hfihfcs-ncsra.htm

N-CSR 1 hfihfcs-ncsra.htm HENNESSY FUNDS CORNERSTONE SERIES ANNUAL REPORT 10-31-09 hfihfcs-ncsra.htm

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 (811-07493)

The Hennessy Funds, Inc.

(Exact name of registrant as specified in charter)

7250 Redwood Blvd., Suite 200

Novato, CA 94945

(Address of principal executive offices) (Zip code)

Neil J. Hennessy

Hennessy Advisors, Inc.

7250 Redwood Blvd., Suite 200

Novato, CA 94945

(Name and address of agent for service)

800-966-4354

Registrant's telephone number, including area code

Date of fiscal year end: October 31, 2009

Date of reporting period: October 31, 2009

Item 1. Reports to Stockholders.

HENNESSY FUNDS

ANNUAL REPORT

OCTOBER 31, 2009

Hennessy Cornerstone Growth Fund

Hennessy Cornerstone Growth Fund, Series II

Hennessy Focus 30 Fund

Hennessy Cornerstone Large Growth Fund

Hennessy Cornerstone Value Fund

Hennessy Total Return Fund

Hennessy Balanced Fund

Contents

Letter to shareholders	1
Performance overview
Hennessy Cornerstone Growth Fund	4
Hennessy Cornerstone Growth Fund, Series II	6
Hennessy Focus 30 Fund	8
Hennessy Cornerstone Large Growth Fund	10
Hennessy Cornerstone Value Fund	12
Hennessy Total Return Fund	14
Hennessy Balanced Fund	15
Summaries of investments
Hennessy Cornerstone Growth Fund	17
Hennessy Cornerstone Growth Fund, Series II	22
Hennessy Focus 30 Fund	27
Hennessy Cornerstone Large Growth Fund	31
Hennessy Cornerstone Value Fund	36
Hennessy Total Return Fund	41
Hennessy Balanced Fund	45
Financial statements
Statements of assets and liabilities	50
Statements of operations	52
Statements of changes in net assets	54
Financial highlights
Hennessy Cornerstone Growth Fund	64
Hennessy Cornerstone Growth Fund, Series II	66
Hennessy Focus 30 Fund	68
Hennessy Cornerstone Large Growth Fund	70
Hennessy Cornerstone Value Fund	72
Hennessy Total Return Fund	74
Hennessy Balanced Fund	76
Statement of cash flows – Hennessy Total Return Fund	78
Notes to the financial statements	79
Report of Independent Registered Public Accounting Firm	90
Directors and Officers of the Funds	92
Expense example	98
Proxy voting policy	100

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LETTER TO SHAREHOLDERS

December, 2009

Dear Hennessy Funds Shareholder:

The past year is one that I believe many investors will be glad to have behind them. At the beginning of the Fund’s fiscal year (November, 2008) the economy and financial markets were in chaos, and it felt as though they were on the brink of collapse following the AIG bailout, Lehman Brothers failure and the mega mergers between some of the country’s largest banks and investment houses. Many investors saw their portfolios and 401K’s cut nearly in half, while at the same time watched the values of their homes tumble; there was truly nowhere for investors to hide from the financial fallout. In my 30 years in the business, I have never witnessed the crisis of confidence we experienced in late February/March of this year. Even the most seasoned, disciplined and long-term investors I know simply had had enough and were pulling money out of the stock market.

Since their lows in March, the major indices have rallied back roughly 50-60%. There is certainly some ground to make up for the markets to return to their pre-recession levels, but I believe we are now in the midst of a recovery and that we should see steady, sustainable growth in the coming years. I actually believe the recovery began in November of 2008, with the first injection of government TARP (Trouble Asset Relief Program) spending. Like anything that is broken, a fix takes time to work, however, I believe that investors had seen such staggering losses that they were not willing to take a wait and see approach with this government stimulus. While the markets will no doubt have their ups and downs, I am confident that the lows of March should be behind us.

While the markets are in recovery, in my opinion, investor confidence is not. The magnitude of the most recent downturn has left investors feeling overwhelmed and distraught, and fear has kept many people on the sidelines, causing them to miss the recent rally. I believe there are several key factors that could push the stock market higher:

•

During the past year companies have seen their stock prices crushed, and many have taken this as an opportunity to cut costs and position their balance sheets for the future. Companies have de-leveraged themselves, laid off employees, closed unprofitable business lines and taken any available write-offs. As these companies emerge leaner, we expect to see their quarterly

HENNESSY FUNDS 1-800-966-4354

earnings steadily improving, as any additional revenue falls to their bottom lines.

•

The Federal Reserve appears to remain committed to very low interest rates. With 30-year U.S. Treasury yields hovering in the 4% range, investors may need to look to the market for more aggressive returns to try to stay ahead of inflation, and I believe this should drive increased investment in high-quality equities.

•

The price to sales ratio, one of the tools we use to determine a stock’s value, has returned to normalized historical levels. Over the past ten years the price to sales ratio of the Dow Jones Industrial Average has averaged $1.23. At the market low on March 9th the price to sales ratio of the Dow had dropped to just $0.60, meaning that investors were able to buy a dollar of revenue for just sixty cents. As of the end of September, 2009, this ratio had rebounded to $1.21 and is again within its historical norm. I believe this ratio will hold steady and that stock prices should rise proportionally with any increase in sales.

•	U.S. investors are holding an estimated $9 trillion on the sidelines. Once investor confidence starts to build, I believe this will encourage equity investing. Confidence should beget more widespread confidence and investing may beget further investing.

•	Banks are steadily regaining strength, with many already paying back their TARP loans. They have begun to lend again to credit-worthy consumers, who in turn have been able to purchase homes and other big ticket items.

•

I believe that companies with strong balance sheets will consider increasing or beginning to pay dividends as a way to increase the attractiveness of their stocks. Should shareholders receive dividend payments and see their investments rise in value, I believe that may spur confidence and increased consumer spending and investing.

During the past decade, the tech bubble and the housing bubble created large financial gains. Many consumers were allowed, maybe even encouraged, to borrow more heavily than they should have and live beyond their means. In the past year, investors across the globe have learned a lesson about leverage and its downside, and I believe the markets have now made a move back to “normal”, where growth is based on fundamentals, and will be driven by increases in personal income and consumer spending, which should result in increases in

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LETTER TO SHAREHOLDERS

corporate earnings. Using history as my guide, I believe the markets should return to a more normalized annual return. Since 1980, even with several major corrections along the way and including the most recent downturn, the Dow Jones Industrial Average has produced a 12% average annual return. While this may not be the 35% return investors were getting in the late 1990’s, I do believe a more normalized growth rate is sustainable for the foreseeable future.

I continue to believe that historical performance data has shown how patience, discipline and a long-term investing view can be rewarded. Many of the savviest investors, who realize that sometimes the best time to invest is when things look the worst, have already benefitted from the recent rally since the market lows in March.

We maintain our focus on long-term investing and on building value for all of our shareholders. At Hennessy Funds, we serve our shareholders directly, so that we can provide answers to shareholder questions and concerns. Please don’t hesitate to contact us at 800-966-4354 if we can answer any questions or can be of service.

Best regards,

Neil J. Hennessy

Portfolio Manager & Chief Investment Officer

Past performance does not guarantee future results.

Mutual fund investing involves risk. Principal loss is possible.

Price-to-sales ratio is a tool for calculating a stock’s valuation relative to other companies. It is calculated by dividing a stock’s current price by its revenue per share.

Opinions expressed are those of Neil Hennessy and are subject to change, are not guaranteed and should not be considered investment advice.

The Dow Jones Industrial Average is an unmanaged index of common stocks comprised of major industrial companies and assumes reinvestment of dividends. You cannot invest directly in an index.

HENNESSY FUNDS 1-800-966-4354

Hennessy Cornerstone Growth Fund

Original Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

				Since Inception
	One Year	Five Years	Ten Years	(11/1/96)
Hennessy Cornerstone
Growth Fund – Original Class	0.11%	-4.40%	4.97%	7.23%
Russell 2000 Index	6.46%	0.59%	4.11%	5.32%
S&P 500 Index	9.80%	0.33%	-0.95%	4.82%

Gross expense ratio: 1.25%

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 gross expense ratio presented is that from the most recent prospectus.

PERFORMANCE NARRATIVE

The Hennessy Cornerstone Growth Fund returned 0.11% for the twelve-month period ending October 31, 2009, underperforming its benchmark, the Russell 2000, which returned 6.46%, and the S&P 500, which returned 9.80%. The underperformance is primarily due to individual security selection after the rebalance (which occurred in the winter), which offset the positive overall sector allocation in the Fund. Post rebalance, the portfolio maintained an overweight position in Consumer Discretionary stocks which outperformed as the economy rebounded, but also held an underweight position in Financials, which underperformed despite the sharp rally in Financials within the broader market off the March lows. Post rebalance, performance of the portfolio was hampered by Consumer Discretionary stock Hot Topic, which was down over 10%, Industrial stock Aceto Corp., which was down over 30%, and Information Technology stock Mantech International Corp., which was down over 15%.

CHANGE IN VALUE OF $10,000 INVESTMENT

This chart assumes an initial gross investment of $10,000 made on October 31, 1999. 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.

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PERFORMANCE OVERVIEW — HENNESSY CORNERSTONE GROWTH FUND

Hennessy Cornerstone Growth Fund

Institutional Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

		Since Inception
	One Year	3/3/08
Hennessy Cornerstone
Growth Fund – Institutional Class	0.45%	-21.99%
Russell 2000 Index	6.46%	-9.66%
S&P 500 Index	9.80%	-11.88%

Gross expense ratio: 1.12%. Net expense ratio: 0.98%. The expense ratio is contractually capped at 0.98% indefinitely.

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. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. The gross expense ratio presented is that from the most recent prospectus.

CHANGE IN VALUE OF $250,000 INVESTMENT

This chart assumes an initial gross investment of $250,000 (minimum investment) made on March 3, 2008 (inception date of share class). 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.

The S&P 500 Index and Russell 2000 Index are unmanaged indices commonly used to measure the performance of U.S. Stocks. You cannot invest directly in an index. 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. References to specific securities should not be considered a recommendation to buy or sell any security. Fund holdings and sector allocations are subject to change. Please refer to the included Schedule of Investments.

HENNESSY FUNDS 1-800-966-4354

Hennessy Cornerstone Growth Fund, Series II

Original Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

		Since Inception
	One Year	7/1/05
Hennessy Cornerstone Growth
Fund, Series II – Original Class	7.15%	-13.22%
Russell 2000 Growth Index	11.34%	-0.85%
S&P 500 Index	9.80%	-1.17%

Gross expense ratio: 1.37%.

PERFORMANCE NARRATIVE

The Hennessy Cornerstone Growth Fund, Series II returned 7.15% for the twelve-month period ending October 31, 2009, trailing its benchmark, the Russell 2000 Growth Index, which returned 11.34%, and the S&P 500, which returned 9.80%. The underperformance of the Fund versus its benchmark was primarily the result of individual security selection after the rebalance (which occurred in the summer), particularly in the Consumer Discretionary Sector. Within that sector, Spartan Motors was a particularly poor performer, down over 50% after the rebalance, as was Isle of Capri, which was down over 40%. The poor overall security selection in the Fund post rebalance offset positive sector allocation during that same period, particularly an overweight position in the Consumer Discretionary sector, which outperformed over the period. Prior to the rebalance, an underweight position in Health Care stocks (which underperformed) positively impacted the Fund’s performance, while overweight positions in Materials and Energy (which both underperformed) negatively impacted performance. Prior to the rebalance Energy stock Interoil Corp., was up over 70%, Materials stock Schnitzer Steel was up over 100% and Industrials stock Aecom Technology Corp. was up over 60%.

CHANGE IN VALUE OF $10,000 INVESTMENT

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.

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PERFORMANCE OVERVIEW — HENNESSY CORNERSTONE GROWTH FUND, SERIES II

Hennessy Cornerstone Growth Fund, Series II

Institutional Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

		Since Inception
	One Year	3/3/08
Hennessy Cornerstone Growth
Fund, Series II – Institutional Class	7.89%	-27.58%
Russell 2000 Growth Index	11.34%	-9.67%
S&P 500 Index	9.80%	-11.88%

Gross expense ratio: 1.22%. Net expense ratio: 0.98%. The expense ratio is contractually capped at 0.98% indefinitely.

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. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. The gross expense ratio presented is that from the most recent prospectus.

CHANGE IN VALUE OF $250,000 INVESTMENT

This chart assumes an initial gross investment of $250,000 (minimum investment) made on March 3, 2008 (date of share class 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.

The Russell 2000 Growth Index and S&P 500 Index are unmanaged indices commonly used to measure the performance of U.S. Stocks. You cannot invest directly in an index. 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. References to specific securities should not be considered a recommendation to buy or sell any security. Fund holdings and sector allocations are subject to change. Please refer to the included Schedule of Investments.

HENNESSY FUNDS 1-800-966-4354

Hennessy Focus 30 Fund

Original Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

			Since Inception
	One Year	Five Years	(9/17/03)
Hennessy Focus 30 Fund – Original Class	8.85%	6.52%	6.52%
S&P Midcap 400 Index	18.18%	3.24%	5.18%
S&P 500 Index	9.80%	0.33%	2.19%

Gross expense ratio: 1.27%

PERFORMANCE NARRATIVE

The Hennessy Focus 30 Fund returned 8.85% for the twelve-month period ending October 31, 2009, underperforming both its benchmark, the S&P Midcap 400, which returned 18.18%, and the S&P 500, which returned 9.80%. The Fund’s underperformance relative to its benchmark was primarily attributable to individual stock selection prior to the rebalance, which occurred in the fall of 2009. The contribution to the portfolio’s performance from strong security selection in the Financials sector as well as the positive overall sector allocation prior to the rebalance (specifically an overweight position in the Consumer Discretionary sector) was overshadowed by weak security selection, chiefly in the Industrial and Utilities sectors. In the Industrial sector, Teledyne Technologies Inc. (down over 20% prior to the rebalance) and Hub Group Inc. (down over 25%) both suffered. Within the Utilities sector, Piedmont Natural Gas (down over 20%) and Hawaiian Electric Industries, Inc. (down over 30%) both negatively impacted the performance of the Fund. These weak performers offset some strong holdings prior to the rebalance, specifically in Financials, such as Odyssey Re Holdings (up over 50%), which benefitted from strong operating results and an acquisition bid announced prior to the rebalance. Following the rebalance, the Fund has outperformed its benchmark, with the outperformance resulting from strong security selection, specifically in the Materials, Energy, Health Care, and Financial sectors. Materials stock Newmarket Corp. is up over 5% since the rebalance, as is Energy stock Linn Energy and generic pharmaceutical maker, Mylan Inc. Americredit, the sole Financial stock in the Fund, has performed well, up over 10% since the rebalance.

CHANGE IN VALUE OF $10,000 INVESTMENT

This chart assumes an initial gross investment of $10,000 made on September 17, 2003 (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.

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PERFORMANCE OVERVIEW — HENNESSY FOCUS 30 FUND

Hennessy Focus 30 Fund

Institutional Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

		Since Inception
	One Year	3/3/08
Hennessy Focus 30 Fund – Institutional Class	9.20%	-13.38%
S&P Midcap 400 Index	18.18%	-8.75%
S&P 500 Index	9.80%	-11.88%

Gross expense ratio: 1.13%. Net expense ratio: 0.98%. The expense ratio is contractually capped at 0.98% indefinitely.

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. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. The gross expense ratio presented is that from the most recent prospectus.

CHANGE IN VALUE OF $250,000 INVESTMENT

The S&P 500 Index and S&P Midcap 400 Index are unmanaged indices commonly used to measure the performance of U.S. Stocks. You cannot invest directly in an index. Small and medium-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. References to specific securities should not be considered a recommendation to buy or sell any security. Fund holdings and sector allocations are subject to change. Please refer to the included Schedule of Investments.

HENNESSY FUNDS 1-800-966-4354

Hennessy Cornerstone Large Growth Fund

Original Class Shares

CUMULATIVE TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

		Since Inception
	One Month	(3/20/09)
Hennessy Cornerstone Large
Growth Fund – Original Class*	-1.15%	41.01%
Russell 1000 Index	-2.21%	37.41%
S&P 500 Index	-1.86%	36.62%

Gross expense ratio: 1.33%. Net expense ratio: 1.30%. The expense ratio is contractually capped at 1.30% through March, 2010.

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. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. The gross expense ratio presented is that from the most recent prospectus.

On March 20, 2009, the Tamarack Large Cap Growth Fund was reorganized into the Hennessy Cornerstone Large Growth Fund. At that time, the Fund began utilizing a purely quantitative formula to choose stocks for the portfolio, which differs from the investment strategy employed by the previous investment manager. Accordingly, performance is being reported for the period after the reorganization.

PERFORMANCE NARRATIVE

The Hennessy Cornerstone Large Growth Fund has changed its fiscal year end from September 30th to October 31st, effective with this report for the period ending October 31, 2009. Therefore, the following narrative describes performance for the one-month period since the Fund’s last published annual report (for the twelve-month period ending September 30, 2009). The Hennessy Cornerstone Large Growth Fund returned -1.15% for the one-month period ending October 31, 2009, outperforming both its benchmark, the Russell 1000 Index, which returned -2.21%, and the S&P 500, which returned -1.86% . The Fund’s outperformance for the period was primarily the result of positive sector allocation, particularly an overweight position in the Energy sector. McGraw-Hill Companies was the strongest performing stock in the portfolio for the period, gaining 14%.

CHANGE IN VALUE OF $10,000 INVESTMENT

This chart assumes an initial gross investment of $10,000 made on March 20, 2009 (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.

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Hennessy Cornerstone Large Growth Fund

Institutional Class Shares

CUMULATIVE TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

		Since Inception
	One Month	(3/20/09)
Hennessy Cornerstone Large
Growth Fund – Institutional Class	-1.04%	41.31%
Russell 1000 Index	-2.21%	37.41%
S&P 500 Index	-1.86%	36.62%

Gross expense ratio: 1.15%. Net expense ratio: 0.98%. The expense ratio is contractually capped at 0.98% indefinitely.

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. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. The gross expense ratio presented is that from the most recent prospectus.

CHANGE IN VALUE OF $250,000 INVESTMENT

This chart assumes an initial gross investment of $250,000 (minimum investment) made on March 20, 2009 (inception date). 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.

The S&P 500 and Russell 1000 are unmanaged indices commonly used to measure the performance of U.S. stocks. One cannot invest directly in an index. Medium-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Growth stocks typically are more volatile than value stocks; however value stocks have a lower expected growth rate in earnings and sales. The Fund’s composition and sector weightings are shown as a percentage of the Fund’s total net assets. Portfolio composition and sector weightings are subject to change at any time and should not be considered a recommendation to buy or sell a particular security. Please refer to the Summary of Investments within this Annual Report for additional portfolio information, including percentages of holdings.

HENNESSY FUNDS 1-800-966-4354

Hennessy Cornerstone Value Fund

Original Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

				Since Inception
	One Year	Five Years	Ten Years	(11/1/96)
Hennessy Cornerstone
Value Fund – Original Class	25.51%	-0.01%	2.66%	4.20%
Russell 1000 Value Index	4.78%	-0.05%	1.70%	5.92%
S&P 500 Index	9.80%	0.33%	-0.95%	4.82%

Gross expense ratio: 1.20%

PERFORMANCE NARRATIVE

The Hennessy Cornerstone Value Fund returned 25.51% for the twelve-month period ending October 31, 2009, outperforming its benchmark, the Russell 1000 Value, which returned 4.78%, and the S&P 500, which returned 9.80%. The Fund’s strong outperformance of its benchmark is primarily attributable to strong security selection across a number of sectors, namely Materials, Consumer Discretionary, Telecom, Industrials, Financials and Energy. The positive effects of security selection were augmented by positive overall sector allocation, specifically in Materials, where an overweight position benefited from the sector’s outperformance in 2009. After the rebalance (which occurred in the winter), the best performing stocks within the Materials sector were Rio Tinto, which gained over 140%, and Southern Copper Corp., which gained over 110%. Within the Consumer Discretionary sector, Macy’s Inc. (up over 90%) and Limited Brands Inc. (up over 80%) both contributed to the portfolio’s performance. Telecom stock Vimpelcom gained over 90% after the rebalance, Industrial stock RR Donnelly & Sons gained over 50% and Energy stock CNOOC Ltd. gained over 70%. Financial stocks led the rally of 2009 as credit losses slowed, credit markets improved substantially and unprecedented liquidity was injected by the Fed. Morgan Stanley was one beneficiary of this, which gained over 90% after the rebalance. The effects of strong security selection were augmented by positive overall sector allocation, specifically in Materials, where an overweight position benefited from the sector’s outperformance in 2009.

