Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
12
|
Statement of Operations
|
13
|
Statements of Changes in Net Assets
|
15
|
Financial Highlights
|
16
|
Notes to the Financial Statements
|
20
|
Report of Independent Registered Public Accounting Firm
|
28
|
Trustees and Officers of the Fund
|
29
|
Expense Example
|
32
|
Proxy Voting Policy and Proxy Voting Records
|
34
|
Quarterly Schedule of Investments
|
34
|
Important Notice Regarding Delivery of Shareholder Documents
|
34
|
Privacy Policy
|
35
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Cornerstone Growth Fund –
|
|||
Investor Class (HFCGX)
|
-8.24%
|
7.24%
|
9.69%
|
Hennessy Cornerstone Growth Fund –
|
|||
Institutional Class (HICGX)
|
-7.93%
|
7.55%
|
10.03%
|
Russell 2000® Index
|
1.85%
|
8.01%
|
12.44%
|
S&P 500 Index
|
7.35%
|
11.34%
|
13.24%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
CVR Energy, Inc.
|
3.96%
|
Insperity, Inc.
|
3.13%
|
Verso Corp.
|
2.98%
|
Crocs, Inc.
|
2.84%
|
Boot Barn Holdings, Inc.
|
2.70%
|
Burlington Stores, Inc.
|
2.63%
|
Callaway Golf Co.
|
2.54%
|
Centene Corp.
|
2.42%
|
CBIZ, Inc.
|
2.29%
|
Progressive Corp.
|
2.26%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 95.23%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 2.05%
|
||||||||||||
Live Nation Entertainment, Inc. (a)
|
70,400
|
$
|
3,681,920
|
2.05
|
%
|
|||||||
Consumer Discretionary – 27.07%
|
||||||||||||
Best Buy Co., Inc.
|
47,100
|
3,304,536
|
1.84
|
%
|
||||||||
BJ’s Restaurants, Inc.
|
49,000
|
2,997,820
|
1.67
|
%
|
||||||||
Boot Barn Holdings, Inc. (a)
|
196,300
|
4,844,684
|
2.70
|
%
|
||||||||
Burlington Stores, Inc. (a)
|
27,500
|
4,715,975
|
2.63
|
%
|
||||||||
Callaway Golf Co.
|
213,400
|
4,566,760
|
2.54
|
%
|
||||||||
Crocs, Inc. (a)
|
247,800
|
5,089,812
|
2.84
|
%
|
||||||||
KB Home
|
109,000
|
2,176,730
|
1.21
|
%
|
||||||||
Kohl’s Corp.
|
52,500
|
3,975,825
|
2.21
|
%
|
||||||||
Lear Corp.
|
17,400
|
2,312,460
|
1.29
|
%
|
||||||||
Noodles & Co. (a)
|
281,200
|
2,651,716
|
1.48
|
%
|
||||||||
Penn National Gaming, Inc. (a)
|
122,700
|
2,979,156
|
1.66
|
%
|
||||||||
Regis Corp. (a)
|
202,700
|
3,413,468
|
1.90
|
%
|
||||||||
Restoration Hardware Holdings, Inc. (a)
|
24,300
|
2,811,753
|
1.57
|
%
|
||||||||
Turtle Beach Corp. (a)
|
154,800
|
2,747,700
|
1.53
|
%
|
||||||||
|
48,588,395
|
27.07
|
%
|
|||||||||
Consumer Staples – 7.23%
|
||||||||||||
Nomad Foods Ltd. (a) (b)
|
197,700
|
3,776,070
|
2.10
|
%
|
||||||||
Pyxus International, Inc. (a)
|
86,500
|
2,053,510
|
1.15
|
%
|
||||||||
Sprouts Farmers Market, Inc. (a)
|
127,600
|
3,431,164
|
1.91
|
%
|
||||||||
The Chefs’ Warehouse, Inc. (a)
|
110,400
|
3,712,752
|
2.07
|
%
|
||||||||
|
12,973,496
|
7.23
|
%
|
|||||||||
Energy – 9.46%
|
||||||||||||
CVR Energy, Inc.
|
165,226
|
7,104,718
|
3.96
|
%
|
||||||||
HollyFrontier Corp.
|
54,900
|
3,702,456
|
2.06
|
%
|
||||||||
Legacy Reserves, Inc. (a)
|
580,600
|
2,444,326
|
1.36
|
%
|
||||||||
Renewable Energy Group, Inc. (a)
|
119,800
|
3,723,384
|
2.08
|
%
|
||||||||
|
16,974,884
|
9.46
|
%
|
|||||||||
Financials – 8.62%
|
||||||||||||
EZCORP, Inc., Class A (a)
|
252,500
|
2,509,850
|
1.40
|
%
|
||||||||
LPL Financial Holdings, Inc.
|
52,700
|
3,246,320
|
1.81
|
%
|
||||||||
PennyMac Financial Services, Inc., Class A
|
136,000
|
2,718,640
|
1.51
|
%
|
||||||||
Progressive Corp.
|
58,300
|
4,063,510
|
2.26
|
%
|
||||||||
The Carlyle Group LP
|
144,900
|
2,937,123
|
1.64
|
%
|
||||||||
|
15,475,443
|
8.62
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Health Care – 12.21%
|
||||||||||||
AMN Healthcare Services, Inc. (a)
|
58,600
|
$
|
2,966,332
|
1.65
|
%
|
|||||||
Anthem, Inc.
|
14,400
|
3,968,208
|
2.21
|
%
|
||||||||
Centene Corp. (a)
|
33,300
|
4,339,656
|
2.42
|
%
|
||||||||
Endo International PLC (a)(b)
|
195,000
|
3,303,300
|
1.84
|
%
|
||||||||
Providence Service Corp. (a)
|
52,400
|
3,463,116
|
1.93
|
%
|
||||||||
UnitedHealth Group, Inc.
|
14,800
|
3,867,980
|
2.16
|
%
|
||||||||
|
21,908,592
|
12.21
|
%
|
|||||||||
|
||||||||||||
Industrials – 14.03%
|
||||||||||||
ArcBest Corp.
|
70,200
|
2,605,824
|
1.45
|
%
|
||||||||
BlueLinx Holdings, Inc. (a)
|
82,900
|
1,952,295
|
1.09
|
%
|
||||||||
CBIZ, Inc. (a)
|
185,700
|
4,118,826
|
2.29
|
%
|
||||||||
CNH Industrial N.V. (b)
|
236,200
|
2,454,118
|
1.37
|
%
|
||||||||
Insperity, Inc.
|
51,100
|
5,613,335
|
3.13
|
%
|
||||||||
MasTec, Inc. (a)
|
65,800
|
2,862,958
|
1.59
|
%
|
||||||||
SPX FLOW, Inc. (a)
|
70,300
|
2,406,369
|
1.34
|
%
|
||||||||
XPO Logistics, Inc. (a)
|
35,500
|
3,172,990
|
1.77
|
%
|
||||||||
|
25,186,715
|
14.03
|
%
|
|||||||||
|
||||||||||||
Information Technology – 5.96%
|
||||||||||||
Comtech Telecommunications Corp.
|
142,500
|
3,978,600
|
2.21
|
%
|
||||||||
Mantech International Corp., Class A
|
62,200
|
3,562,816
|
1.99
|
%
|
||||||||
Unisys Corp. (a)
|
172,000
|
3,166,520
|
1.76
|
%
|
||||||||
|
10,707,936
|
5.96
|
%
|
|||||||||
|
||||||||||||
Materials – 8.60%
|
||||||||||||
Boise Cascade Co.
|
76,700
|
2,361,593
|
1.31
|
%
|
||||||||
Constellium N.V., Class A (a)(b)
|
273,200
|
2,475,192
|
1.38
|
%
|
||||||||
Huntsman Corp.
|
99,200
|
2,170,496
|
1.21
|
%
|
||||||||
Verso Corp. (a)
|
190,100
|
5,343,711
|
2.98
|
%
|
||||||||
Warrior Met Coal, Inc.
|
110,100
|
3,082,800
|
1.72
|
%
|
||||||||
|
15,433,792
|
8.60
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $168,247,369)
|
170,931,173
|
95.23
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
SHORT-TERM INVESTMENTS – 4.96%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 4.96%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (c)
|
8,908,236
|
$
|
8,908,236
|
4.96
|
%
|
|||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $8,908,236)
|
8,908,236
|
4.96
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $177,155,605) – 100.19%
|
179,839,409
|
100.19
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.19)%
|
(344,117
|
)
|
(0.19
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
179,495,292
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
(b)
|
U.S.-traded security of a foreign corporation
|
(c)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
3,681,920
|
$
|
—
|
$
|
—
|
$
|
3,681,920
|
||||||||
Consumer Discretionary
|
48,588,395
|
—
|
—
|
48,588,395
|
||||||||||||
Consumer Staples
|
12,973,496
|
—
|
—
|
12,973,496
|
||||||||||||
Energy
|
16,974,884
|
—
|
—
|
16,974,884
|
||||||||||||
Financials
|
15,475,443
|
—
|
—
|
15,475,443
|
||||||||||||
Health Care
|
21,908,592
|
—
|
—
|
21,908,592
|
||||||||||||
Industrials
|
25,186,715
|
—
|
—
|
25,186,715
|
||||||||||||
Information Technology
|
10,707,936
|
—
|
—
|
10,707,936
|
||||||||||||
Materials
|
15,433,792
|
—
|
—
|
15,433,792
|
||||||||||||
Total Common Stocks
|
$
|
170,931,173
|
$
|
—
|
$
|
—
|
$
|
170,931,173
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
8,908,236
|
$
|
—
|
$
|
—
|
$
|
8,908,236
|
||||||||
Total Short-Term Investments
|
$
|
8,908,236
|
$
|
—
|
$
|
—
|
$
|
8,908,236
|
||||||||
Total Investments
|
$
|
179,839,409
|
$
|
—
|
$
|
—
|
$
|
179,839,409
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
Rights
|
||||
Balance as of October 31, 2017
|
$
|
55
|
||
Accrued discounts/premiums
|
—
|
|||
Realized gain (loss)
|
—
|
|||
Change in unrealized appreciation (depreciation)*
|
(55
|
)
|
||
Purchases
|
—
|
|||
Transfer in and/or out of Level 3
|
—
|
|||
Balance as of October 31, 2018
|
$
|
—
|
||
Change in unrealized appreciation/depreciation during the period for
|
||||
Level 3 investments held at October 31, 2018
|
$
|
—
|
*
|
The rights were acquired in a past merger. The fair value of the rights was determined under procedures established by the Board of Trustees. The rights expired during the period and were removed from the Fund’s holdings on July 25, 2018.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $177,155,605)
|
$
|
179,839,409
|
||
Dividends and interest receivable
|
23,616
|
|||
Receivable for fund shares sold
|
7,122
|
|||
Prepaid expenses and other assets
|
21,078
|
|||
Total Assets
|
179,891,225
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
48,591
|
|||
Payable to advisor
|
118,204
|
|||
Payable to administrator
|
16,998
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
135,180
|
|||
Accrued service fees
|
14,136
|
|||
Accrued trustees fees
|
5,964
|
|||
Accrued expenses and other payables
|
34,960
|
|||
Total Liabilities
|
395,933
|
|||
NET ASSETS
|
$
|
179,495,292
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
163,609,128
|
||
Total distributable earnings
|
15,886,164
|
|||
Total Net Assets
|
$
|
179,495,292
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
158,977,658
|
||
Shares issued and outstanding
|
7,170,178
|
|||
Net asset value, offering price and redemption price per share
|
$
|
22.17
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
20,517,634
|
||
Shares issued and outstanding
|
896,632
|
|||
Net asset value, offering price and redemption price per share
|
$
|
22.88
|
HENNESSYFUNDS.COM
|
STATEMENT OF ASSETS AND LIABILITIES/STATEMENT OF OPERATIONS
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income
|
$
|
1,461,646
|
||
Interest income
|
81,106
|
|||
Total investment income
|
1,542,752
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
1,542,181
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
270,596
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
12,969
|
|||
Distribution fees – Investor Class (See Note 5)
|
275,181
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
199,081
|
|||
Service fees – Investor Class (See Note 5)
|
183,454
|
|||
Federal and state registration fees
|
41,019
|
|||
Compliance expense (See Note 5)
|
29,500
|
|||
Audit fees
|
23,148
|
|||
Reports to shareholders
|
23,203
|
|||
Trustees’ fees and expenses
|
17,128
|
|||
Legal fees
|
705
|
|||
Interest expense (See Note 7)
|
355
|
|||
Other expenses
|
14,570
|
|||
Total expenses before recoupment from advisor
|
2,633,090
|
|||
Expense recoupment by advisor – Institutional Class
|
1,024
|
|||
Net expenses
|
2,634,114
|
|||
NET INVESTMENT LOSS
|
$
|
(1,091,362
|
)
|
|
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
15,676,800
|
||
Net change in unrealized appreciation/depreciation on investments
|
(30,685,707
|
)
|
||
Net loss on investments
|
(15,008,907
|
)
|
||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
(16,100,269
|
)
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment loss
|
$
|
(1,091,362
|
)
|
$
|
(615,891
|
)
|
||
Net realized gain on investments
|
15,676,800
|
25,408,962
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(30,685,707
|
)
|
26,412,588
|
|||||
Net increase (decrease) in net
|
||||||||
assets resulting from operations
|
(16,100,269
|
)
|
51,205,659
|
|||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
2,945,262
|
5,154,765
|
||||||
Proceeds from shares subscribed – Institutional Class
|
1,645,129
|
6,572,602
|
||||||
Cost of shares redeemed – Investor Class
|
(26,887,338
|
)
|
(37,414,723
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(10,968,680
|
)
|
(7,012,794
|
)
|
||||
Net decrease in net assets derived
|
||||||||
from capital share transactions
|
(33,265,627
|
)
|
(32,700,150
|
)
|
||||
TOTAL INCREASE (DECREASE) IN NET ASSETS
|
(49,365,896
|
)
|
18,505,509
|
|||||
NET ASSETS:
|
||||||||
Beginning of year
|
228,861,188
|
210,355,679
|
||||||
End of year
|
$
|
179,495,292
|
$
|
228,861,188
|
(1)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
122,514
|
233,860
|
||||||
Shares sold – Institutional Class
|
65,421
|
279,691
|
||||||
Shares redeemed – Investor Class
|
(1,116,060
|
)
|
(1,795,884
|
)
|
||||
Shares redeemed – Institutional Class
|
(442,363
|
)
|
(328,917
|
)
|
||||
Net decrease in shares outstanding
|
(1,370,488
|
)
|
(1,611,250
|
)
|
(1)
|
Includes accumulated net investment loss of $(796,849).
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
24.16
|
$
|
18.98
|
$
|
20.00
|
$
|
18.68
|
$
|
15.65
|
|||||||||
(0.17
|
)
|
(0.09
|
)
|
(0.02
|
)
|
0.06
|
(0.04
|
)
|
||||||||||
(1.82
|
)
|
5.27
|
(0.98
|
)
|
1.26
|
3.07
|
||||||||||||
(1.99
|
)
|
5.18
|
(1.00
|
)
|
1.32
|
3.03
|
||||||||||||
—
|
—
|
(0.02
|
)
|
—
|
—
|
|||||||||||||
—
|
—
|
(0.02
|
)
|
—
|
—
|
|||||||||||||
$
|
22.17
|
$
|
24.16
|
$
|
18.98
|
$
|
20.00
|
$
|
18.68
|
|||||||||
(8.24
|
)%
|
27.29
|
%
|
(5.00
|
)%
|
7.07
|
%
|
19.36
|
%
|
|||||||||
$
|
158.98
|
$
|
197.22
|
$
|
184.61
|
$
|
248.74
|
$
|
227.68
|
|||||||||
1.30
|
%
|
1.30
|
%
|
1.32
|
%
|
1.15
|
%
|
1.23
|
%
|
|||||||||
(0.56
|
)%
|
(0.33
|
)%
|
(0.18
|
)%
|
0.30
|
%
|
(0.17
|
)%
|
|||||||||
133
|
%
|
98
|
%
|
97
|
%
|
102
|
%
|
84
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
24.85
|
$
|
19.46
|
$
|
20.47
|
$
|
19.08
|
$
|
15.94
|
|||||||||
0.11
|
0.01
|
0.17
|
0.03
|
0.06
|
||||||||||||||
(2.08
|
)
|
5.38
|
(1.13
|
)
|
1.36
|
3.08
|
||||||||||||
(1.97
|
)
|
5.39
|
(0.96
|
)
|
1.39
|
3.14
|
||||||||||||
—
|
—
|
(0.05
|
)
|
—
|
—
|
|||||||||||||
—
|
—
|
(0.05
|
)
|
—
|
—
|
|||||||||||||
$
|
22.88
|
$
|
24.85
|
$
|
19.46
|
$
|
20.47
|
$
|
19.08
|
|||||||||
(7.93
|
)%
|
27.70
|
%
|
(4.69
|
)%
|
7.29
|
%
|
19.70
|
%
|
|||||||||
$
|
20.52
|
$
|
31.65
|
$
|
25.74
|
$
|
38.96
|
$
|
25.54
|
|||||||||
0.96
|
%
|
0.97
|
%
|
0.98
|
%
|
0.99
|
%
|
1.03
|
%
|
|||||||||
0.96
|
%
|
0.97
|
%
|
0.98
|
%
|
0.99
|
%
|
0.98
|
%
|
|||||||||
(0.23
|
)%
|
(0.00
|
)%
|
0.14
|
%
|
0.51
|
%
|
0.03
|
%
|
|||||||||
(0.23
|
)%
|
(0.00
|
)%
|
0.14
|
%
|
0.51
|
%
|
0.08
|
%
|
|||||||||
133
|
%
|
98
|
%
|
97
|
%
|
102
|
%
|
84
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in the financial statements because of temporary book and tax basis differences. Temporary differences are primarily the result of the treatment of partnership income and wash sales for tax reporting purposes. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(584,133)
|
$584,133
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSY FUNDS
|
1-800-966-4354
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, foreign-issued common stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”) will generally be valued at the NASDAQ Official Closing Price, which may differ from
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
177,241,031
|
||
Gross tax unrealized appreciation
|
$
|
19,606,515
|
||
Gross tax unrealized depreciation
|
(17,008,137
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
2,598,378
|
||
Undistributed ordinary income
|
$
|
—
|
||
Undistributed long-term capital gains
|
14,373,091
|
|||
Total distributable earnings
|
$
|
14,373,091
|
||
Other accumulated gain/(loss)
|
$
|
(1,085,305
|
)
|
|
Total accumulated gain/(loss)
|
$
|
15,886,164
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Long-term
|
Investor Class
|
$1.81640
|
Institutional Class
|
$1.87674
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM/TRUSTEES AND OFFICERS
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 943.40
|
$6.40
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,018.62
|
$6.64
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 945.10
|
$4.71
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.37
|
$4.89
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.31% for Investor Class shares or 0.96% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
8
|
Statement of Assets and Liabilities
|
12
|
Statement of Operations
|
13
|
Statements of Changes in Net Assets
|
15
|
Financial Highlights
|
16
|
Notes to the Financial Statements
|
20
|
Report of Independent Registered Public Accounting Firm
|
28
|
Trustees and Officers of the Fund
|
29
|
Expense Example
|
32
|
Proxy Voting Policy and Proxy Voting Records
|
34
|
Quarterly Schedule of Investments
|
34
|
Federal Tax Distribution Information
|
34
|
Important Notice Regarding Delivery of Shareholder Documents
|
34
|
Privacy Policy
|
35
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Focus Fund –
|
|||
Investor Class (HFCSX)
|
-2.02%
|
7.55%
|
13.69%
|
Hennessy Focus Fund –
|
|||
Institutional Class (HFCIX)
|
-1.65%
|
7.94%
|
14.08%
|
Russell 3000® Index
|
6.60%
|
10.81%
|
13.35%
|
Russell Midcap® Growth Index
|
6.14%
|
10.10%
|
15.10%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
||||
American Tower Corp., Class A
|
11.98
|
%
|
|||
O’Reilly Automotive, Inc.
|
10.14
|
%
|
|||
CarMax, Inc.
|
9.35
|
%
|
|||
The Charles Schwab Corp.
|
8.66
|
%
|
|||
Markel Corp.
|
8.66
|
%
|
|||
Brookfield Asset Management, Inc.
|
8.60
|
%
|
|||
Aon PLC
|
8.56
|
%
|
|||
Hexcel Corp.
|
7.01
|
%
|
|||
NVR, Inc.
|
4.94
|
%
|
|||
American Woodmark Corp.
|
4.15
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS – 75.31%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Consumer Discretionary – 26.40%
|
||||||||||||
Camping World Holdings, Inc. (d)
|
2,471,506
|
$
|
42,386,328
|
1.97
|
%
|
|||||||
CarMax, Inc. (a)
|
2,962,712
|
201,197,772
|
9.35
|
%
|
||||||||
NVR, Inc. (a)
|
47,487
|
106,324,818
|
4.94
|
%
|
||||||||
O’Reilly Automotive, Inc. (a)
|
679,856
|
218,063,812
|
10.14
|
%
|
||||||||
|
567,972,730
|
26.40
|
%
|
|||||||||
Financials – 32.03%
|
||||||||||||
Aon PLC (b)
|
1,179,036
|
184,141,842
|
8.56
|
%
|
||||||||
Encore Capital Group, Inc. (a)(d)
|
3,082,416
|
78,324,191
|
3.64
|
%
|
||||||||
Markel Corp. (a)
|
170,380
|
186,266,231
|
8.66
|
%
|
||||||||
Marlin Business Services Corp. (d)
|
1,010,273
|
26,853,056
|
1.25
|
%
|
||||||||
Metro Bank PLC (a) (b)
|
956,183
|
27,181,581
|
1.26
|
%
|
||||||||
The Charles Schwab Corp.
|
4,029,065
|
186,303,966
|
8.66
|
%
|
||||||||
|
689,070,867
|
32.03
|
%
|
|||||||||
Industrials – 16.88%
|
||||||||||||
American Woodmark Corp. (a)(d)
|
1,475,202
|
89,161,209
|
4.15
|
%
|
||||||||
Ametek, Inc.
|
459,822
|
30,844,860
|
1.43
|
%
|
||||||||
Ashtead Group PLC (b)
|
2,941,861
|
72,780,367
|
3.38
|
%
|
||||||||
Hexcel Corp.
|
2,577,037
|
150,808,205
|
7.01
|
%
|
||||||||
Mistras Group, Inc. (a)
|
979,716
|
19,496,348
|
0.91
|
%
|
||||||||
|
363,090,989
|
16.88
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $945,213,544)
|
1,620,134,586
|
75.31
|
%
|
|||||||||
|
||||||||||||
REITS – 20.58%
|
||||||||||||
Financials – 20.58%
|
||||||||||||
American Tower Corp., Class A
|
1,653,694
|
257,662,062
|
11.98
|
%
|
||||||||
Brookfield Asset Management, Inc. (b)
|
4,543,328
|
185,140,616
|
8.60
|
%
|
||||||||
|
442,802,678
|
20.58
|
%
|
|||||||||
Total REITS
|
||||||||||||
(Cost $207,870,109)
|
442,802,678
|
20.58
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
SHORT-TERM INVESTMENTS – 4.21%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 4.21%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (c)
|
90,654,933
|
$
|
90,654,933
|
4.21
|
%
|
|||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $90,654,933)
|
90,654,933
|
4.21
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $1,243,738,586) – 100.10%
|
2,153,592,197
|
100.10
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.10)%
|
(2,183,491
|
)
|
(0.10
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
2,151,408,706
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
|
(b)
|
U.S.-traded security of a foreign corporation.
