,548,592 33,190,775
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DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (108,497)
From net realized gains (30,993,772) --
------------ ------------
(30,993,772) (108,497)
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CAPITAL SHARE TRANSACTIONS:
Proceeds from shares subscribed 69,453,923 108,849,934
Dividends reinvested 30,743,046 107,365
Redemption fees retained 54,048 23,301
Cost of shares redeemed (126,497,325) (190,917,296)
------------ ------------
Net increase (decrease) in net assets
derived from capital share transactions (26,246,308) (81,936,696)
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TOTAL INCREASE (DECREASE) IN NET ASSETS (19,691,488) (48,854,418)
NET ASSETS:
Beginning of period 298,969,467 347,823,885
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End of period $279,277,979 $298,969,467
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ACCUMULATED NET INVESTMENT
INCOME (LOSS), END OF PERIOD $ -- $ (1,871,871)
------------ ------------
CHANGES IN SHARES OUTSTANDING:
Shares sold 2,162,883 3,865,585
Shares issued to holders as
reinvestment of dividends 1,080,457 3,532
Shares redeemed (4,122,793) (6,875,515)
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Net increase (decrease) in shares outstanding (879,453) (3,006,398)
------------ ------------
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See notes to the financial statements.
FINANCIAL STATEMENTS
FINANCIAL HIGHLIGHTS
Year Ended June 30,
----------------------------------------------------------------
2006 2005(2)<F8> 2004 2003 2002
---- ----------- ---- ---- ----
PER SHARE DATA:
Net asset value, beginning of period $31.29 $27.69 $18.13 $16.79 $19.15
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS:
Net investment gain (loss)(1)<F7> (0.07) (0.14) (0.23) (0.16) (0.18)
Net realized and unrealized gains (losses) on securities 4.65 3.75 9.79 1.50 (2.14)
------ ------ ------ ------ ------
Total from investment operations 4.58 3.61 9.56 1.34 (2.32)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income -- (0.01) -- -- --
Dividends from net realized gains (3.68) -- -- -- (0.04)
------ ------ ------ ------ ------
Total distributions (3.68) (0.01) -- -- (0.04)
------ ------ ------ ------ ------
Net asset value, end of period $32.19 $31.29 $27.69 $18.13 $16.79
------ ------ ------ ------ ------
------ ------ ------ ------ ------
TOTAL RETURN 16.48% 13.04% 52.73% 7.98% (12.11)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions) $279,278 $298,969 $347,824 $77,957 $95,317
Ratio of expenses to average net assets:
Before expense reimbursement 1.25% 1.33% 1.38% 1.58% 1.39%
After expense reimbursement 1.25% 1.33% 1.38% 1.58% 1.39%
Ratio of net investment income to average net assets:
Before expense reimbursement (0.22)% (0.49)% (0.90)% (1.04)% (0.98)%
After expense reimbursement (0.22)% (0.49)% (0.90)% (1.04)% (0.98)%
Portfolio turnover rate 109.02% 192.24% 113.27% 90.06% 132.21%
(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
June 30, 2006
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 U.S. generally accepted accounting principles
("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: 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 of
the portfolio holdings.
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 passive foreign investment
companies, 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.
Due to inherent differences in the recognition of income, expense, and
realized gain/losses under U.S generally accepted accounting principles and
federal income tax purposes, permanent differences between book and tax
basis reporting for the 2006 fiscal year have been identified and
appropriately reclassified on the Statement of Assets and Liabilities. For
the year ended June 30, 2006, the Fund had a $2,482,059 permanent book and
tax basis difference relating to the Fund's net operating loss and
reclassification from sales of passive foreign investment companies which
resulted in an increase in accumulated net investment income an a decrease
in accumulated realized gain/loss.
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 year ended June 30, 2006, purchases and sales of investment
securities (excluding short-term investments) were $291,910,997 and
$321,219,840, respectively.
4). INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Hennessy Advisors, Inc. (the "Advisor") is the advisor of the Fund. The Advisor
provides the Fund with investment advisory services under an Advisory Agreement.
The Advisor furnishes all investment advice, office space, facilities, and
provides most of the personnel needed by the Fund. As compensation for its
services, the Advisor 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 Advisor has
agreed to reimburse the Fund to the extent necessary to ensure that the "Total
Annual Fund Operating Expense" does not exceed 1.25%. The Advisor waived or
reimbursed expenses of $7,214 associated with the Fund for the year ended June
30, 2006. This expense cap was in effect through June 30, 2006.
The Board of Directors has approved a Shareholder Servicing Plan which was
instituted to compensate the Advisor for the non-investment management services
it provides the Fund. The Plan provides for a monthly fee paid to the Advisor at
an annual rate of 0.10% of the average daily net assets of the Fund.
The Fund has entered into agreements with various brokers, dealers and
financial intermediaries in connection with the sale of shares of the Fund. The
agreements provide for periodic payments by the Fund to the brokers, dealers and
financial intermediaries for providing certain shareholder maintenance services
(sub-transfer agent expenses). These shareholder services include: the pre-
processing and quality control of new accounts, shareholder correspondence,
answering customer inquiries regarding account status, and facilitating
shareholder telephone transactions. Fees paid by the Fund to various brokers,
dealers and financial intermediaries for the year ended June 30, 2006, were
$340,607.
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 year
ended June 30, 2006, were $634,136.
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, 2006, the Fund's most recent fiscal year end:
HENNESSY CORNERSTONE
GROWTH FUND, SERIES II
----------------------
Cost of investments $241,510,146
------------
Gross unrealized appreciation 62,957,502
Gross unrealized depreciation 25,115,366
------------
Net unrealized appreciation (depreciation) 37,842,136
------------
------------
Undistributed ordinary income 825,569
Undistributed long-term capital gain 68,028
------------
Total distributable earnings 893,597
------------
------------
Accumulated realized losses --
------------
Total accumulated realized
and unrealized gains (losses) $ 38,735,733
------------
------------
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, 2006
and 2005, capital loss carryovers, which may be used to offset future capital
gains, subject to Internal Revenue Code limitations, as of June 30, 2006, and
tax basis post-October losses as of June 30, 2006, which are not recognized for
tax purposes until the first day of the following fiscal year are:
JUNE 30, 2006
------------------------------------------------------------
ORDINARY LONG-TERM NET CAPITAL
INCOME CAPITAL GAINS LOSS POST-OCTOBER
DISTRIBUTIONS DISTRIBUTIONS CARRYOVERS LOSSES
------------- ------------- ----------- ------------
$23,569,994 $7,423,778 $ -- $ --
JUNE 30, 2005
------------------------------------------------------------
ORDINARY LONG-TERM NET CAPITAL
INCOME CAPITAL GAINS LOSS POST-OCTOBER
DISTRIBUTIONS DISTRIBUTIONS CARRYOVERS LOSSES
------------- ------------- ----------- ------------
$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, 2006, which is designated as qualifying
for the dividends received deduction, is 11.1% (unaudited).
For shareholders in the Fund, the percentage of dividend income distributed
for the year ended June 30, 2006, which is designated as qualified dividend
income under the Jobs and Growth Tax Relief Act of 2003, is 37.75% (unaudited).
Additional Information Applicable to Foreign Shareholders Only: The Fund
hereby designates 1.79% of its ordinary income distributions for the fiscal
year, June 30, 2006, as interest related dividends under Internal Revenue
Service Code Section 871(k)(1)(C) (unaudited).
6). RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board ("FASB")
released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken or expected to be taken in the
course of preparing the Hennessy Cornerstone Growth Fund, Series II tax returns
to determine whether the tax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. Tax positions not deemed to meet the
more-likely-than-not threshold would be recorded as a tax benefit or expense in
the current year. Adoption of FIN 48 is required for fiscal years beginning
after December 15, 2006 and is to be applied to all open tax years as of the
effective date. At this time, management is evaluating the implications of FIN
48 and its impact in the financial statements has not yet been determined.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
of Hennessy Cornerstone Growth Fund, Series II
We have audited the accompanying statement of assets and liabilities of Hennessy
Cornerstone Growth Fund, Series II (the Fund) (formerly known as The Henlopen
Fund), including the schedule of investments, as of June 30, 2006, and the
related statement of operations, the statement of changes in net assets, and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the period ended, June 30, 2005, and the financial highlights for each of
the years or periods ended June 30, 2005, and prior, were audited by other
auditors whose report thereon dated July 28, 2005 expressed an unqualified
opinion on those financial statements.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2006, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of June 30, 2006, the results of its operations, the changes in its net
assets and the financial highlights for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/KPMG LLP
Chicago, Illinois
August 24, 2006
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To facilitate the Hennessy Funds having a common independent registered public
accounting firm, on November 15, 2005 PricewaterhouseCoopers LLP declined to
stand for re-election as the independent registered public accounting firm for
the Hennessy Cornerstone Growth Fund, Series II.
The reports of PricewaterhouseCoopers LLP on the Fund's financial statements for
the past two years contained no adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principle. During the Fund's two most recent fiscal years and through November
15, 2005, there have been no disagreements with PricewaterhouseCoopers LLP on
any matter of accounting principle or practices, financial statement disclosure,
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of PricewaterhouseCoopers LLP, would have caused them to make
reference thereto in their reports on the Fund's financial statements for such
years.
The Audit Committee engaged KPMG LLP as the Fund's new independent registered
public accounting firm as of December 6, 2005.
TRUSTEES AND OFFICERS OF THE FUND (Unaudited)
As a Delaware statutory trust, the business and affairs of the Fund are managed
by its officers under the direction of its Board of Trustees. Prior to July 1,
2005, the trustees were Michael L. Hershey, Howard E. Cosgrove, Robert J. Fahey,
Jr. and John H. Remer. The name, age, address, principal occupation(s) during
the past five years, and other information with respect to each of the current
trustees and officers of the Fund are as follows:
NUMBER OF
PORTFOLIOS
TERM OF IN THE FUND
POSITION(S) OFFICE AND COMPLEX OTHER
HELD WITH LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS
NAME, AGE AND ADDRESS THE FUND TIME SERVED DURING PAST 5 YEARS TRUSTEE(1)<F9> HELD BY TRUSTEE
- --------------------- ----------- ----------- ----------------------- -------------- ---------------
"DISINTERESTED PERSONS"
J. Dennis DeSousa Trustee Indefinite, Currently a real estate 6 None
Age: 69 until investor.
Address: successor
c/o Hennessy Advisors, Inc. elected
7250 Redwood Blvd.
Suite 200 Served since
Novato, CA 94945 July 2005
Robert T. Doyle Trustee Indefinite, Currently the Sheriff of 6 None
Age: 58 until Marin County, California
Address: successor (since 1996) and has been
c/o Hennessy Advisors, Inc. elected employed in the Marin County
7250 Redwood Blvd. Sheriff's Office in various
Suite 200 Served since capacities since 1969
Novato, CA 94945 July 2005
Gerald P. Richardson Trustee Indefinite, Chief Executive Officer and 6 None.
Age: 59 until owner of ORBIS Payment
Address: successor Services since January 2001;
c/o Hennessy Advisors, Inc. elected and in 2000, Mr. Richardson
7250 Redwood Blvd. was an independent consultant.
Suite 200 Served since
Novato, CA 94945 July 2005
"INTERESTED PERSONS"
Neil J. Hennessy(1)<F9>(2)<F10> Trustee Trustee: President, Chairman, CEO and 6 Director
Age: 50 and President ------- Portfolio Manager of Hennessy of Hennessy
Address: Indefinite, Advisors, Inc., the Fund's Advisors, Inc.
c/o Hennessy Advisors, Inc. until investment adviser, since 1989;
7250 Redwood Blvd. successor President of The Hennessy
Suite 200 elected Mutual Funds, Inc. and The
Novato, CA 94945 Served since Hennessy Funds, Inc. since
July 2005 1996, and President of
Hennessy Funds Trust since 2005.