CHANGE IN VALUE OF $10,000 INVESTMENT

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PERFORMANCE OVERVIEW — HENNESSY CORNERSTONE VALUE FUND

Hennessy Cornerstone Value Fund

Institutional Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

		Since Inception
	One Year	3/3/08
Hennessy Cornerstone Value Fund – Institutional Class	25.87%	-10.80%
Russell 1000 Value Index	4.78%	-14.92%
S&P 500 Index	9.80%	-11.88%

Gross expense ratio: 1.14%. Net expense ratio: 0.98%. The expense ratio is contractually capped at 0.98% indefinitely.

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. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. The gross expense ratio presented is that from the most recent prospectus.

CHANGE IN VALUE OF $250,000 INVESTMENT

The Russell 1000 Value Index and S&P 500 Index are unmanaged indices commonly used to measure the performance of U.S. Stocks. You cannot invest directly in an index. The Fund may invest in medium-capitalization companies which 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. References to specific securities should not be considered a recommendation to buy or sell any security. Fund holdings and sector allocations are subject to change. Please refer to the included Schedule of Investments.

HENNESSY FUNDS 1-800-966-4354

Hennessy Total Return Fund

Original Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

				Since Inception
	One Year	Five Years	Ten Years	(7/29/98)
Hennessy Total Return Fund	0.69%	-0.26%	1.03%	1.30%
Dow Jones Industrial Average	7.71%	1.95%	1.25%	2.99%
S&P 500 Index	9.80%	0.33%	-0.95%	1.01%

Gross expense ratio: 2.36%

Expenses net of interest expense: 1.20%

PERFORMANCE NARRATIVE

The Hennessy Total Return Fund returned 0.69% for the twelve-month period ending October 31, 2009, lagging both the Dow Jones Industrial Average, which returned 7.71%, and the S&P 500 Index, which returned 9.80%. Citigroup, AIG, and General Motors significantly contributed to the Fund’s underperformance, as each saw severe stock price declines over the course of the twelve-month period and were eventually removed from the Dow Jones index. The Fund’s 25% position in short-term Treasury Bills hampered overall performance as Treasury yields remained relatively low throughout the twelve-month period, lagging performance of the stock market.

CHANGE IN VALUE OF $10,000 INVESTMENT

This chart assumes an initial gross investment of $10,000 made on October 31, 1999. Performance reflects fee waivers in effect. In the absence of fee waivers, total return would be reduced. Returns shown include the reinvestment of all dividend and other distributions. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Dow Jones Industrial Average and S&P 500 Index are unmanaged indices commonly used to measure the performance of U.S. Stocks. You cannot invest directly in an index. The Hennessy Total Return Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund, making it more exposed to individual stock volatility than a diversified fund. References to specific securities should not be considered a recommendation to buy or sell any security. Fund holdings are subject to change. Please refer to the included Schedule of Investments. Current or future portfolio holdings are subject to risk.

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PERFORMANCE OVERVIEW — HENNESSY TOTAL RETURN FUND AND HENNESSY BALANCED FUND

Hennessy Balanced Fund

Original Class Shares

AVERAGE ANNUAL TOTAL RETURN PERIODS ENDED OCTOBER 31, 2009

				Since Inception
	One Year	Five Years	Ten Years	(3/8/96)
Hennessy Balanced Fund	5.46%	0.97%	1.22%	3.29%
Dow Jones Industrial Average	7.71%	1.95%	1.25%	6.53%
S&P 500 Index	9.80%	0.33%	-0.95%	5.51%

Gross expense ratio: 1.56%

PERFORMANCE NARRATIVE

The Hennessy Balanced Fund returned 5.46% for the twelve-month period ending October 31, 2009, lagging both the Dow Jones Industrial Average, which returned 7.71%, and the S&P 500 Index, which returned 9.80%. Citigroup, AIG, and General Motors significantly contributed to the Fund’s underperformance, as each saw severe stock price declines over the course of the twelve-month period and were eventually removed from the Dow Jones index. The Fund’s 50% position in short-term Treasury Bills hampered overall performance as Treasury yields remained relatively low throughout the twelve-month period, lagging performance of the stock market.

CHANGE IN VALUE OF $10,000 INVESTMENT

This chart assumes an initial gross investment of $10,000, made on October 31, 1999. Returns shown include the reinvestment of all dividend and other distributions. Returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.

The Dow Jones Industrial Average and S&P 500 Index are unmanaged indices commonly used to measure the performance of U.S. Stocks. You cannot invest directly in an index. The Hennessy Balanced Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund, making it more exposed to individual stock volatility than a diversified fund. References to specific securities should not be considered a recommendation to buy or sell any security. Fund holdings are subject to change. Please refer to the included Schedule of Investments. Current or future portfolio holdings are subject to risk.

HENNESSY FUNDS 1-800-966-4354

(This Page Intentionally Left Blank.)

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SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE GROWTH FUND

Summaries of Investments

The following summaries of investment portfolios are designed to help investors better understand each fund’s principal holdings. Each summary is as of October 31, 2009.

HENNESSY CORNERSTONE GROWTH FUND

(% of Net Assets)

	TOP TEN EQUITY HOLDINGS	% of net assets
	SXC Health Solutions Corp.	4.79%
	NetFlix, Inc.	3.51%
	World Fuel Services Corp.	2.69%
	Emergency Medical Services Corp.	2.57%
	Carter’s, Inc.	2.40%
	American Italian Pasta Co.	2.38%
	Monro Muffler, Inc.	2.38%
	Viasat, Inc.	2.37%
	Panera Bread Co.	2.25%
	Applied Signal Technology Inc.	2.24%

HENNESSY FUNDS 1-800-966-4354

COMMON STOCKS – 96.30%	Number				% of Net
	of Shares		Value		Assets
Consumer Discretionary – 26.15%
Aaron’s, Inc.		172,000	$	4,308,600		1.84	%
Autozone, Inc. (a)		32,800		4,438,168		1.90	%
Carter’s, Inc. (a)		237,700		5,609,720		2.40	%
Corinthian Colleges, Inc. (a)		279,600		4,434,456		1.90	%
Dollar Tree, Inc. (a)		109,800		4,955,274		2.12	%
Family Dollar Stores, Inc.		175,600		4,969,480		2.13	%
FGX International Holdings, Ltd. (a)(b)		333,200		4,394,908		1.88	%
HOT Topic, Inc. (a)		493,800		3,802,260		1.63	%
Monro Muffler, Inc.		179,500		5,562,705		2.38	%
National Presto Inds, Inc.		59,500		5,172,335		2.21	%
NetFlix, Inc. (a)		153,200		8,188,540		3.51	%
Panera Bread Co. (a)		87,600		5,254,248		2.25	%
				61,090,694		26.15	%
Consumer Staples – 3.65%
American Italian Pasta Co. (a)		204,900		5,567,133		2.38	%
Nash Finch Co.		102,000		2,955,960		1.27	%
				8,523,093		3.65	%
Energy – 2.69%
World Fuel Services Corp.		123,700		6,290,145		2.69	%

Financials – 6.24%
Amerisafe, Inc. (a)		223,000		4,134,420		1.77	%
First Bancorp PR (b)		410,900		776,601		0.33	%
Nelnet, Inc. (a)		319,500		4,482,585		1.92	%
Stifel Financial Corp. (a)		99,800		5,185,608		2.22	%
				14,579,214		6.24	%
Health Care – 14.95%
Cantel Medical Corp. (a)		312,000		5,010,720		2.15	%
Emergency Medical Services Corp. (a)		125,000		6,002,500		2.57	%
Ensign Group, Inc.		273,500		4,042,330		1.73	%
Gentiva Health Services, Inc. (a)		156,500		3,756,000		1.61	%
PSS World Med, Inc. (a)		243,200		4,917,504		2.10	%
SXC Health Solutions Corp. (a)(b)		245,200		11,200,736		4.79	%
				34,929,790		14.95	%

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE GROWTH FUND

COMMON STOCKS	Number				% of Net
	of Shares		Value		Assets
Industrials – 21.62%
Aaon, Inc.		219,200	$	3,947,792		1.69	%
Aceto Corp.		457,300		2,533,442		1.08	%
Aecom Technology Corp Delaware Co. (a)		149,000		3,760,760		1.61	%
Applied Signal Technology, Inc.		255,200		5,229,048		2.24	%
Baker Michael Corp. (a)		124,000		4,426,800		1.89	%
Beacon Roofing Supply, Inc. (a)		329,800		4,735,928		2.03	%
Granite Construction, Inc.		104,200		2,975,952		1.27	%
Insituform Technologies, Inc. (a)		232,500		4,929,000		2.11	%
Stanley, Inc. (a)		126,400		3,570,800		1.53	%
Tetra Tech, Inc. (a)		189,600		4,878,408		2.09	%
Trex, Inc. (a)		278,100		4,424,571		1.89	%
VSE Corp.		116,700		5,110,293		2.19	%
				50,522,794		21.62	%
Information Technology – 11.39%
CACI International, Inc. (a)		101,500		4,833,430		2.07	%
CSG Systems International, Inc. (a)		262,000		4,281,080		1.83	%
Mantech International Corp. – Class A (a)		84,500		3,706,170		1.59	%
NCI, Inc. (a)		151,900		4,087,629		1.75	%
SAIC, Inc. (a)		235,000		4,161,850		1.78	%
Viasat, Inc. (a)		190,100		5,541,415		2.37	%
				26,611,574		11.39	%
Materials – 1.74%
Zep, Inc.		237,100		4,054,410		1.74	%

Utilities – 7.87%
Laclede Group, Inc.		97,700		3,000,367		1.28	%
New Jersey Resource Corp.		116,300		4,093,760		1.75	%
NSTAR		125,500		3,884,225		1.66	%
Piedmont Natural Gas Co.		144,500		3,363,960		1.44	%
South Jersey Industries, Inc.		114,900		4,054,821		1.74	%
				18,397,133		7.87	%

Total Common Stocks (Cost $220,732,744)				224,998,847		96.30	%

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

SHORT-TERM INVESTMENTS – 1.42%	Number				% of
	of Shares		Value		Net Assets
Money Market Funds – 1.42%
Fidelity Government Portfolio, 0.0623% (c)	$	3,310,638	$	3,310,638		1.42	%

Total Money Market Funds
(Cost $3,310,638)				3,310,638		1.42	%

Total Short-Term Investments
(Cost $3,310,638)				3,310,638		1.42	%

Total Investments – 97.72%
(Cost $224,043,382)				228,309,485		97.72	%

Other Assets in Excess of Liabilities – 2.28%				5,328,868		2.28	%
TOTAL NET ASSETS – 100.00%			$	233,638,353		100.00	%

Percentages are stated as a percent of net assets.

(a)Non Income Producing

(b)Foreign Issued Security

(c)The rate listed is the Fund’s 7-day yield as of October 31, 2009.

Summary of Fair Value Exposure at October 31, 2009

The Fund has adopted authoritative fair valuation accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion in changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below.

The Fund has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination.

	Level 1 –	Quoted unadjusted prices for identical instruments in active markets to which the fund has access at the date of measurement
	Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
	Level 3 –	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE GROWTH FUND

The following is a summary of the inputs used to value the Fund’s net assets as of October 31, 2009:

	Level 1		Level 2		Level 3		Total
Equity
Consumer Discretionary	$	61,090,694	$	—	$	—	$	61,090,694
Consumer Staples		8,523,093		—		—		8,523,093
Energy		6,290,145		—		—		6,290,145
Financials		14,579,214		—		—		14,579,214
Health Care		34,929,790		—		—		34,929,790
Industrials		50,522,794		—		—		50,522,794
Information Technology		26,611,574		—		—		26,611,574
Materials		4,054,410		—		—		4,054,410
Utilities		18,397,133		—		—		18,397,133
Total Equity	$	224,998,847	$	—	$	—		224,998,847
Short-Term Investments	$	3,310,638	$	—	$	—		3,310,638
Total Investments in Securities	$	228,309,485	$	—	$	—	$	228,309,485

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

HENNESSY CORNERSTONE

GROWTH FUND, SERIES II

(% of Net Assets)

	TOP TEN EQUITY HOLDINGS	% of net assets
	Schweitzer-Mauduit International, Inc.	3.53%
	Dollar Thrifty Automotive Group Co.	3.42%
	SXC Health Solutions Corp.	3.22%
	Evercore Partners, Inc.	3.01%
	Cott Corp.	2.79%
	Madden Steven Ltd.	2.73%
	Kirklands, Inc.	2.44%
	Jos. A Bank Clothiers, Inc.	2.38%
	Peet’s Coffee & Tea, Inc.	2.34%
	APAC Customer Services, Inc.	2.27%

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE GROWTH FUND, SERIES II

COMMON STOCKS – 96.00%	Number				% of Net
	of Shares		Value		Assets
Consumer Discretionary – 30.81%
99 Cents Only Stores (a)		39,900	$	453,663		1.51	%
Aaron’s, Inc.		17,600		440,880		1.46	%
Carter’s, Inc. (a)		22,800		538,080		1.79	%
Fuqi International, Inc. (a)		30,900		633,141		2.10	%
H H Gregg, Inc. (a)		33,800		557,362		1.85	%
Isle Of Capri Casinos, Inc. (a)		43,700		338,675		1.13	%
Jos A Bank Clothiers, Inc. (a)		17,500		717,150		2.38	%
Kirklands, Inc. (a)		58,300		733,414		2.44	%
Lincoln Educational Services Corp. (a)		28,800		570,816		1.90	%
Madden Steven Ltd. (a)		20,300		822,150		2.73	%
National Presto Industries, Inc.		6,900		599,817		1.99	%
P F Changs China Bistro, Inc. (a)		17,100		499,149		1.66	%
Peet’s Coffee & Tea, Inc. (a)		20,700		703,800		2.34	%
Pep Boys Manny Moe & Jack		56,600		496,382		1.65	%
Spartan Motors, Inc.		50,000		249,500		0.83	%
Sturm Ruger & Co., Inc.		42,800		454,536		1.51	%
Texas Roadhouse, Inc. (a)		48,900		463,083		1.54	%
				9,271,598		30.81	%
Consumer Staples – 13.20%
Calavo Growers, Inc.		26,900		480,165		1.60	%
Central Garden & Pet Co. (a)		56,200		531,652		1.77	%
Coca Cola Bottling Co. Consolidated		9,600		431,136		1.43	%
Cott Corp. (a)(b)		106,100		838,190		2.79	%
J & J Snack Foods Corp.		15,000		587,550		1.95	%
Lancaster Colony Corp.		12,100		587,818		1.95	%
United Natural Foods, Inc. (a)		21,400		515,954		1.71	%
				3,972,465		13.20	%
Energy – 6.05%
Nustar Energy LP		10,500		563,430		1.87	%
Sunoco Logistics Partners LP		10,100		590,345		1.96	%
World Fuel Services Corp.		13,100		666,135		2.22	%
				1,819,910		6.05	%

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

COMMON STOCKS	Number				% of Net
	of Shares		Value		Assets
Financials – 8.95%
Encore Cap Group, Inc. (a)		44,300	$	663,171		2.20	%
Evercore Partners, Inc.		27,700		904,128		3.01	%
First Horizon National Corp. (a)		43,300		512,239		1.70	%
Stifel Financial Corp. (a)		11,800		613,128		2.04	%
				2,692,666		8.95	%
Health Care – 8.34%
Bio-reference Labs, Inc. (a)		17,200		556,076		1.85	%
Cantel Medical Corp. (a)		33,600		539,616		1.79	%
Rehabcare Group, Inc. (a)		23,800		446,250		1.48	%
SXC Health Solutions Corp. (a)(b)		21,200		968,416		3.22	%
				2,510,358		8.34	%
Industrials – 14.99%
APAC Customer Services, Inc. (a)		105,900		683,055		2.27	%
Baker Michael Corp. (a)		13,300		474,810		1.58	%
Cubic Corp.		15,300		531,063		1.76	%
Dollar Thrifty Automotive Group Co. (a)		55,600		1,029,156		3.42	%
Force Protection, Inc. (a)		69,100		304,040		1.01	%
Goodrich Corp.		10,600		576,110		1.91	%
Marten Transport Ltd. (a)		25,300		443,762		1.48	%
Tetra Tech, Inc. (a)		18,300		470,859		1.56	%
				4,512,855		14.99	%
Information Technology – 4.44%
Black Box Corp.		14,900		394,999		1.31	%
Global Cash Access Holdings Inc (a)		75,600		478,548		1.59	%
NCI, Inc. (a)		17,200		462,852		1.54	%
				1,336,399		4.44	%
Materials – 7.62%
Bway Holding Co. (a)		33,500		595,295		1.98	%
Rock-Tenn Co.		14,500		635,100		2.11	%
Schweitzer-Mauduit International, Inc.		20,600		1,063,990		3.53	%
				2,294,385		7.62	%

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE GROWTH FUND, SERIES II

COMMON STOCKS	Number					% of Net
	of Shares		Value			Assets
Telecommunication Services – 1.60%
USA Mobility, Inc.		44,100	$	480,690			1.60	%

Total Common Stocks (Cost $26,393,200)				28,891,326			96.00	%

SHORT-TERM INVESTMENTS – 4.25%
Money Market Funds – 4.25%
Fidelity Government Portfolio, 0.0623% (c)	$	1,280,481	$	1,280,481			4.25	%

Total Money Market Funds
(Cost $1,280,481)				1,280,481			4.25	%

Total Short-Term Investments
(Cost $1,280,481)				1,280,481			4.25	%

Total Investments – 100.25%
(Cost $27,673,681)				30,171,807			100.25	%

Liabilities in Excess of Other Assets – (0.25)%				(74,144	)		-0.25	%
TOTAL NET ASSETS – 100.00%			$	30,097,663			100.00	%

Percentages are stated as a percent of net assets.

(a)Non Income Producing

(b)Foreign Issued Security

(c)The rate listed is the Fund’s 7-day yield as of October 31, 2009.

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

Summary of Fair Value Exposure at October 31, 2009

The Fund has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination.