|
|
(c)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
|
(d)
|
Investment represents five percent or more of the outstanding voting securities of the issuer, and is or was an affiliate of the Hennessy Focus Fund, as defined in the Investment Company Act of 1940, as amended, at or during the year ended October 31, 2018. Details of transactions with these affiliated companies for the year ended October 31, 2018, are as follows:
|
American
|
Camping World
|
Encore Capital
|
Marlin Business
|
||||||||||||||
Issuer
|
Woodmark Corp.
|
Holdings, Inc.
|
Group, Inc.
|
Services Corp.
|
|||||||||||||
Beginning Cost
|
$
|
54,953,784
|
$
|
—
|
$
|
73,525,403
|
$
|
15,865,289
|
|||||||||
Purchase Cost
|
$
|
20,369,449
|
$
|
52,261,467
|
$
|
31,327,664
|
$
|
—
|
|||||||||
Sales Cost
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||||
Ending Cost
|
$
|
75,323,233
|
$
|
52,261,467
|
$
|
104,853,067
|
$
|
15,865,289
|
|||||||||
Dividend Income
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
565,753
|
|||||||||
Net change in unrealized
|
|||||||||||||||||
appreciation/ (depreciation)
|
$
|
(51,799,912
|
)
|
$
|
(9,875,139
|
)
|
$
|
(57,923,990
|
)
|
$
|
4,728,077
|
||||||
Realized Gain/Loss
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
|||||||||
Shares
|
1,475,202
|
2,471,506
|
3,082,416
|
1,010,273
|
|||||||||||||
Market Value
|
$
|
89,161,209
|
$
|
42,386,328
|
$
|
78,324,191
|
$
|
26,853,056
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Consumer Discretionary
|
$
|
567,972,730
|
$
|
—
|
$
|
—
|
$
|
567,972,730
|
||||||||
Financials
|
689,070,867
|
—
|
—
|
689,070,867
|
||||||||||||
Industrials
|
363,090,989
|
—
|
—
|
363,090,989
|
||||||||||||
Total Common Stocks
|
$
|
1,620,134,586
|
$
|
—
|
$
|
—
|
$
|
1,620,134,586
|
||||||||
REITS
|
||||||||||||||||
Financials
|
$
|
442,802,678
|
$
|
—
|
$
|
—
|
$
|
442,802,678
|
||||||||
Total REITS
|
$
|
442,802,678
|
$
|
—
|
$
|
—
|
$
|
442,802,678
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
90,654,933
|
$
|
—
|
$
|
—
|
$
|
90,654,933
|
||||||||
Total Short-Term Investments
|
$
|
90,654,933
|
$
|
—
|
$
|
—
|
$
|
90,654,933
|
||||||||
Total Investments
|
$
|
2,153,592,197
|
$
|
—
|
$
|
—
|
$
|
2,153,592,197
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in unaffiliated securities, at value (cost $995,435,530)
|
$
|
1,916,867,413
|
||
Investments in affiliated securities, at value (cost $248,303,056)
|
236,724,784
|
|||
Total investments in securities, at value (cost $1,243,738,586)
|
2,153,592,197
|
|||
Dividends and interest receivable
|
676,086
|
|||
Receivable for fund shares sold
|
1,522,394
|
|||
Prepaid expenses and other assets
|
93,172
|
|||
Total Assets
|
2,155,883,849
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
1,721,980
|
|||
Payable to advisor
|
1,723,545
|
|||
Payable to administrator
|
203,686
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
288,372
|
|||
Accrued service fees
|
119,145
|
|||
Accrued trustees fees
|
5,964
|
|||
Accrued expenses and other payables
|
390,551
|
|||
Total Liabilities
|
4,475,143
|
|||
NET ASSETS
|
$
|
2,151,408,706
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
903,414,014
|
||
Total distributable earnings
|
1,247,994,692
|
|||
Total Net Assets
|
$
|
2,151,408,706
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
1,339,447,913
|
||
Shares issued and outstanding
|
16,098,413
|
|||
Net asset value, offering price and redemption price per share
|
$
|
83.20
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
811,960,793
|
||
Shares issued and outstanding
|
9,478,426
|
|||
Net asset value, offering price and redemption price per share
|
$
|
85.66
|
HENNESSYFUNDS.COM
|
STATEMENT OF ASSETS AND LIABILITIES/STATEMENT OF OPERATIONS
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income from unaffiliated securities(1)
|
$
|
17,833,607
|
||
Dividend income from affiliated securities
|
565,753
|
|||
Interest income
|
1,265,221
|
|||
Total investment income
|
19,664,581
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
23,437,190
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
3,273,425
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
773,046
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
2,499,733
|
|||
Distribution fees – Investor Class (See Note 5)
|
2,397,805
|
|||
Service fees – Investor Class (See Note 5)
|
1,598,536
|
|||
Reports to shareholders
|
151,493
|
|||
Federal and state registration fees
|
73,899
|
|||
Compliance expense (See Note 5)
|
29,495
|
|||
Legal fees
|
28,256
|
|||
Trustees’ fees and expenses
|
25,707
|
|||
Audit fees
|
22,502
|
|||
Interest expense (See Note 7)
|
643
|
|||
Other expenses
|
181,038
|
|||
Total expenses
|
34,492,768
|
|||
NET INVESTMENT LOSS
|
$
|
(14,828,187
|
)
|
|
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on:
|
||||
Unaffiliated investments
|
$
|
373,659,739
|
||
Affiliated investments
|
—
|
|||
Net change in unrealized appreciation/depreciation on:
|
||||
Unaffiliated investments
|
(258,976,278
|
)
|
||
Affiliated investments
|
(114,870,964
|
)
|
||
Net loss on investments
|
(187,503
|
)
|
||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
(15,015,690
|
)
|
(1)
|
Net of foreign taxes withheld of $402,085.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment loss
|
$
|
(14,828,187
|
)
|
$
|
(9,635,486
|
)
|
||
Net realized gain on investments
|
373,659,739
|
6,262,037
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(373,847,242
|
)
|
477,904,990
|
|||||
Net increase (decrease) in net
|
||||||||
assets resulting from operations
|
(15,015,690
|
)
|
474,531,541
|
|||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(103,968
|
)
|
—
|
|||||
Distributable earnings – Institutional Class
|
(67,148
|
)
|
—
|
|||||
Total distributions
|
(171,116
|
)
|
—
|
|||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
110,725,649
|
192,418,104
|
||||||
Proceeds from shares subscribed – Institutional Class
|
198,457,882
|
329,777,433
|
||||||
Dividends reinvested – Investor Class
|
102,585
|
—
|
||||||
Dividends reinvested – Institutional Class
|
57,674
|
—
|
||||||
Cost of shares redeemed – Investor Class
|
(432,891,744
|
)
|
(448,768,404
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(442,177,824
|
)
|
(208,168,872
|
)
|
||||
Net decrease in net assets derived
|
||||||||
from capital share transactions
|
(565,725,778
|
)
|
(134,741,739
|
)
|
||||
TOTAL INCREASE (DECREASE) IN NET ASSETS
|
(580,912,584
|
)
|
339,789,802
|
|||||
NET ASSETS:
|
||||||||
Beginning of year
|
2,732,321,290
|
2,392,531,488
|
||||||
End of year
|
$
|
2,151,408,706
|
$
|
2,732,321,290
|
(1)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
1,252,599
|
2,500,539
|
||||||
Shares sold – Institutional Class
|
2,178,048
|
4,162,013
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
1,169
|
—
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
641
|
—
|
||||||
Shares redeemed – Investor Class
|
(4,879,914
|
)
|
(5,805,953
|
)
|
||||
Shares redeemed – Institutional Class
|
(4,839,525
|
)
|
(2,633,695
|
)
|
||||
Net decrease in shares outstanding
|
(6,286,982
|
)
|
(1,777,096
|
)
|
(1)
|
Includes accumulated net investment loss of $(10,054,323).
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Amount is less than $0.01.
|
(2)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
84.92
|
$
|
70.63
|
$
|
71.94
|
$
|
69.46
|
$
|
63.58
|
|||||||||
(0.86
|
)
|
(0.51
|
)
|
(0.45
|
)
|
(0.33
|
)
|
0.27
|
||||||||||
(0.85
|
)
|
14.80
|
(0.72
|
)
|
8.07
|
6.68
|
||||||||||||
(1.71
|
)
|
14.29
|
(1.17
|
)
|
7.74
|
6.95
|
||||||||||||
—
|
—
|
—
|
(0.02
|
)
|
—
|
|||||||||||||
(0.01
|
)
|
—
|
(0.14
|
)
|
(5.24
|
)
|
(1.07
|
)
|
||||||||||
(0.01
|
)
|
—
|
(0.14
|
)
|
(5.26
|
)
|
(1.07
|
)
|
||||||||||
—
|
—
|
—
|
—
|
0.00
|
(1)
|
|||||||||||||
$
|
83.20
|
$
|
84.92
|
$
|
70.63
|
$
|
71.94
|
$
|
69.46
|
|||||||||
(2.02
|
)%
|
20.23
|
%
|
(1.63
|
)%
|
11.83
|
%
|
11.05
|
%
|
|||||||||
$
|
1,339.45
|
$
|
1,675.00
|
$
|
1,626.71
|
$
|
1,615.36
|
$
|
1,213.03
|
|||||||||
1.47
|
%
|
1.48
|
%
|
1.47
|
%
|
1.46
|
%
|
1.41
|
%
|
|||||||||
(0.72
|
)%
|
(0.51
|
)%
|
(0.65
|
)%
|
(0.55
|
)%
|
0.41
|
%
|
|||||||||
13
|
%
|
5
|
%
|
2
|
%
|
4
|
%
|
18
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
87.10
|
$
|
72.17
|
$
|
73.24
|
$
|
70.50
|
$
|
64.32
|
|||||||||
(0.28
|
)
|
(0.11
|
)
|
(0.14
|
)
|
(0.08
|
)
|
0.35
|
||||||||||
(1.15
|
)
|
15.04
|
(0.79
|
)
|
8.19
|
6.90
|
||||||||||||
(1.43
|
)
|
14.93
|
(0.93
|
)
|
8.11
|
7.25
|
||||||||||||
—
|
—
|
—
|
(0.05
|
)
|
—
|
|||||||||||||
(0.01
|
)
|
—
|
(0.14
|
)
|
(5.32
|
)
|
(1.07
|
)
|
||||||||||
(0.01
|
)
|
—
|
(0.14
|
)
|
(5.37
|
)
|
(1.07
|
)
|
||||||||||
$
|
85.66
|
$
|
87.10
|
$
|
72.17
|
$
|
73.24
|
$
|
70.50
|
|||||||||
(1.65
|
)%
|
20.69
|
%
|
(1.27
|
)%
|
12.23
|
%
|
11.40
|
%
|
|||||||||
$
|
811.96
|
$
|
1,057.32
|
$
|
765.82
|
$
|
520.06
|
$
|
283.31
|
|||||||||
1.09
|
%
|
1.10
|
%
|
1.10
|
%
|
1.11
|
%
|
1.10
|
%
|
|||||||||
(0.34
|
)%
|
(0.13
|
)%
|
(0.28
|
)%
|
(0.19
|
)%
|
0.59
|
%
|
|||||||||
13
|
%
|
5
|
%
|
2
|
%
|
4
|
%
|
18
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(10,636,072)
|
$10,636,072
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSY FUNDS
|
1-800-966-4354
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
Investments
|
|||||
Cost of investments for tax purposes
|
$
|
1,243,738,586
|
|||
Gross tax unrealized appreciation
|
$
|
998,259,530
|
|||
Gross tax unrealized depreciation
|
(88,405,919
|
)
|
|||
Net tax unrealized appreciation/(depreciation)
|
$
|
909,853,611
|
|||
Undistributed ordinary income
|
$
|
—
|
|||
Undistributed long-term capital gains
|
351,447,441
|
||||
Total distributable earnings
|
$
|
351,447,441
|
|||
Other accumulated gain/(loss)
|
$
|
(13,306,360
|
)
|
||
Total accumulated gain/(loss)
|
$
|
1,247,994,692
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
Year Ended
|
Year Ended
|
||||||||
October 31, 2018
|
October 31, 2017
|
||||||||
Ordinary income
|
$
|
—
|
$
|
—
|
|||||
Long-term capital gain
|
171,116
|
—
|
|||||||
$
|
171,116
|
$
|
—
|
Long-term
|
||
Investor Class
|
$14.47031
|
|
Institutional Class
|
$14.98779
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM/TRUSTEES AND OFFICERS
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 966.20
|
$7.29
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,017.80
|
$7.48
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 968.10
|
$5.41
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,019.71
|
$5.55
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.47% for Investor Class shares or 1.09% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
11
|
Statement of Operations
|
12
|
Statements of Changes in Net Assets
|
13
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
18
|
Report of Independent Registered Public Accounting Firm
|
27
|
Trustees and Officers of the Fund
|
28
|
Expense Example
|
32
|
Proxy Voting Policy and Proxy Voting Records
|
34
|
Quarterly Schedule of Investments
|
34
|
Federal Tax Distribution Information
|
34
|
Important Notice Regarding Delivery of Shareholder Documents
|
34
|
Privacy Policy
|
35
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Cornerstone Mid Cap 30 Fund –
|
|||
Investor Class (HFMDX)
|
-10.54%
|
6.13%
|
11.41%
|
Hennessy Cornerstone Mid Cap 30 Fund –
|
|||
Institutional Class (HIMDX)
|
-10.22%
|
6.48%
|
11.79%
|
Russell Midcap® Index
|
2.79%
|
8.97%
|
14.19%
|
S&P 500 Index
|
7.35%
|
11.34%
|
13.24%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
AES Corp.
|
3.93%
|
Cleveland-Cliffs, Inc.
|
3.90%
|
Casey’s General Stores, Inc.
|
3.88%
|
Spirit Airlines, Inc.
|
3.85%
|
Old Republic International Corp.
|
3.52%
|
Crocs, Inc.
|
3.51%
|
Clean Harbors, Inc.
|
3.49%
|
UGI Corp.
|
3.47%
|
Sprouts Farmers Market, Inc.
|
3.47%
|
Booz Allen Hamilton Holding Corp.
|
3.41%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 96.92%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Consumer Discretionary – 24.51%
|
||||||||||||
Aaron’s, Inc.
|
465,900
|
$
|
21,957,867
|
3.29
|
%
|
|||||||
American Axle & Manufacturing Holdings, Inc. (a)
|
1,367,400
|
20,743,458
|
3.11
|
%
|
||||||||
American Eagle Outfitters, Inc.
|
892,161
|
20,573,233
|
3.08
|
%
|
||||||||
BJ’s Restaurants, Inc.
|
313,700
|
19,192,166
|
2.88
|
%
|
||||||||
Crocs, Inc. (a)
|
1,139,600
|
23,407,384
|
3.51
|
%
|
||||||||
Murphy USA, Inc. (a)
|
280,200
|
22,592,526
|
3.38
|
%
|
||||||||
Penn National Gaming, Inc. (a)
|
701,758
|
17,038,684
|
2.55
|
%
|
||||||||
Restoration Hardware Holdings, Inc. (a)
|
156,500
|
18,108,615
|
2.71
|
%
|
||||||||
|
163,613,933
|
24.51
|
%
|
|||||||||
Consumer Staples – 10.58%
|
||||||||||||
Casey’s General Stores, Inc.
|
205,400
|
25,902,994
|
3.88
|
%
|
||||||||
Post Holdings, Inc. (a)
|
243,442
|
21,525,141
|
3.23
|
%
|
||||||||
Sprouts Farmers Market, Inc. (a)
|
861,700
|
23,171,113
|
3.47
|
%
|
||||||||
|
70,599,248
|
10.58
|
%
|
|||||||||
Energy – 5.70%
|
||||||||||||
EnLink Midstream Partners LP
|
1,289,900
|
19,554,884
|
2.93
|
%
|
||||||||
PBF Energy, Inc.
|
442,900
|
18,535,365
|
2.77
|
%
|
||||||||
|
38,090,249
|
5.70
|
%
|
|||||||||
Financials – 6.89%
|
||||||||||||
Assurant, Inc.
|
231,700
|
22,523,557
|
3.37
|
%
|
||||||||
Old Republic International Corp.
|
1,065,700
|
23,498,685
|
3.52
|
%
|
||||||||
|
46,022,242
|
6.89
|
%
|
|||||||||
Health Care – 6.17%
|
||||||||||||
Allscripts Healthcare Solutions, Inc. (a)
|
1,626,800
|
19,375,188
|
2.90
|
%
|
||||||||
Molina Healthcare, Inc. (a)
|
171,900
|
21,791,763
|
3.27
|
%
|
||||||||
|
41,166,951
|
6.17
|
%
|
|||||||||
Industrials – 19.08%
|
||||||||||||
Clean Harbors, Inc. (a)
|
342,600
|
23,310,504
|
3.49
|
%
|
||||||||
Insperity, Inc.
|
195,900
|
21,519,615
|
3.22
|
%
|
||||||||
Landstar System, Inc.
|
200,400
|
20,058,036
|
3.00
|
%
|
||||||||
NOW, Inc. (a)
|
1,403,900
|
18,026,076
|
2.70
|
%
|
||||||||
Spirit Airlines, Inc. (a)
|
494,700
|
25,674,930
|
3.85
|
%
|
||||||||
Trinity Industries, Inc.
|
659,000
|
18,814,450
|
2.82
|
%
|
||||||||
|
127,403,611
|
19.08
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Information Technology – 9.56%
|
||||||||||||
Booz Allen Hamilton Holding Corp.
|
460,100
|
$
|
22,793,354
|
3.41
|
%
|
|||||||
CACI International, Inc., Class A (a)
|
120,300
|
21,468,738
|
3.22
|
%
|
||||||||
Conduent, Inc. (a)
|
1,024,700
|
19,571,770
|
2.93
|
%
|
||||||||
|
63,833,862
|
9.56
|
%
|
|||||||||
|
||||||||||||
Materials – 7.03%
|
||||||||||||
Ashland Global Holdings, Inc.
|
282,400
|
20,891,952
|
3.13
|
%
|
||||||||
Cleveland-Cliffs, Inc. (a)
|
2,422,700
|
26,068,252
|
3.90
|
%
|
||||||||
|
46,960,204
|
7.03
|
%
|
|||||||||
|
||||||||||||
Utilities – 7.40%
|
||||||||||||
AES Corp.
|
1,800,000
|
26,244,000
|
3.93
|
%
|
||||||||
UGI Corp.
|
437,000
|
23,187,220
|
3.47
|
%
|
||||||||
|
49,431,220
|
7.40
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $708,444,037)
|
647,121,520
|
96.92
|
%
|
|||||||||
|
||||||||||||
SHORT-TERM INVESTMENTS – 3.60%
|
||||||||||||
|
||||||||||||
Money Market Funds – 3.60%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (b)
|
24,064,354
|
24,064,354
|
3.60
|
%
|
||||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $24,064,354)
|
24,064,354
|
3.60
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $732,508,391) – 100.52%
|
671,185,874
|
100.52
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.52)%
|
(3,498,646
|
)
|
(0.52
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
667,687,228
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
(b)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Consumer Discretionary
|
$
|
163,613,933
|
$
|
—
|
$
|
—
|
$
|
163,613,933
|
||||||||
Consumer Staples
|
70,599,248
|
—
|
—
|
70,599,248
|
||||||||||||
Energy
|
38,090,249
|
—
|
—
|
38,090,249
|
||||||||||||
Financials
|
46,022,242
|
—
|
—
|
46,022,242
|
||||||||||||
Health Care
|
41,166,951
|
—
|
—
|
41,166,951
|
||||||||||||
Industrials
|
127,403,611
|
—
|
—
|
127,403,611
|
||||||||||||
Information Technology
|
63,833,862
|
—
|
—
|
63,833,862
|
||||||||||||
Materials
|
46,960,204
|
—
|
—
|
46,960,204
|
||||||||||||
Utilities
|
49,431,220
|
—
|
—
|
49,431,220
|
||||||||||||
Total Common Stocks
|
$
|
647,121,520
|
$
|
—
|
$
|
—
|
$
|
647,121,520
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
24,064,354
|
$
|
—
|
$
|
—
|
$
|
24,064,354
|
||||||||
Total Short-Term Investments
|
$
|
24,064,354
|
$
|
—
|
$
|
—
|
$
|
24,064,354
|
||||||||
Total Investments
|
$
|
671,185,874
|
$
|
—
|
$
|
—
|
$
|
671,185,874
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $732,508,391)
|
$
|
671,185,874
|
||
Dividends and interest receivable
|
332,885
|
|||
Receivable for fund shares sold
|
108,579
|
|||
Return of capital receivable
|
503,061
|
|||
Prepaid expenses and other assets
|
43,059
|
|||
Total Assets
|
672,173,458
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
3,683,772
|
|||
Payable to advisor
|
464,484
|
|||
Payable to administrator
|
68,418
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
74,050
|
|||
Accrued service fees
|
30,659
|
|||
Accrued interest payable
|
2,600
|
|||
Accrued trustees fees
|
5,962
|
|||
Accrued expenses and other payables
|
134,385
|
|||
Total Liabilities
|
4,486,230
|
|||
NET ASSETS
|
$
|
667,687,228
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
573,353,708
|
||
Total distributable earnings
|
94,333,520
|
|||
Total Net Assets
|
$
|
667,687,228
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
338,386,287
|
||
Shares issued and outstanding
|
20,058,687
|
|||
Net asset value, offering price and redemption price per share
|
$
|
16.87
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
329,300,941
|
||
Shares issued and outstanding
|
18,950,436
|
|||
Net asset value, offering price and redemption price per share
|
$
|
17.38
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income
|
$
|
8,063,454
|
||
Interest income
|
335,638
|
|||
Total investment income
|
8,399,092
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
7,413,487
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
900,533
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
504,826
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
951,554
|
|||
Distribution fees – Investor Class (See Note 5)
|
661,878
|
|||
Service fees – Investor Class (See Note 5)
|
441,252
|
|||
Reports to shareholders
|
70,608
|
|||
Federal and state registration fees
|
44,516
|
|||
Compliance expense (See Note 5)
|
29,499
|
|||
Audit fees
|
23,146
|
|||
Trustees’ fees and expenses
|
20,188
|
|||
Interest expense (See Note 7)
|
10,317
|
|||
Legal fees
|
8,669
|
|||
Other expenses
|
56,523
|
|||
Total expenses
|
11,136,996
|
|||
NET INVESTMENT LOSS
|
$
|
(2,737,904
|
)
|
|
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
263,670,396
|
||
Net change in unrealized appreciation/depreciation on investments
|
(355,690,732
|
)
|
||
Net loss on investments
|
(92,020,336
|
)
|
||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
(94,758,240
|
)
|
HENNESSYFUNDS.COM
|
STATEMENT OF OPERATIONS/STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment loss
|
$
|
(2,737,904
|
)
|
$
|
(1,057,646
|
)
|
||
Net realized gain on investments
|
263,670,396
|
245,505,242
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(355,690,732
|
)
|
(15,162,353
|
)
|
||||
Net increase (decrease) in net assets resulting from operations
|
(94,758,240
|
)
|
229,285,243
|
|||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(59,254,277
|
)
|
(3,088,473
|
)
|
||||
Distributable earnings – Institutional Class
|
(103,063,607
|
)
|
(4,766,317
|
)
|
||||
Total distributions
|
(162,317,884
|
)
|
(7,854,790
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares issued in the Reorganization –
|
||||||||
Investor Class (see Note 9)
|
216,366,669
|
—
|
||||||
Proceeds from shares issued in the Reorganization –
|
||||||||
Institutional Class (see Note 9)
|
105,537,409
|
—
|
||||||
Proceeds from shares subscribed – Investor Class
|
20,976,077
|
37,287,639
|
||||||
Proceeds from shares subscribed – Institutional Class
|
53,065,851
|
90,659,855
|
||||||
Dividends reinvested – Investor Class
|
58,251,271
|
3,040,512
|
||||||
Dividends reinvested – Institutional Class
|
99,300,713
|
4,572,946
|
||||||
Cost of shares redeemed – Investor Class
|
(196,042,061
|
)
|
(257,782,079
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(404,237,132
|
)
|
(367,781,422
|
)
|
||||
Net decrease in net assets derived
|
||||||||
from capital share transactions
|
(46,781,203
|
)
|
(490,002,549
|
)
|
||||
TOTAL DECREASE IN NET ASSETS
|
(303,857,327
|
)
|
(268,572,096
|
)
|
||||
NET ASSETS:
|
||||||||
Beginning of year
|
971,544,555
|
1,240,116,651
|
||||||
End of year
|
$
|
667,687,228
|
$
|
971,544,555
|
(2)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares issued in the Reorganization – Investor Class
|
10,499,531
|
—
|
||||||
Shares issued in the Reorganization – Institutional Class
|
4,794,539
|
—
|
||||||
Shares sold – Investor Class
|
1,074,535
|
1,844,085
|
||||||
Shares sold – Institutional Class
|
2,546,896
|
4,348,038
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
3,038,668
|
149,705
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
5,045,768
|
220,065
|
||||||
Shares redeemed – Investor Class
|
(10,187,380
|
)
|
(12,769,278
|
)
|
||||
Shares redeemed – Institutional Class
|
(20,331,396
|
)
|
(17,841,055
|
)
|
||||
Net decrease in shares outstanding
|
(3,518,839
|
)
|
(24,048,440
|
)
|
(1)
|
All distributions were from net realized gain.
|
(2)
|
Includes accumulated net investment loss of $(1,118,367).