Officer:
-------
1 year term
Served since
July 2005
Frank Ingarra, Jr. (2)<F10> Assistant 1 year term Assistant Portfolio Manager Not Not
Age: 35 Portfolio for Hennessy Advisors, Inc., applicable. applicable.
Address: Manager and Served since the Fund's investment adviser,
c/o Hennessy Advisors, Inc. Vice President July 2005 from March 2002 to the present;
7250 Redwood Blvd. from August 2000 through March
Suite 200 2002, Mr. Ingarra was the head
Novato, CA 94945 trader for Hennessy Advisors,
Inc.; from August 2002 to the
present, Mr. Ingarra has been
a Vice President of The Hennessy
Mutual Funds, Inc. and The
Hennessy Funds, Inc.; and from
July 1999 through August 2000,
Mr. Ingarra was the Vice President
and lead trader for O'Shaughnessy
Capital Management. Mr. Ingarra
was Assistant Vice President and
Equity Trader for O'Shaughnessy
Capital Management.
Harry F. Thomas(2)<F10> Chief Compliance 1 year term Chief Compliance Officer for Not Not
Age: 59 Officer Hennessy Advisors, Inc., the applicable. applicable.
Address: Served since Fund's investment adviser,
c/o Hennessy Advisors, Inc. July 2005 since 2004; retired business
7250 Redwood Blvd. executive from 2001 through
Suite 200 2004; director of The Hennessy
Novato, CA 94945 Mutual Funds, Inc. and The
Hennessy Funds, Inc. from 2000
to May 2004; and Managing
Director of Emplifi, Inc., a
consulting firm, from 1999
through 2001; and Vice President
and Manager of Employee Benefit
Trust Operation at Wells Fargo
Bank from 1997 through 1999.
Teresa M. Nilsen(2)<F10> Executive Vice 1 year term Currently Executive Vice Not Director
Age: 40 President and President, Chief Financial applicable. of Hennessy
Address: Treasurer Served since Officer and Secretary of Advisors, Inc.
c/o Hennessy Advisors, Inc. July 2005 Hennessy Advisors, Inc., the
7250 Redwood Blvd. Fund's investment adviser; Ms.
Suite 200 Nilsen has been the corporate
Novato, CA 94945 secretary and a financial
officer of Hennessy Advisors,
Inc. Since 1989; Ms. Nilsen has
been an officer of The Hennessy
Mutual Funds, Inc. and The
Hennessy Funds, Inc. since 1996,
and is currently Executive
Vice President and Treasurer.
Daniel B. Steadman(2)<F10> Executive Vice 1 year term Executive Vice President of Not Director of
Age: 50 President and Hennessy Advisors, Inc., the applicable. Hennessy
Address: Secretary Served since Fund's investment adviser, Advisors, Inc.
c/o Hennessy Advisors, Inc. July 2005 from 2000 to the present; Vice
7250 Redwood Blvd. President of Westamerica Bank
Suite 200 from 1995 through 2000; Mr.
Novato, CA 94945 Steadman has been Executive
Vice President and Secretary
of The Hennessy Mutual Funds,
Inc. and The Hennessy Funds,
Inc. since 2000.
(1)<F9> There are six portfolios in the fund complex overseen by the
trustees: (a) the Fund; (b) the Hennessy Cornerstone Growth Fund,
Hennessy Focus 30 Fund and Hennessy Cornerstone Value Fund, series
of The Hennessy Mutual Funds, Inc.; and (c) the Hennessy Total
Return Fund and Hennessy Balanced Fund, series of The Hennessy
Funds, Inc. (collectively, the "Hennessy Funds").