	Level 1 –	Quoted unadjusted prices for identical instruments in active markets to which the fund has access at the date of measurement
	Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
	Level 3 –	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s net assets as of October 31, 2009:

	Level 1		Level 2		Level 3		Total
Equity
Consumer Discretionary	$	9,271,598	$	—	$	—	$	9,271,598
Consumer Staples		3,972,465		—		—		3,972,465
Energy		1,819,910		—		—		1,819,910
Financials		2,692,666		—		—		2,692,666
Health Care		2,510,358		—		—		2,510,358
Industrials		4,512,855		—		—		4,512,855
Information Technology		1,336,399		—		—		1,336,399
Materials		2,294,385		—		—		2,294,385
Telecommunication Services		480,690		—		—		480,690
Total Equity	$	28,891,326	$	—	$	—		28,891,326
Short-Term Investments	$	1,280,481	$	—	$	—		1,280,481
Total Investments in Securities	$	30,171,807	$	—	$	—	$	30,171,807

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY FOCUS 30 FUND

HENNESSY FOCUS 30 FUND

(% of Net Assets)

	TOP TEN EQUITY HOLDINGS	% of net assets
	Tupperware Brands Corp.	3.89%
	Virgin Media, Inc.	3.86%
	Linn Energy LLC	3.77%
	World Fuel Services Corp.	3.66%
	Mylan, Inc.	3.65%
	Newmarket Corp.	3.64%
	Americredit Corp.	3.53%
	Computer Sciences Corp.	3.41%
	Emergency Medical Services Corp.	3.35%
	Ball Corp.	3.32%

HENNESSY FUNDS 1-800-966-4354

COMMON STOCKS – 97.94%	Number				% of Net
	of Shares		Value		Assets
Consumer Discretionary – 32.09%
Aeropostale, Inc. (a)		122,000	$	4,578,660		2.94	%
Carter’s, Inc. (a)		202,200		4,771,920		3.06	%
Darden Restaurants, Inc.		147,700		4,476,787		2.87	%
Dollar Tree, Inc. (a)		103,400		4,666,442		3.00	%
Gymboree Corp. (a)		112,500		4,789,125		3.07	%
O Reilly Automotive, Inc. (a)		135,400		5,047,712		3.24	%
Ross Stores, Inc.		108,200		4,761,882		3.06	%
Tractor Supply Co. (a)		107,900		4,823,130		3.10	%
Tupperware Brands Corp.		134,600		6,059,692		3.89	%
Virgin Media, Inc.		430,800		6,018,276		3.86	%
				49,993,626		32.09	%
Consumer Staples – 9.36%
Coca Cola Enterprises, Inc.		250,200		4,771,314		3.06	%
Del Monte Foods Co.		452,300		4,884,840		3.14	%
Lancaster Colony Corp.		101,300		4,921,154		3.16	%
				14,577,308		9.36	%
Energy – 10.68%
Linn Energy LLC		239,700		5,872,650		3.77	%
Plains All American Pipeline LP		106,000		5,069,980		3.25	%
World Fuel Services Corp.		112,200		5,705,370		3.66	%
				16,648,000		10.68	%
Financials – 3.53%
Americredit Corp. (a)		311,300		5,494,445		3.53	%

Health Care – 10.22%
Emergency Medical Services Corp. (a)		108,600		5,214,972		3.35	%
Mylan, Inc. (a)		349,900		5,682,376		3.65	%
Watson Pharmaceuticals, Inc. (a)		146,000		5,025,320		3.22	%
				15,922,668		10.22	%
Industrials – 9.11%
Goodrich Corp.		90,800		4,934,980		3.17	%
KBR, Inc.		233,100		4,771,557		3.06	%
Tetra Tech, Inc. (a)		174,300		4,484,739		2.88	%
				14,191,276		9.11	%

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY FOCUS 30 FUND

COMMON STOCKS	Number					% of Net
	of Shares		Value			Assets
Information Technology – 9.79%
Broadridge Financial Solutions Inc.		236,800	$	4,927,808			3.16	%
Computer Sciences Corp. (a)		104,700		5,309,337			3.41	%
Tech Data Corp. (a)		130,400		5,011,272			3.22	%
				15,248,417			9.79	%
Materials – 13.16%
Ball Corp.		105,000		5,179,650			3.32	%
Newmarket Corp.		60,700		5,675,450			3.64	%
Rock-Tenn Co.		103,100		4,515,780			2.90	%
Scotts Miracle Gro Co.		126,600		5,142,492			3.30	%
				20,513,372			13.16	%

Total Common Stocks (Cost $152,647,649)				152,589,112			97.94	%

WARRANTS – 0.00%
Lantronix Inc., Warrant ^
Expiration: February, 2011,
Exercise Price: $0.850		158		0			0.00	%

Total Warrants (Cost $0)				0			0.00	%

SHORT-TERM INVESTMENTS – 2.28%
Money Market Funds – 2.28%
Fidelity Government Portfolio, 0.0623% (b)	$	3,549,694		3,549,694			2.28	%

Total Money Market Funds
(Cost $3,549,694)				3,549,694			2.28	%

Total Short-Term Investments
(Cost $3,549,694)				3,549,694			2.28	%

Total Investments – 100.22%
(Cost $156,197,343)				156,138,806			100.22	%

Liabilities in Excess of Other Assets – (0.22)%				(341,332	)		-0.22	%
TOTAL NET ASSETS – 100.00%			$	155,797,474			100.00	%

Percentages are stated as a percent of net assets.

(a)	Non Income Producing

(b)	The rate listed is the Fund’s 7-day yield as of October 31, 2009.

^	Security is fair valued

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

Summary of Fair Value Exposure at October 31, 2009

The Fund has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination.

	Level 1 –	Quoted unadjusted prices for identical instruments in active markets to which the fund has access at the date of measurement
	Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
	Level 3 –	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s net assets as of October 31, 2009:

	Level 1		Level 2		Level 3			Total
Equity
Consumer Discretionary	$	49,993,626	$	—	$	—		$	49,993,626
Consumer Staples		14,577,308		—		—			14,577,308
Energy		16,648,000		—		—			16,648,000
Financials		5,494,445		—		—			5,494,445
Health Care		15,922,668		—		—			15,922,668
Industrials		14,191,276		—		—			14,191,276
Information Technology		15,248,417		—		—			15,248,417
Materials		20,513,372		—		—			20,513,372
Total Equity	$	152,589,112	$	—	$	—		$	152,589,112
Warrants	$	—	$	—	$	—	(1)	$	—
Short-Term Investments	$	3,549,694	$	—	$	—		$	3,549,694
Total Investments in Securities	$	156,138,806	$	—	$	—		$	156,138,806

(1)	If the Lantronix, Inc. warrant would have had a value, it would have been a Level 3 fair value. The warrant has been fair valued at $0 during the entire reporting period.

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE LARGE GROWTH FUND

HENNESSY CORNERSTONE

LARGE GROWTH FUND

(% of Net Assets)

	TOP TEN EQUITY HOLDINGS	% of net assets
	Coach, Inc.	2.95%
	Western Digital Corp.	2.61%
	Cummins, Inc.	2.46%
	Avon Products, Inc.	2.41%
	The Gap, Inc.	2.39%
	Halliburton Co.	2.33%
	Dish Network Corp.	2.26%
	General Dynamics Corp.	2.24%
	Precision Castparts Corp.	2.23%
	Cameron International Corp.	2.20%

HENNESSY FUNDS 1-800-966-4354

COMMON STOCKS – 95.83%	Number				% of Net
	of Shares		Value		Assets
Consumer Discretionary – 15.19%
Best Buy Co, Inc.		28,900	$	1,103,402		1.59	%
Coach, Inc.		62,100		2,047,437		2.95	%
Dish Network Corp. (a)		90,100		1,567,740		2.26	%
The Gap, Inc.		77,800		1,660,252		2.39	%
The McGraw-Hill Companies, Inc.		49,300		1,418,854		2.04	%
Omnicom Group		39,200		1,343,776		1.93	%
TJX Cos., Inc.		37,800		1,411,830		2.03	%
				10,553,291		15.19	%
Consumer Staples – 2.41%
Avon Products, Inc.		52,200		1,673,010		2.41	%

Energy – 28.97%
Baker Hughes, Inc.		30,100		1,266,307		1.82	%
Cameron International Corp. (a)		41,300		1,526,861		2.20	%
ChevronTexaco Corp.		14,400		1,102,176		1.59	%
ConocoPhillips		24,700		1,239,446		1.78	%
Denbury Resources, Inc. (a)		59,400		867,240		1.25	%
Diamond Offshore Drilling		14,100		1,343,025		1.93	%
ENSCO International, Inc.		33,200		1,520,228		2.19	%
EOG Resources, Inc.		15,100		1,233,066		1.78	%
Exxon Mobil Corp.		14,100		1,010,547		1.45	%
Halliburton Co.		55,400		1,618,234		2.33	%
Hess Corp.		15,100		826,574		1.19	%
Marathon Oil Corp.		38,400		1,227,648		1.77	%
Murphy Oil Corp.		19,500		1,192,230		1.72	%
Noble Corporation Baar (b)		37,000		1,507,380		2.17	%
Occidental Petroleum Corp.		16,400		1,244,432		1.79	%
Schlumberger Ltd. (b)		22,500		1,399,500		2.01	%
				20,124,894		28.97	%
Health Care – 4.72%
Eli Lilly & Co.		28,700		976,087		1.41	%
Forest Laboratories, Inc. (a)		44,100		1,220,247		1.76	%
Merck & Co., Inc.		34,900		1,079,457		1.55	%
				3,275,791		4.72	%

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE LARGE GROWTH FUND

COMMON STOCKS	Number				% of Net
	of Shares		Value		Assets
Industrials – 29.39%
3M Co.		20,300	$	1,493,471		2.15	%
Boeing Co.		28,700		1,371,860		1.98	%
Cooper Industries Ltd. (b)		39,300		1,520,517		2.19	%
Cummins, Inc.		39,700		1,709,482		2.46	%
Emerson Electric Co.		34,800		1,313,700		1.89	%
Fluor Corp.		25,500		1,132,710		1.63	%
General Dynamics Corp.		24,800		1,554,960		2.24	%
Goodrich Corp.		25,000		1,358,750		1.96	%
Honeywell International, Inc.		34,600		1,241,794		1.79	%
ITT Industries, Inc.		24,700		1,252,290		1.80	%
Lockheed Martin Corp.		13,800		949,302		1.37	%
Pitney Bowes, Inc.		42,700		1,046,150		1.51	%
Precision Castparts Corp.		16,200		1,547,586		2.23	%
Rockwell Collins, Inc.		29,700		1,496,286		2.15	%
United Technologies Corp.		23,000		1,413,350		2.04	%
				20,402,208		29.39	%
Information Technology – 10.22%
Dell, Inc. (a)		94,400		1,367,856		1.97	%
International Business Machines Corp.		10,100		1,218,161		1.75	%
Mastercard, Inc.		6,000		1,314,120		1.89	%
Texas Instruments, Inc.		59,100		1,385,895		2.00	%
Western Digital Corp. (a)		53,900		1,815,352		2.61	%
				7,101,384		10.22	%
Materials – 4.93%
Consol Energy, Inc.		32,400		1,387,044		1.99	%
Mosaic Co.		22,400		1,046,752		1.51	%
Nucor Corp.		24,900		992,265		1.43	%
				3,426,061		4.93	%

Total Common Stocks (Cost $51,037,781)				66,556,639		95.83	%

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

SHORT-TERM INVESTMENTS – 4.21%	Shares/Principal					% of Net
	Amount		Value			Assets
Money Market Funds – 4.18%
Fidelity Government Portfolio, 0.080% (c)	$	2,898,149	$	2,898,149			4.18	%

Total Investment Company
(Cost $2,898,149)				2,898,149			4.18	%

Variable Rate Demand Notes# – 0.03%
American Family Financial Services, 0.100%		21,078		21,078			0.03	%

Total Variable Demand Notes
(Cost $21,078)				21,078			0.03	%

Total Short-Term Investments
(Cost $2,919,227)				2,919,227			4.21	%

Total Investments – 100.04%
(Cost $53,957,008)				69,475,866			100.04	%

Liabilities in Excess of Other Assets – (0.04)%				(25,753	)		(0.04	)%
TOTAL NET ASSETS – 100.00%			$	69,450,113			100.00	%

Percentages are stated as a percent of net assets.

(a)	Non income producing

(b)	Foreign issued security

(c)	The rate listed is the Fund’s 7-day yield as of October 31, 2009.

#	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 October 31, 2009.

Summary of Fair Value Exposure at October 31, 2009

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE LARGE GROWTH FUND

The Fund has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination.

	Level 1 –	Quoted unadjusted prices for identical instruments in active markets to which the fund has access at the date of measurement
	Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
	Level 3 –	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s net assets as of October 31, 2009:

Common Stock	Level 1		Level 2		Level 3		Total
Consumer Discretionary	$	10,553,291	$	—	$	—	$	10,553,291
Consumer Staples		1,673,010		—		—		1,673,010
Energy		20,124,894		—		—		20,124,894
Health Care		3,275,791		—		—		3,275,791
Industrials		20,402,208		—		—		20,402,208
Information Technology		7,101,384		—		—		7,101,384
Materials		3,426,061		—		—		3,426,061
Total Common Stock	$	66,556,639	$	—	$	—	$	66,556,639
Short Term Investments	$	2,898,149	$	21,078	$	—	$	2,919,227
Total Investments in Securities	$	69,454,788	$	21,078	$	—	$	69,475,866

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

HENNESSY CORNERSTONE VALUE FUND

(% of Net Assets)

	TOP TEN EQUITY HOLDINGS	% of net assets
	Rio Tinto PLC	3.73%
	Southern Copper Corp.	3.49%
	Credit Suisse Group – ADR	2.92%
	Vimpel Communications – ADR	2.90%
	Morgan Stanley	2.78%
	Macys, Inc.	2.78%
	International Paper Co.	2.75%
	CNOOC Ltd. – ADR	2.63%
	Limited Brands, Inc.	2.56%
	Starwood Hotels & Resorts Worldwide	2.46%

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE VALUE FUND

COMMON STOCKS – 97.16%	Number				% of Net
	of Shares		Value		Assets
Consumer Discretionary – 15.73%
CBS Corp.		270,500	$	3,183,785		2.17	%
Daimler AG		67,300		3,245,879		2.21	%
Harley-Davidson, Inc.		120,400		3,000,368		2.04	%
Limited Brands, Inc.		214,000		3,766,400		2.56	%
Macys, Inc.		232,200		4,079,754		2.78	%
Newell Rubbermaid, Inc.		153,400		2,225,834		1.51	%
Starwood Hotels & Resorts Worldwide		124,600		3,620,876		2.46	%
				23,122,896		15.73	%
Consumer Staples – 5.14%
Altria Group, Inc.		133,300		2,414,063		1.64	%
Reynolds American, Inc.		48,100		2,331,888		1.59	%
Supervalu, Inc.		176,900		2,807,403		1.91	%
				7,553,354		5.14	%
Energy – 11.74%
BP PLC – ADR (b)		45,900		2,598,858		1.77	%
CNOOC Ltd. – ADR (b)		25,900		3,857,546		2.63	%
ENI SPA – ADR (b)		48,400		2,399,672		1.63	%
Enterprise Products Partners LP		100,900		2,829,236		1.93	%
Sasol Ltd. – ADR (b)		81,100		3,032,329		2.06	%
Total SA – ADR (b)		42,200		2,534,954		1.72	%
				17,252,595		11.74	%
Financials – 17.97%
Allianz AG – ADR (b)		229,000		2,599,150		1.77	%
Allstate Corp.		74,000		2,188,180		1.49	%
Bank of America Corp.		131,200		1,912,896		1.30	%
BB&T Corp.		68,500		1,637,835		1.12	%
Credit Suisse Group – ADR (b)		80,600		4,295,980		2.92	%
Hartford Financial Services Group, Inc.		137,000		3,359,240		2.29	%
HSBC Holdings PLC – ADR (b)		37,500		2,077,125		1.41	%
Morgan Stanley		127,200		4,085,664		2.78	%
Sun Life Financial, Inc. (b)		96,900		2,651,184		1.80	%
US Bancorp (d)		69,200		1,606,824		1.09	%
				26,414,078		17.97	%

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

COMMON STOCKS	Number				% of Net
	of Shares		Value		Assets
Health Care – 4.38%
Bristol-Myers Squibb Co.		94,200	$	2,053,560		1.39	%
Merck & Co., Inc.		75,500		2,335,215		1.59	%
Pfizer, Inc.		120,800		2,057,224		1.40	%
				6,445,999		4.38	%
Industrials – 10.17%
General Electric Co.		112,000		1,597,120		1.09	%
Koninklijke Philips – ADR (b)		123,900		3,108,651		2.11	%
Masco Corp.		196,400		2,307,700		1.57	%
Pitney Bowes, Inc.		85,000		2,082,500		1.42	%
RR Donnelley & Sons Co.		166,500		3,343,320		2.27	%
Textron, Inc.		141,600		2,517,648		1.71	%
				14,956,939		10.17	%
Information Technology – 4.05%
AU Optronics Corp. – ADR (b)		352,000		3,108,160		2.11	%
Taiwan Semiconductor
Manufacturing Co., Ltd. – ADR (b)		299,000		2,852,460		1.94	%
				5,960,620		4.05	%
Materials – 19.09%
Alcoa, Inc.		245,300		3,046,626		2.07	%
Arcelor Mittal – ADR (b)		94,200		3,204,684		2.18	%
Dow Chem Co.		105,200		2,470,096		1.68	%
EI Du Pont de Nemours & Co.		82,900		2,637,878		1.79	%
International Paper Co.		180,800		4,033,648		2.75	%
Rio Tinto PLC – ADR (b)		30,800		5,483,324		3.73	%
Southern Copper Corp.		162,900		5,131,350		3.49	%
Weyerhaeuser Co.		56,500		2,053,210		1.40	%
				28,060,816		19.09	%
Telecommunication Services – 8.89%
AT&T, Inc.		71,000		1,822,570		1.24	%
Deutsche Telekom AG – ADR (b)		136,400		1,846,856		1.26	%
Mobile Telesystems – ADR (b)		74,000		3,352,200		2.28	%
Telefonica De Argentina (a)(b)^		100		—		0.00	%
Vimpel Communications – ADR (a)(b)		238,000		4,267,340		2.90	%

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY CORNERSTONE VALUE FUND

COMMON STOCKS	Number				% of Net
	of Shares		Value		Assets
Telecommunication Services
Verizon Communications, Inc.		60,200	$	1,781,318		1.21	%
				13,070,284		8.89	%

Total Common Stocks (Cost $130,848,714)				142,837,581		97.16	%

SHORT-TERM INVESTMENTS – 2.64%
Money Market Funds – 2.64%
Fidelity Government Portfolio, 0.0623% (c)	$	3,873,950		3,873,950		2.64	%

Total Money Market Funds
(Cost $3,873,950)				3,873,950		2.64	%

Total Short-Term Investments
(Cost $3,873,950)				3,873,950		2.64	%

Total Investments – 99.80%
(Cost $134,722,664)				146,711,531		99.80	%

Other Assets in Excess of Liabilities – 0.20%				300,236		0.20	%
TOTAL NET ASSETS – 100.00%			$	147,011,767		100.00	%

Percentages are stated as a percent of net assets.

(a)	Non Income Producing

(b)	Foreign Issued Security

(c)	The rate listed is the Fund’s 7-day yield as of October 31, 2009.

(d)	Investment in affiliated security. Quasar Distributors, LLC, which serves as the Fund’s distributor, is a subsidiary of U.S. Bancorp. Details of transactions with this affiliated company for the year ended October 31, 2009 were as follows:

	Beginning	Purchase	Sales	Ending	Dividend		Market
Issuer	Cost	Cost	Cost	Cost	Income	Shares	Value
U.S. Bancorp	$2,762,128	$409,882	$1,450,699	$1,731,659	$32,020	69,200	$1,606,824

^	Security is fair valued.

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

Summary of Fair Value Exposure at October 31, 2009

The Fund has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination.