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
22.46
|
$
|
18.37
|
$
|
20.12
|
$
|
19.00
|
$
|
17.32
|
|||||||||
(0.06
|
)
|
(0.15
|
)
|
(0.07
|
)
|
0.10
|
(0.05
|
)
|
||||||||||
(1.87
|
)
|
4.36
|
(1.51
|
)
|
2.16
|
3.04
|
||||||||||||
(1.93
|
)
|
4.21
|
(1.58
|
)
|
2.26
|
2.99
|
||||||||||||
—
|
—
|
(0.03
|
)
|
—
|
(0.05
|
)
|
||||||||||||
(3.66
|
)
|
(0.12
|
)
|
(0.14
|
)
|
(1.14
|
)
|
(1.26
|
)
|
|||||||||
(3.66
|
)
|
(0.12
|
)
|
(0.17
|
)
|
(1.14
|
)
|
(1.31
|
)
|
|||||||||
$
|
16.87
|
$
|
22.46
|
$
|
18.37
|
$
|
20.12
|
$
|
19.00
|
|||||||||
(10.54
|
)%
|
23.02
|
%
|
(7.89
|
)%
|
12.35
|
%
|
18.25
|
%
|
|||||||||
$
|
338.39
|
$
|
351.16
|
$
|
485.15
|
$
|
765.90
|
$
|
258.17
|
|||||||||
1.31
|
%
|
1.34
|
%
|
1.35
|
%
|
1.17
|
%
|
1.25
|
%
|
|||||||||
(0.47
|
)%
|
(0.33
|
)%
|
(0.24
|
)%
|
0.27
|
%
|
(0.47
|
)%
|
|||||||||
181
|
%
|
106
|
%
|
108
|
%
|
5
|
%
|
132
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Amount is less than $(0.01) or $0.01.
|
(2)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
23.07
|
$
|
18.80
|
$
|
20.55
|
$
|
19.36
|
$
|
17.62
|
|||||||||
(0.00
|
)(1)
|
0.02
|
0.00
|
(1)
|
(0.03
|
)
|
(0.08
|
)
|
||||||||||
(1.92
|
)
|
4.38
|
(1.54
|
)
|
2.38
|
3.17
|
||||||||||||
(1.92
|
)
|
4.40
|
(1.54
|
)
|
2.35
|
3.09
|
||||||||||||
—
|
—
|
(0.06
|
)
|
—
|
(0.09
|
)
|
||||||||||||
(3.77
|
)
|
(0.13
|
)
|
(0.15
|
)
|
(1.16
|
)
|
(1.26
|
)
|
|||||||||
(3.77
|
)
|
(0.13
|
)
|
(0.21
|
)
|
(1.16
|
)
|
(1.35
|
)
|
|||||||||
$
|
17.38
|
$
|
23.07
|
$
|
18.80
|
$
|
20.55
|
$
|
19.36
|
|||||||||
(10.22
|
)%
|
23.47
|
%
|
(7.53
|
)%
|
12.62
|
%
|
18.57
|
%
|
|||||||||
$
|
329.30
|
$
|
620.38
|
$
|
754.97
|
$
|
306.04
|
$
|
75.53
|
|||||||||
0.95
|
%
|
0.97
|
%
|
0.97
|
%
|
0.96
|
%
|
1.07
|
%
|
|||||||||
0.95
|
%
|
0.97
|
%
|
0.97
|
%
|
0.96
|
%
|
0.98
|
%
|
|||||||||
(0.12
|
)%
|
0.04
|
%
|
0.07
|
%
|
0.41
|
%
|
(0.29
|
)%
|
|||||||||
(0.12
|
)%
|
0.04
|
%
|
0.07
|
%
|
0.41
|
%
|
(0.20
|
)%
|
|||||||||
181
|
%
|
106
|
%
|
108
|
%
|
5
|
%
|
132
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(101,348,648)
|
$101,348,648
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSY FUNDS
|
1-800-966-4354
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”) will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
739,706,681
|
||
Gross tax unrealized appreciation
|
$
|
4,822,523
|
||
Gross tax unrealized depreciation
|
(73,343,330
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
(68,520,807
|
)
|
|
Undistributed ordinary income
|
$
|
5,436,050
|
||
Undistributed long-term capital gains
|
157,418,277
|
|||
Total distributable earnings
|
$
|
162,854,327
|
||
Other accumulated gain/(loss)
|
$
|
—
|
||
Total accumulated gain/(loss)
|
$
|
94,333,520
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income
|
$
|
—
|
$
|
—
|
||||
Long-term capital gain
|
162,317,884
|
7,854,790
|
||||||
|
$
|
162,317,884
|
$
|
7,854,790
|
Shares Issued
|
Hennessy Mid Cap 30 Fund Net Assets
|
|||
Rainier Mid
|
to Shareholders
|
Combined
|
||
Cap Equity Fund
|
of Rainier Mid
|
(Post Merger)
|
Tax Status
|
|
Net Assets
|
Cap Equity Fund
|
Pre Merger
|
Net Assets
|
of Transfer
|
$69,217,067(1)
|
2,967,419
|
$968,703,016
|
$1,037,920,083
|
Non-taxable
|
Shares Issued
|
Hennessy Mid Cap 30 Fund Net Assets
|
|||
Rainier Small/Mid
|
to Shareholders of
|
Combined
|
||
Cap Equity Fund
|
Rainier Small/Mid
|
(Post Merger)
|
Tax Status
|
|
Net Assets
|
Cap Equity Fund
|
Pre Merger
|
Net Assets
|
of Transfer
|
$252,687,011(2)
|
12,326,651
|
$1,016,365,858
|
$1,269,052,869
|
Non-taxable
|
Net investment loss
|
$
|
(3,175,732
|
)
|
|
Net realized gain on investments
|
$
|
270,696,978
|
||
Net change in unrealized appreciation/depreciation on investments
|
$
|
(345,824,579
|
)
|
|
Net decrease in net assets resulting from operations
|
$
|
(78,303,333
|
)
|
HENNESSY FUNDS
|
1-800-966-4354
|
Long-term
|
Short-term
|
||
Investor Class
|
$4.34596
|
$0.15008
|
|
Institutional Class
|
$4.44097
|
$0.15336
|
HENNESSYFUNDS.COM
|
NOTES/REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSY FUNDS
|
1-800-966-4354
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 895.40
|
$6.31
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,018.55
|
$6.72
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 897.30
|
$4.54
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.42
|
$4.84
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.32% for Investor Class shares or 0.95% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
11
|
Statement of Operations
|
12
|
Statements of Changes in Net Assets
|
14
|
Financial Highlights
|
16
|
Notes to the Financial Statements
|
20
|
Report of Independent Registered Public Accounting Firm
|
28
|
Trustees and Officers of the Fund
|
29
|
Expense Example
|
32
|
Proxy Voting Policy and Proxy Voting Records
|
34
|
Quarterly Schedule of Investments
|
34
|
Federal Tax Distribution Information
|
34
|
Important Notice Regarding Delivery of Shareholder Documents
|
34
|
Privacy Policy
|
35
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Since
|
||
|
One
|
Five
|
Inception
|
|
Year
|
Years
|
(3/20/09)
|
Hennessy Cornerstone Large Growth Fund –
|
|||
Investor Class (HFLGX)
|
8.53%
|
9.12%
|
15.53%
|
Hennessy Cornerstone Large Growth Fund –
|
|||
Institutional Class (HILGX)
|
8.82%
|
9.36%
|
15.82%
|
Russell 1000® Index
|
6.98%
|
11.05%
|
16.53%
|
S&P 500 Index
|
7.35%
|
11.34%
|
16.42%
|
(1)
|
The Fund’s investment advisor has contractually agreed to limit expenses until November 30, 2019.
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
HCA Healthcare, Inc.
|
2.63%
|
Apple, Inc.
|
2.61%
|
United Continental Holdings, Inc.
|
2.58%
|
Express Scripts Holding Co.
|
2.58%
|
CSX Corp.
|
2.51%
|
Centene Corp.
|
2.45%
|
Kohl’s Corp.
|
2.40%
|
HP, Inc.
|
2.29%
|
Walgreens Boots Alliance, Inc.
|
2.26%
|
Target Corp.
|
2.25%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 96.01%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 8.28%
|
||||||||||||
CBS Corp., Class B
|
52,900
|
$
|
3,033,815
|
2.09
|
%
|
|||||||
Omnicom Group, Inc.
|
35,700
|
2,653,224
|
1.83
|
%
|
||||||||
The Walt Disney Co.
|
27,200
|
3,123,376
|
2.15
|
%
|
||||||||
Verizon Communications, Inc.
|
56,100
|
3,202,749
|
2.21
|
%
|
||||||||
|
12,013,164
|
8.28
|
%
|
|||||||||
|
||||||||||||
Consumer Discretionary – 18.86%
|
||||||||||||
AutoZone, Inc. (a)
|
3,900
|
2,860,533
|
1.97
|
%
|
||||||||
Best Buy Co., Inc.
|
40,000
|
2,806,400
|
1.93
|
%
|
||||||||
Darden Restaurants, Inc.
|
29,900
|
3,185,845
|
2.20
|
%
|
||||||||
General Motors Co.
|
67,000
|
2,451,530
|
1.69
|
%
|
||||||||
Kohl’s Corp.
|
46,000
|
3,483,580
|
2.40
|
%
|
||||||||
L Brands, Inc.
|
57,800
|
1,873,876
|
1.29
|
%
|
||||||||
Starbucks Corp.
|
50,770
|
2,958,368
|
2.04
|
%
|
||||||||
Target Corp.
|
39,100
|
3,269,933
|
2.25
|
%
|
||||||||
The Gap, Inc.
|
89,500
|
2,443,350
|
1.68
|
%
|
||||||||
Wyndham Hotels & Resorts, Inc.
|
23,900
|
1,178,031
|
0.81
|
%
|
||||||||
Wyndham Worldwide Corp.
|
24,200
|
868,296
|
0.60
|
%
|
||||||||
|
27,379,742
|
18.86
|
%
|
|||||||||
|
||||||||||||
Consumer Staples – 18.64%
|
||||||||||||
Altria Group, Inc.
|
43,000
|
2,796,720
|
1.93
|
%
|
||||||||
Campbell Soup Co.
|
60,700
|
2,270,787
|
1.56
|
%
|
||||||||
Conagra Brands, Inc.
|
78,800
|
2,805,280
|
1.93
|
%
|
||||||||
CVS Health Corp.
|
40,300
|
2,917,317
|
2.01
|
%
|
||||||||
General Mills, Inc.
|
51,200
|
2,242,560
|
1.54
|
%
|
||||||||
Kimberly-Clark Corp.
|
24,700
|
2,576,210
|
1.77
|
%
|
||||||||
The Kroger Co.
|
103,400
|
3,077,184
|
2.12
|
%
|
||||||||
Tyson Foods, Inc., Class A
|
37,700
|
2,258,984
|
1.56
|
%
|
||||||||
Walgreens Boots Alliance, Inc.
|
41,100
|
3,278,547
|
2.26
|
%
|
||||||||
Walmart, Inc.
|
28,300
|
2,837,924
|
1.96
|
%
|
||||||||
|
27,061,513
|
18.64
|
%
|
|||||||||
|
||||||||||||
Financials – 3.62%
|
||||||||||||
Allstate Corp.
|
31,000
|
2,967,320
|
2.04
|
%
|
||||||||
Ameriprise Financial, Inc.
|
18,000
|
2,290,320
|
1.58
|
%
|
||||||||
|
5,257,640
|
3.62
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Health Care – 7.66%
|
||||||||||||
Centene Corp. (a)
|
27,300
|
$
|
3,557,736
|
2.45
|
%
|
|||||||
Express Scripts Holding Co. (a)
|
38,600
|
3,743,042
|
2.58
|
%
|
||||||||
HCA Healthcare, Inc.
|
28,600
|
3,818,958
|
2.63
|
%
|
||||||||
|
11,119,736
|
7.66
|
%
|
|||||||||
|
||||||||||||
Industrials – 19.57%
|
||||||||||||
American Airlines Group, Inc.
|
56,200
|
1,971,496
|
1.36
|
%
|
||||||||
CSX Corp.
|
52,900
|
3,642,694
|
2.51
|
%
|
||||||||
Deere & Co.
|
17,700
|
2,397,288
|
1.65
|
%
|
||||||||
Delta Air Lines, Inc.
|
54,000
|
2,955,420
|
2.04
|
%
|
||||||||
FedEx Corp.
|
11,700
|
2,577,978
|
1.78
|
%
|
||||||||
PACCAR, Inc.
|
41,200
|
2,357,052
|
1.62
|
%
|
||||||||
Southwest Airlines Co.
|
49,500
|
2,430,450
|
1.67
|
%
|
||||||||
Union Pacific Corp.
|
21,898
|
3,201,925
|
2.21
|
%
|
||||||||
United Continental Holdings, Inc. (a)
|
43,900
|
3,753,889
|
2.58
|
%
|
||||||||
Waste Management, Inc.
|
34,900
|
3,122,503
|
2.15
|
%
|
||||||||
|
28,410,695
|
19.57
|
%
|
|||||||||
|
||||||||||||
Information Technology – 13.02%
|
||||||||||||
Apple, Inc.
|
17,330
|
3,792,844
|
2.61
|
%
|
||||||||
Applied Materials, Inc.
|
56,800
|
1,867,584
|
1.29
|
%
|
||||||||
HP, Inc.
|
137,800
|
3,326,492
|
2.29
|
%
|
||||||||
Intel Corp.
|
62,750
|
2,941,720
|
2.03
|
%
|
||||||||
International Business Machines Corp.
|
18,600
|
2,146,998
|
1.48
|
%
|
||||||||
Lam Research Corp.
|
16,300
|
2,310,199
|
1.59
|
%
|
||||||||
Micron Technology, Inc. (a)
|
66,700
|
2,515,924
|
1.73
|
%
|
||||||||
|
18,901,761
|
13.02
|
%
|
|||||||||
|
||||||||||||
Materials – 6.36%
|
||||||||||||
Eastman Chemical Co.
|
28,800
|
2,256,480
|
1.55
|
%
|
||||||||
Freeport-McMoRan, Inc.
|
160,100
|
1,865,165
|
1.29
|
%
|
||||||||
Nucor Corp.
|
44,300
|
2,619,016
|
1.80
|
%
|
||||||||
Steel Dynamics, Inc.
|
62,900
|
2,490,840
|
1.72
|
%
|
||||||||
|
9,231,501
|
6.36
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $131,231,207)
|
139,375,752
|
96.01
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
SHORT-TERM INVESTMENTS – 4.12%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 4.12%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (b)
|
5,979,305
|
$
|
5,979,305
|
4.12
|
%
|
|||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $5,979,305)
|
5,979,305
|
4.12
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $137,210,512) – 100.13%
|
145,355,057
|
100.13
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.13)%
|
(193,434
|
)
|
(0.13
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
145,161,623
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
(b)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
12,013,164
|
$
|
—
|
$
|
—
|
$
|
12,013,164
|
||||||||
Consumer Discretionary
|
27,379,742
|
—
|
—
|
27,379,742
|
||||||||||||
Consumer Staples
|
27,061,513
|
—
|
—
|
27,061,513
|
||||||||||||
Financials
|
5,257,640
|
—
|
—
|
5,257,640
|
||||||||||||
Health Care
|
11,119,736
|
—
|
—
|
11,119,736
|
||||||||||||
Industrials
|
28,410,695
|
—
|
—
|
28,410,695
|
||||||||||||
Information Technology
|
18,901,761
|
—
|
—
|
18,901,761
|
||||||||||||
Materials
|
9,231,501
|
—
|
—
|
9,231,501
|
||||||||||||
Total Common Stocks
|
$
|
139,375,752
|
$
|
—
|
$
|
—
|
$
|
139,375,752
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
5,979,305
|
$
|
—
|
$
|
—
|
$
|
5,979,305
|
||||||||
Total Short-Term Investments
|
$
|
5,979,305
|
$
|
—
|
$
|
—
|
$
|
5,979,305
|
||||||||
Total Investments
|
$
|
145,355,057
|
$
|
—
|
$
|
—
|
$
|
145,355,057
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $137,210,512)
|
$
|
145,355,057
|
||
Dividends and interest receivable
|
166,239
|
|||
Receivable for fund shares sold
|
4,894
|
|||
Prepaid expenses and other assets
|
16,777
|
|||
Total Assets
|
145,542,967
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
5,056
|
|||
Payable to advisor
|
92,600
|
|||
Payable to administrator
|
13,178
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
226,211
|
|||
Accrued service fees
|
10,857
|
|||
Accrued trustees fees
|
5,963
|
|||
Accrued expenses and other payables
|
5,579
|
|||
Total Liabilities
|
381,344
|
|||
NET ASSETS
|
$
|
145,161,623
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
108,975,614
|
||
Total distributable earnings
|
36,186,009
|
|||
Total Net Assets
|
$
|
145,161,623
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
125,908,520
|
||
Shares issued and outstanding
|
10,284,365
|
|||
Net asset value, offering price and redemption price per share
|
$
|
12.24
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
19,253,103
|
||
Shares issued and outstanding
|
1,555,060
|
|||
Net asset value, offering price and redemption price per share
|
$
|
12.38
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income
|
$
|
3,062,722
|
||
Interest income
|
62,738
|
|||
Total investment income
|
3,125,460
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
1,127,992
|
|||
Distribution fees – Investor Class (See Note 5)
|
197,920
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
146,207
|
|||
Service fees – Investor Class (See Note 5)
|
131,947
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
97,529
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
7,888
|
|||
Federal and state registration fees
|
30,371
|
|||
Compliance expense (See Note 5)
|
29,509
|
|||
Audit fees
|
23,134
|
|||
Trustees’ fees and expenses
|
17,151
|
|||
Reports to shareholders
|
15,705
|
|||
Legal fees
|
834
|
|||
Other expenses
|
9,259
|
|||
Total expenses before recoupment from advisor
|
1,835,446
|
|||
Expense recoupment by advisor – Institutional Class
|
238
|
|||
Net expenses
|
1,835,684
|
|||
NET INVESTMENT INCOME
|
$
|
1,289,776
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
29,755,376
|
||
Net change in unrealized appreciation/depreciation on investments
|
(20,362,172
|
)
|
||
Net gain on investments
|
9,393,204
|
|||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
10,682,980
|
HENNESSYFUNDS.COM
|
STATEMENT OF OPERATIONS
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
1,289,776
|
$
|
1,052,238
|
||||
Net realized gain on investments
|
29,755,376
|
10,781,271
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(20,362,172
|
)
|
3,606,256
|
|||||
Net increase in net assets resulting from operations
|
10,682,980
|
15,439,765
|
||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(5,633,818
|
)
|
(1,086,070
|
)
|
||||
Distributable earnings – Institutional Class
|
(941,276
|
)
|
(172,457
|
)
|
||||
Total distributions
|
(6,575,094
|
)
|
(1,258,527
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares issued in
|
||||||||
the Reorganization – Investor Class (See Note 9)
|
42,940,857
|
—
|
||||||
Proceeds from shares issued in
|
||||||||
the Reorganization – Institutional Class (See Note 9)
|
9,672,906
|
—
|
||||||
Proceeds from shares subscribed – Investor Class
|
2,864,547
|
6,295,964
|
||||||
Proceeds from shares subscribed – Institutional Class
|
995,312
|
772,639
|
||||||
Dividends reinvested – Investor Class
|
5,350,903
|
1,010,431
|
||||||
Dividends reinvested – Institutional Class
|
911,739
|
169,405
|
||||||
Cost of shares redeemed – Investor Class
|
(20,588,670
|
)
|
(15,757,878
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(5,008,275
|
)
|
(2,723,788
|
)
|
||||
Net increase (decrease) in net assets
|
||||||||
derived from capital share transactions
|
37,139,319
|
(10,233,227
|
)
|
|||||
TOTAL INCREASE IN NET ASSETS
|
41,247,205
|
3,948,011
|
||||||
NET ASSETS:
|
||||||||
Beginning of year
|
103,914,418
|
99,966,407
|
||||||
End of year
|
$
|
145,161,623
|
$
|
103,914,418
|
(2)
|
(1)
|
All distributions were from net investment income.
|
(2)
|
Includes accumulated net investment income of $1,052,238.