--------------
(2)<F10> All officers of the Trust and employees of the Manager are
interested persons (as defined in the 1940 Act) of the Trust.
EXPENSE EXAMPLE June 30, 2006 (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 January 1, 2006 through June
30, 2006.
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*<F11>
VALUE 1/1/06 VALUE 6/30/06 1/1/06-6/30/06
------------ ------------- -------------------
Hennessy Cornerstone Growth
Fund, Series II Actual $1,000 $1,000.00 $1,095.30 $6.50
Hypothetical
(5% return before expenses) $1,000.00 $1,018.59 $6.26
*<F11> Expenses are equal to the Fund's annualized expense ratio of 1.25%,
multiplied by the average account value over the period, multiplied by
181/365 (to reflect the one-half year period between January 1, 2006
and June 30, 2006).
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.
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.
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.
Custody Operations
1555 N. RiverCenter Dr., Suite 302
Milwaukee, Wisconsin 53212
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
ITEM 2. CODE OF ETHICS.
- -----------------------
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer and principal financial officer. The registrant has
not made any amendments to its code of ethics during the period covered by this
report. The registrant has not granted any waivers from any provisions of the
code of ethics during the period covered by this report.
A copy of the registrant's Code of Ethics is filed herewith.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ----------------------------------------
The registrant's board of trustees has determined that it does not have an audit
committee financial expert serving on its audit committee. At this time, the
registrant believes that the experience provided by each member of the audit
committee together offers the registrant adequate oversight for the registrant's
level of financial complexity.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
The registrant has engaged its principal accountant to perform audit services,
audit-related services, tax services and other services during the past two
fiscal years. "Audit services" refer to performing an audit of the registrant's
annual financial statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings or engagements
for those fiscal years. "Audit-related services" refer to the assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit. "Tax services" refer to professional services rendered
by the principal accountant for tax compliance, tax advice, and tax planning.
The following table details the aggregate fees billed or expected to be billed
for each of the last two fiscal years for audit fees, audit-related fees, tax
fees and other fees by the principal accountant.
FYE 06/30/06 FYE 06/30/05
------------- -------------
Audit Fees $16,000 $14,250
Audit-Related Fees
Tax Fees 3,625 18,250
All Other Fees
The audit committee has adopted pre-approval policies and procedures that
require the audit committee to pre-approve all audit and non-audit services of
the registrant, including services provided to any entity affiliated with the
registrant. All of the principal accountant's hours spent on auditing the
registrant's financial statements were attributed to work performed by full-time
permanent employees of the principal accountant. (If more than 50 percent of
the accountant's hours were spent to audit the registrant's financial statements
for the most recent fiscal year, state how many hours were attributed to work
performed by persons other than the principal accountant's full-time, permanent
employees.)
The following table indicates the non-audit fees billed or expected to be billed
by the registrant's accountant for services to the registrant and to the
registrant's investment adviser (and any other controlling entity, etc.--not
sub-adviser) for the last two years. The audit committee of the board of
trustees/directors has considered whether the provision of non-audit services
that were rendered to the registrant's investment adviser is compatible with
maintaining the principal accountant's independence and has concluded that the
provision of such non-audit services by the accountant has not compromised the
accountant's independence.
Non-Audit Related Fees FYE 06/30/2006 FYE 6/30/2005
- ---------------------- --------------- -------------
Registrant
Registrant's Investment Adviser
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable to registrants who are not listed issuers (as defined in Rule
10A-3 under the Securities Exchange Act of 1934).
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 PURCHASERS.
- ----------------------------------
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 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. Filed herewith
(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 September 7, 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)* /s/ Neil J. Hennessy
-------------------------------------
Neil J. Hennessy, President
Date September 7, 2006
-------------------
By (Signature and Title)* /s/ Teresa M. Nilsen
-------------------------------------
Teresa M. Nilsen, Treasurer
Date September 7, 2006
-------------------