	Level 1 –	Quoted unadjusted prices for identical instruments in active markets to which the fund has access at the date of measurement
	Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
	Level 3 –	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s net assets as of October 31, 2009:

	Level 1		Level 2		Level 3		Total
Equity
Consumer Discretionary	$	23,122,896	$	—	$	—	$	23,122,896
Consumer Staples		7,553,354		—		—		7,553,354
Energy		17,252,595		—		—		17,252,595
Financials		26,414,078		—		—		26,414,078
Health Care		6,445,999		—		—		6,445,999
Industrials		14,956,939		—		—		14,956,939
Information Technology		5,960,620		—		—		5,960,620
Materials		28,060,816		—		—		28,060,816
Telecommunication Services		13,070,284		—		—		13,070,284
Total Equity	$	142,837,581	$	—	$	—	$	142,837,581
Short-Term Investments	$	3,873,950	$	—	$	—	$	3,873,950
Total Investments in Securities	$	146,711,531	$	—	$	—	$	146,711,531

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY TOTAL RETURN FUND

HENNESSY TOTAL RETURN FUND

(% of Net Assets)

	TOP TEN EQUITY HOLDINGS	% of net assets
	EI Du Pont de Nemours & Co.	7.30%
	Pfizer, Inc.	6.84%
	AT&T, Inc.	6.54%
	Verizon Communications, Inc.	6.43%
	Kraft Foods, Inc.	5.64%
	Merck & Co., Inc.	5.63%
	Caterpillar, Inc.	5.43%
	ChevronTexaco Corp.	4.91%
	Boeing Co.	4.82%
	American Express Co.	4.08%

HENNESSY FUNDS 1-800-966-4354

COMMON STOCKS – 72.74%	Number				% of Net
	of Shares		Value		Assets
Consumer Discretionary – 6.57%
Home Depot, Inc.		77,600	$	1,946,984		3.72	%
McDonald’s Corp.		25,500		1,494,555		2.85	%
				3,441,539		6.57	%
Consumer Staples – 5.64%
Kraft Foods, Inc. – Class A		107,400		2,955,648		5.64	%

Energy – 4.91%
ChevronTexaco Corp.		33,600		2,571,744		4.91	%

Financials – 6.57%
American Express Co.		61,300		2,135,692		4.08	%
Bank of America Corp.		21,200		309,096		0.59	%
J.P. Morgan Chase & Co.		23,800		994,126		1.90	%
				3,438,914		6.57	%
Health Care – 13.63%
Johnson & Johnson		10,300		608,215		1.16	%
Merck & Co., Inc.		95,400		2,950,722		5.63	%
Pfizer, Inc.		210,200		3,579,706		6.84	%
				7,138,643		13.63	%
Industrials – 12.48%
3M Co.		2,400		176,568		0.34	%
Boeing Co.		52,800		2,523,840		4.82	%
Caterpillar, Inc.		51,700		2,846,602		5.43	%
General Electric Co.		69,600		992,496		1.89	%
				6,539,506		12.48	%
Materials – 9.97%
Alcoa, Inc.		112,800		1,400,976		2.67	%
EI Du Pont de Nemours & Co.		120,100		3,821,582		7.30	%
				5,222,558		9.97	%
Telecommunication Services – 12.97%
AT&T, Inc.		133,400		3,424,378		6.54	%
Verizon Communications, Inc.		113,900		3,370,301		6.43	%
				6,794,679		12.97	%

Total Common Stocks (Cost $38,452,252)				38,103,231		72.74	%

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY TOTAL RETURN FUND

SHORT-TERM INVESTMENTS – 53.77%	Shares/Principal					% of Net
	Amount		Value			Assets
Demand Notes# – 1.88%
American Family Financial Services, 0.1001%	$	982,794	$	982,794			1.88	%

Total Demand Notes
(Cost $982,794)				982,794			1.88	%

Money Market Funds – 1.50%
Fidelity Government Portfolio, 0.0623% (a)		787,478		787,478			1.50	%

Total Money Market Funds
(Cost $787,478)				787,478			1.50	%

U.S. Treasury Bills* – 50.39%
0.0000%, 12/24/2009		26,400,000		26,393,469			50.39	%

Total U.S. Treasury Bills (Cost $26,393,469)				26,393,469			50.39	%

Total Short-Term Investments
(Cost $28,163,741)				28,163,741			53.77	%

Total Investments – 126.51%
(Cost $66,615,993)				66,266,972			126.51	%

Liabilities in Excess of Other Assets – (26.51)%				(13,887,290	)		-26.51	%
TOTAL NET ASSETS – 100.00%			$	52,379,682			100.00	%

(a)	The rate listed is the Fund’s 7-day yield as of October 31, 2009.

#	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 October 31, 2009.

*	Collateral or partial collateral for securities sold subject to repurchase.

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

Summary of Fair Value Exposure at October 31, 2009

The Fund has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination.

	Level 1 –	Quoted unadjusted prices for identical instruments in active markets to which the fund has access at the date of measurement
	Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
	Level 3 –	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s net assets as of October 31, 2009:

	Level 1		Level 2		Level 3		Total
Equity
Consumer Discretionary	$	3,441,539	$	—	$	—	$	3,441,539
Consumer Staples		2,955,648		—		—		2,955,648
Energy		2,571,744		—		—		2,571,744
Financials		3,438,914		—		—		3,438,914
Health Care		7,138,643		—		—		7,138,643
Industrials		6,539,506		—		—		6,539,506
Materials		5,222,558		—		—		5,222,558
Telecommunication Services		6,794,679		—		—		6,794,679
Total Equity	$	38,103,231	$	—	$	—	$	38,103,231
Short-Term Investments	$	787,478	$	27,376,263	$	—	$	28,163,741
Total Investments in Securities	$	38,890,709	$	27,376,263	$	—	$	66,266,972

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY BALANCED FUND

HENNESSY BALANCED FUND

(% of Net Assets)

	TOP TEN EQUITY HOLDINGS	% of net assets
	American Express Co.	6.12%
	Alcoa, Inc.	5.60%
	Caterpillar, Inc.	5.39%
	J.P. Morgan Chase & Co.	4.70%
	EI Du Pont de Nemours & Co.	4.22%
	General Electric Co.	3.97%
	Pfizer, Inc.	3.42%
	Verizon Communications, Inc.	3.24%
	AT&T, Inc.	3.10%
	Merck & Co., Inc.	2.41%

HENNESSY FUNDS 1-800-966-4354

COMMON STOCKS – 50.19%	Number				% of Net
	of Shares		Value		Assets
Consumer Discretionary – 1.65%
Home Depot, Inc.		3,600	$	90,324		0.78	%
McDonald’s Corp.		1,700		99,637		0.87	%
				189,961		1.65	%
Consumer Staples – 2.27%
Kraft Foods, Inc. – Class A		9,450		260,064		2.27	%

Energy – 1.40%
ChevronTexaco Corp.		2,100		160,734		1.40	%

Financials – 12.02%
American Express Co.		20,140		701,678		6.12	%
Bank of America Corp.		5,990		87,334		0.76	%
Citigroup, Inc.		12,410		50,757		0.44	%
J.P. Morgan Chase & Co.		12,900		538,833		4.70	%
				1,378,602		12.02	%
Health Care – 6.29%
Johnson & Johnson		900		53,145		0.46	%
Merck & Co., Inc.		8,920		275,895		2.41	%
Pfizer, Inc.		23,060		392,712		3.42	%
				721,752		6.29	%
Industrials – 10.40%
Boeing Co.		2,500		119,500		1.04	%
Caterpillar, Inc.		11,220		617,773		5.39	%
General Electric Co.		31,940		455,465		3.97	%
				1,192,738		10.40	%
Materials – 9.82%
Alcoa, Inc.		51,670		641,742		5.60	%
EI Du Pont de Nemours & Co.		15,220		484,300		4.22	%
				1,126,042		9.82	%
Telecommunication Services – 6.34%
AT&T, Inc.		13,870		356,043		3.10	%
Verizon Communications, Inc.		12,550		371,354		3.24	%
				727,397		6.34	%

Total Common Stocks (Cost $5,231,761)				5,757,290		50.19	%

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY BALANCED FUND

SHORT-TERM INVESTMENTS – 7.18%	Shares/Principal					% of Net
	Amount		Value			Assets
U.S. Treasury Bills – 46.15%
3.125%, 11/30/2009	$	800,000	$	802,063			6.99	%
3.625%, 01/15/2010		400,000		402,938			3.51	%
3.500%, 02/15/2010		1,600,000		1,615,875			14.09	%
4.000%, 04/15/2010		200,000		203,508			1.77	%
3.625%, 06/15/2010		300,000		306,375			2.67	%
4.125%, 08/15/2010		1,000,000		1,030,001			8.98	%
4.250%, 10/15/2010		900,000		933,259			8.14	%

Total U.S. Treasury Bills (Cost $5,290,169)				5,294,019			46.15	%

Money Market Funds – 7.18%
Federated Government Obligation
Money Market, 0.0804% (a)		328,002		328,002			2.86	%
Fidelity Government Portfolio, 0.0623% (a)		495,455		495,455			4.32	%

Total Money Market Funds (Cost $823,457)				823,457			7.18	%

Total Short-Term Investments
(Cost $6,113,626)				6,117,476			53.33	%

Total Investments – 103.52%
(Cost $11,345,387)				11,874,766			103.52	%

Liabilities in Excess of Other Assets – (3.52)%				(403,683	)		(3.52	)%
TOTAL NET ASSETS – 100.00%			$	11,471,083			100.00	%

(a)	The rate listed is the Fund’s 7-day yield as of October 31, 2009.

The accompanying notes are an integral part of these financial statements.

HENNESSY FUNDS 1-800-966-4354

Summary of Fair Value Exposure at October 31, 2009

The Fund has performed an analysis of all existing investments to determine the significance and character of all inputs to their fair value determination.

	Level 1 –	Quoted unadjusted prices for identical instruments in active markets to which the fund has access at the date of measurement
	Level 2 –	Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
	Level 3 –	Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used to value the Fund’s net assets as of October 31, 2009:

	Level 1		Level 2		Level 3		Total
Equity
Consumer Discretionary	$	189,961	$	—	$	—	$	189,961
Consumer Staples		260,064		—		—		260,064
Energy		160,734		—		—		160,734
Financials		1,378,602		—		—		1,378,602
Health Care		721,752		—		—		721,752
Industrials		1,192,738		—		—		1,192,738
Materials		1,126,042		—		—		1,126,042
Telecommunication Services		727,397		—		—		727,397
Total Equity	$	5,757,290	$	—	$	—	$	5,757,290
Short-Term Investments	$	823,457	$	5,294,019	$	—	$	6,117,476
Total Investments in Securities	$	6,580,747	$	5,294,019	$	—	$	11,874,766

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

SUMMARY OF INVESTMENTS — HENNESSY BALANCED FUND

(This Page Intentionally Left Blank.)

HENNESSY FUNDS 1-800-966-4354

Financial Statements

Statements of Assets and Liabilities as of October 31, 2009

	HENNESSY
	CORNERSTONE
	GROWTH FUND
ASSETS:
Investments in unaffiliated securities, at value (cost $224,043,382, $27,673,681,
$156,197,343, $53,957,008, $132,991,005, $66,615,993 and $11,345,387 respectively)	$	228,309,485
Investments in affiliated securities, at value (cost $1,731,659)		—
Cash		172,409
Dividends and interest receivable		106,995
Receivable for fund shares sold		28,786
Receivable for securities sold		5,746,000
Prepaid expenses and other assets		31,488
Total Assets		234,395,163

LIABILITIES:
Payable for securities purchased		15,332
Payable for fund shares redeemed		261,510
Payable to Advisor		153,630
Payable to Administrator		208,923
Payable to Auditor		19,748
Reverse repurchase agreement		—
Accrued interest payable		287
Accrued service fees		20,290
Accrued sub transfer agent expenses		—
Accrued expenses and other payables		77,090
Total Liabilities		756,810

NET ASSETS	$	233,638,353

NET ASSETS CONSIST OF:
Capital stock	$	521,844,718
Accumulated net investment income (loss)		—
Accumulated net realized gain (loss) on investments		(292,472,468	)
Unrealized net appreciation (depreciation) on investments		4,266,103
Total Net Assets	$	233,638,353

NET ASSETS
Original Class:
Shares authorized ($.0001 par value)		25,000,000,000
Net assets applicable to outstanding Original Class shares		228,959,784
Shares issued and outstanding		25,974,994
Net asset value, offering price and redemption price per share	$	8.81

Institutional Class:
Shares authorized ($.0001 par value)		25,000,000,000
Net assets applicable to outstanding Institutional Class shares		4,678,569
Shares issued and outstanding		527,954
Net asset value, offering price and redemption price per share	$	8.86

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL STATEMENTS — STATEMENTS OF ASSETS AND LIABILITIES

HENNESSY						HENNESSY
CORNERSTONE			HENNESSY			CORNERSTONE			HENNESSY			HENNESSY			HENNESSY
GROWTH FUND			FOCUS 30			LARGE GROWTH			CORNERSTONE			TOTAL RETURN			BALANCED
SERIES II			FUND			FUND			VALUE FUND			FUND			FUND

$	30,171,807		$	156,138,806		$	69,475,866		$	145,104,707		$	66,266,972		$	11,874,766
	—			—			—			1,606,824			—			—
	—			—			2,277			—			—			—
	41			158,610			72,009			321,835			152,767			65,615
	1,859			55,934			945			689,782			259			25
	—			—			—			—			3,506,069			797,455
	20,461			25,930			46,670			22,838			12,045			9,337
	30,194,168			156,379,280			69,597,767			147,745,986			69,938,112			12,747,198

	—			—			—			—			3,009,279			1,233,350
	7,260			282,431			3,143			499,297			24,298			—
	20,282			96,064			47,706			90,673			27,293			5,936
	27,167			141,012			58,097			98,977			44,073			9,467
	16,578			14,492			17,055			15,426			14,514			13,535
	—			—			—			—			14,380,000			—
	9			27			—			—			13,450			—
	2,737			11,540			6,123			12,101			4,549			989
	—			—			1,699			—			—			—
	22,472			36,240			13,831			17,745			40,974			12,838
	96,505			581,806			147,654			734,219			17,558,430			1,276,115
$	30,097,663		$	155,797,474		$	69,450,113		$	147,011,767		$	52,379,682		$	11,471,083

$	88,999,345		$	244,970,714		$	75,015,330		$	217,876,584		$	72,021,858		$	14,454,901
	—			—			358,421			2,611,157			86,870			4,907
	(61,399,808	)		(89,114,703	)		(21,442,496	)		(85,464,841	)		(19,380,025	)		(3,518,104	)
	2,498,126			(58,537	)		15,518,858			11,988,867			(349,021	)		529,379
$	30,097,663		$	155,797,474		$	69,450,113		$	147,011,767		$	52,379,682		$	11,471,083

Unlimited				25,000,000,000		Unlimited				25,000,000,000			100,000,000			100,000,000
	29,813,921			128,357,777			69,412,389			145,905,678			52,379,682			11,471,083
	2,688,873			14,708,178			7,310,663			13,729,442			5,757,939			1,210,257
$	11.09		$	8.73		$	9.49		$	10.63		$	9.10		$	9.48

Unlimited				25,000,000,000		Unlimited				25,000,000,000
	283,742			27,439,697			37,724			1,106,089
	25,315			3,126,117			3,966			104,080
$	11.21		$	8.78		$	9.51		$	10.63

HENNESSY FUNDS 1-800-966-4354

Financial Statements

Statements of Operations

	HENNESSY
	HENNESSY			CORNERSTONE
	CORNERSTONE			GROWTH FUND
	GROWTH FUND			SERIES II
	Year Ended			Year Ended
	October 31, 2009			October 31, 2009
INVESTMENT INCOME:
Dividend income from unaffiliated securities(1)	$	2,378,649		$	387,008
Dividend income from affiliated securities		—			—
Interest income		4,399			1,517
Total investment income		2,383,048			388,525
EXPENSES:
Investment advisory fees		1,882,422			225,699
Administration, fund accounting, custody and transfer agent fees		654,138			83,471
Distribution fees – Original Class (See Note 5)		—			—
Distribution fees – Predecessor Classes (See Note 5)		—			—
Service fees – Original Class (See Note 5)		249,871			30,355
Federal and state registration fees		42,755			41,020
Audit fees		22,999			19,976
Legal fees		24,428			19,977
Reports to shareholders		90,259			14,542
Directors’ fees and expenses		11,877			10,561
Sub-transfer agent expenses – Original Class (See Note 5)		414,603			55,465
Sub-transfer agent expenses – Institutional Class (See Note 5)		867			80
Sub-transfer agent expenses – Predecessor Classes (See Note 5)		—			—
Interest expense (See Note 3 and 6)		846			584
Other		53,204			18,337
Total expenses before reimbursement from advisor		3,448,269			520,067
Expense recoupment by advisor – Original Class		—			—
Expense reimbursement from advisor – Institutional Class		(6,062	)		(706	)
Expense waiver/reimbursement by:
Advisor (See Note 5)		—			—
Distributor (See Note 5)		—			—
Net expenses		3,442,207			519,361
NET INVESTMENT INCOME (LOSS)	$	(1,059,159	)	$	(130,836	)
REALIZED AND UNREALIZED GAINS (LOSSES):
Net realized gain (loss) on investments	$	(175,588,612	)	$	(25,002,829	)
Net realized gain (loss) on unaffiliated investments		—			—
Net realized gain (loss) on affiliated investments		—			—
Change in unrealized appreciation (depreciation) on investments		171,339,271			26,641,700
Net gain (loss) on investments		(4,249,341	)		1,638,871
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS	$	(5,308,500	)	$	1,508,035

(1)	Net of foreign taxes withheld of $81,778, $10,188, $0, $0, $173,859, $0 and $0, respectively.

*	For the one month ended October 31, 2009. Effective October 31, 2009, the Hennessy Cornerstone Large Growth Fund changed its fiscal year end to October 31st from September 30th.

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL STATEMENTS — STATEMENTS OF OPERATIONS

HENNESSY			HENNESSY						HENNESSY			HENNESSY			HENNESSY
FOCUS 30			CORNERSTONE						CORNERSTONE			TOTAL RETURN			BALANCED
FUND			LARGE GROWTH FUND						VALUE FUND			FUND			FUND
Year Ended			One Month Ended			Year Ended			Year Ended			Year Ended			Year Ended
October 31, 2009			October 31, 2009*			September 30, 2009			October 31, 2009			October 31, 2009			October 31, 2009

$	1,939,777		$	76,275		$	1,073,917		$	4,228,870		$	1,737,135		$	245,135
	—			—			—			32,020			—			—
	5,124			58			5,210			5,355			73,980			61,361
	1,944,901			76,333			1,079,127			4,266,265			1,811,115			306,496

	1,211,554			45,336			442,796			707,415			295,880			63,393
	423,766			15,623			223,204			246,561			131,401			32,730
	—			—			—			—			73,970			15,849
	—			—			5,770			—			—			—
	138,766			6,123			33,417			94,724			49,313			10,566
	45,581			2,973			42,367			36,801			20,196			19,726
	18,676			1,962			21,711			19,217			18,697			17,502
	12,477			1,019			17,856			10,977			10,012			10,023
	54,781			1,062			31,722			17,998			11,501			2,500
	10,812			849			5,829			10,562			8,390			8,389
	259,349			1,225			31,656			53,513			—			—
	12,879			—			2,000			135			—			—
	—			—			5,448			—			—			—
	1,004			—			—			514			140,695			—
	24,410			1,092			10,046			13,330			7,834			2,226
	2,214,055			77,264			873,822			1,211,747			767,889			182,904
	—			2,375			—			—			—			—
	(43,673	)		(5	)		—			(1,298	)		—			—

	—			—			(148,261	)		—			—			—
	—			—			(2,660	)		—			—			—
	2,170,382			79,634			722,901			1,210,449			767,889			182,904
$	(225,481	)	$	(3,301	)	$	356,226		$	3,055,816		$	1,043,226		$	123,592

$	(41,135,146	)	$	810,847		$	(21,384,860	)	$	(56,666,478	)	$	(17,884,613	)	$	(2,906,301	)
	—			—						10,348			—			—
	—			—						—			—			—
	51,687,206			(1,552,441	)		14,850,433			74,246,459			16,495,364			3,283,017
	10,552,060			(741,594	)		(6,534,427	)		17,590,329			(1,389,249	)		376,716

$	10,326,579		$	(744,895	)	$	(6,178,201	)	$	20,646,145		$	(346,023	)	$	500,308

HENNESSY FUNDS 1-800-966-4354

Financial Statements

Statements of Changes in Net Assets

	Hennessy Cornerstone Growth Fund
	Year Ended			Year Ended
	October 31, 2009			October 31, 2008
OPERATIONS:
Net investment income (loss)	$	(1,059,159	)	$	(1,718,215	)
Net realized gain (loss) on securities		(175,588,612	)		(116,321,526	)
Change in unrealized appreciation (depreciation) on securities		171,339,271			(248,016,087	)
Net increase (decrease) in net assets resulting from operations		(5,308,500	)		(366,055,828	)