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares issued in the Reorganization – Investor Class
|
3,458,944
|
—
|
||||||
Shares issued in the Reorganization – Institutional Class
|
771,378
|
—
|
||||||
Shares sold – Investor Class
|
230,354
|
565,507
|
||||||
Shares sold – Institutional Class
|
78,488
|
68,027
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
442,489
|
92,025
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
74,617
|
15,303
|
||||||
Shares redeemed – Investor Class
|
(1,653,034
|
)
|
(1,394,127
|
)
|
||||
Shares redeemed – Institutional Class
|
(395,137
|
)
|
(238,017
|
)
|
||||
Net increase (decrease) in shares outstanding
|
3,008,099
|
(891,282
|
)
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
11.75
|
$
|
10.27
|
$
|
12.99
|
$
|
15.16
|
$
|
13.56
|
|||||||||
0.06
|
0.11
|
0.09
|
0.17
|
0.15
|
||||||||||||||
0.94
|
1.49
|
0.08
|
0.04
|
2.28
|
||||||||||||||
1.00
|
1.60
|
0.17
|
0.21
|
2.43
|
||||||||||||||
(0.08
|
)
|
(0.12
|
)
|
(0.16
|
)
|
(0.14
|
)
|
(0.15
|
)
|
|||||||||
(0.43
|
)
|
—
|
(2.73
|
)
|
(2.24
|
)
|
(0.68
|
)
|
||||||||||
(0.51
|
)
|
(0.12
|
)
|
(2.89
|
)
|
(2.38
|
)
|
(0.83
|
)
|
|||||||||
$
|
12.24
|
$
|
11.75
|
$
|
10.27
|
$
|
12.99
|
$
|
15.16
|
|||||||||
8.53
|
%
|
15.70
|
%
|
2.63
|
%
|
1.11
|
%
|
18.73
|
%
|
|||||||||
$
|
125.91
|
$
|
91.74
|
$
|
87.73
|
$
|
98.64
|
$
|
105.51
|
|||||||||
1.24
|
%
|
1.25
|
%
|
1.25
|
%
|
1.09
|
%
|
1.15
|
%
|
|||||||||
0.81
|
%
|
0.95
|
%
|
1.22
|
%
|
1.37
|
%
|
1.12
|
%
|
|||||||||
70
|
%
|
65
|
%
|
53
|
%
|
79
|
%
|
57
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
11.87
|
$
|
10.37
|
$
|
13.10
|
$
|
15.30
|
$
|
13.68
|
|||||||||
0.14
|
0.13
|
0.13
|
0.20
|
0.17
|
||||||||||||||
0.90
|
1.52
|
0.07
|
0.02
|
2.30
|
||||||||||||||
1.04
|
1.65
|
0.20
|
0.22
|
2.47
|
||||||||||||||
(0.10
|
)
|
(0.15
|
)
|
(0.17
|
)
|
(0.16
|
)
|
(0.17
|
)
|
|||||||||
(0.43
|
)
|
—
|
(2.76
|
)
|
(2.26
|
)
|
(0.68
|
)
|
||||||||||
(0.53
|
)
|
(0.15
|
)
|
(2.93
|
)
|
(2.42
|
)
|
(0.85
|
)
|
|||||||||
$
|
12.38
|
$
|
11.87
|
$
|
10.37
|
$
|
13.10
|
$
|
15.30
|
|||||||||
8.82
|
%
|
16.00
|
%
|
2.92
|
%
|
1.19
|
%
|
18.96
|
%
|
|||||||||
$
|
19.25
|
$
|
12.17
|
$
|
12.24
|
$
|
13.82
|
$
|
14.88
|
|||||||||
0.96
|
%
|
1.00
|
%
|
1.01
|
%
|
0.99
|
%
|
1.06
|
%
|
|||||||||
0.96
|
%
|
1.00
|
%
|
1.01
|
%
|
0.99
|
%
|
0.98
|
%
|
|||||||||
1.08
|
%
|
1.20
|
%
|
1.47
|
%
|
1.47
|
%
|
1.21
|
%
|
|||||||||
1.08
|
%
|
1.20
|
%
|
1.47
|
%
|
1.47
|
%
|
1.30
|
%
|
|||||||||
70
|
%
|
65
|
%
|
53
|
%
|
79
|
%
|
57
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(3,003,589)
|
$3,003,589
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSY FUNDS
|
1-800-966-4354
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”) will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy.
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
137,238,677
|
||
Gross tax unrealized appreciation
|
$
|
20,050,417
|
||
Gross tax unrealized depreciation
|
(11,934,063
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
8,116,354
|
||
Undistributed ordinary income
|
$
|
1,289,774
|
||
Undistributed long-term capital gains
|
26,779,881
|
|||
Total distributable earnings
|
$
|
28,069,655
|
||
Other accumulated gain/(loss)
|
$
|
—
|
||
Total accumulated gain/(loss)
|
$
|
36,186,009
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
1,275,498
|
$
|
1,258,527
|
||||
Long-term capital gain
|
5,299,596
|
—
|
||||||
|
$
|
6,575,094
|
$
|
1,258,527
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
Shares Issued
|
Hennessy Large Growth Fund Net Assets
|
|||
Rainier Large
|
to Shareholders
|
Combined
|
||
Cap Equity Fund
|
of Rainier Large
|
(Post Merger)
|
Tax Status
|
|
Net Assets
|
Cap Equity Fund
|
Pre Merger
|
Net Assets
|
of Transfer
|
$52,613,763(1)
|
4,230,322
|
$109,172,141
|
$161,785,904
|
Non-taxable
|
Net investment income
|
$
|
1,324,395
|
||
Net realized gain on investments
|
$
|
30,907,365
|
||
Net change in unrealized appreciation on investments
|
$
|
(20,226,635
|
)
|
|
Net increase in net assets resulting from operations
|
$
|
12,005,125
|
Long-term
|
||
Investor Class
|
$2.29850
|
|
Institutional Class
|
$2.32790
|
Investor Class
|
$0.08724196
|
|
Institutional Class
|
$0.11795880
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM/TRUSTEES AND OFFICERS
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$1,025.10
|
$6.38
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,018.90
|
$6.36
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$1,027.40
|
$4.91
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.37
|
$4.89
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.25% for Investor Class shares or 0.96% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
|
Performance Overview
|
4
|
|
Financial Statements
|
||
Schedule of Investments
|
7
|
|
Statement of Assets and Liabilities
|
11
|
|
Statement of Operations
|
12
|
|
Statements of Changes in Net Assets
|
14
|
|
Financial Highlights
|
16
|
|
Notes to the Financial Statements
|
20
|
|
Report of Independent Registered Public Accounting Firm
|
28
|
|
Trustees and Officers of the Fund
|
29
|
|
Expense Example
|
32
|
|
Proxy Voting Policy and Proxy Voting Records
|
34
|
|
Quarterly Schedule of Investments
|
34
|
|
Federal Tax Distribution Information
|
34
|
|
Important Notice Regarding Delivery of Shareholder Documents
|
34
|
|
Privacy Policy
|
35
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Cornerstone Value Fund –
|
|||
Investor Class (HFCVX)
|
3.64%
|
7.68%
|
12.39%
|
Hennessy Cornerstone Value Fund –
|
|||
Institutional Class (HICVX)
|
3.88%
|
7.88%
|
12.66%
|
Russell 1000® Value Index
|
3.03%
|
8.61%
|
11.30%
|
S&P 500 Index
|
7.35%
|
11.34%
|
13.24%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
Eli Lilly & Co.
|
2.78%
|
Merck & Co., Inc.
|
2.59%
|
Pfizer, Inc.
|
2.43%
|
Target Corp.
|
2.32%
|
Cisco Systems, Inc.
|
2.30%
|
Equinor ASA - ADR
|
2.29%
|
Thomson Reuters Corp.
|
2.25%
|
Verizon Communications, Inc.
|
2.21%
|
GlaxoSmithKline PLC - ADR
|
2.18%
|
Amgen, Inc.
|
2.17%
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 3.92%
|
||||||||||||
AT&T, Inc.
|
152,860
|
$
|
4,689,745
|
1.71
|
%
|
|||||||
Verizon Communications, Inc.
|
105,900
|
6,045,831
|
2.21
|
%
|
||||||||
|
10,735,576
|
3.92
|
%
|
|||||||||
|
||||||||||||
Consumer Discretionary – 8.95%
|
||||||||||||
Carnival Corp. (a)
|
79,900
|
4,477,596
|
1.63
|
%
|
||||||||
Ford Motor Co.
|
521,845
|
4,983,620
|
1.82
|
%
|
||||||||
General Motors Co.
|
135,000
|
4,939,650
|
1.80
|
%
|
||||||||
Las Vegas Sands Corp.
|
73,800
|
3,766,014
|
1.38
|
%
|
||||||||
Target Corp.
|
76,100
|
6,364,243
|
2.32
|
%
|
||||||||
|
24,531,123
|
8.95
|
%
|
|||||||||
|
||||||||||||
Consumer Staples – 16.76%
|
||||||||||||
Altria Group, Inc.
|
81,400
|
5,294,256
|
1.93
|
%
|
||||||||
CVS Health Corp.
|
72,700
|
5,262,753
|
1.92
|
%
|
||||||||
General Mills, Inc.
|
97,900
|
4,288,020
|
1.57
|
%
|
||||||||
PepsiCo, Inc.
|
47,600
|
5,349,288
|
1.95
|
%
|
||||||||
Philip Morris International, Inc.
|
53,400
|
4,702,938
|
1.72
|
%
|
||||||||
The Coca-Cola Co.
|
120,300
|
5,759,964
|
2.10
|
%
|
||||||||
The Kraft Heinz Co.
|
73,000
|
4,012,810
|
1.46
|
%
|
||||||||
The Procter & Gamble Co.
|
66,300
|
5,879,484
|
2.15
|
%
|
||||||||
Unilever PLC – ADR (a)
|
101,400
|
5,372,172
|
1.96
|
%
|
||||||||
|
45,921,685
|
16.76
|
%
|
|||||||||
|
||||||||||||
Energy – 23.34%
|
||||||||||||
BP PLC – ADR (a)
|
133,800
|
5,802,906
|
2.12
|
%
|
||||||||
Canadian Natural Resources Ltd. (a)
|
167,600
|
4,578,832
|
1.67
|
%
|
||||||||
Chevron Corp.
|
45,675
|
5,099,614
|
1.86
|
%
|
||||||||
Equinor ASA – ADR (a)
|
244,200
|
6,275,940
|
2.29
|
%
|
||||||||
Exxon Mobil Corp.
|
65,610
|
5,227,805
|
1.91
|
%
|
||||||||
Marathon Petroleum Corp.
|
82,600
|
5,819,170
|
2.12
|
%
|
||||||||
Occidental Petroleum Corp.
|
76,360
|
5,121,465
|
1.87
|
%
|
||||||||
Phillips 66
|
55,900
|
5,747,638
|
2.10
|
%
|
||||||||
Royal Dutch Shell PLC – ADR (a)
|
79,600
|
5,230,516
|
1.91
|
%
|
||||||||
Schlumberger Ltd. (a)
|
77,800
|
3,991,918
|
1.46
|
%
|
||||||||
Suncor Energy, Inc. (a)
|
157,900
|
5,259,649
|
1.92
|
%
|
||||||||
Total S.A. – ADR (a)
|
98,600
|
5,777,960
|
2.11
|
%
|
||||||||
|
63,933,413
|
23.34
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Financials – 10.76%
|
||||||||||||
Bank of Nova Scotia (a)
|
86,100
|
$
|
4,624,431
|
1.69
|
%
|
|||||||
HSBC Holdings PLC – ADR (a)
|
106,200
|
4,363,758
|
1.59
|
%
|
||||||||
Manulife Financial Corp. (a)
|
269,600
|
4,238,112
|
1.55
|
%
|
||||||||
Royal Bank of Canada (a)
|
66,800
|
4,865,712
|
1.78
|
%
|
||||||||
Thomson Reuters Corp. (a)
|
132,200
|
6,160,520
|
2.25
|
%
|
||||||||
Toronto-Dominion Bank (a)
|
94,100
|
5,218,786
|
1.90
|
%
|
||||||||
|
29,471,319
|
10.76
|
%
|
|||||||||
Health Care – 17.65%
|
||||||||||||
Amgen, Inc.
|
30,800
|
5,937,932
|
2.17
|
%
|
||||||||
Bristol-Myers Squibb Co.
|
91,400
|
4,619,356
|
1.69
|
%
|
||||||||
Eli Lilly & Co.
|
70,300
|
7,623,332
|
2.78
|
%
|
||||||||
Gilead Sciences, Inc.
|
68,300
|
4,656,694
|
1.70
|
%
|
||||||||
GlaxoSmithKline PLC – ADR (a)
|
152,600
|
5,960,556
|
2.18
|
%
|
||||||||
Johnson & Johnson
|
41,400
|
5,795,586
|
2.11
|
%
|
||||||||
Merck & Co., Inc.
|
96,600
|
7,110,726
|
2.59
|
%
|
||||||||
Pfizer, Inc.
|
154,500
|
6,652,770
|
2.43
|
%
|
||||||||
|
48,356,952
|
17.65
|
%
|
|||||||||
Industrials – 6.73%
|
||||||||||||
Emerson Electric Co.
|
79,300
|
5,382,884
|
1.96
|
%
|
||||||||
General Electric Co.
|
354,034
|
3,575,743
|
1.31
|
%
|
||||||||
Johnson Controls International PLC (a)
|
146,300
|
4,677,211
|
1.71
|
%
|
||||||||
United Parcel Service, Inc., Class B
|
45,000
|
4,794,300
|
1.75
|
%
|
||||||||
|
18,430,138
|
6.73
|
%
|
|||||||||
Information Technology – 7.97%
|
||||||||||||
Cisco Systems, Inc.
|
137,810
|
6,304,807
|
2.30
|
%
|
||||||||
HP, Inc.
|
245,500
|
5,926,370
|
2.16
|
%
|
||||||||
Intel Corp.
|
118,900
|
5,574,032
|
2.03
|
%
|
||||||||
International Business Machines Corp.
|
35,000
|
4,040,050
|
1.48
|
%
|
||||||||
|
21,845,259
|
7.97
|
%
|
|||||||||
|
||||||||||||
Total Common Stocks
|
||||||||||||
(Cost $253,844,570)
|
263,225,465
|
96.08
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 4.02%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (b)
|
11,019,735
|
$
|
11,019,735
|
4.02
|
%
|
|||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $11,019,735)
|
11,019,735
|
4.02
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $264,864,305) – 100.10%
|
274,245,200
|
100.10
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.10)%
|
(272,243
|
)
|
(0.10
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
273,972,957
|
100.00
|
%
|
(a)
|
U.S.-traded security of a foreign corporation.
|
(b)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
10,735,576
|
$
|
—
|
$
|
—
|
$
|
10,735,576
|
||||||||
Consumer Discretionary
|
24,531,123
|
—
|
—
|
24,531,123
|
||||||||||||
Consumer Staples
|
45,921,685
|
—
|
—
|
45,921,685
|
||||||||||||
Energy
|
63,933,413
|
—
|
—
|
63,933,413
|
||||||||||||
Financials
|
29,471,319
|
—
|
—
|
29,471,319
|
||||||||||||
Health Care
|
48,356,952
|
—
|
—
|
48,356,952
|
||||||||||||
Industrials
|
18,430,138
|
—
|
—
|
18,430,138
|
||||||||||||
Information Technology
|
21,845,259
|
—
|
—
|
21,845,259
|
||||||||||||
Total Common Stocks
|
$
|
263,225,465
|
$
|
—
|
$
|
—
|
$
|
263,225,465
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
11,019,735
|
$
|
—
|
$
|
—
|
$
|
11,019,735
|
||||||||
Total Short-Term Investments
|
$
|
11,019,735
|
$
|
—
|
$
|
—
|
$
|
11,019,735
|
||||||||
Total Investments
|
$
|
274,245,200
|
$
|
—
|
$
|
—
|
$
|
274,245,200
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $264,864,305)
|
$
|
274,245,200
|
||
Dividends and interest receivable
|
556,916
|
|||
Receivable for fund shares sold
|
43,969
|
|||
Prepaid expenses and other assets
|
25,280
|
|||
Total Assets
|
274,871,365
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
6,216
|
|||
Payable to advisor
|
177,379
|
|||
Payable to administrator
|
24,951
|
|||
Payable to auditor
|
21,901
|
|||
Accrued distribution fees
|
603,034
|
|||
Accrued service fees
|
23,335
|
|||
Accrued trustees fees
|
5,963
|
|||
Accrued expenses and other payables
|
35,629
|
|||
Total Liabilities
|
898,408
|
|||
NET ASSETS
|
$
|
273,972,957
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
228,405,343
|
||
Total distributable earnings
|
45,567,614
|
|||
Total Net Assets
|
$
|
273,972,957
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
266,756,238
|
||
Shares issued and outstanding
|
13,828,075
|
|||
Net asset value, offering price and redemption price per share
|
$
|
19.29
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
7,216,719
|
||
Shares issued and outstanding
|
373,364
|
|||
Net asset value, offering price and redemption price per share
|
$
|
19.33
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income(1)
|
$
|
9,752,505
|
||
Interest income
|
150,939
|
|||
Total investment income
|
9,903,444
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
2,145,562
|
|||
Distribution fees – Investor Class (See Note 5)
|
423,872
|
|||
Service fees – Investor Class (See Note 5)
|
282,581
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
277,676
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
197,807
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
7,113
|
|||
Federal and state registration fees
|
34,005
|
|||
Compliance expense (See Note 5)
|
29,499
|
|||
Reports to shareholders
|
23,864
|
|||
Audit fees
|
23,135
|
|||
Trustees’ fees and expenses
|
17,597
|
|||
Legal fees
|
2,570
|
|||
Other expenses
|
19,748
|
|||
Total expenses
|
3,485,029
|
|||
NET INVESTMENT INCOME
|
$
|
6,418,415
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
33,529,159
|
||
Net change in unrealized appreciation/depreciation on investments
|
(29,037,130
|
)
|
||
Net gain on investments
|
4,492,029
|
|||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
10,910,444
|
(1)
|
Net of foreign taxes withheld and issuance fees of $337,593.
|
HENNESSYFUNDS.COM
|
STATEMENT OF OPERATIONS
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
6,418,415
|
$
|
5,498,468
|
||||
Net realized gain on investments
|
33,529,159
|
40,317,512
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(29,037,130
|
)
|
(11,111,810
|
)
|
||||
Net increase in net assets resulting from operations
|
10,910,444
|
34,704,170
|
||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(38,837,104
|
)
|
(2,916,316
|
)
|
||||
Distributable earnings – Institutional Class
|
(1,032,863
|
)
|
(52,044
|
)
|
||||
Total distributions
|
(39,869,967
|
)
|
(2,968,360
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares issued in the Reorganization –
|
||||||||
Investor Class (see Note 9)
|
—
|
141,680,285
|
||||||
Proceeds from shares issued in the Reorganization –
|
||||||||
Institutional Class (see Note 9)
|
—
|
3,258,094
|
||||||
Proceeds from shares subscribed – Investor Class
|
2,033,069
|
2,341,233
|
||||||
Proceeds from shares subscribed – Institutional Class
|
1,207,915
|
2,547,752
|
||||||
Dividends reinvested – Investor Class
|
36,758,791
|
2,640,562
|
||||||
Dividends reinvested – Institutional Class
|
906,473
|
33,704
|
||||||
Cost of shares redeemed – Investor Class
|
(24,897,883
|
)
|
(23,154,846
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(1,542,637
|
)
|
(1,029,188
|
)
|
||||
Net increase in net assets derived
|
||||||||
from capital share transactions
|
14,465,728
|
128,317,596
|
||||||
TOTAL INCREASE (DECREASE) IN NET ASSETS
|
(14,493,795
|
)
|
160,053,406
|
|||||
NET ASSETS:
|
||||||||
Beginning of year
|
288,466,752
|
128,413,346
|
||||||
End of year
|
$
|
273,972,957
|
$
|
288,466,752
|
(2)
|
(1)
|
All distributions were from net investment income.
|
(2)
|
Includes accumulated net investment income of $4,980,270.
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares issued in the Reorganization – Investor Class
|
—
|
7,092,199
|
||||||
Shares issued in the Reorganization – Institutional Class
|
—
|
163,058
|
||||||
Shares sold – Investor Class
|
101,307
|
118,558
|
||||||
Shares sold – Institutional Class
|
60,882
|
127,648
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
1,887,491
|
138,105
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
46,455
|
1,763
|
||||||
Shares redeemed – Investor Class
|
(1,247,375
|
)
|
(1,154,302
|
)
|
||||
Shares redeemed – Institutional Class
|
(77,746
|
)
|
(50,925
|
)
|
||||
Net increase in shares outstanding
|
771,014
|
6,436,104
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
PER SHARE DATA:
|
Net asset value, beginning of year
|
Income from investment operations:
|
Net investment income
|
Net realized and unrealized gains (losses) on investments
|
Total from investment operations
|
Less distributions:
|
Dividends from net investment income
|
Dividends from net realized gains
|
Total distributions
|
Net asset value, end of year
|
TOTAL RETURN
|
SUPPLEMENTAL DATA AND RATIOS:
|
Net assets, end of year (millions)
|
Ratio of expenses to average net assets
|
Ratio of net investment income to average net assets
|
Portfolio turnover rate(1)
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
21.48
|
$
|
18.36
|
$
|
17.69
|
$
|
18.41
|
$
|
16.90
|
|||||||||
0.41
|
0.45
|
0.43
|
0.44
|
0.39
|
||||||||||||||
0.35
|
3.10
|
0.67
|
(0.75
|
)
|
1.55
|
|||||||||||||
0.76
|
3.55
|
1.10
|
(0.31
|
)
|
1.94
|
|||||||||||||
(0.42
|
)
|
(0.43
|
)
|
(0.43
|
)
|
(0.41
|
)
|
(0.43
|
)
|
|||||||||
(2.53
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
(2.95
|
)
|
(0.43
|
)
|
(0.43
|
)
|
(0.41
|
)
|
(0.43
|
)
|
|||||||||
$
|
19.29
|
$
|
21.48
|
$
|
18.36
|
$
|
17.69
|
$
|
18.41
|
|||||||||
3.64
|
%
|
19.63
|
%
|
6.41
|
%
|
(1.77
|
)%
|
11.69
|
%
|
|||||||||
$
|
266.76
|
$
|
281.07
|
$
|
126.53
|
$
|
129.86
|
$
|
145.04
|
|||||||||
1.21
|
%
|
1.22
|
%
|
1.25
|
%
|
1.10
|
%
|
1.17
|
%
|
|||||||||
2.21
|
%
|
2.36
|
%
|
2.33
|
%
|
2.32
|
%
|
2.18
|
%
|
|||||||||
41
|
%
|
72
|
%
|
36
|
%
|
46
|
%
|
34
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
PER SHARE DATA:
|
Net asset value, beginning of year
|
Income from investment operations:
|
Net investment income
|
Net realized and unrealized gains (losses) on investments
|
Total from investment operations
|
Less distributions:
|
Dividends from net investment income
|
Dividends from net realized gains
|
Total distributions
|
Net asset value, end of year
|
TOTAL RETURN
|
SUPPLEMENTAL DATA AND RATIOS:
|
Net assets, end of year (millions)
|
Ratio of expenses to average net assets:
|
Before expense reimbursement
|
After expense reimbursement
|
Ratio of net investment income to average net assets:
|
Before expense reimbursement
|
After expense reimbursement
|
Portfolio turnover rate(1)
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
21.52
|
$
|
18.40
|
$
|
17.67
|
$
|
18.41
|
$
|
16.92
|
|||||||||
0.45
|
0.43
|
0.48
|
0.53
|
0.59
|
||||||||||||||
0.35
|
3.18
|
0.67
|
(0.83
|
)
|
1.37
|
|||||||||||||
0.80
|
3.61
|
1.15
|
(0.30
|
)
|
1.96
|
|||||||||||||
(0.46
|
)
|
(0.49
|
)
|
(0.42
|
)
|
(0.44
|
)
|
(0.47
|
)
|
|||||||||
(2.53
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
(2.99
|
)
|
(0.49
|
)
|
(0.42
|
)
|
(0.44
|
)
|
(0.47
|
)
|
|||||||||
$
|
19.33
|
$
|
21.52
|
$
|
18.40
|
$
|
17.67
|
$
|
18.41
|
|||||||||
3.88
|
%
|
19.95
|
%
|
6.72
|
%
|
(1.72
|
)%
|
11.82
|
%
|
|||||||||
$
|
7.22
|
$
|
7.40
|
$
|
1.88
|
$
|
1.75
|
$
|
10.65
|
|||||||||
0.98
|
%
|
0.97
|
%
|
0.95
|
%
|
1.00
|
%
|
1.03
|
%
|
|||||||||
0.98
|
%
|
0.97
|
%
|
0.95
|
%
|
1.00
|
%
|
0.98
|
%
|
|||||||||
2.43
|
%
|
2.60
|
%
|
2.63
|
%
|
2.43
|
%
|
2.30
|
%
|
|||||||||
2.43
|
%
|
2.60
|
%
|
2.63
|
%
|
2.43
|
%
|
2.35
|
%
|
|||||||||
41
|
%
|
72
|
%
|
36
|
%
|
46
|
%
|
34
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(2,168,104)
|
$2,168,104
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSY FUNDS
|
1-800-966-4354
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
265,224,797
|
||
Gross tax unrealized appreciation
|
$
|
31,214,430
|
||
Gross tax unrealized depreciation
|
(22,194,269
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
9,020,161
|
||
Undistributed ordinary income
|
$
|
20,685,079
|
||
Undistributed long-term capital gains
|
15,862,374
|
|||
Total distributable earnings
|
$
|
36,547,453
|
||
Other accumulated gain/(loss)
|
$
|
—
|
||
Total accumulated gain/(loss)
|
$
|
45,567,614
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
8,809,992
|
$
|
2,968,360
|
||||
Long-term capital gain
|
31,059,975
|
—
|
||||||
|
$
|
39,869,967
|
$
|
2,968,360
|
||||
|
||||||||
(1) Ordinary income includes short-term capital gains.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
Shares Issued
|
||||
to Shareholders
|
Cornerstone
|
|||
Large Value Fund
|
of Large Value
|
Value Fund
|
Combined
|
Tax Status
|
Net Assets
|
Fund
|
Net Assets
|
Net Assets
|
of Transfer
|
$144,938,380(1)
|
7,255,257
|
$138,339,221
|
$283,277,601
|
Non-taxable
|
(1)
|
Includes accumulated realized losses and unrealized appreciation in the amounts of $(1,561,193) and $34,112,735, respectively.