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income – Original Class		—			—
Net investment income – Institutional Class		—			—
Net realized gains – Original Class		—			(110,914,265	)
Net realized gains – Institutional Class		—			—
Total distributions		—			(110,914,265	)

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares subscribed – Original Class		13,769,357			39,355,042
Proceeds from shares subscribed – Institutional Class		135,313			14,450,082
Dividends reinvested – Original Class		—			107,702,229
Dividends reinvested – Institutional Class		—			—
Redemption fees retained – Original Class		—			23,170
Redemption fees retained – Institutional Class		—			205
Cost of shares redeemed – Original Class		(92,048,170	)		(350,084,701	)
Cost of shares redeemed – Institutional Class		(498,966	)		(7,312,081	)
Net increase (decrease) in net assets derived
from capital share transactions		(78,642,466	)		(195,866,054	)

TOTAL INCREASE (DECREASE) IN NET ASSETS		(83,950,966	)		(672,836,147	)

NET ASSETS:
Beginning of period		317,589,319			990,425,466
End of period	$	233,638,353		$	317,589,319

Accumulated net investment income (loss), end of period	$	—		$	—

CHANGES IN SHARES OUTSTANDING:
Shares sold – Original Class		1,670,446			42,121,972
Shares sold – Institutional Class		16,333			1,117,876
Shares issued to holders as reinvestment of dividends
Original Class		—			7,062,441
Institutional Class		—			—
Shares redeemed – Original Class		(11,189,297	)		(64,717,368	)
Shares redeemed – Institutional Class		(65,345	)		(540,910	)
Net increase (decrease) in shares outstanding		(9,567,863	)		(14,955,989	)

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL STATEMENTS — STATEMENTS OF CHANGES IN NET ASSETS

Hennessy Cornerstone
Growth Fund, Series II						Hennessy Focus 30 Fund
Year Ended			Year Ended			Year Ended			Year Ended
October 31, 2009			October 31, 2008			October 31, 2009			October 31, 2008

$	(130,836	)	$	(330,874	)	$	(225,481	)	$	(1,274,378	)
	(25,002,829	)		(35,487,492	)		(41,135,146	)		(47,714,145	)
	26,641,700			(21,004,180	)		51,687,206			(49,274,887	)
	1,508,035			(56,822,546	)		10,326,579			(98,263,410	)

	—			—			—			—
	—			—			—			—
	—			(27,055,016	)		—			(33,250,015	)
	—			—			—			—
	—			(27,055,016	)		—			(33,250,015	)

	884,541			3,777,707			28,044,578			169,225,771
	229,027			108,132			3,182,769			40,370,645
	—			26,856,690			—			32,845,640
	—			—			—			—
	—			6,554			—			118,011
	—			—			—			2,592
	(8,829,446	)		(49,122,781	)		(75,221,408	)		(146,107,945	)
	(21,810	)					(4,641,964	)		(4,205,478	)

	(7,737,688	)		(18,373,698	)		(48,636,025	)		92,249,236

	(6,229,653	)		(102,251,260	)		(38,309,446	)		(39,264,189	)

	36,327,316			138,578,576			194,106,920			233,371,109
$	30,097,663		$	36,327,316		$	155,797,474		$	194,106,920
$	—		$	—		$	—		$	—

	90,535			3,389,025			3,800,184			26,879,882
	21,589			5,992			412,433			3,743,355

	—			1,292,430			—			2,935,134
	—			—			—			—
	(904,443	)		(5,749,094	)		(9,945,713	)		(26,028,686	)
	(2,266	)		—			(619,087	)		(410,584	)
	(794,585	)		(1,061,647	)		(6,352,183	)		7,119,101

HENNESSY FUNDS 1-800-966-4354

Financial Statements

Statements of Changes in Net Assets

OPERATIONS:
Net investment income (loss)
Net realized gain (loss) on securities
Change in unrealized appreciation (depreciation) on securities
Net increase (decrease) in net assets resulting from operations
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income – Original Class
Net investment income – Institutional Class
Net realized gains – Original Class
Net realized gains – Institutional Class
Total distributions
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued in the reorganization
Proceeds from shares subscribed – Original Class
Proceeds from shares subscribed – Institutional Class
Proceeds from shares subscribed – Class A
Proceeds from shares subscribed – Class I
Proceeds from shares subscribed – Class C
Proceeds from shares subscribed – Class S
Cost of shares redeemed – Original Class
Cost of shares redeemed – Predecessor Class A
Cost of shares redeemed – Predecessor Class I
Cost of shares redeemed – Predecessor Class C
Cost of shares redeemed – Predecessor Class R
Cost of shares redeemed – Predecessor Class S
Cost of shares redeemed in the reorganization – Class A
Cost of shares redeemed in the reorganization – Class I
Cost of shares redeemed in the reorganization – Class C
Cost of shares redeemed in the reorganization – Class R
Cost of shares redeemed in the reorganization – Class S
Net increase (decrease) in net assets derived from capital share transactions
TOTAL DECREASE IN NET ASSETS
NET ASSETS:
Beginning of period
End of period
Accumulated net investment income (loss), end of period

*	For the one month ended October 31, 2009. Effective October 31, 2009, the Fund changed its fiscal year end to October 31st from September 30th.

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL STATEMENTS — STATEMENTS OF CHANGES IN NET ASSETS

Hennessy Cornerstone
Large Growth Fund

One Month Ended			Year Ended			Year Ended
October 31, 2009*			September 30, 2009			September 30, 2008

$	(3,301	)	$	356,226		$	(22,418	)
	810,847			(21,384,860	)		(866,288	)
	(1,552,441	)		14,850,433			(21,199,636	)
	(744,895	)		(6,178,201	)		(22,088,342	)

	—			—			—
	—			—			—
	—			—			—
	—			—			—
	—			—			—

	—			51,980,253			—
	92,349			399,858			—
	914			30,524			—
	—			354,913			637,476
	—			1,450			43,830
	—			—			114,000
	—			226,710			1,012,835
	(549,997	)		(3,502,412	)		—
	—			(394,647	)		(1,104,104	)
	—			(103,571	)		(316,089	)
	—			(1,916	)		(4,572	)
	—			(1,961	)		(514	)
	—			(4,936,283	)		(12,226,101	)
	—			(2,045,574	)		—
	—			(293,648	)		—
	—			(81,763	)		—
	—			(3,654	)		—
	—			(49,555,614	)		—
	(456,734	)		(7,927,335	)		(11,843,239	)
	(1,201,629	)		(14,105,536	)		(33,931,581	)

	70,651,742			84,757,278			118,688,859
$	69,450,113		$	70,651,742		$	84,757,278
$	358,421		$	358,421		$	—

HENNESSY FUNDS 1-800-966-4354

Financial Statements

Statements of Changes in Net Assets

CHANGES IN SHARES OUTSTANDING:
Shares issued in connection with reorganization
Shares sold – Original Class
Shares sold – Institutional Class
Shares sold – Predecessor Class A
Shares sold – Predecessor Class I
Shares sold – Predecessor Class C
Shares sold – Predecessor Class S
Shares redeemed – Original Class
Shares redeemed – Predecessor Class A
Shares redeemed – Predecessor Class I
Shares redeemed – Predecessor Class C
Shares redeemed – Predecessor Class R
Shares redeemed – Predecessor Class S
Shares redeemed in the reorganization – Predecessor Class A
Shares redeemed in the reorganization – Predecessor Class I
Shares redeemed in the reorganization – Predecessor Class C
Shares redeemed in the reorganization – Predecessor Class R
Shares redeemed in the reorganization – Predecessor Class S

Net decrease in shares outstanding

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL STATEMENTS — STATEMENTS OF CHANGES IN NET ASSETS

Hennessy Cornerstone
Large Growth Fund

One Month Ended			Year Ended			Year Ended
October 31, 2009*			September 30, 2009			September 30, 2008

	—			7,722,854			—
	9,537			47,603			—
	93			3,873			—
	—			49,665			55,203
	—			198			4,066
	—			—			10,374
	—			30,610			87,136
	(55,752	)		(413,579	)		—
	—			(55,087	)		(98,867	)
	—			(14,533	)		(28,065	)
	—			(317	)		(418	)
	—			(316	)		(46	)
	—			(685,035	)		(1,041,694	)
	—			(309,689	)		—
	—			(43,625	)		—
	—			(12,829	)		—
	—			(560	)		—
	—			(7,362,580	)		—
	(46,122	)		(1,043,347	)		(1,012,311	)

HENNESSY FUNDS 1-800-966-4354

Financial Statements

Statements of Changes in Net Assets


	Hennessy Cornerstone Value Fund

	Year Ended			Year Ended
	October 31, 2009			October 31, 2008
OPERATIONS:
Net investment income (loss)	$	3,055,816		$	5,994,086
Net realized gain (loss) on securities		(56,656,130	)		5,901,494
Change in unrealized appreciation (depreciation) on securities		74,246,459			(99,303,788	)
Net increase (decrease) in net assets resulting from operations		20,646,145			(87,408,208	)

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income – Original Class		(5,597,237	)		(4,859,028	)
Net investment income – Institutional Class		(55,214	)		—
Net realized gains – Original Class		—			—
Net realized gains – Institutional Class		—			—
Total distributions		(5,652,451	)		(4,859,028	)

CAPITAL SHARE TRANSACTIONS:
Proceeds from shares subscribed – Original Class		43,322,159			2,874,361
Proceeds from shares subscribed – Institutional Class		39,402			1,312,785
Dividends reinvested – Original Class		4,981,771			4,316,071
Dividends reinvested – Institutional Class		33,372			—
Cost of shares redeemed – Original Class		(14,327,901	)		(22,760,874	)
Cost of shares redeemed – Institutional Class		(10,708	)		—
Redemption fees retained – Original Class		—			664
Redemption fees retained – Institutional Class		—			—
Net increase (decrease) in net assets derived
from capital share transactions		34,038,095			(14,256,993	)

TOTAL INCREASE (DECREASE) IN NET ASSETS		49,031,789			(106,524,229	)

NET ASSETS:
Beginning of period		97,979,978			204,504,207
End of period	$	147,011,767		$	97,979,978

Accumulated net investment income (loss), end of period	$	2,611,157		$	5,319,895

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL STATEMENTS — STATEMENTS OF CHANGES IN NET ASSETS


Hennessy Total Return Fund						Hennessy Balanced Fund

Year Ended			Year Ended			Year Ended			Year Ended
October 31, 2009			October 31, 2008			October 31, 2009			October 31, 2008

$	1,043,226		$	1,864,720		$	123,592		$	326,516
	(17,884,613	)		(447,136	)		(2,906,301	)		(35,369	)
	16,495,364			(29,382,944	)		3,283,017			(3,656,241	)
	(346,023	)		(27,965,360	)		500,308			(3,365,094	)

	(956,356	)		(2,023,302	)		(138,030	)		(345,420	)
	N/A			N/A			N/A			N/A
	—			—			—			(785,865	)
	N/A			N/A			N/A			N/A
	(956,356	)		(2,023,302	)		(138,030	)		(1,131,285	)

	657,981			1,911,184			795,947			656,445
	N/A			N/A			N/A			N/A
	884,126			1,889,484			134,495			1,104,807
	N/A			N/A			N/A			N/A
	(6,082,697	)		(11,899,129	)		(1,280,181	)		(2,627,822	)
	N/A			N/A			N/A			N/A
	—			855			—			610
	N/A			N/A			N/A			N/A

	(4,540,590	)		(8,097,606	)		(349,739	)		(865,960	)

	(5,842,969	)		(38,086,268	)		12,539			(5,362,339	)

	58,222,651			96,308,919			11,458,544			16,820,883
$	52,379,682		$	58,222,651		$	11,471,083		$	11,458,544

$	86,870		$	—		$	4,907		$	17,790

HENNESSY FUNDS 1-800-966-4354

Financial Statements

Statements of Changes in Net Assets


	Hennessy Cornerstone Value Fund

	Year Ended			Year Ended
	October 31, 2009			October 31, 2008
CHANGES IN SHARES OUTSTANDING:
Shares sold
Original Class		4,111,585			11,669,368
Institutional Class		4,670			96,448
Shares issued to holders as reinvestment of dividends
Original Class		638,689			288,122
Institutional Class		4,290			—
Shares redeemed
Original Class		(1,749,104	)		(13,218,237	)
Institutional Class		(1,328	)		—
Net increase (decrease) in shares outstanding		3,008,802			(1,164,299	)

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL STATEMENTS — STATEMENTS OF CHANGES IN NET ASSETS


Hennessy Total Return Fund						Hennessy Balanced Fund

Year Ended			Year Ended			Year Ended			Year Ended
October 31, 2009			October 31, 2008			October 31, 2009			October 31, 2008

	79,969			161,806			91,298			61,447
	—			—			—			—

	110,321			169,813			16,328			98,884
	—			—			—			—

	(746,373	)		(1,034,535	)		(155,366	)		(247,266	)
	—			—			—			—
	(556,083	)		(702,916	)		(47,740	)		(86,935	)

HENNESSY FUNDS 1-800-966-4354

Financial Highlights

Hennessy Cornerstone Growth Fund

	Year Ended
	October 31, 2009
				Institutional
	Original Class			Class(1)
PER SHARE DATA:
Net asset value, beginning of period	$	8.80		$	8.82

Income from investment operations:
Net investment income (loss)(3)		(0.04	)		—
Net realized and unrealized gains (losses) on securities		0.05			0.04
Total from investment operations		0.01			0.04

Less Distributions:
Dividends from net investment income		—			—
Dividends from net realized gains		—			—
Total distributions		—			—
Redemption fees retained(4)		—			—
Net asset value, end of period	$	8.81		$	8.86

TOTAL RETURN		0.11	%		0.45	%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions)	$	228.96		$	4.68
Ratio of expenses to average net assets:
Before expense reimbursement		1.36	%		1.11	%
After expense reimbursement(5)		1.36	%		0.98	%
Ratio of net investment income to average net assets
Before expense reimbursement		(0.42	)%		(0.17	)%
After expense reimbursement(5)		(0.42	)%		(0.04	)%
Portfolio turnover rate(6)		108	%		108	%

(1)	Institutional Class shares commenced operations on March 3, 2008.

(2)	All ratios for the period have been annualized, except portfolio turnover and total return.

(3)	Net investment loss per share is calculated using ending balances prior to consideration for adjustments for permanent book and tax differences.

(4)	Amount is less than $0.01.

(5)	The Advisor has agreed to reimburse expenses in order to cap the Institutional Class share expenses. Please refer to Note 5 for more information.

(6)	Portfolio turnover is calculated on the basis of the Fund as a whole.

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL HIGHLIGHTS — HENNESSY CORNERSTONE GROWTH FUND

Year Ended October 31,						Year Ended October 31,
2008						2007			2006			2005
			Institutional
Original Class			Class(1)(2)			Original Class

$	19.41		$	13.29		$	20.77		$	19.49		$	19.38

	(0.05	)		0.01			(0.07	)		(0.04	)		(0.14	)
	(8.32	)		(4.48	)		1.82			2.55			4.13
	(8.37	)		(4.47	)		1.75			2.51			3.99

	—			—			—			—			—
	(2.24	)		—			(3.11	)		(1.23	)		(3.88	)
	(2.24	)		—			(3.11	)		(1.23	)		(3.88	)
	—			—			—			—			—
$	8.80		$	8.82		$	19.41		$	20.77		$	19.49

	(48.00	)%		(34.13	)%		9.65	%		13.59	%		23.17	%

$	312.50		$	5.09		$	990.43		$	1,250.67		$	1,071.78

	1.25	%		1.12	%		1.20	%		1.21	%		1.23	%
	1.25	%		0.98	%		1.20	%		1.21	%		1.23	%

	(0.29	)%		0.15	%		(0.32	)%		(0.20	)%		(0.78	)%
	(0.29	)%		0.29	%		(0.32	)%		(0.20	)%		(0.78	)%
	103	%		103	%		97	%		90	%		89	%

HENNESSY FUNDS 1-800-966-4354

Financial Highlights

Hennessy Cornerstone Growth Fund, Series II

	Year Ended
	October 31, 2009
				Institutional
	Original Class			Class
PER SHARE DATA:
Net asset value, beginning of period	$	10.35		$	10.39

Income from investment operations:
Net investment income (loss)		(0.05	)		0.02
Net realized and unrealized gains (losses) on securities		0.79			0.80
Total from investment operations		0.74			0.82

Less Distributions:
Dividends from net investment income		—			—
Dividends from net realized gains		—			—
Total distributions		—			—
Redemption fees retained(5)		—			—
Net asset value, end of period	$	11.09		$	11.21

TOTAL RETURN		7.15	%		7.89	%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions)	$	29.81		$	0.28
Ratio of expenses to average net assets
Before expense reimbursement		1.70	%		1.46	%
After expense reimbursement(7)		1.70	%		0.98	%
Ratio of net investment income to average net assets
Before expense reimbursement		(0.43	)%		(0.19	)%
After expense reimbursement(7)		(0.43	)%		0.29	%
Portfolio turnover rate(8)		94	%		94	%

(1)	Institutional Class shares commenced operations on March 3, 2008.

(2)	For the four months ended October 31, 2006. Effective October 31, 2006 the Fund changed its fiscal year end to October 31st from June 30th.

(3)	All ratios for the period have been annualized, except portfolio turnover and total return.

(4)	Net investment loss per share is calculated using average shares outstanding.

(5)	Amount is less than $0.01.

(6)	The financial highlights set forth herein include the historical highlights of The Henlopen Fund. On July 1, 2005 Hennessy Advisors, Inc. became the investment advisor to the Fund and the Fund changed its name from “The Henlopen Fund” to Hennessy Cornerstone Growth Fund, Series II.

(7)	The Advisor has agreed to reimburse expenses in order to cap the Institutional Class share expenses. Please refer to Note 5 for more information.

(8)	Portfolio turnover is calculated on the basis of the Fund as a whole.

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL HIGHLIGHTS — HENNESSY CORNERSTONE GROWTH FUND, SERIES II

Year Ended						Year Ended			Period Ended
October 31,						October 31,			October 31,			Year Ended June 30,
2008						2007			2006(2)(3)			2006			2005(6)
			Institutional
Original Class			Class(1)(3)			Original Class

$	30.32		$	19.17		$	30.75		$	32.19		$	31.29		$	27.69

	(0.09	)		0.02			(0.25	)		(0.03	)		(0.07	)(4)		(0.14	)(4)
	(13.75	)		(8.80	)		1.02			(1.41	)		4.65			3.75
	(13.84	)		(8.78	)		0.77			(1.44	)		4.58			3.61

	—			—			—			—			—			(0.01	)
	(6.13	)		—			(1.20	)		—			(3.68	)		—
	(6.13	)		—			(1.20	)		—			(3.68	)		(0.01	)
	—			—			—			—			—			—
$	10.35		$	10.39		$	30.32		$	30.75		$	32.19		$	31.29

	(55.79	)%		(45.80	)%		2.60	%		(4.47	)%		16.48	%		13.04	%


$	36.27		$	0.06		$	138.58		$	244.19		$	279.3		$	299.0

	1.37	%		1.22	%		1.27	%		1.25	%		1.25	%		1.33	%
	1.37	%		0.98	%		1.27	%		1.25	%		1.25	%		1.33	%

	(0.40	)%		0.17	%		(0.59	)%		(0.24	)%		(0.22	)%		(0.49	)%
	(0.40	)%		0.41	%		(0.59	)%		(0.24	)%		(0.22	)%		(0.49	)%
	75	%		75	%		86	%		93	%		109	%		192	%

HENNESSY FUNDS 1-800-966-4354

Financial Highlights

Hennessy Focus 30 Fund

	Year Ended
	October 31, 2009
				Institutional
	Original Class			Class
PER SHARE DATA:
Net asset value, beginning of period	$	8.02		$	8.04

Income from investment operations:
Net investment income (loss)		(0.02	)		0.02
Net realized and unrealized gains (losses) on investments		0.73			0.72
Total from investment operations		0.71			0.74

Less Distributions:
Dividends from net investment income		—			—
Dividends from net realized gains		—			—
Total distributions		—			—
Redemption fees retained		—	(3)		—	(3)
Net asset value, end of period	$	8.73		$	8.78

TOTAL RETURN		8.85	%		9.20	%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions)	$	128.36		$	27.44
Ratio of net expenses to average net assets:
Before expense reimbursement		1.39	%		1.15	%
After expense reimbursement(4)		1.39	%		0.98	%
Ratio of net investment loss to average net assets:
Before expense reimbursement		(0.20	)%		0.04	%
After expense reimbursement(4)		(0.20	)%		0.21	%
Portfolio turnover rate(5)		90	%		90	%

(1)	Institutional Class shares commenced operations on March 3, 2008.

(2)	All ratios for the period have been annualized, except portfolio turnover and total return.

(3)	Amount is less than $0.01.

(4)	The Advisor has agreed to reimburse expenses in order to cap the Institutional Class share expenses. Please refer to Note 5 for more information.

(5)	Portfolio turnover is calculated on the basis of the Fund as a whole.

The accompanying notes are an integral part of these financial statements.

WWW.HENNESSYFUNDS.COM

FINANCIAL HIGHLIGHTS — HENNESSY FOCUS 30 FUND

Year Ended October 31,						Year Ended October 31,
2008						2007			2006			2005
			Institutional
Original Class			Class(1)(2)			Original Class

$	13.67		$	11.15		$	12.39		$	12.21		$	8.67

	(0.06	)		(0.02	)		(0.09	)		(0.08	)		(0.04	)
	(3.57	)		(3.09	)		1.47			1.86			3.58
	(3.63	)		(3.11	)		1.38			1.78			3.54

	—			—			—			—			—
	(2.02	)		—			(0.10	)		(1.61	)		—
	(2.02	)		—			(0.10	)		(1.61	)		—
	—	(3)		—	(3)		—	(3)		0.01			—	(3)
$	8.02		$	8.04		$	13.67		$	12.39		$	12.21

	(30.81	)%		(27.89	)%		11.30	%		16.18	%		40.83	%


$	167.32		$	26.78		$	233.37		$	240.63		$	125.31

	1.27	%		1.13	%		1.23	%		1.21	%		1.35	%
	1.27	%		0.98	%		1.23	%		1.21	%		1.35	%

	(0.62	)%		(0.28	)%		(0.61	)%		(0.65	)%		(0.60	)%
	(0.62	)%		(0.13	)%		(0.61	)%		(0.65	)%		(0.60	)%
	123	%		123	%		112	%		124	%		155	%

HENNESSY FUNDS 1-800-966-4354

Financial Highlights

Hennessy Cornerstone Large Growth Fund

	One Month Ended
	October 31, 2009
	Original Class			Class I
PER SHARE DATA:
Net asset value, beginning of period	$	9.60		$	9.61

Income from investment operations:
Net investment income		—			—
Net realized and unrealized gains (losses) on securities		(0.11	)		(0.10	)
Total from investment operations		(0.11	)		(0.10	)

Less Distributions:
Dividends from net investment income		—			—
Dividends from net realized gains		—			—
Total distributions		—			—
Redemption fees retained(3)		—			—
Net asset value, end of period	$	9.49		$	9.51

TOTAL RETURN		(1.15	)%(5)		(1.04	)%(5)

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions)	$	69.41		$	0.04
Ratio of expenses to average net assets:
Before expense recoupment/reimbursement		1.26	%(6)		1.14	%(6)
After expense recoupment/reimbursement(7)		1.30	%(6)		0.98	%(6)
Ratio of net investment income to average net assets
Before expense recoupment/reimbursement		(0.01	)%(6)		0.12	%(6)
After expense recoupment/reimbursement(7)		(0.05	)%(6)		0.28	%(6)
Portfolio turnover rate(8)		0	%(5)		0	%(5)

(1)

The financial highlights set forth for periods prior to March 20, 2009 represent the historical financial highlights of the Tamarack Large Cap Growth Fund, Class S shares. The assets of the Tamarack Large Cap Growth Fund were acquired by the Hennessy Cornerstone Large Growth Fund on March 20, 2009. Prior to the reorganization, Tamarack Large Cap Growth Fund also offered Class A, I, C and R shares. At that time Voyageur Asset Management Inc. ceased to be investment advisor and Hennessy Advisors, Inc. became investment advisor. The return of the Tamarack Large Cap Growth Fund, Class S shares during the period October 1, 2008 through March 20, 2009 was (33.30)%. The return of the Hennessy Cornerstone Large Growth Fund, Original Class shares during the period March 20, 2009 through September 30, 2009 was 42.64%.

(2)	Institutional Class shares commenced operations on March 20, 2009.

(3)	Amount is less than $0.01 or ($0.01) per share.

(4)	Per share net investment income (loss) has been calculated using the average daily shares method.

(5)	Not annualized.

(6)	Annualized.

(7)	The Advisor has agreed to reimburse expenses in order to cap the Original Class and Institutional Class share expenses. Please refer to Note 5 for more information.

(8)	Portfolio turnover is calculated on the basis of the Fund as a whole.

The accompanying notes are an integral part of these financial statements.

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FINANCIAL HIGHLIGHTS — HENNESSY CORNERSTONE LARGE GROWTH FUND

Year Ended
September 30,						Year Ended September 30,
2009						2008			2007			2006			2005
Original Class(1)			Class I(2)			Original Class(1)

$	10.09		$	6.73		$	12.61		$	10.98		$	10.75		$	9.97

	0.05			0.03			—	(3)(4)		—	(3)		—	(3)		0.02
	(0.54	)		2.85			(2.52	)		1.63			0.23			0.78
	(0.49	)		2.88			(2.52	)		1.63			0.23			0.80

	—			—			—			—			—	(3)		(0.02	)
	—			—			—			—			—			—
	—			—			—			—			—			(0.02	)
	—			—			—			—			—			—
$	9.60		$	9.61		$	10.09		$	12.61		$	10.98		$	10.75
	(4.86	)%		42.79	%(5)		(19.98	)%		14.85	%		2.18	%		8.04	%


$	70.61		$	0.04		$	80.91		$	113.15		$	125.25		$	145.65

	1.40	%		16.51	%(6)		1.16	%		1.18	%		1.18	%		1.25	%
	1.17	%		0.98	%(6)		0.98	%		1.00	%		1.00	%		0.91	%

	0.36	%		(14.54	)%(6)		(0.19	)%		(0.19	)%		(0.20	)%		(0.10	)%
	0.59	%		0.99	%(6)		(0.01	)%		(0.01	)%		(0.02	)%		0.24	%
	116	%		116	%		38	%		25	%		35	%		28	%

HENNESSY FUNDS 1-800-966-4354

Financial Highlights

Hennessy Cornerstone Value Fund

	Year Ended
	October 31, 2009
	Original Class			Class I
PER SHARE DATA:
Net asset value, beginning of period	$	9.05		$	9.06

Income from investment operations:
Net investment income		0.24			0.30
Net realized and unrealized gains (losses) on investments		1.87			1.83
Total from investment operations		2.11			2.13

Less Distributions:
Dividends from net investment income		(0.53	)		(0.56	)
Dividends from net realized gains		—			—
Total distributions		(0.53	)		(0.56	)
Redemption fees retained(3)		—			—
Net asset value, end of period	$	10.63		$	10.63

TOTAL RETURN		25.51	%		25.87	%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions)	$	145.91		$	1.11
Ratio of net expenses to average net assets
Before expense reimbursement		1.27	%		1.13	%
After expense reimbursement		1.27	%		0.98	%(4)
Ratio of net investment income to average net assets
Before expense reimbursement		3.19	%		3.33	%
After expense reimbursement		3.19	%		3.48	%
Portfolio turnover rate(5)		59	%		59	%

(1)	Institutional Class shares commenced operations on March 3, 2008.

(2)	All ratios for the period have been annualized, except portfolio turnover and total return.

(3)	Amount is less than $0.01.

(4)	The Advisor has agreed to reimburse expenses in order to cap the Institutional Class share expenses. Please refer to Note 5 for more information.

(5)	Portfolio turnover is calculated on the basis of the Fund as a whole.

The accompanying notes are an integral part of these financial statements.

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FINANCIAL HIGHLIGHTS — HENNESSY CORNERSTONE VALUE FUND

Year Ended October 31,						Year Ended October 31,
2008						2007			2006			2005
Original Class			Class I(1)(2)			Original Class

$	17.06		$	13.79		$	15.27		$	12.95		$	12.48

	0.55			0.34			0.46			0.30			0.30
	(8.15	)		(5.07	)		1.68			2.36			0.41
	(7.60	)		(4.73	)		2.14			2.66			0.71

	(0.41	)		—			(0.35	)		(0.34	)		(0.24	)
	—			—			—			—			—
	(0.41	)		—			(0.35	)		(0.34	)		(0.24	)
	—			—			—			—			—
$	9.05		$	9.06		$	17.06		$	15.27		$	12.95

	(45.50	)%		(34.30	)%		14.26	%		21.00	%		5.69	%

$	97.10		$	0.87		$	204.50		$	256.80		$	183.76

	1.20	%		1.14	%		1.17	%		1.15	%		1.20	%
	1.20	%		0.98	%(4)		1.17	%		1.15	%		1.20	%

	3.92	%		4.94	%		2.64	%		2.49	%		2.19	%
	3.92	%		5.10	%		2.64	%		2.49	%		2.19	%
	53	%		53	%		40	%		35	%		32	%

HENNESSY FUNDS 1-800-966-4354

Financial Highlights

Hennessy Total Return Fund

	Year Ended October 31,
	2009			2008
	Original Class
PER SHARE DATA:
Net asset value, beginning of period	$	9.22		$	13.73

Income from investment operations:
Net investment income		0.18			0.28
Net realized and unrealized gains (losses) on securities		(0.14	)		(4.49	)
Total from investment operations		0.04			(4.21	)

Less Distributions:
Dividends from net investment income		(0.16	)		(0.30	)
Dividends from realized capital gains		—			—
Return of capital		—			—
Total distributions		(0.16	)		(0.30	)
Redemption fees retained(1)		—			—
Net asset value, end of period	$	9.10		$	9.22

TOTAL RETURN		0.69	%		(30.97	)%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions)	$	52.38		$	58.22
Gross ratio of expenses, including
interest expense, to average net assets		1.56	%		2.36	%
Ratio of interest expense to average net assets		0.29	%		1.16	%
Net ratio of expenses, excluding
interest expense, to average net assets		1.27	%		1.20	%
Ratio of net investment income (loss) to average net assets		2.12	%		2.43	%
Portfolio turnover rate		41	%		16	%

(1)	Amount is less than $0.01.

The accompanying notes are an integral part of these financial statements.

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FINANCIAL HIGHLIGHTS — HENNESSY TOTAL RETURN FUND

Year Ended October 31,
2007			2006			2005
Original Class

$	12.61		$	10.57		$	10.40


	0.33			0.31			0.23
	1.13			2.03			0.17
	1.46			2.34			0.40


	(0.34	)		(0.30	)		(0.23	)
	—			—			—
	—			—			—
	(0.34	)		(0.30	)		(0.23	)
	—			—			—
$	13.73		$	12.61		$	10.57

	11.70	%		22.48	%		3.83	%


$	96.31		$	113.26		$	86.75

	3.04	%		2.80	%		2.28	%
	1.88	%		1.64	%		1.05	%

	1.16	%		1.16	%		1.23	%
	2.48	%		2.79	%		2.07	%
	12	%		24	%		26	%

HENNESSY FUNDS 1-800-966-4354

Financial Highlights

Hennessy Balanced Fund

	Year Ended October 31,
	2009			2008
	Original Class
PER SHARE DATA:
Net asset value, beginning of period	$	9.11		$	12.51

Income from investment operations:
Net investment income		0.10			0.25
Net realized and unrealized gains (losses) on securities		0.38			(2.80	)
Total from investment operations		0.48			(2.55	)

Less Distributions:
Dividends from net investment income		(0.11	)		(0.26	)
Dividends from realized capital gains		—			(0.59	)
Return of capital		—			—
Total distributions		(0.11	)		(0.85	)
Redemption fees retained(1)		—			—
Net asset value, end of period	$	9.48		$	9.11

TOTAL RETURN		5.46	%		(21.55	)%

SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (millions)	$	11.47		$	11.46
Ratio of net expenses to average net assets		1.73	%		1.56	%
Ratio of net investment income to average net assets		1.17	%		2.31	%
Portfolio turnover rate		46	%		13	%

(1)	Amount is less than $0.01.

The accompanying notes are an integral part of these financial statements.

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FINANCIAL HIGHLIGHTS — HENNESSY BALANCED FUND

Year Ended October 31,
2007			2006			2005
Original Class

$	11.83		$	10.56		$	10.62


	0.38			0.30			0.18
	0.69			1.25			(0.07	)
	1.07			1.55			0.11


	(0.39	)		(0.28	)		(0.17	)
	—			—			—
	—			—			—
	(0.39	)		(0.28	)		(0.17	)
	—			—			—
$	12.51		$	11.83		$	10.56

	9.16	%		14.92	%		1.13	%


$	16.82		$	26.14		$	19.27
	1.36	%		1.34	%		1.49	%
	2.86	%		2.75	%		1.58	%
	35	%		88	%		21	%

HENNESSY FUNDS 1-800-966-4354

Statement of Cash Flows

Hennessy Total Return Fund For the Year Ended October 31, 2009

Cash Flows From Operating Activities:

Net decrease in net assets from operations	$	(346,023	)
Adjustments to reconcile net decrease in net assets from
operations to net cash provided by operating activities:
Purchase of investment securities		(122,712,871	)
Proceeds on sale of securities		135,322,749
Decrease in other receivables, net		24,122
Decrease in other assets		1,105
Decrease in accrued expenses and other payables		(65,632	)
Net accretion of discount on securities		(68,253	)
Net realized loss on investments		17,884,613
Unrealized appreciation on securities		(16,495,364	)
Net cash provided by operating activities	$	13,544,446

Cash Flows From Financing Activities:

Decrease in reverse repurchase agreements	$	(8,047,500	)
Proceeds on shares sold		657,981
Payment on shares repurchased		(6,082,697	)
Cash dividends paid		(72,230	)
Net cash used by financing activities	$	(13,544,446	)
Net increase (decrease) in cash		—

Cash at beginning of period		—
Cash at end of period	$	—

Cash paid for interest	$	159,637

The accompanying notes are an integral part of these financial statements.

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Notes to the Financial Statements

October 31, 2009

1). ORGANIZATION

The Hennessy Mutual Funds, Inc. was organized as a Maryland corporation on May 20, 1996 and consists of three separate series: Hennessy Cornerstone Growth Fund (the “Growth Fund”), Hennessy Cornerstone Value Fund (the “Value Fund”) and the Hennessy Focus 30 Fund (the “Focus 30 Fund”), formerly SYM Select Growth Fund. These Funds are open-end, diversified management investment companies registered under the Investment Company Act of 1940, as amended. The Growth Fund and Value Fund commenced operations on November 1, 1996. On September 17, 2003, Hennessy Advisors, Inc. became the investment advisor to the SYM Select Growth Fund and the fund changed its name to the Hennessy Focus 30 Fund.

The Hennessy Funds, Inc. was organized as a Maryland corporation on January 11, 1996 and consists of two separate series: Hennessy Balanced Fund (the “Balanced Fund”) and Hennessy Total Return Fund (the “Total Return Fund”). The Balanced and Total Return Funds are open-end, non-diversified management investment companies registered under the Investment Company Act of 1940, as amended. The Balanced Fund and Total Return Fund commenced operations on March 8, 1996 and July 29, 1998, respectively.

The Hennessy Funds Trust (the “Trust”) was organized as a Delaware Statutory Trust on September 17, 1992 and consists of three series: Hennessy Cornerstone Growth Fund, Series II (the “Growth II Fund”), Hennessy Select Large Value Fund and Hennessy Large Growth Fund (the “Large Growth Fund”). The financial results of the Hennessy Select Large Value Fund are not contained in this report. Prior to July 1, 2005, both the Trust and the Growth II Fund were known as The Henlopen Fund. On July 1, 2005, Hennessy Advisors, Inc., became the investment advisor to the Growth II Fund and the Growth II Fund changed its name from “The Henlopen Fund” to “Hennessy Cornerstone Growth Fund, Series II”. The Large Growth Fund is the successor to the Tamarack Large Cap Growth Fund (the “Predecessor Tamarack Fund”) pursuant to a reorganization that took place on March 20, 2009 (See Note 8). As a result of the reorganization, holders of the Class A, Class C, Class I, Class R and Class S shares of the Tamarack Large Cap Growth Fund received Original Class shares of the Hennessy Cornerstone Large Growth Fund. On March 20, 2009, Hennessy Advisors, Inc., became the investment advisor to the Large Growth Fund and the Large Growth Fund changed its name from “Tamarack Large Cap Growth Fund” to “Hennessy Cornerstone Large Growth Fund”. The Growth II and Large Growth Funds are open-end, diversified investment management companies registered under the Investment Company Act of 1940, as amended.

The Growth Fund, Growth II Fund, Focus 30 Fund, Large Growth Fund, Value Fund, Total Return Fund and Balanced Fund collectively represent the Hennessy Cornerstone Series Funds (the “Funds”).

HENNESSY FUNDS 1-800-966-4354

The Growth, Growth II, Focus 30, Large Growth and Value Funds offer Original and Institutional Class shares. Each class of shares differs principally in its respective administration and transfer agent expenses and sales charges, if any. Each class has identical rights to earnings, assets and voting privileges, except for class-specific expenses and exclusive rights to vote on matters affecting only individual classes.

2).	SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. These policies are in conformity with 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, fair value pricing procedures have been adopted by the Board of Directors of the Funds. Fair value pricing determinations are made in good faith in accordance with these procedures. 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 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 Funds have elected to be taxed as “regulated investment companies” and intend to distribute substantially all taxable income to shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Net investment income and realized gains and losses for federal income tax purposes may differ from that reported on the financial statements because of temporary book and tax basis differences. Temporary differences are primarily the result of the treatment of wash sales 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, expenses, and realized gains/losses under U.S. generally accepted accounting principles and federal income tax purposes, permanent differences between book and tax basis reporting for the 2009 fiscal year have been identified and appropriately reclassified on the Statement of Assets and Liabilities.

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NOTES TO THE FINANCIAL STATEMENTS

	Undistributed Net			Accumulated Net			Paid In
	Investment Income/(Loss)			Realized Gain/(Loss)			Capital
Cornerstone Growth		1,059,159			369,963			(1,429,122	)
Cornerstone Growth Series II		130,836			(84	)		(130,752	)
Focus 30		225,481			8			(225,489	)
Cornerstone Large Growth		3,301			2,915,217			(2,918,518	)
Cornerstone Value		(112,103	)		112,103			—
Total Return		—			34,658,579			(34,658,579	)
Balanced		1,555			446,409			(447,964	)

The permanent differences primarily relate to net operating losses and capital loss carryovers lost due to expiration

c).

Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Funds and interest income is recognized on an accrual basis. Income expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its respective net assets.

d).

Distributions to Shareholders – Dividends from net investment income for the Growth, Growth II, Focus 30, Large Growth and Value Funds, if any, are declared and paid out annually, usually in November or December of each year. Dividends from net investment income for the Total Return and Balanced Funds are declared and paid on a calendar quarter basis. Distributions of net realized capital gains, if any, are declared and paid annually, usually in November or December of each year, for all of the Funds.

e).

Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Funds determine the gain or loss realized from the investment transactions by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted/amortized over the life of the respective security.

f).

Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported change in net assets during the reporting period. Actual results could differ from those estimates.

g).