|
Net investment income
|
$
|
6,090,397
|
||
Net realized gain on investments
|
$
|
41,027,748
|
||
Net change in unrealized appreciation on investments
|
$
|
5,413,160
|
||
Net increase in net assets resulting from operations
|
$
|
52,531,305
|
|
Long-term
|
Short-term
|
||||||
Investor Class
|
$
|
1.12340
|
$
|
1.09611
|
||||
Institutional Class
|
$
|
1.12535
|
$
|
1.09801
|
Investor Class
|
$
|
0.41092028
|
|
|||||
Institutional Class
|
$
|
0.44958484
|
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM/TRUSTEES AND OFFICERS
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 992.30
|
$6.08
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,019.11
|
$6.16
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 993.80
|
$4.92
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.27
|
$4.99
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.21% for Investor Class shares or 0.98% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
6
|
Statement of Assets and Liabilities
|
10
|
Statement of Operations
|
11
|
Statements of Changes in Net Assets
|
12
|
Statement of Cash Flows
|
13
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
16
|
Report of Independent Registered Public Accounting Firm
|
25
|
Trustees and Officers of the Fund
|
26
|
Expense Example
|
30
|
Proxy Voting Policy and Proxy Voting Records
|
32
|
Quarterly Schedule of Investments
|
32
|
Federal Tax Distribution Information
|
32
|
Important Notice Regarding Delivery of Shareholder Documents
|
32
|
Privacy Policy
|
33
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Total Return Fund (HDOGX)
|
4.92%
|
6.94%
|
8.90%
|
75/25 Blended DJIA/Treasury Index
|
7.90%
|
9.70%
|
10.12%
|
Dow Jones Industrial Average
|
9.87%
|
12.76%
|
13.33%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
U.S. Treasury Bill, 2.155%, 11/15/2018
|
25.12%
|
U.S. Treasury Bill, 2.125%, 12/20/2018
|
22.97%
|
U.S. Treasury Bill, 2.270%, 01/17/2019
|
20.85%
|
Cisco Systems, Inc.
|
7.98%
|
Pfizer, Inc.
|
7.80%
|
Verizon Communications, Inc.
|
7.51%
|
Merck & Co., Inc.
|
7.21%
|
The Coca-Cola Co.
|
7.13%
|
The Procter & Gamble Co.
|
7.05%
|
Exxon Mobil Corp.
|
6.53%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS – 67.50%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 7.51%
|
||||||||||||
Verizon Communications, Inc.
|
94,200
|
$
|
5,377,878
|
7.51
|
%
|
|||||||
|
||||||||||||
Consumer Staples – 14.18%
|
||||||||||||
The Coca-Cola Co.
|
106,600
|
5,104,008
|
7.13
|
%
|
||||||||
The Procter & Gamble Co.
|
56,900
|
5,045,892
|
7.05
|
%
|
||||||||
|
10,149,900
|
14.18
|
%
|
|||||||||
|
||||||||||||
Energy – 12.97%
|
||||||||||||
Chevron Corp.
|
41,300
|
4,611,145
|
6.44
|
%
|
||||||||
Exxon Mobil Corp.
|
58,700
|
4,677,216
|
6.53
|
%
|
||||||||
|
9,288,361
|
12.97
|
%
|
|||||||||
|
||||||||||||
Health Care – 15.01%
|
||||||||||||
Merck & Co., Inc.
|
70,100
|
5,160,061
|
7.21
|
%
|
||||||||
Pfizer, Inc.
|
129,800
|
5,589,188
|
7.80
|
%
|
||||||||
|
10,749,249
|
15.01
|
%
|
|||||||||
|
||||||||||||
Industrials – 2.33%
|
||||||||||||
General Electric Co.
|
165,000
|
1,666,500
|
2.33
|
%
|
||||||||
|
||||||||||||
Information Technology – 15.50%
|
||||||||||||
Cisco Systems, Inc.
|
124,900
|
5,714,175
|
7.98
|
%
|
||||||||
Intel Corp.
|
37,600
|
1,762,688
|
2.46
|
%
|
||||||||
International Business Machines Corp.
|
31,400
|
3,624,502
|
5.06
|
%
|
||||||||
|
11,101,365
|
15.50
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $43,886,864)
|
48,333,253
|
67.50
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
SHORT-TERM INVESTMENTS – 74.15%
|
Number of Shares/
|
% of
|
||||||||||
|
Par Amount
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 5.21%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (a)
|
3,416,000
|
$
|
3,416,000
|
4.77
|
%
|
|||||||
The Government & Agency Portfolio, Institutional Class, 2.08% (a)
|
313,295
|
313,295
|
0.44
|
%
|
||||||||
|
3,729,295
|
5.21
|
%
|
|||||||||
U.S. Treasury Bills (c) – 68.94%
|
||||||||||||
2.155%, 11/15/2018 (b)
|
18,000,000
|
17,985,895
|
25.12
|
%
|
||||||||
2.125%, 12/20/2018 (b)
|
16,500,000
|
16,452,388
|
22.97
|
%
|
||||||||
2.270%, 01/17/2019 (b)
|
15,000,000
|
14,928,254
|
20.85
|
%
|
||||||||
|
49,366,537
|
68.94
|
%
|
|||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $53,095,391)
|
53,095,832
|
74.15
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $96,982,255) – 141.65%
|
101,429,085
|
141.65
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (41.65)%
|
(29,825,736
|
)
|
(41.65
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
71,603,349
|
100.00
|
%
|
(a)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
(b)
|
The rate listed is discount rate at issue.
|
(c)
|
Collateral or partial collateral for securities sold subject to repurchase.
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
5,377,878
|
$
|
—
|
$
|
—
|
$
|
5,377,878
|
||||||||
Consumer Staples
|
10,149,900
|
—
|
—
|
10,149,900
|
||||||||||||
Energy
|
9,288,361
|
—
|
—
|
9,288,361
|
||||||||||||
Health Care
|
10,749,249
|
—
|
—
|
10,749,249
|
||||||||||||
Industrials
|
1,666,500
|
—
|
—
|
1,666,500
|
||||||||||||
Information Technology
|
11,101,365
|
—
|
—
|
11,101,365
|
||||||||||||
Total Common Stocks
|
$
|
48,333,253
|
$
|
—
|
$
|
—
|
$
|
48,333,253
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
3,729,295
|
$
|
—
|
$
|
—
|
$
|
3,729,295
|
||||||||
U.S. Treasury Bills
|
—
|
49,366,537
|
—
|
49,366,537
|
||||||||||||
Total Short-Term Investments
|
$
|
3,729,295
|
$
|
49,366,537
|
$
|
—
|
$
|
53,095,832
|
||||||||
Total Investments
|
$
|
52,062,548
|
$
|
49,366,537
|
$
|
—
|
$
|
101,429,085
|
Principal
|
Maturity
|
Maturity
|
||||||||||||
Face Value
|
Counterparty
|
Rate
|
Trade Date
|
Date
|
Amount
|
|||||||||
$
|
10,794,000
|
Jefferies LLC
|
2.25%
|
|
8/16/18
|
11/15/18
|
$
|
10,854,716
|
||||||
9,894,500
|
Jefferies LLC
|
2.40%
|
|
9/20/18
|
12/20/18
|
9,953,867
|
||||||||
8,995,000
|
Jefferies LLC
|
2.40%
|
|
10/18/18
|
1/17/19
|
9,048,970
|
||||||||
$
|
29,683,500
|
$
|
29,857,553
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $96,982,255)
|
$
|
101,429,085
|
||
Dividends and interest receivable
|
102,263
|
|||
Receivable for fund shares sold
|
31,118
|
|||
Prepaid expenses and other assets
|
12,102
|
|||
Total Assets
|
101,574,568
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
37,149
|
|||
Payable to advisor
|
36,298
|
|||
Payable to administrator
|
6,279
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
70,854
|
|||
Accrued service fees
|
6,050
|
|||
Reverse repurchase agreements
|
29,683,500
|
|||
Accrued interest payable
|
86,112
|
|||
Accrued trustees fees
|
5,962
|
|||
Accrued expenses and other payables
|
17,115
|
|||
Total Liabilities
|
29,971,219
|
|||
NET ASSETS
|
$
|
71,603,349
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
65,081,638
|
||
Total distributable earnings
|
6,521,711
|
|||
Total Net Assets
|
$
|
71,603,349
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
71,603,349
|
||
Shares issued and outstanding
|
5,274,843
|
|||
Net asset value, offering price and redemption price per share
|
$
|
13.57
|
HENNESSYFUNDS.COM
|
STATEMENT OF ASSETS AND LIABILITIES/STATEMENT OF OPERATIONS
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income
|
$
|
1,817,785
|
||
Interest income
|
832,360
|
|||
Total investment income
|
2,650,145
|
|||
EXPENSES:
|
||||
Interest expense (See Notes 7 and 9)
|
555,805
|
|||
Investment advisory fees (See Note 5)
|
438,837
|
|||
Distribution fees – Investor Class (See Note 5)
|
109,709
|
|||
Service fees – Investor Class (See Note 5)
|
73,139
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
69,602
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
68,130
|
|||
Compliance expense (See Note 5)
|
29,499
|
|||
Federal and state registration fees
|
24,571
|
|||
Audit fees
|
23,145
|
|||
Trustees’ fees and expenses
|
16,865
|
|||
Reports to shareholders
|
11,956
|
|||
Legal fees
|
83
|
|||
Other expenses
|
6,834
|
|||
Total expenses
|
1,428,175
|
|||
NET INVESTMENT INCOME
|
$
|
1,221,970
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
2,578,436
|
||
Net change in unrealized appreciation/depreciation on investments
|
(298,004
|
)
|
||
Net gain on investments
|
2,280,432
|
|||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
3,502,402
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
1,221,970
|
$
|
1,187,349
|
||||
Net realized gain on investments
|
2,578,436
|
8,689,833
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(298,004
|
)
|
49,360
|
|||||
Net increase in net assets resulting from operations
|
3,502,402
|
9,926,542
|
||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(9,194,795
|
)
|
(5,600,022
|
)
|
||||
Total distributions
|
(9,194,795
|
)
|
(5,600,022
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
4,184,396
|
17,437,144
|
||||||
Dividends reinvested – Investor Class
|
8,730,660
|
5,335,208
|
||||||
Cost of shares redeemed – Investor Class
|
(13,372,214
|
)
|
(33,215,945
|
)
|
||||
Net decrease in net assets derived
|
||||||||
from capital share transactions
|
(457,158
|
)
|
(10,443,593
|
)
|
||||
TOTAL DECREASE IN NET ASSETS
|
(6,149,551
|
)
|
(6,117,073
|
)
|
||||
NET ASSETS:
|
||||||||
Beginning of year
|
77,752,900
|
83,869,973
|
||||||
End of year
|
$
|
71,603,349
|
$
|
77,752,900
|
(2)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
306,057
|
1,237,906
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
654,267
|
387,386
|
||||||
Shares redeemed – Investor Class
|
(989,853
|
)
|
(2,382,169
|
)
|
||||
Net decrease in shares outstanding
|
(29,529
|
)
|
(756,877
|
)
|
(1)
|
Includes net investment income distributions of $1,171,215 and net realized gain distributions of $4,428,807 for the Investor Class.
|
(2)
|
Includes accumulated net investment income of $112,796.
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS/STATEMENT OF CASH FLOWS
|
Statement of Cash Flows for the year ended October 31, 2018
|
Cash flows from operating activities:
|
||||
Net increase in net assets from operations
|
$
|
3,502,402
|
||
Adjustments to reconcile net increase in net assets from
|
||||
operations to net cash provided by operating activities:
|
||||
Payments to purchase securities
|
(5,249,464
|
)
|
||
Proceeds from sale of securities
|
12,566,221
|
|||
Proceeds from securities litigation
|
9,577
|
|||
Sale of short term investments, net
|
4,602,726
|
|||
Realized gain on investments in securities
|
(2,578,436
|
)
|
||
Net accretion of discount on securities
|
(799,743
|
)
|
||
Change in unrealized appreciation on investments in securities
|
298,004
|
|||
(Increases) decreases in operating assets:
|
||||
Decrease in dividends and interest receivable
|
16,831
|
|||
Decrease in prepaid expenses and other assets
|
873
|
|||
Increases (decreases) in operating liabilities:
|
||||
Decrease in payable to advisor
|
(3,934
|
)
|
||
Decrease in payable to administrator
|
(6,850
|
)
|
||
Increase in accrued distribution fees
|
8,318
|
|||
Decrease in accrued service fees
|
(655
|
)
|
||
Increase in accrued interest payable
|
47,250
|
|||
Increase in accrued audit fees
|
595
|
|||
Increase in accrued trustee fees
|
390
|
|||
Increase in other accrued expenses and payables
|
3,768
|
|||
Net cash provided by operating activities
|
12,417,873
|
|||
Cash flows from financing activities:
|
||||
Decrease in reverse repurchase agreements
|
(2,698,500
|
)
|
||
Proceeds from shares sold
|
4,159,008
|
|||
Payment on shares redeemed
|
(13,414,246
|
)
|
||
Distributions paid in cash, net of reinvestments
|
(464,135
|
)
|
||
Net cash used in financing activities
|
(12,417,873
|
)
|
||
Net increase in cash
|
—
|
|||
Cash:
|
||||
Beginning balance
|
—
|
|||
Ending balance
|
$
|
—
|
||
Supplemental information:
|
||||
Non-cash financing activities not included herein consists
|
||||
of dividend reinvestment of dividends and distributions
|
$
|
8,730,660
|
||
Cash paid for interest
|
$
|
508,555
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
14.66
|
$
|
13.84
|
$
|
14.19
|
$
|
15.27
|
$
|
14.30
|
|||||||||
0.23
|
0.20
|
0.16
|
0.20
|
0.20
|
||||||||||||||
0.43
|
1.48
|
0.88
|
(0.02
|
)
|
0.96
|
|||||||||||||
0.66
|
1.68
|
1.04
|
0.18
|
1.16
|
||||||||||||||
(0.23
|
)
|
(0.20
|
)
|
(0.16
|
)
|
(0.20
|
)
|
(0.19
|
)
|
|||||||||
(1.52
|
)
|
(0.66
|
)
|
(1.23
|
)
|
(1.06
|
)
|
—
|
||||||||||
(1.75
|
)
|
(0.86
|
)
|
(1.39
|
)
|
(1.26
|
)
|
(0.19
|
)
|
|||||||||
$
|
13.57
|
$
|
14.66
|
$
|
13.84
|
$
|
14.19
|
$
|
15.27
|
|||||||||
4.92
|
%
|
12.56
|
%
|
8.20
|
%
|
1.22
|
%
|
8.15
|
%
|
|||||||||
$
|
71.60
|
$
|
77.75
|
$
|
83.87
|
$
|
69.42
|
$
|
83.89
|
|||||||||
1.95
|
%
|
1.57
|
%
|
1.44
|
%
|
1.28
|
%
|
1.34
|
%
|
|||||||||
1.67
|
%
|
1.38
|
%
|
1.22
|
%
|
1.40
|
%
|
1.31
|
%
|
|||||||||
10
|
%
|
36
|
%
|
44
|
%
|
27
|
%
|
23
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(459,287)
|
$459,287
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid at the end of each calendar quarter. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
Derivatives – The Fund may invest in, or enter into, derivatives, such as options, futures contracts, options on futures contracts, and swaps, for a variety of reasons, including to hedge certain risks, provide a substitute for purchasing or selling particular securities, or increase potential income gain. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives may allow the Fund to increase or decrease its level of risk more quickly and efficiently than transactions in other types of instruments. The main reason for utilizing derivative instruments is for hedging purposes.
|
The Fund follows the financial accounting reporting rules as required by the Derivatives and Hedging Topic of the FASB Accounting Standards Codification. Under such rules, the Fund is required to include enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivatives instruments affect an entity’s results of operations and financial position. During fiscal year 2018, the Fund did not hold any derivative instruments.
|
HENNESSY FUNDS
|
1-800-966-4354
|
j).
|
Repurchase and Reverse Repurchase Agreements – The Fund may enter into repurchase agreements and reverse repurchase agreements with member banks or security dealers of the Federal Reserve Board whom the investment advisor deems creditworthy. Transactions involving repurchase agreements and reverse repurchase agreements are treated as collateralized financing transactions and are recorded at their contracted resell or repurchase amounts, which approximates fair value. Interest on repurchase agreements and reverse repurchase agreements is included in interest receivable and interest payable, respectively.
|
In connection with repurchase agreements, securities pledged as collateral 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 to cover the repurchase amount in the event of default of the counterparty. If the counterparty defaults and the fair 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.
|
|
At October 31, 2018, securities with a fair value of $32,911,016, which are included in investments in securities in the Statement of Assets and Liabilities, were pledged to collateralize reverse repurchase agreements.
|
|
k).
|
Offsetting Assets and Liabilities – The Fund follows the financial reporting rules regarding offsetting assets and liabilities and related netting arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. Reverse repurchase transactions are entered into by the Fund under Master Repurchase Agreements (“MRAs”) that permit the Fund, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables under the MRA with collateral held with the counterparty and create one single net payment from the Fund. Upon a bankruptcy or insolvency of the MRA counterparty, the Fund is considered an unsecured creditor with respect to excess collateral and, as such, the return of excess collateral may be delayed. In the event the buyer of securities under an MRA files for bankruptcy or becomes insolvent, the Fund’s use of the proceeds of the MRA may be restricted while the other party, or its trustee or receiver, determines whether or not to enforce the Fund’s obligation to repurchase the securities. For additional information regarding the offsetting of assets and liabilities at October 31, 2018, please refer to the table in Note 9.
|
l).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
m).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
97,111,504
|
||
Gross tax unrealized appreciation
|
$
|
7,948,884
|
||
Gross tax unrealized depreciation
|
(3,631,303
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
4,317,581
|
||
Undistributed ordinary income
|
$
|
87,850
|
||
Undistributed long-term capital gains
|
2,116,280
|
|||
Total distributable earnings
|
$
|
2,204,130
|
||
Other accumulated gain/(loss)
|
$
|
—
|
||
Total accumulated gain/(loss)
|
$
|
6,521,711
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
1,939,475
|
$
|
1,216,622
|
||||
Long-term capital gain
|
7,255,320
|
4,383,400
|
||||||
|
$
|
9,194,795
|
$
|
5,600,022
|
Maturity Date
|
Amount
|
Interest Rate
|
||||
November 15, 2018
|
$10,794,000
|
2.25%
|
||||
December 20, 2018
|
$ 9,894,500
|
2.40%
|
||||
January 17, 2019
|
$ 8,995,000
|
2.40%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Gross
|
Net
|
||||||
Amounts
|
Amounts
|
||||||
Offset
|
Presented
|
Gross Amounts Not
|
|||||
in the
|
in the
|
Offset in the Statement
|
|||||
Gross
|
Statement
|
Statement
|
of Assets and Liabilities
|
||||
Amounts of
|
of
|
of
|
Collateral
|
||||
Recognized
|
Assets and
|
Assets and
|
Financial
|
Pledged
|
Net
|
||
Description
|
Liabilities
|
Liabilities
|
Liabilities
|
Instruments
|
(Received)
|
Amount
|
|
Reverse
|
|||||||
Repurchase
|
|||||||
Agreements
|
$29,683,500
|
$ —
|
$29,683,500
|
$29,683,500
|
$ —
|
$ —
|
|
$29,683,500
|
$ —
|
$29,683,500
|
$29,683,500
|
$ —
|
$ —
|
Long-term
|
||
Investor Class
|
$0.39762
|
Investor Class
|
$0.03291752
|
HENNESSYFUNDS.COM
|
NOTES/REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSY FUNDS
|
1-800-966-4354
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$1,036.00
|
$10.73
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,014.67
|
$10.61
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 2.09%, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
8
|
Statement of Assets and Liabilities
|
19
|
Statement of Operations
|
20
|
Statements of Changes in Net Assets
|
21
|
Financial Highlights
|
22
|
Notes to the Financial Statements
|
26
|
Report of Independent Registered Public Accounting Firm
|
34
|
Trustees and Officers of the Fund
|
35
|
Expense Example
|
38
|
Proxy Voting Policy and Proxy Voting Records
|
40
|
Quarterly Schedule of Investments
|
40
|
Federal Tax Distribution Information
|
40
|
Important Notice Regarding Delivery of Shareholder Documents
|
40
|
Privacy Policy
|
41
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Equity and Income Fund –
|
|||
Investor Class (HEIFX)
|
3.44%
|
5.70%
|
8.76%
|
Hennessy Equity and Income Fund –
|
|||
Institutional Class (HEIIX)
|
3.86%
|
6.08%
|
9.09%
|
Blended Balanced Index
|
4.07%
|
7.39%
|
9.43%
|
S&P 500 Index
|
7.35%
|
11.34%
|
13.24%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
Berkshire Hathaway, Inc., Class B
|
4.35%
|
Apple, Inc.
|
3.86%
|
The Progressive Corp.
|
3.49%
|
Visa, Inc., Class A
|
3.00%
|
Alphabet, Inc., Class C
|
2.97%
|
Norfolk Southern Corp.
|
2.61%
|
Dollar Tree, Inc.
|
2.34%
|
CarMax, Inc.
|
2.28%
|
Carnival Corp.
|
2.27%
|
BlackRock, Inc.
|
1.97%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS – 58.38%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 3.98%
|
||||||||||||
Alphabet, Inc., Class C (a)
|
6,039
|
$
|
6,502,614
|
2.97
|
%
|
|||||||
Verizon Communications, Inc.
|
38,815
|
2,215,948
|
1.01
|
%
|
||||||||
|
8,718,562
|
3.98
|
%
|
|||||||||
Consumer Discretionary – 11.23%
|
||||||||||||
CarMax, Inc. (a)
|
73,485
|
4,990,366
|
2.28
|
%
|
||||||||
Carnival Corp. (b)
|
88,995
|
4,987,280
|
2.27
|
%
|
||||||||
Dollar Tree, Inc. (a)
|
60,811
|
5,126,367
|
2.34
|
%
|
||||||||
Home Depot, Inc.
|
22,055
|
3,879,033
|
1.77
|
%
|
||||||||
Lowe’s Companies, Inc.
|
19,114
|
1,820,035
|
0.83
|
%
|
||||||||
O’Reilly Automotive, Inc. (a)
|
11,890
|
3,813,718
|
1.74
|
%
|
||||||||
|
24,616,799
|
11.23
|
%
|
|||||||||
Consumer Staples – 4.92%
|
||||||||||||
Altria Group, Inc.
|
63,901
|
4,156,121
|
1.90
|
%
|
||||||||
Nestle S.A. (b)
|
49,942
|
4,209,112
|
1.92
|
%
|
||||||||
The Coca-Cola Co.
|
50,606
|
2,423,015
|
1.10
|
%
|
||||||||
|
10,788,248
|
4.92
|
%
|
|||||||||
Energy – 1.21%
|
||||||||||||
Chevron Corp.
|
23,672
|
2,642,979
|
1.21
|
%
|
||||||||
|
||||||||||||
Financials – 14.45%
|
||||||||||||
Alleghany Corp.
|
6,684
|
4,014,945
|
1.83
|
%
|
||||||||
Bank of America Corp.
|
75,498
|
2,076,195
|
0.95
|
%
|
||||||||
Berkshire Hathaway, Inc., Class B (a)
|
46,499
|
9,545,315
|
4.35
|
%
|
||||||||
BlackRock, Inc.
|
10,472
|
4,308,390
|
1.97
|
%
|
||||||||
The Progressive Corp.
|
109,777
|
7,651,457
|
3.49
|
%
|
||||||||
Wells Fargo & Co.
|
76,569
|
4,075,768
|
1.86
|
%
|
||||||||
|
31,672,070
|
14.45
|
%
|
|||||||||
Health Care – 1.03%
|
||||||||||||
Bristol-Myers Squibb Co.
|
44,831
|
2,265,759
|
1.03
|
%
|
||||||||
|
||||||||||||
Industrials – 7.99%
|
||||||||||||
Deere & Co.
|
11,890
|
1,610,381
|
0.73
|
%
|
||||||||
FedEx Corp.
|
15,691
|
3,457,355
|
1.58
|
%
|
||||||||
General Dynamics Corp.
|
19,229
|
3,318,541
|
1.51
|
%
|
||||||||
Norfolk Southern Corp.
|
34,049
|
5,714,444
|
2.61
|
%
|
||||||||
Southwest Airlines Co.
|
69,421
|
3,408,571
|
1.56
|
%
|
||||||||
|
17,509,292
|
7.99
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Information Technology – 8.69%
|
||||||||||||
Apple, Inc.
|
38,656
|
$
|
8,460,252
|
3.86
|
%
|
|||||||
Cisco Systems, Inc.
|
87,497
|
4,002,988
|
1.83
|
%
|
||||||||
Visa, Inc., Class A
|
47,683
|
6,573,102
|
3.00
|
%
|
||||||||
|
19,036,342
|
8.69
|
%
|
|||||||||
|
||||||||||||
Materials – 4.88%
|
||||||||||||
Albemarle Corp.
|
39,212
|
3,890,615
|
1.78
|
%
|
||||||||
Martin Marietta Materials, Inc.
|
19,380
|
3,319,406
|
1.51
|
%
|
||||||||
NewMarket Corp.
|
9,054
|
3,494,482
|
1.59
|
%
|
||||||||
|
10,704,503
|
4.88
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $99,644,037)
|
127,954,554
|
58.38
|
%
|
|||||||||
|
||||||||||||
PREFERRED STOCKS – 1.86%
|
||||||||||||
|
||||||||||||
Communication Services – 0.05%
|
||||||||||||
AT&T, Inc., 5.350%, 11/01/2066
|
4,530
|
106,772
|
0.05
|
%
|
||||||||
|
||||||||||||
Consumer Staples – 0.08%
|
||||||||||||
CHS, Inc., Series 4, 7.500%, Perpetual
|
7,005
|
185,843
|
0.08
|
%
|
||||||||
|
||||||||||||
Energy – 0.05%
|
||||||||||||
Enbridge, Inc., Series B, 6.375% to 04/15/2023,
|
||||||||||||
3.593% to 04/15/2028, 3.843% to 04/15/2043, then
|
||||||||||||
3 Month LIBOR USD + 4.593%, 04/15/2078 (b)(f)
|
4,410
|
108,839
|
0.05
|
%
|
||||||||
|
||||||||||||
Financials – 1.61%
|
||||||||||||
Aegon N.V., 6.375%, Perpetual (b)
|
3,845
|
97,278
|
0.05
|
%
|
||||||||
Arch Capital Group Ltd., Series F, 5.450%, Perpetual (b)
|
4,575
|
103,120
|
0.05
|
%
|
||||||||
Axis Capital Holdings Ltd, Series E, 5.500%, Perpetual (b)
|
2,470
|
57,057
|
0.03
|
%
|
||||||||
Banc of California, Inc., Series E, 7.000%, Perpetual
|
3,805
|
97,408
|
0.05
|
%
|
||||||||
Bank of America Corp.
|
||||||||||||
Series GG, 6.000%, Perpetual
|
3,455
|
86,824
|
0.04
|
%
|
||||||||
Series CC, 6.200%, Perpetual
|
2,360
|
61,053
|
0.03
|
%
|
||||||||
BB&T Corp.
|
||||||||||||
5.625%, Perpetual
|
4,230
|
105,962
|
0.05
|
%
|
||||||||
Series F, 5.200%, Perpetual
|
4,400
|
105,512
|
0.05
|
%
|
||||||||
Capital One Financial Corp.
|
||||||||||||
Series F, 6.200%, Perpetual
|
4,330
|
110,458
|
0.05
|
%
|
||||||||
Series H, 6.000%, Perpetual
|
4,365
|
111,526
|
0.05
|
%
|
||||||||
Citigroup, Inc., Series S, 6.300%, Perpetual
|
3,605
|
93,874
|
0.04
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
PREFERRED STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Financials (Continued)
|
||||||||||||
Fannie Mae Preferred, Series S, 8.250%, Perpetual (a)
|
7,000
|
$
|
41,860
|
0.02
|
%
|
|||||||
First Republic Bank
|
||||||||||||
Series F, 5.700%, Perpetual
|
3,120
|
76,534
|
0.04
|
%
|
||||||||
Series G, 5.500%, Perpetual
|
3,170
|
75,192
|
0.03
|
%
|
||||||||
Hartford Financial Services Group, Inc., Series G, 6.000%, Perpetual (a)
|
4,400
|
110,352
|
0.05
|
%
|
||||||||
Huntington Bancshares, Inc., Series D, 6.250%, Perpetual
|
5,930
|
152,164
|
0.07
|
%
|
||||||||
IBERIABANK Corp., Series B, 6.625% to 08/01/2025 then
|
||||||||||||
3 Month LIBOR USD + 4.262%, Perpetual (f)
|
1,920
|
50,400
|
0.02
|
%
|
||||||||
ING Groep N.V., 6.125%, Perpetual (b)
|
2,055
|
51,909
|
0.02
|
%
|
||||||||
JPMorgan Chase & Co., Series BB, 6.150%, Perpetual
|
8,595
|
217,539
|
0.10
|
%
|
||||||||
KeyCorp
|
||||||||||||
Series E, 6.125% to 12/15/2026 then
|
||||||||||||
3 Month LIBOR USD + 3.892%, Pepetual (f)
|
4,075
|
107,172
|
0.05
|
%
|
||||||||
Series F, 5.650%, Pepetual (a)
|
2,065
|
50,035
|
0.02
|
%
|
||||||||
Legg Mason, Inc.
|
||||||||||||
5.450%, 09/15/2056
|
2,085
|
48,956
|
0.02
|
%
|
||||||||
6.375%, 03/15/2056
|
1,946
|
49,545
|
0.03
|
%
|
||||||||
MetLife, Inc., Series E, 5.625%, Pepetual
|
4,400
|
108,944
|
0.05
|
%
|
||||||||
Morgan Stanley, Series I, 6.375% to 10/15/2024 then
|
||||||||||||
3 Month LIBOR USD + 3.708%, Perpetual (f)
|
7,000
|
183,260
|
0.08
|
%
|
||||||||
National General Holdings Corp., Series C, 7.500%, Perpetual
|
2,450
|
58,653
|
0.03
|
%
|
||||||||
Regions Financial Corp., Series B, 6.375% to 09/15/2024 then
|
||||||||||||
3 Month LIBOR USD + 3.536%, Perpetual (f)
|
4,145
|
110,423
|
0.05
|
%
|
||||||||
State Street Corp.
|
||||||||||||
Series D, 5.900% to 03/15/2024 then
|
||||||||||||
3 Month LIBOR USD + 3.108%, Perpetual (f)
|
4,150
|
108,066
|
0.05
|
%
|
||||||||
Series E, 6.000%, Perpetual
|
1,950
|
49,569
|
0.02
|
%
|
||||||||
TCF Financial Corp., Series C, 5.700%, Perpetual
|
2,090
|
50,244
|
0.02
|
%
|
||||||||
The Allstate Corp., Series G, 5.625%, Perpetual
|
4,745
|
116,110
|
0.05
|
%
|
||||||||
The Charles Schwab Corp.
|
||||||||||||
Series C, 6.000%, Perpetual
|
4,315
|
110,982
|
0.05
|
%
|
||||||||
Series D, 5.950%, Perpetual
|
4,375
|
113,094
|
0.05
|
%
|
||||||||
The Goldman Sachs Group, Inc.
|
||||||||||||
Series K, 6.375% to 05/10/2024 then
|
||||||||||||
3 Month LIBOR USD + 3.550%, Perpetual (f)
|
2,560
|
67,226
|
0.03
|
%
|
||||||||
Series N, 6.300%, Perpetual
|
2,620
|
66,941
|
0.03
|
%
|
||||||||
U.S. Bancorp, Series F, 6.500% to 01/15/2022 then
|
||||||||||||
3 Month LIBOR USD + 4.447%, Perpetual (d)(f)
|
2,755
|
74,413
|
0.03
|
%
|
||||||||
Webster Financial Corp., Series F, 5.250%, Perpetual
|
1,075
|
24,005
|
0.01
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
PREFERRED STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Financials (Continued)
|
||||||||||||
Wells Fargo & Co.
|
||||||||||||
Series V, 6.000%, Perpetual
|
4,325
|
$
|
110,677
|
0.05
|
%
|
|||||||
Series X, 5.500%, Perpetual
|
4,475
|
109,727
|
0.05
|
%
|
||||||||
|
3,524,064
|
1.61
|
%
|
|||||||||
Utilities – 0.07%
|
||||||||||||
DTE Energy Co., Series F, 6.000%, 12/15/2076
|
2,320
|
60,181
|
0.03
|
%
|
||||||||
The Southern Co., 6.250%, 10/15/2075
|
3,840
|
98,265
|
0.04
|
%
|
||||||||
|
158,446
|
0.07
|
%
|
|||||||||
Total Preferred Stocks
|
||||||||||||
(Cost $4,293,450)
|
4,083,964
|
1.86
|
%
|
|||||||||
|
||||||||||||
REITS – 0.68%
|
||||||||||||
Financials – 0.68%
|
||||||||||||
Annaly Capital Management, Inc., Series F, 6.950% to 09/30/2022 then
|
||||||||||||
3 Month LIBOR USD + 4.993%, Perpetual (f)
|
4,370
|
109,818
|
0.05
|
%
|
||||||||
Apollo Commercial Real Estate Finance, Inc.
|
9,010
|
168,577
|
0.08
|
%
|
||||||||
Chimera Investment Corp.
|
9,270
|
172,422
|
0.08
|
%
|
||||||||
Chimera Investment Corp.
|
||||||||||||
Series A, 8.000%, Perpetual
|
4,620
|
117,440
|
0.05
|
%
|
||||||||
Series B, 8.000% to 03/30/2024 then
|
||||||||||||
3 Month LIBOR USD + 5.791%, Perpetual (f)
|
2,350
|
60,795
|
0.03
|
%
|
||||||||
Invesco Mortgage Capital, Inc., Series C, 7.500% to 09/27/2027 then
|
||||||||||||
3 Month LIBOR USD + 5.289%, Perpetual (f)
|
4,510
|
112,028
|
0.05
|
%
|
||||||||
Monmouth Real Estate Investment Corp., Series C, 6.125%, Perpetual
|
4,180
|
100,320
|
0.05
|
%
|
||||||||
Public Storage, Series B, 5.400%, Perpetual
|
3,015
|
71,486
|
0.03
|
%
|
||||||||
Starwood Property Trust, Inc.
|
7,765
|
168,656
|
0.08
|
%
|
||||||||
Two Harbors Investment Corp.
|
10,655
|
156,522
|
0.07
|
%
|
||||||||
Two Harbors Investment Corp., Series B, 7.625% to 07/27/2027 then
|
||||||||||||
3 Month LIBOR USD + 5.352%, Perpetual (f)
|
6,880
|
169,798
|
0.08
|
%
|
||||||||
Vornado Realty Trust, Series M, 5.250%, Perpetual
|
3,310
|
72,555
|
0.03
|
%
|
||||||||
|
1,480,417
|
0.68
|
%
|
|||||||||
Total REITS
|
||||||||||||
(Cost $1,461,792)
|
1,480,417
|
0.68
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
CORPORATE BONDS – 25.28%
|
Par
|
% of
|
||||||||||
|
Amount
|
Value
|
Net Assets
|
|||||||||
Communication Services – 1.99%
|
||||||||||||
AT&T, Inc.
|
||||||||||||
3.000%, 02/15/2022
|
500,000
|
$
|
488,546
|
0.22
|
%
|
|||||||
4.250%, 03/01/2027
|
980,000
|
952,013
|
0.44
|
%
|
||||||||
5.350%, 09/01/2040
|
200,000
|
191,314
|
0.09
|
%
|
||||||||
5.800%, 02/15/2019
|
400,000
|
403,234
|
0.18
|
%
|
||||||||
Deutsche Telekom AG, 6.000%, 07/08/2019 (b)
|
1,160,000
|
1,182,457
|
0.54
|
%
|
||||||||
Verizon Communications, Inc., 2.450%, 11/01/2022
|
1,200,000
|
1,147,866
|
0.52
|
%
|
||||||||
|
4,365,430
|
1.99
|
%
|
|||||||||
|
||||||||||||
Consumer Discretionary – 0.93%
|
||||||||||||
Alibaba Group Holding Ltd, 3.600%, 11/28/2024 (b)
|
1,000,000
|
973,733
|
0.45
|
%
|
||||||||
Ford Motor Co., 7.450%, 07/16/2031
|
1,000,000
|
1,054,612
|
0.48
|
%
|
||||||||
|
2,028,345
|
0.93
|
%
|
|||||||||
|
||||||||||||
Consumer Staples – 0.61%
|
||||||||||||
CVS Health Corp., 4.125%, 05/15/2021
|
1,000,000
|
1,012,632
|
0.46
|
%
|
||||||||
Wal-Mart Stores, Inc., 5.000%, 10/25/2040
|
300,000
|
325,020
|
0.15
|
%
|
||||||||
|
1,337,652
|
0.61
|
%
|
|||||||||
|
||||||||||||
Energy – 2.55%
|
||||||||||||
Boardwalk Pipelines LP, 4.450%, 07/15/2027
|
1,200,000
|
1,129,091
|
0.52
|
%
|
||||||||
Canadian Natural Resources Ltd., 3.900%, 02/01/2025 (b)
|
1,000,000
|
972,520
|
0.44
|
%
|
||||||||
Encana Corp., 3.900%, 11/15/2021 (b)
|
1,600,000
|
1,599,429
|
0.73
|
%
|
||||||||
Husky Energy, Inc., 4.000%, 04/15/2024 (b)
|
750,000
|
741,111
|
0.34
|
%
|
||||||||
National Oilwell Varco, Inc., 2.600%, 12/01/2022
|
1,200,000
|
1,137,768
|
0.52
|
%
|
||||||||
|
5,579,919
|
2.55
|
%
|
|||||||||
|
||||||||||||
Financials – 12.48%
|
||||||||||||
American International Group, Inc.
|
||||||||||||
4.125%, 02/15/2024
|
1,000,000
|
997,203
|
0.45
|
%
|
||||||||
4.875%, 06/01/2022
|
1,000,000
|
1,029,262
|
0.47
|
%
|
||||||||
Boston Properties, Inc., 5.875%, 10/15/2019
|
700,000
|
713,841
|
0.33
|
%
|
||||||||
Capital One Financial Corp., 4.750%, 07/15/2021
|
1,500,000
|
1,544,533
|
0.70
|
%
|
||||||||
Capital One NA, 2.250%, 09/13/2021
|
500,000
|
479,996
|
0.22
|
%
|
||||||||
Comerica, Inc., 2.125%, 05/23/2019
|
500,000
|
497,721
|
0.23
|
%
|
||||||||
Diamond 1 Finance Corp. / Diamond 2
|
||||||||||||
Finance Corp., 5.450%, 06/15/2023 (e)
|
1,220,000
|
1,265,727
|
0.58
|
%
|
||||||||
Discover Financial Services, 5.200%, 04/27/2022
|
900,000
|
930,200
|
0.42
|
%
|
||||||||
Fifth Third Bancorp, 2.375%, 04/25/2019
|
1,675,000
|
1,670,583
|
0.76
|
%
|
||||||||
First Niagara Financial Group, Inc., 6.750%, 03/19/2020
|
590,000
|
615,538
|
0.28
|
%
|
||||||||
General Electric Capital Corp., 6.000%, 08/07/2019
|
610,000
|
622,231
|
0.28
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
CORPORATE BONDS
|
Par
|
% of
|
||||||||||
|
Amount
|
Value
|
Net Assets
|
|||||||||
Financials (Continued)
|
||||||||||||
Huntington Bancshares Inc/OH, 4.000%, 05/15/2025
|
765,000
|
$
|
759,780
|
0.35
|
%
|
|||||||
JPMorgan Chase & Co., 2.700%, 05/18/2023
|
1,000,000
|
956,257
|
0.43
|
%
|
||||||||
KeyCorp, 5.100%, 03/24/2021
|
950,000
|
983,833
|
0.45
|
%
|
||||||||
Lincoln National Corp., 6.250%, 02/15/2020
|
780,000
|
807,281
|
0.37
|
%
|
||||||||
Morgan Stanley, 5.500%, 07/28/2021
|
2,333,000
|
2,445,238
|
1.12
|
%
|
||||||||
Prudential Financial, Inc., 3.878%, 03/27/2028
|
400,000
|
393,830
|
0.18
|
%
|
||||||||
Qwest Capital Funding, Inc., 6.500%, 11/15/2018
|
700,000
|
700,437
|
0.32
|
%
|
||||||||
Raymond James Financial, Inc.
|
||||||||||||
3.625%, 09/15/2026
|
1,500,000
|
1,413,916
|
0.65
|
%
|
||||||||
5.625%, 04/01/2024
|
700,000
|
747,580
|
0.34
|
%
|
||||||||
Synchrony Financial, 3.750%, 08/15/2021
|
1,200,000
|
1,184,152
|
0.54
|
%
|
||||||||
Synovus Financial Corp., 3.125%, 11/01/2022
|
1,300,000
|
1,238,250
|
0.56
|
%
|
||||||||
The Goldman Sachs Group, Inc.
|
||||||||||||
5.375%, 03/15/2020
|
1,100,000
|
1,129,638
|
0.52
|
%
|
||||||||
6.000%, 06/15/2020
|
1,500,000
|
1,560,413
|
0.71
|
%
|
||||||||
The Toronto-Dominion Bank, 2.125%, 07/02/2019 (b)
|
1,500,000
|
1,492,572
|
0.68
|
%
|
||||||||
Westpac Banking Corp., 4.875%, 11/19/2019 (b)
|
450,000
|
458,107
|
0.21
|
%
|
||||||||
Willis North America, Inc., 3.600%, 05/15/2024
|
750,000
|
722,458
|
0.33
|
%
|
||||||||
|
27,360,577
|
12.48
|
%
|
|||||||||
|
||||||||||||
Health Care – 3.12%
|
||||||||||||
Agilent Technologies, Inc., 5.000%, 07/15/2020
|
650,000
|
667,098
|
0.30
|
%
|
||||||||
Amgen, Inc.
|
||||||||||||
3.450%, 10/01/2020
|
1,000,000
|
1,002,700
|
0.46
|
%
|
||||||||
3.625%, 05/22/2024
|
1,500,000
|
1,479,520
|
0.68
|
%
|
||||||||
Celgene Corp., 3.625%, 05/15/2024
|
1,600,000
|
1,555,749
|
0.71
|
%
|
||||||||
Edwards Lifesciences Corp., 4.300%, 06/15/2028
|
1,450,000
|
1,440,936
|
0.66
|
%
|
||||||||
Express Scripts Holding Co., 3.500%, 06/15/2024
|
700,000
|
680,554
|
0.31
|
%
|
||||||||
|
6,826,557
|
3.12
|
%
|
|||||||||
|
||||||||||||
Industrials – 0.45%
|
||||||||||||
Rio Tinto Finance USA Ltd., 3.750%, 06/15/2025 (b)
|
1,000,000
|
992,273
|
0.45
|
%
|
||||||||
Information Technology – 0.97%
|
||||||||||||
Apple, Inc., 4.500%, 02/23/2036
|
250,000
|
260,438
|
0.12
|
%
|
||||||||
Corning, Inc.
|
||||||||||||
6.625%, 05/15/2019
|
695,000
|
707,906
|
0.32
|
%
|
||||||||
6.850%, 03/01/2029
|
275,000
|
319,813
|
0.15
|
%
|
||||||||
Juniper Networks, Inc., 4.600%, 03/15/2021
|
600,000
|
611,989
|
0.28
|
%
|
||||||||
Oracle Corp., 2.650%, 07/15/2026
|
250,000
|
228,865
|
0.10
|
%
|
||||||||
|
2,129,011
|
0.97
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
CORPORATE BONDS
|
Par
|
% of
|
||||||||||
|
Amount
|
Value
|
Net Assets
|
|||||||||
Materials – 1.71%
|
||||||||||||
AngloGold Ashanti Holdings PLC, 5.125%, 08/01/2022 (b)
|
1,000,000
|
$
|
1,010,000
|
0.46
|
%
|
|||||||
Goldcorp, Inc., 3.625%, 06/09/2021 (b)
|
750,000
|
746,032
|
0.34
|
%
|
||||||||
Newmont Mining Corp., 3.500%, 03/15/2022
|
1,000,000
|
988,095
|
0.45
|
%
|
||||||||
The Dow Chemical Co., 4.250%, 11/15/2020
|
1,000,000
|
1,013,328
|
0.46
|
%
|
||||||||
|
3,757,455
|
1.71
|
%
|
|||||||||
Retail Trade – 0.47%
|
||||||||||||
Macy’s Retail Holdings, Inc.