Share Valuation – The net asset value (“NAV”) per share of each Fund is calculated by dividing the sum of the value of the securities held by each Fund, plus cash or other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding for each Fund, rounded to the nearest cent. The Funds’ shares will not be priced on the days on which the NYSE is closed for trading. The offering and redemption price per share for each Fund is equal to each Fund’s net asset value per share. The Funds charged a 1.50% redemption fee on shares held less than 90 days through August 29, 2008. These fees were deducted from the redemption proceeds otherwise payable to the shareholder. The Funds retained the fee charged as paid-in capital and such fees became part of that Fund’s daily NAV calculation.

HENNESSY FUNDS 1-800-966-4354

h).

Repurchase Agreements – Each Fund may enter into repurchase agreements with member banks or security dealers of the Federal Reserve whom the investment advisor deems creditworthy. The repurchase price generally equals the price paid by the Fund plus interest negotiated on the basis of current short-term rates.

Securities pledged as collateral for repurchase agreements are held by the custodian bank until the respective agreements mature. Provisions of the repurchase agreements ensure that the market value of the collateral, including accrued interest thereon, is sufficient, in the event of default of the counterparty. If the counterparty defaults and the value of the collateral declines or if the counterparty enters an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited.

i).

Accounting for Uncertainty in Income Taxes – The Funds have adopted accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Funds have reviewed all open tax years and major jurisdictions and concluded that there is no impact on the Funds’ net assets and no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken on a tax return. As of October 31, 2009, open Federal and state tax years for the Large Growth Fund include the tax years ended September 30, 2006 through 2009 and for the period ended October 31, 2009. As of October 31, 2009, open Federal and state tax years for the Growth, Growth II, Focus, Value, Total Return and Balanced Fund include the tax years ended October 31, 2006 through 2009.

j).

Events Subsequent to the Fiscal Period End – The Funds have adopted financial reporting rules regarding subsequent events which requires an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. In addition, an entity is required to disclose the date through which subsequent events have been evaluated. Management has evaluated the Funds’ related events and transactions that occurred subsequent to October 31, 2009, through December 29, 2009, the date of issuance of the Funds’ financial statements. There were no events or transactions that occurred during this period that materially impacted the amounts or disclosures in the Fund’s financial statements.

3).	REVERSE REPURCHASE AGREEMENTS

The Total Return Fund has entered into reverse repurchase agreements with UBS Financial Services, Inc., under which the Total Return Fund sells securities and agrees to repurchase them later at a mutually agreed upon price. For the year ended October 31, 2009, the average daily balance and average interest rate in effect for reverse repurchase agreements was $14,797,860 and 0.53%, respectively. In addition, an interest payment of $55,231 was paid due to the early termination of a reverse repurchase agreement. At October 31, 2009, the interest rate in effect for the outstanding reverse repurchase agreements, scheduled to mature on December 24, 2009 ($10,782,000), and December 24, 2009 ($3,598,000) was 0.32% and 0.32%, respectively. Outstanding reverse repurchase agreements at October 31, 2009 were equal to 27.45% of the Total Return Fund’s total net assets.

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NOTES TO THE FINANCIAL STATEMENTS

4).	INVESTMENT TRANSACTIONS

Purchases and sales of investment securities (excluding government and short-term investments) during the following fiscal periods were as follows:

	Growth		Growth II		Focus 30		Large Growth		Value		Total Return		Balanced
	Fund		Fund		Fund		Fund		Fund		Fund		Fund
	Year		Year		Year		Period		Year		Year		Year
	Ended		Ended		Ended		Ended		Ended		Ended		Ended
	10/31/09		10/31/09		10/31/09		10/31/09		10/31/09		10/31/09		10/31/09
Purchases	$	273,736,263	$	28,232,796	$	145,322,855	$	—	$	86,164,443	$	14,574,779	$	2,528,018
Sales	$	353,908,800	$	36,595,712	$	192,809,893	$	2,930,408	$	56,101,205	$	16,398,646	$	2,872,796

Purchases and sales of investment securities (excluding government and short-term investments) for the Large Growth Fund during the year ended September 30, 2009 were $73,469,560 and $80,757,495, respectively. Purchases and sales of long-term U.S. Government Securities for the Total Return Fund were $28,997,582 and $29,000,000, respectively. Purchases and sales of long-term U.S. Government Securities for the Balanced Fund were $5,678,816 and $866,257, respectively. There were no purchases or sales of long-term U.S. Government Securities for the Growth, Growth II, Focus 30, Large Growth, or Value Funds.

5).	INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Hennessy Advisors, Inc. (the “Advisor”) is the Advisor of the Funds. The Advisor provides the Funds with investment management services under a Management Agreement. The Advisor furnishes all investment advice, office space, facilities, and provides most of the personnel needed by the Funds. As compensation for its services, the Advisor is entitled to a monthly fee from each Fund. The fee is based upon the average daily net assets of the Funds at the annual rate of:

Growth Fund	0.74%
Growth II Fund	0.74%
Focus 30 Fund	0.74%
Large Growth Fund	0.74%
Value Fund	0.74%
Total Return Fund	0.60%
Balanced Fund	0.60%

Prior to March 20, 2009, Voyageur Asset Management Inc. (“Voyageur”) acted as the investment advisor for the Predecessor Tamarack Fund. The Predecessor Tamarack Fund entered an agreement with Voyageur whereas they furnished related office facilities, equipment, research and personnel. The agreement required the Predecessor Tamarack Fund to pay Voyageur a monthly fee of 0.70% based upon average daily net assets.

The Advisor has agreed to waive its fees and absorb expenses to the extent that the total annual operating expenses (excluding all federal, state and local taxes, interest, brokerage commissions, acquired fund fees and expenses and other costs incurred in connection with the purchase and sale of securities and extraordinary items) do not exceed 0.98% of the Funds’ net assets for the Institutional Class shares in the Growth, Growth II, Focus 30, Large Growth and Value Funds or 1.30% of the Original Class shares of the Large Growth Fund.

HENNESSY FUNDS 1-800-966-4354

The expense limitation agreement for the Original Class shares of the Large Growth Fund is in place until March 31, 2010. The expense limitation agreement for the Institutional Class can only be terminated by the Board of Trustees. Voyageur Asset Management Inc. (“Voyaguer”) had contractually agreed to waive fees/or make payments in order to keep total operating expenses of the Predecessor Fund, Class S at 1.00%. This limitation was in place February 1, 2008 until January 31, 2009. For a period of three years after the year in which the Advisor waives or reimburses expenses, the Advisor may seek reimbursement from the Funds to the extent that total annual Fund operating expenses are less than the expense limitation in effect at the time of the reimbursement. The Advisor reimbursed Institutional Class expenses of $6,062, $706, $43,673, $5 and $1,298 for the Growth, Growth II, Focus 30, Large Growth and Value Funds, respectively for the year ended October 31, 2009.

The Advisor recouped $2,375 of previously reimbursed Original Class expenses for the Large Growth Fund for the period ended October 31, 2009.

As of October 31, 2009, cumulative expenses subject to potential recovery to the aforementioned conditions and year of expiration are as follows:

	Oct. 31, 2011		Oct. 31, 2012		Total
Growth Fund – Institutional Class	$	7,464	$	6,062	$	13,526
Growth II Fund – Institutional Class	$	137	$	706	$	843
Focus 30 Fund – Institutional Class	$	35,499	$	43,673	$	79,172
Large Growth Fund – Original Class	$	38,323	$	—	$	38,323
Large Growth Fund – Institutional Class	$	2,051	$	5	$	2,056
Value Fund – Institutional Class	$	1,056	$	1,298	$	2,354

The Board of Directors has approved a Shareholder Servicing Plan for the Original Class shares of the Growth, Growth II, Focus 30, Large Growth, Value, Total Return and Balanced Funds which was instituted to compensate the Advisor for the non-investment management services it provides to the Funds. 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 Funds.

The Growth Fund, Growth II Fund, Focus 30 Fund, Large Growth and Value Fund have entered into agreements with various brokers, dealers and financial intermediaries in connection with the sale of shares of the Funds. The agreements provide for periodic payments by the Funds 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 Growth Fund, Growth II Fund, Focus 30 Fund, Large Growth and Value Fund to various brokers, dealers and financial intermediaries for the period ended October 31, 2009, were $415,470, $55,545, $272,228, $1,225 and $53,648, respectively. Fees paid by the Large Growth Fund and Predecessor Tamarack Fund to various brokers, dealers and financial intermediaries for the year ended September 30, 2009, were $31,656, $2,000, $203, $37, $8, $1 and $5,199 for Original Class, Institutional Class and Predecessor Classes A, I, C, R and S, respectively.

WWW.HENNESSYFUNDS.COM

NOTES TO THE FINANCIAL STATEMENTS

The Total Return and Balanced Funds have adopted a plan pursuant to Rule 12b-1 which authorizes payments in connection with the distribution of the Total Return and Balanced Fund shares at an annual rate not to exceed 0.15% of each Fund’s average daily net assets. Amounts paid under the Plan may be spent on any activities or expenses primarily intended to result in the sale of shares, including but not limited to, advertising, compensation for sales and marketing activities or financial institutions and others such as dealers and distributors, shareholder account servicing, the printing and mailing of prospectuses to other than current shareowners and the printing and mailing of sales literature.

The Predecessor Tamarack Fund had adopted a Master Distribution 12b-1 Plan (the “Plan”) in which Tamarack Distributors Inc. (the “Distributor”) acted as the Predecessor Tamarack Fund’s distributor. The Distributor is an affiliate of Voyageur. The Plan permitted the Predecessor Tamarack Fund to make payments for or reimburse the Distributor monthly for distribution-related costs and expenses of marketing shares of each share class covered under the Plan; and/or for providing shareholder services. The following chart shows the most recent Plan fee rate for each class of the Predecessor Tamarack Fund.

		Class A	Class C	Class R
	12b-1 Plan Fee	0.25%*	1.00%	0.50%

*	The maximum Plan fee rate for Class A shares is 0.50%. The Distributor has contractually waived 0.25% of the total 0.50% Plan fee for Class A.

Plan fees are based on average daily net assets of the applicable class. Up to 0.25% of each Plan fee may be designated as a Service Fee, as defined by the applicable rules of the Financial Industry Regulatory Authority. The Distributor, subject to applicable legal requirements, may waive a Plan fee voluntarily, in whole or in part. The distribution fees as of September 30, 2009 for the Predecessor Tamarack Fund were $5,320, $435 and $15 for Classes A, C and R, respectively. Neither the Original nor the Institutional Class shares of the Cornerstone Large Growth Fund have adopted a 12b-1 Plan.

For the period ended March 20, 2009, the Distributor received commissions of $436 from front-end sales charges of Class A shares of the Predecessor Tamarack Fund, all of which was paid to affiliated broker-dealers. The Distributor received no CDSC fees from Class A shares or Class C shares of the Predecessor Tamarack Fund during the period ended March 20, 2009. Class A and Class C shares were no longer offered for sale after March 20, 2009.

U.S. Bancorp Fund Services, LLC (the “Administrator”) acts as the Funds’ Administrator under an Administration Agreement. The Administrator prepares various federal and state regulatory filings, reports and returns for the Funds; prepares reports and materials to be supplied to the directors; monitors the activities of the Funds’ custodian, transfer agent and accountants; coordinates the preparation and payment of the Funds’ expenses and reviews the Funds’ expense accruals. Fees paid to U.S. Bancorp Fund Services, LLC for the year ended October 31, 2009, were $654,138, $83,471, $423,766, $15,623, $246,561, $131,401 and $32,730 for Growth, Growth II, Focus 30, Large Growth, Value, Total Return and Balanced Funds, respectively. Fees paid to U.S. Bancorp Fund Services, LLC for services provided to the Large Growth Fund for the period March 20, 2009 through September 30, 2009 were $85,033.

HENNESSY FUNDS 1-800-966-4354

Prior to March 23, 2009 Voyageur and PNC Global Investment Servicing (U.S.) Inc. (“PNC”) served as co-administrators of the Predecessor Tamarack Fund. Services provided under the administrative services contract included providing day-to-day administration of matters related to the Predecessor Tamarack Fund, maintenance of its records and the preparation of reports. Under the terms of the administrative services contract, Voyageur received a fee, payable monthly, at the annual rate of 0.075% of the Predecessor Tamarack Fund’s average daily net assets. PNC received a fee for its services payable by the Predecessor Tamarack Fund based on the Predecessor Tamarack Fund’s average net assets. Voyageur’s fee is included in “Administration fees” in the Statement of Operations for the year ended September 30, 2009. PNC’s fee is included with “Fund Accounting fees” in the Statement of Operations for the year ended September 30, 2009.

Quasar Distributors, LLC (the “Distributor”) acts as the Funds’ principal underwriter in a continuous public offering of the Funds’ shares. The Distributor is an affiliated company of U.S. Bank, N.A.

6).	LINE OF CREDIT

The Growth, Growth II, Focus 30, and Value Funds have $40,000,000, $1,500,000, $25,000,000 and $10,000,000 lines of credit, respectively, intended to provide short-term financing, if necessary, subject to certain restrictions, in connection with shareholder redemptions. The credit facility is with its custodian bank, U.S. Bank, N.A. During the year ended October 31, 2009, the Growth Fund had an outstanding average daily balance and a weighted average interest rate of $35,436 and 3.34%, respectively. The maximum amount outstanding for the Growth Fund during the period was $1,511,000. During the year ended October 31, 2009, the Growth II Fund had an outstanding average daily balance and a weighted average interest rate of $4,014 and 3.34%, respectively. The maximum amount outstanding for the Growth II Fund during the period was $303,000. During the year ended October 31, 2009, the Focus 30 Fund had an outstanding average daily balance and a weighted average interest rate of $15,299 and 3.34%, respectively. The maximum amount outstanding for the Focus 30 Fund during the period was $1,941,000. During the year ended October 31, 2009, the Value Fund had an outstanding average daily balance and a weighted average interest rate of $414 and 3.34%, respectively. The maximum amount outstanding for the Value Fund during the period was $108,000.

WWW.HENNESSYFUNDS.COM

NOTES TO THE FINANCIAL STATEMENTS

7).	FEDERAL TAX INFORMATION

As of October 31, 2009, the components of accumulated earnings (losses) for income tax purposes were as follows:

	Growth			Growth II			Focus 30
	Fund			Fund			Fund
Tax cost of Investments	$	224,061,528		$	27,673,681		$	156,197,343
Unrealized Appreciation		24,112,218			4,292,546			5,600,584
Unrealized Depreciation		(19,864,261	)		(1,794,420	)		(5,659,121	)
Net unrealized appreciation (depreciation)		4,247,957			2,498,126			(58,537	)
Undistributed OI	$	—		$	—		$	—
Undistributed LTG	$	—		$	—		$	—
Distributable earnings	$	—		$	—		$	—
Other accumulated gain/(loss)	$	(292,454,322	)	$	(61,399,808	)	$	(89,114,703	)
Total accumulated gain/(loss)	$	(288,206,365	)	$	(58,901,682	)	$	(89,173,240	)

	Large						Total
	Growth			Value			Return			Balanced
	Fund			Fund			Fund			Fund
Tax cost of Investments	$	53,957,008		$	134,897,164		$	67,023,216		$	11,355,997
Unrealized Appreciation		16,656,370			27,487,624			4,107,674			1,367,882
Unrealized Depreciation		(1,137,512	)		(15,673,257	)		(4,863,918	)		(849,113	)
Net unrealized
appreciation (depreciation)		15,518,858			11,814,367			(756,244	)		518,769
Undistributed OI	$	358,421		$	2,322,929		$	86,870		$	4,907
Undistributed LTG	$	—		$	—		$	—		$	—
Distributable earnings	$	358,421		$	2,322,929		$	86,870		$	4,907
Other accumulated gain/(loss)	$	(21,442,496	)	$	(85,002,113	)	$	(18,972,802	)	$	(3,507,494	)
Total accumulated gain/(loss)	$	(5,565,217	)	$	(70,864,817	)	$	(19,642,176	)	$	(2,983,818	)

The difference between book-basis and tax-basis unrealized appreciation is attributable primarily to wash sales and partnership adjustments.

At October 31, 2009, the Growth Fund had tax basis capital losses of $292,454,322, to offset future capital gains, the use of a portion of which is limited by IRS regulations. Of such losses, $182,559 expire October 31, 2010, $115,170,412 expire October 31, 2016, and $177,101,351 expire October 31, 2017. Additionally, the Growth Fund had no post-October loss deferrals as of October 31, 2009.

At October 31, 2009, the Growth II Fund had tax basis capital losses of $61,399,808, to offset future capital gains, the use of a portion of which is limited by IRS regulations. Of such losses, $36,286,123 expire October 31, 2016 and $25,113,685 expire October 31, 2017. Additionally, the Growth II Fund had no post-October loss deferrals as of October 31, 2009.

At October 31, 2009, the Focus 30 Fund had tax basis capital losses of $89,114,703, to offset future capital gains, the use of a portion of which is limited by IRS regulations. Of such losses, $47,979,565 expire October 31, 2016

HENNESSY FUNDS 1-800-966-4354

and $41,135,138 expire October 31, 2017. Additionally, the Focus 30 Fund had no post-October loss deferrals as of October 31, 2009.

At October 31, 2009, the Large Growth Fund had tax basis capital losses of $21,442,496, to offset future capital gains, the use of a portion of which is limited by IRS regulations. Of such losses, $612,261 expire October 31, 2015, $2,573,644 expire October 31, 2016 and $18,256,591 expire October 31, 2017. Additionally, the Large Growth Fund had no post-October loss deferrals as of October 31, 2009.

At October 31, 2009, the Value Fund had tax basis capital losses of $85,002,113, to offset future capital gains, the use of a portion of which is limited by IRS regulations. Of such losses, $27,482,264 expire October 31, 2010 and $712,595 expire October 31, 2011 and $56,807,254 expire on October 31, 2017. Additionally, the Value Fund had no post-October loss deferrals as of October 31, 2009.

At October 31, 2009, the Total Return Fund had tax basis capital losses of $18,972,802, which may be carried over to offset future capital gains. Of such $18,972,802 expire October 31, 2017. Additionally, the Total Return Fund had no post-October loss deferrals as of October 31, 2009.

At October 31, 2009, the Balanced Fund had tax basis capital losses of $3,507,494, to offset future capital gains, the use of a portion of which is limited by IRS regulations. Of such losses, $447,964 expire October 31, 2010, $119,027 expire October 31, 2016 and $2,940,503 expire October 31, 2017. Additionally, the Balanced Fund had no post-October loss deferrals as of October 31, 2009.

The tax character of distributions paid during 2009 and 2008 for the Funds were as follows:

	Year Ended		Year Ended
Growth Fund	October 31, 2009		October 31, 2008
Ordinary income	$	—	$	—
Long-term capital gain		—		110,914,201
Return of capital		—		64
	$	—	$	110,914,265

	Year Ended		Year Ended
Growth II Fund	October 31, 2009		October 31, 2008
Ordinary income	$	—	$	7,021,405
Long-term capital gain		—		19,858,903
Return of capital		—		174,708
	$	—	$	27,055,016

	Year Ended		Year Ended
Focus 30 Fund	October 31, 2009		October 31, 2008
Ordinary income	$	—	$	1,697,121
Long-term capital gain		—		31,369,777
Return of capital		—		183,117
	$	—	$	33,250,015

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NOTES TO THE FINANCIAL STATEMENTS

One Month Ended

Year Ended

Large Growth Fund

October 31, 2009

September 30, 2009

September 30, 2008

Ordinary income

—

Long-term capital gain

—

	Years Ended		Year Ended
Value Fund	October 31, 2009		October 31, 2008
Ordinary income	$	5,652,451	$	4,859,028
Long-term capital gain		—		—
	$	5,652,451	$	4,859,028

	Year Ended		Year Ended
Total Return Fund	October 31, 2009		October 31, 2008
Ordinary income	$	956,356	$	2,008,865
Long-term capital gain		—		—
Return of capital		—		14,437
	$	956,356	$	2,023,302

	Year Ended		Year Ended
Balanced Fund	October 31, 2009		October 31, 2008
Ordinary income	$	138,030	$	353,767
Long-term capital gain		—		777,518
	$	138,030	$	1,131,285

8).	FUND REORGANIZATION

On March 20, 2009 the shareholders of the Tamarack Large Cap Growth Fund approved the agreement and plan of reorganization providing for the transfer of assets of the Tamarack Large Cap Growth Fund to the Hennessy Cornerstone Large Growth Fund and the assumption of the liabilities of the Tamarack Large Cap Growth Fund by the Hennessy Cornerstone Large Growth Fund. The following table illustrates the specifics of the reorganization:

	Shares issued to
Acquired Fund	Shareholders of	Acquiring Fund	Combined	Tax Status
Net Assets	Acquired Fund	Net Assets	Net Assets	of Transfer
$51,980,253(1)	7,722,854	—	$51,980,253	Non-taxable

(1)	Includes accumulated realized losses and unrealized depreciation in the amounts of ($13,369,709) and ($16,139,531) respectively.