|
||||||||||||
4.375%, 09/01/2023
|
900,000
|
893,188
|
0.41
|
%
|
||||||||
4.500%, 12/15/2034
|
175,000
|
139,786
|
0.06
|
%
|
||||||||
|
1,032,974
|
0.47
|
%
|
|||||||||
Total Corporate Bonds
|
||||||||||||
(Cost $56,404,646)
|
55,410,193
|
25.28
|
%
|
|||||||||
|
||||||||||||
MORTGAGE BACKED SECURITIES – 4.66%
|
||||||||||||
Fannie Mae Pool
|
||||||||||||
3.000%, 10/01/2043
|
2,484,505
|
2,371,276
|
1.08
|
%
|
||||||||
3.500%, 01/01/2042
|
500,088
|
491,377
|
0.22
|
%
|
||||||||
4.000%, 10/01/2041
|
560,442
|
564,965
|
0.26
|
%
|
||||||||
4.000%, 12/01/2041
|
506,195
|
510,271
|
0.23
|
%
|
||||||||
4.500%, 08/01/2020
|
17,662
|
17,991
|
0.01
|
%
|
||||||||
6.000%, 10/01/2037
|
128,731
|
140,423
|
0.06
|
%
|
||||||||
Fannie Mae REMICS
|
||||||||||||
Series 13-52, 1.250%, 06/25/2043
|
157,830
|
138,552
|
0.06
|
%
|
||||||||
Series 12-22, 2.000%, 11/25/2040
|
136,397
|
130,301
|
0.06
|
%
|
||||||||
Series 12-16, 2.000%, 11/25/2041
|
119,407
|
111,833
|
0.05
|
%
|
||||||||
Series, 10-134, 2.250%, 03/25/2039
|
104,508
|
101,897
|
0.05
|
%
|
||||||||
Freddie Mac Gold Pool
|
||||||||||||
3.000%, 05/01/2042
|
923,283
|
882,181
|
0.40
|
%
|
||||||||
3.000%, 09/01/2042
|
1,772,138
|
1,693,273
|
0.77
|
%
|
||||||||
3.500%, 01/01/2048
|
1,698,356
|
1,654,836
|
0.76
|
%
|
||||||||
5.000%, 05/01/2020
|
14,371
|
14,448
|
0.01
|
%
|
||||||||
5.500%, 04/01/2037
|
74,191
|
80,518
|
0.04
|
%
|
||||||||
Freddie Mac REMICS
|
||||||||||||
Series 4146, 1.500%, 10/15/2042
|
95,896
|
92,041
|
0.04
|
%
|
||||||||
Series 4309, 2.000%, 10/15/2043
|
96,721
|
91,029
|
0.04
|
%
|
||||||||
Series 3928, 2.500%, 08/15/2040
|
256,956
|
253,138
|
0.12
|
%
|
||||||||
Series 3870, 2.750%, 01/15/2041
|
74,142
|
71,558
|
0.03
|
%
|
||||||||
Series 4016, 3.000%, 09/15/2039
|
299,221
|
293,234
|
0.13
|
%
|
||||||||
Series 4322, 3.000%, 05/15/2043
|
293,613
|
288,532
|
0.13
|
%
|
||||||||
Government National Mortgage Association, 1.750%, 02/16/2043
|
252,301
|
229,956
|
0.11
|
%
|
||||||||
|
||||||||||||
Total Mortgage Backed Securities
|
||||||||||||
(Cost $10,649,436)
|
10,223,630
|
4.66
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
U.S. TREASURY OBLIGATIONS – 4.27%
|
Par
|
% of
|
||||||||||
|
Amount
|
Value
|
Net Assets
|
|||||||||
U.S. Treasury Bonds – 0.43%
|
||||||||||||
U.S. Treasury Bonds, 3.625%, 02/15/2044
|
900,000
|
$
|
934,400
|
0.43
|
%
|
|||||||
|
||||||||||||
U.S. Treasury Notes – 3.84%
|
||||||||||||
U.S. Treasury Notes
|
||||||||||||
2.625%, 11/15/2020
|
2,200,000
|
2,188,742
|
1.00
|
%
|
||||||||
2.750%, 02/15/2024
|
3,000,000
|
2,962,969
|
1.35
|
%
|
||||||||
3.625%, 08/15/2019
|
3,250,000
|
3,273,867
|
1.49
|
%
|
||||||||
|
8,425,578
|
3.84
|
%
|
|||||||||
Total U.S. Treasury Obligations
|
||||||||||||
(Cost $9,501,752)
|
9,359,978
|
4.27
|
%
|
|||||||||
|
||||||||||||
U.S. GOVERNMENT AGENCY ISSUES – 2.83%
|
||||||||||||
Fannie Mae
|
||||||||||||
1.500%, 08/10/2021
|
1,000,000
|
956,038
|
0.44
|
%
|
||||||||
1.500%, 04/18/2028 (g)
|
1,000,000
|
993,267
|
0.45
|
%
|
||||||||
2.500%, 03/30/2026 (g)
|
1,200,000
|
1,193,130
|
0.55
|
%
|
||||||||
Federal Home Loan Banks
|
||||||||||||
1.250%, 10/17/2031 (g)
|
1,250,000
|
1,181,805
|
0.54
|
%
|
||||||||
2.750%, 07/11/2031
|
800,000
|
710,473
|
0.32
|
%
|
||||||||
Freddie Mac
|
||||||||||||
2.000%, 10/27/2023 (g)
|
1,200,000
|
1,173,619
|
0.53
|
%
|
||||||||
|
||||||||||||
Total U.S. Government Agency Issues
|
||||||||||||
(Cost $6,398,673)
|
6,208,332
|
2.83
|
%
|
|||||||||
|
||||||||||||
INVESTMENT COMPANIES (EXCLUDING
|
||||||||||||
MONEY MARKET FUNDS) – 1.20%
|
||||||||||||
Apollo Investment Corp.
|
30,270
|
156,496
|
0.07
|
%
|
||||||||
Ares Capital Corp.
|
10,130
|
173,831
|
0.08
|
%
|
||||||||
BlackRock TCP Capital Corp.
|
11,000
|
154,000
|
0.07
|
%
|
||||||||
FS Investment Corp.
|
21,350
|
134,291
|
0.06
|
%
|
||||||||
Guggenheim Credit Allocation Fund
|
34,000
|
697,680
|
0.32
|
%
|
||||||||
Hercules Capital, Inc.
|
13,115
|
164,331
|
0.08
|
%
|
||||||||
Monroe Capital Corp.
|
12,670
|
161,036
|
0.07
|
%
|
||||||||
New Mountain Finance Corp.
|
12,065
|
160,585
|
0.07
|
%
|
||||||||
SPDR Barclays Capital High Yield Bond
|
1,000
|
35,160
|
0.02
|
%
|
||||||||
SPDR Barclays Short Term High Yield
|
4,000
|
108,240
|
0.05
|
%
|
||||||||
TPG Specialty Lending, Inc.
|
8,965
|
180,017
|
0.08
|
%
|
||||||||
Vanguard High-Yield Corporate Fund
|
89,820
|
507,484
|
0.23
|
%
|
||||||||
|
||||||||||||
Total Investment Companies (Excluding
|
||||||||||||
Money Market Funds)
|
||||||||||||
(Cost $2,805,706)
|
2,633,151
|
1.20
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
SHORT-TERM INVESTMENTS – 0.78%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 0.78%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (c)
|
1,702,921
|
$
|
1,702,921
|
0.78
|
%
|
|||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $1,702,921)
|
1,702,921
|
0.78
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $192,862,413) – 99.94%
|
219,057,140
|
99.94
|
%
|
|||||||||
Other Assets in Excess of Liabilities – 0.06%
|
126,312
|
0.06
|
%
|
|||||||||
|
||||||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
219,183,452
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
|
(b)
|
U.S.-traded security of a foreign corporation.
|
|
(c)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
|
(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, 2018, are as follows:
|
Issuer
|
U.S. Bancorp
|
|||||
Beginning Cost
|
$
|
93,213
|
||||
Purchase Cost
|
$
|
—
|
||||
Sales Cost
|
$
|
(13,953
|
)
|
|||
Ending Cost
|
$
|
79,260
|
||||
Dividend Income
|
$
|
5,068
|
||||
Net Change in
|
||||||
Unrealized Appreciation
|
$
|
(4,882
|
)
|
|||
Realized Gain/Loss
|
$
|
(431
|
)
|
|||
Shares
|
2,755
|
|||||
Market Value
|
$
|
74,413
|
(e)
|
Rule 144A security. Security is exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. Rule 144A securities may be resold in transactions exempt from registration to qualified institutional investors. As of October 31, 2018, the market value of this security totaled $1,265,727, which represents 0.58% of net assets.
|
|
(f)
|
Variable rate security; rate disclosed is the current rate as of October 31, 2018.
|
|
(g)
|
Step-up bond; rate disclosed is the current rate as of October 31, 2018.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
8,718,562
|
$
|
—
|
$
|
—
|
$
|
8,718,562
|
||||||||
Consumer Discretionary
|
24,616,799
|
—
|
—
|
24,616,799
|
||||||||||||
Consumer Staples
|
10,788,248
|
—
|
—
|
10,788,248
|
||||||||||||
Energy
|
2,642,979
|
—
|
—
|
2,642,979
|
||||||||||||
Financials
|
31,672,070
|
—
|
—
|
31,672,070
|
||||||||||||
Health Care
|
2,265,759
|
—
|
—
|
2,265,759
|
||||||||||||
Industrials
|
17,509,292
|
—
|
—
|
17,509,292
|
||||||||||||
Information Technology
|
19,036,342
|
—
|
—
|
19,036,342
|
||||||||||||
Materials
|
10,704,503
|
—
|
—
|
10,704,503
|
||||||||||||
Total Common Stocks
|
$
|
127,954,554
|
$
|
—
|
$
|
—
|
$
|
127,954,554
|
||||||||
Preferred Stocks
|
||||||||||||||||
Communication Services
|
$
|
106,772
|
$
|
—
|
$
|
—
|
$
|
106,772
|
||||||||
Consumer Staples
|
185,843
|
—
|
—
|
185,843
|
||||||||||||
Energy
|
108,839
|
—
|
—
|
108,839
|
||||||||||||
Financials
|
3,524,064
|
—
|
—
|
3,524,064
|
||||||||||||
Utilities
|
158,446
|
—
|
—
|
158,446
|
||||||||||||
Total Preferred Stocks
|
$
|
4,083,964
|
$
|
—
|
$
|
—
|
$
|
4,083,964
|
||||||||
REITS
|
||||||||||||||||
Financials
|
$
|
1,480,417
|
$
|
—
|
$
|
—
|
$
|
1,480,417
|
||||||||
Total REITS
|
$
|
1,480,417
|
$
|
—
|
$
|
—
|
$
|
1,480,417
|
||||||||
Corporate Bonds
|
||||||||||||||||
Communication Services
|
$
|
—
|
$
|
4,365,430
|
$
|
—
|
$
|
4,365,430
|
||||||||
Consumer Discretionary
|
—
|
2,028,345
|
—
|
2,028,345
|
||||||||||||
Consumer Staples
|
—
|
1,337,652
|
—
|
1,337,652
|
||||||||||||
Energy
|
—
|
5,579,919
|
—
|
5,579,919
|
||||||||||||
Financials
|
—
|
27,360,577
|
—
|
27,360,577
|
||||||||||||
Health Care
|
—
|
6,826,557
|
—
|
6,826,557
|
||||||||||||
Industrials
|
—
|
992,273
|
—
|
992,273
|
||||||||||||
Information Technology
|
—
|
2,129,011
|
—
|
2,129,011
|
||||||||||||
Materials
|
—
|
3,757,455
|
—
|
3,757,455
|
||||||||||||
Retail Trade
|
—
|
1,032,974
|
—
|
1,032,974
|
||||||||||||
Total Corporate Bonds
|
$
|
—
|
$
|
55,410,193
|
$
|
—
|
$
|
55,410,193
|
||||||||
Mortgage Backed Securities
|
$
|
—
|
$
|
10,223,630
|
$
|
—
|
$
|
10,223,630
|
||||||||
U.S. Treasury Obligations
|
||||||||||||||||
U.S. Treasury Bonds
|
$
|
—
|
$
|
934,400
|
$
|
—
|
$
|
934,400
|
||||||||
U.S. Treasury Notes
|
—
|
8,425,578
|
—
|
8,425,578
|
||||||||||||
Total U.S. Treasury Obligations
|
$
|
—
|
$
|
9,359,978
|
$
|
—
|
$
|
9,359,978
|
||||||||
U.S. Government Agency Issues
|
$
|
—
|
$
|
6,208,332
|
$
|
—
|
$
|
6,208,332
|
||||||||
Investment Companies (Excluding
|
||||||||||||||||
Money Market Funds)
|
$
|
2,633,151
|
$
|
—
|
$
|
—
|
$
|
2,633,151
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
1,702,921
|
$
|
—
|
$
|
—
|
$
|
1,702,921
|
||||||||
Total Short-Term Investments
|
$
|
1,702,921
|
$
|
—
|
$
|
—
|
$
|
1,702,921
|
||||||||
Total Investments
|
$
|
137,855,007
|
$
|
81,202,133
|
$
|
—
|
$
|
219,057,140
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/ STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in unaffiliated securities, at value (cost $192,783,153)
|
$
|
218,982,727
|
||
Investments in affiliated securities, at value (cost $79,260)
|
74,413
|
|||
Total investments in securities, at value (cost $192,862,413)
|
219,057,140
|
|||
Dividends and interest receivable
|
895,595
|
|||
Receivable for fund shares sold
|
171,398
|
|||
Prepaid expenses and other assets
|
25,819
|
|||
Total Assets
|
220,149,952
|
|||
LIABILITIES:
|
||||
Payable for securities purchased
|
109,956
|
|||
Payable for fund shares redeemed
|
573,489
|
|||
Payable to advisor
|
152,521
|
|||
Payable to administrator
|
20,033
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
23,447
|
|||
Accrued service fees
|
10,584
|
|||
Accrued trustees fees
|
5,962
|
|||
Accrued expenses and other payables
|
48,608
|
|||
Total Liabilities
|
966,500
|
|||
NET ASSETS
|
$
|
219,183,452
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
177,515,510
|
||
Total distributable earnings
|
41,667,942
|
|||
Total Net Assets
|
$
|
219,183,452
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
121,321,192
|
||
Shares issued and outstanding
|
7,668,265
|
|||
Net asset value, offering price and redemption price per share
|
$
|
15.82
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
97,862,260
|
||
Shares issued and outstanding
|
6,555,993
|
|||
Net asset value, offering price and redemption price per share
|
$
|
14.93
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income from unaffiliated securities
|
$
|
3,011,363
|
||
Dividend income from affiliated securities
|
5,068
|
|||
Interest income
|
2,668,571
|
|||
Total investment income
|
5,685,002
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
1,969,709
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
303,602
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
73,424
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
232,757
|
|||
Distribution fees – Investor Class (See Note 5)
|
209,274
|
|||
Service fees – Investor Class (See Note 5)
|
139,516
|
|||
Federal and state registration fees
|
38,950
|
|||
Compliance expense (See Note 5)
|
29,501
|
|||
Audit fees
|
22,503
|
|||
Reports to shareholders
|
20,158
|
|||
Trustees’ fees and expenses
|
17,460
|
|||
Legal fees
|
454
|
|||
Interest expense (See Note 7)
|
40
|
|||
Other expenses
|
18,473
|
|||
Total expenses
|
3,075,821
|
|||
NET INVESTMENT INCOME
|
$
|
2,609,181
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain (loss) on:
|
||||
Unaffiliated investments
|
$
|
17,839,361
|
||
Affiliated investments
|
(431
|
)
|
||
Net change in unrealized appreciation/depreciation on:
|
||||
Unaffiliated investments
|
(10,478,946
|
)
|
||
Affiliated investments
|
(4,882
|
)
|
||
Net gain on investments
|
7,355,102
|
|||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
9,964,283
|
HENNESSYFUNDS.COM
|
STATEMENT OF OPERATIONS/STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
2,609,181
|
$
|
2,708,905
|
||||
Net realized gain on investments
|
17,838,930
|
18,193,893
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(10,483,828
|
)
|
19,387,071
|
|||||
Net increase in net assets resulting from operations
|
9,964,283
|
40,289,869
|
||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(8,985,666
|
)
|
(17,440,506
|
)
|
||||
Distributable earnings – Institutional Class
|
(7,053,813
|
)
|
(11,893,937
|
)
|
||||
Total distributions
|
(16,039,479
|
)
|
(29,334,443
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
7,048,624
|
8,054,934
|
||||||
Proceeds from shares subscribed – Institutional Class
|
13,307,380
|
20,836,993
|
||||||
Dividends reinvested – Investor Class
|
8,738,463
|
17,017,145
|
||||||
Dividends reinvested – Institutional Class
|
5,575,964
|
9,255,346
|
||||||
Cost of shares redeemed – Investor Class
|
(46,331,304
|
)
|
(78,489,456
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(29,143,836
|
)
|
(53,524,682
|
)
|
||||
Net decrease in net assets derived
|
||||||||
from capital share transactions
|
(40,804,709
|
)
|
(76,849,720
|
)
|
||||
TOTAL DECREASE IN NET ASSETS
|
(46,879,905
|
)
|
(65,894,294
|
)
|
||||
NET ASSETS:
|
||||||||
Beginning of year
|
266,063,357
|
331,957,651
|
||||||
End of year
|
$
|
219,183,452
|
$
|
266,063,357
|
(2)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
438,224
|
516,776
|
||||||
Shares sold – Institutional Class
|
882,622
|
1,415,138
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
550,174
|
1,128,293
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
371,576
|
648,210
|
||||||
Shares redeemed – Investor Class
|
(2,885,470
|
)
|
(5,022,332
|
)
|
||||
Shares redeemed – Institutional Class
|
(1,918,909
|
)
|
(3,644,868
|
)
|
||||
Net decrease in shares outstanding
|
(2,561,783
|
)
|
(4,958,783
|
)
|
(1)
|
Includes net investment income distributions of $1,353,800 and $1,431,025 and net realized gain distributions of $16,086,706 and $10,462,912 for Investor Class and Institutional Class, respectively.
|
(2)
|
Includes accumulated net investment income of $103,437.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
16.24
|
$
|
15.61
|
$
|
16.15
|
$
|
16.68
|
$
|
15.77
|
|||||||||
0.16
|
0.14
|
0.14
|
0.13
|
0.16
|
||||||||||||||
0.40
|
1.95
|
(0.16
|
)
|
0.11
|
1.41
|
|||||||||||||
0.56
|
2.09
|
(0.02
|
)
|
0.24
|
1.57
|
|||||||||||||
(0.14
|
)
|
(0.12
|
)
|
(0.13
|
)
|
(0.13
|
)
|
(0.16
|
)
|
|||||||||
(0.84
|
)
|
(1.34
|
)
|
(0.39
|
)
|
(0.64
|
)
|
(0.50
|
)
|
|||||||||
(0.98
|
)
|
(1.46
|
)
|
(0.52
|
)
|
(0.77
|
)
|
(0.66
|
)
|
|||||||||
$
|
15.82
|
$
|
16.24
|
$
|
15.61
|
$
|
16.15
|
$
|
16.68
|
|||||||||
3.44
|
%
|
14.16
|
%
|
(0.12
|
)%
|
1.43
|
%
|
10.28
|
%
|
|||||||||
$
|
121.32
|
$
|
155.33
|
$
|
202.04
|
$
|
292.84
|
$
|
284.45
|
|||||||||
1.42
|
%
|
1.43
|
%
|
1.43
|
%
|
1.38
|
%
|
1.33
|
%
|
|||||||||
0.89
|
%
|
0.78
|
%
|
0.84
|
%
|
0.83
|
%
|
1.01
|
%
|
|||||||||
18
|
%
|
15
|
%
|
24
|
%
|
39
|
%
|
28
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
15.34
|
$
|
14.76
|
$
|
15.28
|
$
|
15.80
|
$
|
14.97
|
|||||||||
0.19
|
0.16
|
0.18
|
0.19
|
0.20
|
||||||||||||||
0.39
|
1.87
|
(0.13
|
)
|
0.09
|
1.33
|
|||||||||||||
0.58
|
2.03
|
0.05
|
0.28
|
1.53
|
||||||||||||||
(0.20
|
)
|
(0.18
|
)
|
(0.20
|
)
|
(0.19
|
)
|
(0.20
|
)
|
|||||||||
(0.79
|
)
|
(1.27
|
)
|
(0.37
|
)
|
(0.61
|
)
|
(0.50
|
)
|
|||||||||
(0.99
|
)
|
(1.45
|
)
|
(0.57
|
)
|
(0.80
|
)
|
(0.70
|
)
|
|||||||||
$
|
14.93
|
$
|
15.34
|
$
|
14.76
|
$
|
15.28
|
$
|
15.80
|
|||||||||
3.86
|
%
|
14.60
|
%
|
0.30
|
%
|
1.75
|
%
|
10.60
|
%
|
|||||||||
$
|
97.86
|
$
|
110.74
|
$
|
129.91
|
$
|
168.84
|
$
|
102.10
|
|||||||||
1.02
|
%
|
1.05
|
%
|
1.03
|
%
|
1.04
|
%
|
1.05
|
%
|
|||||||||
1.28
|
%
|
1.16
|
%
|
1.23
|
%
|
1.18
|
%
|
1.29
|
%
|
|||||||||
18
|
%
|
15
|
%
|
24
|
%
|
39
|
%
|
28
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(2,443,808)
|
$2,443,808
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid at the end of each calendar quarter. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSY FUNDS
|
1-800-966-4354
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, foreign-issued common stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”)
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
Investments
|
|||||
Cost of investments for tax purposes
|
$
|
192,870,478
|
|||
Gross tax unrealized appreciation
|
$
|
30,737,666
|
|||
Gross tax unrealized depreciation
|
(4,551,004
|
)
|
|||
Net tax unrealized appreciation/(depreciation)
|
$
|
26,186,662
|
|||
Undistributed ordinary income
|
$
|
240,336
|
|||
Undistributed long-term capital gains
|
15,240,944
|
||||
Total distributable earnings
|
$
|
15,481,280
|
|||
Other accumulated gain/(loss)
|
$
|
—
|
|||
Total accumulated gain/(loss)
|
$
|
41,667,942
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
2,623,910
|
$
|
2,761,400
|
||||
Long-term capital gain
|
13,415,569
|
26,573,043
|
||||||
|
$
|
16,039,479
|
$
|
29,334,443
|
|
Long-term
|
Short-term
|
Investor Class
|
$1.12438
|
$0.00988
|
Institutional Class
|
$1.06068
|
$0.00932
|
Investor Class
|
$0.03033943
|
|
Institutional Class
|
$0.05691292
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM/TRUSTEES AND OFFICERS
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$1,021.50
|
$7.18
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,018.10
|
$7.17
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$1,023.70
|
$5.15
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.11
|
$5.14
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.41% for Investor Class shares or 1.01% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
6
|
Statement of Assets and Liabilities
|
9
|
Statement of Operations
|
10
|
Statements of Changes in Net Assets
|
11
|
Financial Highlights
|
12
|
Notes to the Financial Statements
|
14
|
Report of Independent Registered Public Accounting Firm
|
21
|
Trustees and Officers of the Fund
|
22
|
Expense Example
|
26
|
Proxy Voting Policy and Proxy Voting Records
|
28
|
Quarterly Schedule of Investments
|
28
|
Federal Tax Distribution Information
|
28
|
Important Notice Regarding Delivery of Shareholder Documents
|
28
|
Privacy Policy
|
29
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Balanced Fund (HBFBX)
|
3.46%
|
4.47%
|
6.12%
|
50/50 Blended DJIA/Treasury Index
|
5.66%
|
6.66%
|
7.05%
|
Dow Jones Industrial Average
|
9.87%
|
12.76%
|
13.33%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
U.S. Treasury Bill, 2.305%, 01/31/2019
|
17.11%
|
U.S. Treasury Bill, 2.200%, 12/06/2018
|
8.59%
|
U.S. Treasury Bill, 2.275%, 05/23/2019
|
8.49%
|
U.S. Treasury Bill, 2.275%, 06/20/2019
|
6.78%
|
Cisco Systems, Inc.
|
5.55%
|
Pfizer, Inc.
|
5.28%
|
The Procter & Gamble Co.
|
5.23%
|
Merck & Co., Inc.