HENNESSY FUNDS 1-800-966-4354

Report of Independent Registered Public Accounting Firm

The Shareholders and Board of Directors/Trustees of

The Hennessy Mutual Funds, Inc., The Hennessy Funds, Inc.,

and The Hennessy Funds Trust:

We have audited the accompanying statements of assets and liabilities of Hennessy Cornerstone Growth Fund, Hennessy Cornerstone Growth Fund, Series II, Hennessy Focus 30 Fund, Hennessy Cornerstone Large Growth Fund, Hennessy Cornerstone Value Fund, Hennessy Total Return Fund and Hennessy Balanced Fund, including the schedules of investments, as of October 31, 2009, and the related statements of operations for the year then ended (month ended October 31, 2009 and year ended September 30, 2009 for Hennessy Cornerstone Large Growth Fund), statements of changes in net assets for each of the periods presented in the two-year period then ended (month ended October 31, 2009 and year ended September 30, 2009 for Hennessy Cornerstone Large Growth Fund), and the financial highlights for each of the periods presented in the five-year period then ended (month ended October 31, 2009 and year ended September 30, 2009 for Hennessy Cornerstone Large Growth Fund; years ended October 31, 2008 and 2007, period ended October 31, 2006 and year ended June 30, 2006 for the Hennessy Cornerstone Large Growth Fund, Series II). These financial statements and financial highlights are the responsibility of management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statement of changes in net assets and financial highlights for the periods presented through September 30, 2008 of the Hennessy Cornerstone Large Growth Fund were audited by other auditors whose report dated November 26, 2008, expressed an unqualified opinion on that statement and those financial highlights. The financial highlights for the year ended June 30, 2005 of the Hennessy Cornerstone Growth Fund, Series II were audited by other auditors whose report dated July 28, 2005 expressed an unqualified opinion on those financial highlights.

We conducted our audits 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 October 31, 2009 by correspondence with the custodian and brokers or by other appropriate auditing procedures. 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 audits provide 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 Hennessy

WWW.HENNESSYFUNDS.COM

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Cornerstone Growth Fund, Hennessy Cornerstone Growth Fund, Series II, Hennessy Focus 30 Fund, Hennessy Cornerstone Large Growth Fund, Hennessy Cornerstone Value Fund, Hennessy Total Return Fund and Hennessy Balanced Fund as of October 31, 2009, and the results of their operations, the changes in their net assets and the financial highlights for each of the periods described in the first paragraph above, in conformity with U.S. generally accepted accounting principles.

Milwaukee, Wisconsin

December 29, 2009

HENNESSY FUNDS 1-800-966-4354

Directors and Officers of the Fund

	Position(s)	Term of Office
	Held with	and Length of
Name, Age and Address	the Companies	Time Served

“Disinterested Persons”

J. Dennis DeSousa	Director/Trustee	Indefinite, until
Age: 72		successor elected
Address:
c/o Hennessy Advisors, Inc.		HMFI: Since January 1996
7250 Redwood Blvd.		HFI: Since January 1996
Suite 200		HFT: Since July 2005
Novato, CA 94945

Robert T. Doyle	Director/Trustee	Indefinite, until
Age: 61		successor elected
Address:
c/o Hennessy Advisors, Inc.		HMFI: Since January 1996
7250 Redwood Blvd.		HFI: Since January 1996
Suite 200		HFT: Since July 2005
Novato, CA 94945

Gerald P. Richardson	Director/Trustee	Indefinite, until
Age: 62		successor elected
Address:
c/o Hennessy Advisors, Inc.		HMFI: Since May 2004
7250 Redwood Blvd.		HFI: Since May 2004
Suite 200		HFT: Since July 2005
Novato, CA 94945

“Interested Persons” (as defined in the 1940 Act)

Neil J. Hennessy(1)	Director/Trustee	Director/Trustee:
Age: 53	and Chairman	Indefinite, until
Address:	of the Board	successor elected
c/o Hennessy Advisors, Inc.
7250 Redwood Blvd.		HMFI: Since January 2006
Suite 200		HFI: Since January 2006
Novato, CA 94945		HFT: Since July 2005

		Officer (Chairman of the Board):
		1 year term

		HMFI: Since June 2008
		HFI: Since June 2008
		HFT: Since June 2008

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DIRECTORS AND OFFICERS OF THE FUND

	Number of Portfolios in the
Principal Occupation(s)	Fund Complex Overseen	Other Directorships
During Past 5 Years	by Director/Trustee	Held by Director

Currently a real estate investor.	10	None.







Currently the Sheriff of Marin County,	10	None.
California (since 1996) and has been
employed in the Marin County Sheriff’s
Office in various capacities since 1969.




Formerly the Chief Executive Officer and	10	None.
owner of ORBIS Payment Services.
Mr. Richardson is now an independent
consultant in the securities industries.





President, Chairman, CEO and Co-Portfolio	10	Director of Hennessy
Manager of Hennessy Advisors, Inc., the		Advisors, Inc.
Hennessy Funds’ investment advisor, since
1989; President of HMFI and HFI from 1996
through June 2008, and President of HFT
from 2005 through June 2008.

HENNESSY FUNDS 1-800-966-4354

	Position(s)	Term of Office
	Held with	and Length of
Name, Age and Address	the Companies	Time Served

Kevin A. Rowell(1)	President	1 year term
Age: 49
Address:		HMFI: Since June 2008
c/o Hennessy Advisors, Inc.		HFI: Since June 2008
7250 Redwood Blvd.		HFT: Since June 2008
Suite 200
Novato, CA 94945

Frank Ingarra, Jr.(1)	Co-Portfolio	1 year term
Age: 38	Manager and
Address:	Vice President	HMFI: Since August 2002
c/o Hennessy Advisors, Inc.		HFI: Since August 2002
7250 Redwood Blvd.		HFT: Since July 2005
Suite 200
Novato, CA 94945

Harry F. Thomas(1)	Vice President,	1 year term
Age: 62	Chief Compliance
Address:	Officer	HMFI: Since September 2004
c/o Hennessy Advisors, Inc.		HFI: Since September 2004
7250 Redwood Blvd.		HFT: Since July 2005
Suite 200
Novato, CA 94945

Teresa M. Nilsen(1)	Executive Vice	1 year term
Age: 43	President and
Address:	Treasurer	HMFI: Since January 1996
c/o Hennessy Advisors, Inc.		HFI: Since January 1996
7250 Redwood Blvd.		HFT: Since July 2005
Suite 200
Novato, CA 94945

Daniel B. Steadman(1)	Executive Vice	1 year term
Age: 53	President and
Address:	Secretary	HMFI: Since March 2000
c/o Hennessy Advisors, Inc.		HFI: Since March 2000
7250 Redwood Blvd.		HFT: Since July 2005
Suite 200
Novato, CA 94945

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DIRECTORS AND OFFICERS OF THE FUND

	Number of Portfolios in the
Principal Occupation(s)	Fund Complex Overseen	Other Directorships
During Past 5 Years	by Director/Trustee	Held by Director

Mr. Rowell was President of Pioneer Funds	N/A	None.
Distributor from January 2006 to July 2007;
from April 2004 through November 2005,
Mr. Rowell was Executive Vice President at
Charles Schwab & Co., Inc.; and from
September 2002 through April 2004 was
President SAFECO Mutual Funds.

Mr. Ingarra Co-Portfolio Manager for	N/A	None.
Hennessy Advisors, Inc., the Funds’
investment advisor. Mr. Ingarra has been
with the Hennessy Funds and Hennessy
Advisors, Inc. since 2004. He is Vice
President of the Hennessy Funds.

Vice President, Chief Compliance Officer	N/A	None.
for Hennessy Advisors, Inc., the Funds’
investment advisor, since 2004; retired
business executive from 2001 through
2004; and director of The Hennessy
Funds from 2000 to May 2004.

Currently Executive Vice President, Chief	N/A	Director of Hennessy
Financial Officer and Secretary of Hennessy		Advisors, Inc.
Advisors, Inc., the Funds’ investment advisor;
Ms. Nilsen has been the corporate secretary
and a financial officer of Hennessy Advisors,
Inc. since 1989; Ms. Nilsen has been an
officer of The Hennessy Funds since 1996,
currently she is Executive Vice President
and Treasurer.

Executive Vice President of Hennessy	N/A	Director of Hennessy
Advisors, Inc., the Funds’ investment advisor,		Advisors, Inc.
from 2000 to the present; Mr. Steadman has
been Executive Vice President and Secretary
of The Hennessy Funds since 2000.

HENNESSY FUNDS 1-800-966-4354

	Position(s)	Term of Office
	Held with	and Length of
Name, Age and Address	the Companies	Time Served

Tania A. Kelley(1)	Vice President	1 year term
Age: 44	of Marketing
Address:		HMFI: Since October 2003
c/o Hennessy Advisors, Inc.		HFI: Since October 2003
7250 Redwood Blvd.		HFT: Since July 2005
Suite 200
Novato, CA 94945

Ana Miner(1)	Vice President	1 year term
Age: 51	of Operations
Address:		HMFI: Since March 2000
c/o Hennessy Advisors, Inc.		HFI: Since March 2000
7250 Redwood Blvd.		HFT: Since July 2005
Suite 200
Novato, CA 94945

Brian Peery(1)	Vice President	1 year term
Age: 40	of Sales
Address:		HMFI: Since March 2003
c/o Hennessy Advisors, Inc.		HFI: Since March 2003
7250 Redwood Blvd.		HFT: Since July 2005
Suite 200
Novato, CA 94945

(1)	All officers of the Hennessy Funds and employees of the Advisor are Interested Persons of the Hennessy Funds.

Key:

HMFI = Hennessy Mutual Funds, Inc.

HFI = Hennessy Funds, Inc.

HFT = Hennessy Funds Trust

WWW.HENNESSYFUNDS.COM

DIRECTORS AND OFFICERS OF THE FUND

	Number of Portfolios in the
Principal Occupation(s)	Fund Complex Overseen	Other Directorships
During Past 5 Years	by Director/Trustee	Held by Director

Has been employed by Hennessy	N/A	None.
Advisors, Inc., the Funds’ investment
advisor, since October 2003; Director of
Sales and Marketing for Comcast from
2000 through 2003.

Has been employed by Hennessy	N/A	None.
Advisors, Inc., the Funds’ investment
advisor, since 1998.

Has been employed by Hennessy	N/A	None.
Advisors, Inc., the Funds’ investment
advisor, since June 2002; Vice President of
Institutional Sales and Senior Analyst with
Brad Peery Inc. from June 2000 to June
2002; from 1996 to 2002, Mr. Peery worked
for Haywood Securities where he was a
Vice President.

HENNESSY FUNDS 1-800-966-4354

Expense Example

October 31, 2009

As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; service fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in each of the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from May 1, 2009 through October 31, 2009.

Actual Expenses

The first set of lines of the table below provide information about actual account values and actual expenses. Although the Funds charge no sales loads or transaction fees, you will be assessed fees for outgoing wire transfers, returned checks and stop payment orders at prevailing rates charged by U.S. Bancorp Fund Services, LLC, the Funds’ transfer agent. If you request that a redemption be made by wire transfer, currently a $15.00 fee is charged by the Funds’ transfer agent. IRA accounts will be charged a $15.00 annual maintenance fee. The example below includes, but is not limited to, management fees, shareholder servicing fees, fund accounting, custody and transfer agent fees. However, the example below does not include portfolio trading commissions and related expenses, interest expense or dividends on short positions taken by the Fund and other extraordinary expenses as determined under generally accepted accounting principles. You may use the information within these lines, together with the amount you invested, to estimate the expenses that you paid over the six-month period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second set of lines within the table below provide information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), 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.

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EXPENSE EXAMPLE

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During Period(1)
Original Class	5/1/09	10/31/09	5/1/09 – 10/31/09

Actual
Growth Fund – Original Class	$1,000.00	$1,098.50	$7.19
Growth II Fund – Original Class	$1,000.00	$1,128.20	$9.12
Focus 30 Fund – Original Class	$1,000.00	$1,157.80	$7.56
Large Growth Fund – Original Class	$1,000.00	$1,222.90	$7.34
Value Fund – Original Class	$1,000.00	$1,304.30	$7.38
Total Return Fund – Original Class	$1,000.00	$1,166.60	$8.52
Balanced Fund – Original Class	$1,000.00	$1,141.70	$9.34

Hypothetical (5% return
before expenses)
Growth Fund – Original Class	$1,000.00	$1,018.35	$6.92
Growth II Fund – Original Class	$1,000.00	$1,016.64	$8.64
Focus 30 Fund – Original Class	$1,000.00	$1,018.20	$7.07
Large Growth Fund – Original Class	$1,000.00	$1,018.60	$6.67
Value Fund – Original Class	$1,000.00	$1,018.80	$6.46
Total Return Fund – Original Class	$1,000.00	$1,017.34	$7.93
Balanced Fund – Original Class	$1,000.00	$1,016.48	$8.79

(1)

Expenses are equal to the Growth Funds’s expense ratio of 1.38%, the Growth II Fund’s expense ratio of 1.70%, the Focus 30 Fund’s expense ratio of 1.42%, the Large Growth Fund’s expense ratio of 1.30%, the Value Fund’s expense ratio of 1.26%, the Total Return Fund’s expense ratio of 1.37%, and the Balanced Fund’s expense ratio of 1.73%, multiplied by the average account value over the period, multiplied by 184/365 days (to reflect one-half year period.)

	Beginning	Ending	Expenses Paid
	Account Value	Account Value	During Period(2)
Institutional Class	5/1/09	10/31/09	5/1/09 – 10/31/09

Actual
Growth Fund – Institutional Class	$1,000.00	$1,015.67	$4.98
Growth II Fund – Institutional Class	$1,000.00	$1,020.60	$4.99
Focus 30 Fund – Institutional Class	$1,000.00	$1,024.89	$5.00
Large Growth Fund – Institutional Class	$1,000.00	$1,035.12	$5.03
Value Fund – Institutional Class	$1,000.00	$1,047.89	$5.06

Hypothetical (5% return
before expenses)
Growth Fund – Institutional Class	$1,000.00	$1,003.16	$4.95
Growth II Fund – Institutional Class	$1,000.00	$1,003.16	$4.95
Focus 30 Fund – Institutional Class	$1,000.00	$1,003.16	$4.95
Large Growth Fund – Institutional Class	$1,000.00	$1,003.16	$4.95
Value Fund – Institutional Class	$1,000.00	$1,003.16	$4.95

(2)	Expenses are equal to the Growth, Growth II, Focus 30, Large Growth, and Value Fund’s expense ratio of 0.98%, multiplied by the average account value over the period, multiplied by 184/365 days (to reflect one-half year period.)

HENNESSY FUNDS 1-800-966-4354

How to Obtain a Copy of the Funds’ Proxy Voting Policy and Proxy Voting Records

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge: (1) by calling 1-800-966-4354; (2) on the Hennessy Funds website at www.hennessyfunds.com; or (3) on the U.S. Securities and Exchange Commission’s website at www.sec.gov. Hennessy Funds’ proxy voting record is available on the SEC’s website at www.sec.gov no later than August 31 for the prior 12 months ending June 30.

Quarterly Filings on Form N-Q

The Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Form N-Q will be available on the SEC’s website at www.sec.gov. The Funds’ Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Information included in the Funds’ N-Q will also be available upon request by calling 1-800-966-4354.

Federal Tax Distribution Information (Unaudited)

The Value, Total Return and Balanced Fund designated 100%, 100% and 99.32%, respectively, of the dividend declared from net investment income during the year ended October 31, 2009, as qualified dividend income under the Jobs Growth and Tax Reconciliation Act of 2003.

For the year ended October 31, 2009, 84.20%, 100% and 99% of the ordinary income distributions paid by the Value, Total Return and Balanced Funds, respectively, qualify for the dividends received deduction available to corporate shareholders.

WWW.HENNESSYFUNDS.COM

100

We collect the following non-public personal information about you:

•	information we receive from you on or in applications or other forms, correspondence, or conversations, including, but not limited to, your name, address, phone number, social security number, assets, income and date of birth;

and

•	information about your transactions with us, our affiliates, or others, including, but not limited to, your account number and balance, payment history, parties to transactions, cost basis information and other financial information.

We do not disclose any non-public personal information about our current or former shareholders to nonaffiliated third parties, except as permitted by law. For example, we are permitted by law to disclose all of the information we collect, as described above, to our Transfer Agent to process your transactions. Furthermore, we restrict access to your non-public personal information to those persons who require such information to provide products or services to you. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your non-public personal information.

In the event that you hold shares of the Fund through a financial intermediary, including, but not limited to, a broker-dealer, bank or trust company, the privacy policy of your financial intermediary would govern how your non-public personal information would be shared with nonaffiliated third parties.

HENNESSY FUNDS 1-800-966-4354

101

For information, questions

or assistance, please call

The Hennessy Funds

1-800-966-4354 or 1-415-899-1555

INVESTMENT ADVISOR

Hennessy Advisors, Inc.

7250 Redwood Blvd., Suite 200

Novato, California 94945

ADMINISTRATOR, TRANSFER

AGENT, DIVIDEND PAYING

AGENT & SHAREHOLDER

SERVICING AGENT

U.S. Bancorp Fund Services, LLC

P.O. Box 701

Milwaukee, Wisconsin 53201-0701

CUSTODIAN

U.S. Bank N.A.

Custody Operations

1555 North River Center Dr., Suite 302

Milwaukee, Wisconsin 53212

TRUSTEES

Neil J. Hennessy

Robert T. Doyle

J. Dennis DeSousa

Gerald P. Richardson

COUNSEL

Foley & Lardner LLP

777 East Wisconsin Avenue

Milwaukee, Wisconsin 53202-5306

INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

KPMG LLP

303 East Wacker Drive

Chicago, Illinois 60601

DISTRIBUTOR

Quasar Distributors, LLC

615 East Michigan Street

Milwaukee, Wisconsin 53202

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.

A copy of the registrant’s Code of Ethics is filed herewith.

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.

Item 3. Audit Committee Financial Expert.

The registrant’s board of directors 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 10/31/2009	FYE 10/31/2008
Audit Fees	$31,000	$29,500
Audit-Related Fees	-	-
Tax Fees	6,500	6,500
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.

The percentage of fees billed by KPMG, LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:

	FYE 10/31/2009	FYE 10/31/2008
Audit-Related Fees	0%	0%
Tax Fees	0%	0%
All Other Fees	0%	0%

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 10/31/2009	FYE 10/31/2008
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. 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 Chief Executive Officer and Treasurer 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 the 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) A separate certification for each principal executive and principal financial officer 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)	Certifications 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, Inc.

By (Signature and Title)* /s/Neil J. Hennessy

Neil J. Hennessy, Principal Executive Officer

Date January 5, 2010

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, Principal Executive Officer

Date January 5, 2010

By (Signature and Title) /s/Teresa M. Nilsen

Teresa M. Nilsen, Treasurer

Date January 5, 2010