|
5.13%
|
The Coca-Cola Co.
|
5.13%
|
Verizon Communications, Inc.
|
4.92%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS – 48.32%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 4.92%
|
||||||||||||
Verizon Communications, Inc.
|
10,008
|
$
|
571,357
|
4.92
|
%
|
|||||||
|
||||||||||||
Consumer Staples – 10.36%
|
||||||||||||
The Coca-Cola Co.
|
12,450
|
596,106
|
5.13
|
%
|
||||||||
The Procter & Gamble Co.
|
6,850
|
607,458
|
5.23
|
%
|
||||||||
|
1,203,564
|
10.36
|
%
|
|||||||||
|
||||||||||||
Energy – 9.01%
|
||||||||||||
Chevron Corp.
|
4,630
|
516,940
|
4.45
|
%
|
||||||||
Exxon Mobil Corp.
|
6,650
|
529,872
|
4.56
|
%
|
||||||||
|
1,046,812
|
9.01
|
%
|
|||||||||
|
||||||||||||
Health Care – 10.41%
|
||||||||||||
Merck & Co., Inc.
|
8,100
|
596,241
|
5.13
|
%
|
||||||||
Pfizer, Inc.
|
14,252
|
613,691
|
5.28
|
%
|
||||||||
|
1,209,932
|
10.41
|
%
|
|||||||||
|
||||||||||||
Industrials – 1.45%
|
||||||||||||
General Electric Co.
|
16,702
|
168,690
|
1.45
|
%
|
||||||||
|
||||||||||||
Information Technology – 12.17%
|
||||||||||||
Cisco Systems, Inc.
|
14,088
|
644,526
|
5.55
|
%
|
||||||||
Intel Corp.
|
6,950
|
325,816
|
2.80
|
%
|
||||||||
International Business Machines Corp.
|
3,846
|
443,944
|
3.82
|
%
|
||||||||
|
1,414,286
|
12.17
|
%
|
|||||||||
|
||||||||||||
Total Common Stocks
|
||||||||||||
(Cost $5,095,269)
|
5,614,641
|
48.32
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
SHORT-TERM INVESTMENTS – 52.34%
|
Number of Shares/
|
% of
|
||||||||||
|
Par Amount
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 3.69%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (a)
|
429,571
|
$
|
429,571
|
3.69
|
%
|
|||||||
|
||||||||||||
U.S. Treasury Bills – 48.65%
|
||||||||||||
2.135%, 11/08/2018 (b)
|
500,000
|
499,843
|
4.30
|
%
|
||||||||
2.200%, 12/06/2018 (b)
|
1,000,000
|
998,342
|
8.59
|
%
|
||||||||
2.305%, 01/31/2019 (b)
|
2,000,000
|
1,988,461
|
17.11
|
%
|
||||||||
2.275%, 05/23/2019 (b)
|
1,000,000
|
986,227
|
8.49
|
%
|
||||||||
2.275%, 06/20/2019 (b)
|
800,000
|
787,385
|
6.78
|
%
|
||||||||
2.335%, 07/18/2019 (b)
|
400,000
|
392,827
|
3.38
|
%
|
||||||||
|
5,653,085
|
48.65
|
%
|
|||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $6,087,923)
|
6,082,656
|
52.34
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $11,183,192) – 100.66%
|
11,697,297
|
100.66
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.66)%
|
(76,726
|
)
|
(0.66
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
11,620,571
|
100.00
|
%
|
(a)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
(b)
|
The rate listed is discount rate at issue.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
571,357
|
$
|
—
|
$
|
—
|
$
|
571,357
|
||||||||
Consumer Staples
|
1,203,564
|
—
|
—
|
1,203,564
|
||||||||||||
Energy
|
1,046,812
|
—
|
—
|
1,046,812
|
||||||||||||
Health Care
|
1,209,932
|
—
|
—
|
1,209,932
|
||||||||||||
Industrials
|
168,690
|
—
|
—
|
168,690
|
||||||||||||
Information Technology
|
1,414,286
|
—
|
—
|
1,414,286
|
||||||||||||
Total Common Stocks
|
$
|
5,614,641
|
$
|
—
|
$
|
—
|
$
|
5,614,641
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
429,571
|
$
|
—
|
$
|
—
|
$
|
429,571
|
||||||||
U.S. Treasury Bills
|
—
|
5,653,085
|
—
|
5,653,085
|
||||||||||||
Total Short-Term Investments
|
$
|
429,571
|
$
|
5,653,085
|
$
|
—
|
$
|
6,082,656
|
||||||||
Total Investments
|
$
|
6,044,212
|
$
|
5,653,085
|
$
|
—
|
$
|
11,697,297
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $11,183,192)
|
$
|
11,697,297
|
||
Dividends and interest receivable
|
11,695
|
|||
Prepaid expenses and other assets
|
8,074
|
|||
Total Assets
|
11,717,066
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
815
|
|||
Payable to advisor
|
5,968
|
|||
Payable to administrator
|
1,033
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
49,955
|
|||
Accrued service fees
|
995
|
|||
Accrued trustees fees
|
5,962
|
|||
Accrued expenses and other payables
|
9,867
|
|||
Total Liabilities
|
96,495
|
|||
NET ASSETS
|
$
|
11,620,571
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
10,561,571
|
||
Total distributable earnings
|
1,059,000
|
|||
Total Net Assets
|
$
|
11,620,571
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
11,620,571
|
||
Shares issued and outstanding
|
941,712
|
|||
Net asset value, offering price and redemption price per share
|
$
|
12.34
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income
|
$
|
204,566
|
||
Interest income
|
98,172
|
|||
Total investment income
|
302,738
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
71,737
|
|||
Compliance expense (See Note 5)
|
29,499
|
|||
Audit fees
|
23,182
|
|||
Federal and state registration fees
|
20,669
|
|||
Trustees’ fees and expenses
|
17,396
|
|||
Distribution fees – Investor Class (See Note 5)
|
17,934
|
|||
Service fees – Investor Class (See Note 5)
|
11,956
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
11,571
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
6,831
|
|||
Reports to shareholders
|
5,734
|
|||
Other expenses
|
2,897
|
|||
Total expenses
|
219,406
|
|||
NET INVESTMENT INCOME
|
$
|
83,332
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
591,543
|
||
Net change in unrealized appreciation/depreciation on investments
|
(256,449
|
)
|
||
Net gain on investments
|
335,094
|
|||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
418,426
|
HENNESSYFUNDS.COM
|
STATEMENT OF OPERATIONS/STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
83,332
|
$
|
54,758
|
||||
Net realized gain on investments
|
591,543
|
900,400
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(256,449
|
)
|
149,079
|
|||||
Net increase in net assets resulting from operations
|
418,426
|
1,104,237
|
||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(931,750
|
)
|
(893,436
|
)
|
||||
Total distributions
|
(931,750
|
)
|
(893,436
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
501,087
|
991,429
|
||||||
Dividends reinvested – Investor Class
|
914,566
|
877,425
|
||||||
Cost of shares redeemed – Investor Class
|
(1,520,707
|
)
|
(1,920,997
|
)
|
||||
Net decrease in net assets derived
|
||||||||
from capital share transactions
|
(105,054
|
)
|
(52,143
|
)
|
||||
TOTAL INCREASE (DECREASE) IN NET ASSETS
|
(618,378
|
)
|
158,658
|
|||||
NET ASSETS:
|
||||||||
Beginning of year
|
12,238,949
|
12,080,291
|
||||||
End of year
|
$
|
11,620,571
|
$
|
12,238,949
|
(2)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
39,254
|
79,582
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
75,304
|
72,055
|
||||||
Shares redeemed – Investor Class
|
(123,009
|
)
|
(154,177
|
)
|
||||
Net decrease in shares outstanding
|
(8,451
|
)
|
(2,540
|
)
|
(1)
|
Includes net investment income distributions of $48,189 and net realized gain distributions of $845,247.
|
(2)
|
Includes accumulated undistributed net investment income of $6,569.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
12.88
|
$
|
12.68
|
$
|
12.37
|
$
|
12.98
|
$
|
12.90
|
|||||||||
0.09
|
0.06
|
0.04
|
0.03
|
0.02
|
||||||||||||||
0.33
|
1.09
|
0.58
|
(0.01
|
)
|
0.51
|
|||||||||||||
0.42
|
1.15
|
0.62
|
0.02
|
0.53
|
||||||||||||||
(0.08
|
)
|
(0.05
|
)
|
(0.04
|
)
|
(0.03
|
)
|
(0.01
|
)
|
|||||||||
(0.88
|
)
|
(0.90
|
)
|
(0.27
|
)
|
(0.60
|
)
|
(0.44
|
)
|
|||||||||
(0.96
|
)
|
(0.95
|
)
|
(0.31
|
)
|
(0.63
|
)
|
(0.45
|
)
|
|||||||||
$
|
12.34
|
$
|
12.88
|
$
|
12.68
|
$
|
12.37
|
$
|
12.98
|
|||||||||
3.46
|
%
|
9.56
|
%
|
5.20
|
%
|
0.11
|
%
|
4.26
|
%
|
|||||||||
$
|
11.62
|
$
|
12.24
|
$
|
12.08
|
$
|
11.63
|
$
|
12.54
|
|||||||||
1.84
|
%
|
1.82
|
%
|
1.68
|
%
|
1.68
|
%
|
1.75
|
%
|
|||||||||
0.70
|
%
|
0.45
|
%
|
0.33
|
%
|
0.20
|
%
|
0.17
|
%
|
|||||||||
21
|
%
|
31
|
%
|
51
|
%
|
34
|
%
|
23
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(38,228)
|
$38,228
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid at the end of each calendar quarter. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in
|
HENNESSY FUNDS
|
1-800-966-4354
|
light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”) will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
11,194,398
|
||
Gross tax unrealized appreciation
|
$
|
888,065
|
||
Gross tax unrealized depreciation
|
(385,166
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
502,899
|
||
Undistributed ordinary income
|
$
|
7,891
|
||
Undistributed long-term capital gains
|
548,210
|
|||
Total distributable earnings
|
$
|
556,101
|
||
Other accumulated gain/(loss)
|
$
|
—
|
||
Total accumulated gain/(loss)
|
$
|
1,059,000
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
144,183
|
$
|
91,227
|
||||
Long-term capital gain
|
787,567
|
802,209
|
||||||
|
$
|
931,750
|
$
|
893,436
|
Long-term
|
|
Investor Class
|
$0.54675
|
Investor Class
|
$0.02951113
|
HENNESSYFUNDS.COM
|
NOTES/REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSY FUNDS
|
1-800-966-4354
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$1,018.10
|
$9.31
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,015.98
|
$9.30
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.83% 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
11
|
Statements of Operations
|
12
|
Statements of Changes in Net Assets
|
14
|
Financial Highlights
|
16
|
Notes to the Financial Statements
|
20
|
Report of Independent Registered Public Accounting Firm
|
31
|
Trustees and Officers of the Fund
|
32
|
Expense Example
|
36
|
Proxy Voting Policy and Proxy Voting Records
|
38
|
Quarterly Schedule of Investments
|
38
|
Important Notice Regarding Delivery of Shareholder Documents
|
38
|
Board Approval of Investment Advisory Agreements
|
39
|
Privacy Policy
|
44
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Since Inception
|
|
|
11 Months(1)
|
Year
|
(12/31/13)
|
Hennessy BP Energy Fund –
|
|||
Investor Class (HNRGX)
|
-5.91%
|
-3.58%
|
-1.25%
|
Hennessy BP Energy Fund –
|
|||
Institutional Class (HNRIX)
|
-5.66%
|
-3.29%
|
-1.02%
|
S&P 500 Energy Index
|
0.01%
|
1.78%
|
-2.74%
|
S&P North American Natural
|
|||
Resources Sector Index
|
-4.07%
|
-2.56%
|
-3.98%
|
S&P 500 Index
|
4.15%
|
7.35%
|
10.49%
|
(1)
|
The period ended October 31, 2018, consists of 11 months because the Fund changed its fiscal year end from November 30 to October 31, effective October 26, 2018.
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% TOTAL ASSETS
|
Diamondback Energy, Inc.
|
3.87%
|
WPX Energy, Inc.
|
3.75%
|
Nutrien Ltd.
|
3.70%
|
ProPetro Holding Corp.
|
3.54%
|
Quanta Services, Inc.
|
3.52%
|
Patterson-UTI Energy, Inc.
|
3.52%
|
Parsley Energy, Inc., Class A
|
3.52%
|
Targa Resources Corp.
|
3.36%
|
Pioneer Natural Resources Co.
|
3.32%
|
Knight-Swift Transportation Holdings, Inc.
|
3.32%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 89.05%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Agricultural Products – 3.72%
|
||||||||||||
Nutrien Ltd. (b)
|
68,139
|
$
|
3,606,597
|
3.72
|
%
|
|||||||
|
||||||||||||
Building Materials – 1.86%
|
||||||||||||
Summit Materials, Inc., Class A (a)
|
133,715
|
1,805,153
|
1.86
|
%
|
||||||||
|
||||||||||||
Chemicals – 3.04%
|
||||||||||||
Huntsman Corp.
|
134,575
|
2,944,501
|
3.04
|
%
|
||||||||
|
||||||||||||
Downstream – 5.22%
|
||||||||||||
Delek U.S. Holdings, Inc.
|
74,491
|
2,735,309
|
2.82
|
%
|
||||||||
Marathon Petroleum Corp.
|
32,975
|
2,323,089
|
2.40
|
%
|
||||||||
|
5,058,398
|
5.22
|
%
|
|||||||||
|
||||||||||||
Exploration & Production – 39.21%
|
||||||||||||
Anadarko Petroleum Corp.
|
51,949
|
2,763,687
|
2.85
|
%
|
||||||||
Antero Resources Corp. (a)
|
193,917
|
3,081,341
|
3.18
|
%
|
||||||||
Callon Petroleum Co. (a)
|
223,219
|
2,225,493
|
2.29
|
%
|
||||||||
Continental Resources, Inc. (a)
|
44,784
|
2,359,221
|
2.43
|
%
|
||||||||
Diamondback Energy, Inc.
|
33,612
|
3,776,644
|
3.89
|
%
|
||||||||
Encana Corp. (b)
|
181,515
|
1,858,714
|
1.92
|
%
|
||||||||
EOG Resources, Inc.
|
8,273
|
871,478
|
0.90
|
%
|
||||||||
HighPoint Resources Corp. (a)
|
307,794
|
1,144,994
|
1.18
|
%
|
||||||||
Marathon Oil Corp.
|
139,367
|
2,646,579
|
2.73
|
%
|
||||||||
Newfield Exploration Co. (a)
|
99,874
|
2,017,455
|
2.08
|
%
|
||||||||
Oasis Petroleum, Inc. (a)
|
181,859
|
1,829,501
|
1.89
|
%
|
||||||||
Occidental Petroleum Corp.
|
46,470
|
3,116,743
|
3.21
|
%
|
||||||||
Parsley Energy, Inc., Class A (a)
|
146,464
|
3,430,187
|
3.54
|
%
|
||||||||
Pioneer Natural Resources Co.
|
21,980
|
3,236,995
|
3.34
|
%
|
||||||||
WPX Energy, Inc. (a)
|
228,441
|
3,664,194
|
3.78
|
%
|
||||||||
|
38,023,226
|
39.21
|
%
|
|||||||||
|
||||||||||||
Metals & Mining – 6.10%
|
||||||||||||
Alcoa Corp. (a)
|
77,332
|
2,705,847
|
2.79
|
%
|
||||||||
The Timken Co.
|
81,264
|
3,213,991
|
3.31
|
%
|
||||||||
|
5,919,838
|
6.10
|
%
|
|||||||||
|
||||||||||||
Midstream – 5.76%
|
||||||||||||
Targa Resources Corp.
|
63,449
|
3,278,410
|
3.38
|
%
|
||||||||
The Williams Companies, Inc.
|
94,713
|
2,304,367
|
2.38
|
%
|
||||||||
|
5,582,777
|
5.76
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Oil Services – 20.80%
|
||||||||||||
Forum Energy Technologies, Inc. (a)
|
235,215
|
$
|
2,107,526
|
2.17
|
%
|
|||||||
Halliburton Co.
|
83,453
|
2,894,150
|
2.98
|
%
|
||||||||
MRC Global, Inc. (a)
|
135,723
|
2,148,495
|
2.22
|
%
|
||||||||
Patterson-UTI Energy, Inc.
|
206,198
|
3,431,135
|
3.54
|
%
|
||||||||
ProPetro Holding Corp. (a)
|
195,888
|
3,457,423
|
3.57
|
%
|
||||||||
Quanta Services, Inc. (a)
|
110,159
|
3,436,961
|
3.54
|
%
|
||||||||
Solaris Oilfield Infrastructure, Inc., Class A (a)
|
204,190
|
2,695,308
|
2.78
|
%
|
||||||||
|
20,170,998
|
20.80
|
%
|
|||||||||
|
||||||||||||
Transportation – 3.34%
|
||||||||||||
Knight-Swift Transportation Holdings, Inc.
|
101,128
|
3,236,096
|
3.34
|
%
|
||||||||
|
||||||||||||
Total Common Stocks
|
||||||||||||
(Cost $93,627,859)
|
86,347,584
|
89.05
|
%
|
|||||||||
|
||||||||||||
PARTNERSHIPS & TRUSTS – 10.07%
|
||||||||||||
|
||||||||||||
Midstream – 10.07%
|
||||||||||||
Energy Transfer LP
|
169,046
|
2,626,971
|
2.71
|
%
|
||||||||
Enterprise Products Partners LP
|
108,236
|
2,902,890
|
3.00
|
%
|
||||||||
MPLX LP
|
61,836
|
2,078,308
|
2.14
|
%
|
||||||||
Plains All American Pipeline LP
|
98,929
|
2,153,684
|
2.22
|
%
|
||||||||
|
9,761,853
|
10.07
|
%
|
|||||||||
Total Partnerships & Trusts
|
||||||||||||
(Cost $10,043,233)
|
9,761,853
|
10.07
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
SHORT-TERM INVESTMENTS – 1.20%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 1.20%
|
||||||||||||
Morgan Stanley Institutional Liquidity Funds,
|
||||||||||||
Government Portfolio, 2.05% (c)
|
1,163,922
|
$
|
1,163,922
|
1.20
|
%
|
|||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $1,163,922)
|
1,163,922
|
1.20
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $104,835,014) – 100.32%
|
97,273,359
|
100.32
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.32)%
|
(311,345
|
)
|
(0.32
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
96,962,014
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
(b)
|
U.S.-traded security of a foreign corporation
|
(c)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Agricultural Products
|
$
|
3,606,597
|
$
|
—
|
$
|
—
|
$
|
3,606,597
|
||||||||
Building Materials
|
1,805,153
|
—
|
—
|
1,805,153
|
||||||||||||
Chemicals
|
2,944,501
|
—
|
—
|
2,944,501
|
||||||||||||
Downstream
|
5,058,398
|
—
|
—
|
5,058,398
|
||||||||||||
Exploration & Production
|
38,023,226
|
—
|
—
|
38,023,226
|
||||||||||||
Metals & Mining
|
5,919,838
|
—
|
—
|
5,919,838
|
||||||||||||
Midstream
|
5,582,777
|
—
|
—
|
5,582,777
|
||||||||||||
Oil Services
|
20,170,998
|
—
|
—
|
20,170,998
|
||||||||||||
Transportation
|
3,236,096
|
—
|
—
|
3,236,096
|
||||||||||||
Total Common Stocks
|
$
|
86,347,584
|
$
|
—
|
$
|
—
|
$
|
86,347,584
|
||||||||
Partnerships & Trusts
|
||||||||||||||||
Midstream
|
$
|
9,761,853
|
$
|
—
|
$
|
—
|
$
|
9,761,853
|
||||||||
Total Partnerships & Trusts
|
$
|
9,761,853
|
$
|
—
|
$
|
—
|
$
|
9,761,853
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
1,163,922
|
$
|
—
|
$
|
—
|
$
|
1,163,922
|
||||||||
Total Short-Term Investments
|
$
|
1,163,922
|
$
|
—
|
$
|
—
|
$
|
1,163,922
|
||||||||
Total Investments
|
$
|
97,273,359
|
$
|
—
|
$
|
—
|
$
|
97,273,359
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $104,835,014)
|
$
|
97,273,359
|
||
Cash
|
1,820
|
|||
Dividends and interest receivable
|
950
|
|||
Return of capital receivable
|
134,229
|
|||
Receivable for fund shares sold
|
163,732
|
|||
Prepaid expenses and other assets
|
11,873
|
|||
Total Assets
|
97,585,963
|
|||
LIABILITIES:
|
||||
Payable for securities purchased
|
295,311
|
|||
Payable for fund shares redeemed
|
123,258
|
|||
Payable to advisor
|
112,147
|
|||
Payable to administrator
|
19,668
|
|||
Payable to auditor
|
25,100
|
|||
Accrued distribution fees
|
4,212
|
|||
Accrued service fees
|
249
|
|||
Accrued trustees fees
|
3,450
|
|||
Accrued expenses and other payables
|
40,554
|
|||
Total Liabilities
|
623,949
|
|||
NET ASSETS
|
$
|
96,962,014
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
106,022,804
|
||
Total distributable earnings
|
(9,060,790
|
)
|
||
Total Net Assets
|
$
|
96,962,014
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
18,155,294
|
||
Shares issued and outstanding
|
990,785
|
|||
Net asset value, offering price and redemption price per share
|
$
|
18.32
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
78,806,720
|
||
Shares issued and outstanding
|
4,260,643
|
|||
Net asset value, offering price and redemption price per share
|
$
|
18.50
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statements of Operations
|
11 Months Ended
|
Year Ended
|
|||||||
October 31, 2018(1)
|
November 30, 2017
|
|||||||
INVESTMENT INCOME:
|
||||||||
Distributions received from master limited partnerships
|
$
|
1,230,991
|
$
|
2,132,699
|
||||
Less: return of capital on distributions received
|
(1,138,853
|
)
|
(2,082,043
|
)
|
||||
Dividend income from common stock(2)
|
804,121
|
831,100
|
||||||
Interest income
|
45,114
|
39,985
|
||||||
Other income
|
976
|
—
|
||||||
Total investment income
|
942,349
|
921,741
|
||||||
EXPENSES:
|
||||||||
Investment advisory fees (See Note 5)
|
1,517,058
|
1,786,981
|
||||||
Administration, fund accounting, custody
|
||||||||
and transfer agent fees (See Note 5)
|
170,107
|
219,246
|
||||||
Sub-transfer agent expenses –
|
||||||||
Investor Class (See Note 5)
|
12,208
|
36,685
|
(3)
|
|||||
Sub-transfer agent expenses –
|
||||||||
Institutional Class (See Note 5)
|
58,982
|
116,336
|
||||||
Distribution fees – Investor Class (See Note 5)
|
51,574
|
102,684
|
(3)
|
|||||
Federal and state registration fees
|
43,988
|
62,625
|
||||||
Audit fees
|
25,100
|
25,013
|
||||||
Trustees’ fees and expenses
|
17,848
|
13,924
|
||||||
Reports to shareholders
|
17,670
|
15,910
|
||||||
Compliance expense (See Note 5)
|
10,649
|
12,211
|
||||||
Legal fees
|
4,946
|
10,382
|
||||||
Service fees – Investor Class (See Note 5)
|
249
|
—
|
||||||
Interest expense (See Note 7)
|
197
|
93
|
||||||
Other expenses
|
28,507
|
24,275
|
||||||
Total expenses
|
1,959,083
|
2,426,365
|
||||||
NET INVESTMENT LOSS
|
$
|
(1,016,734
|
)
|
$
|
(1,504,624
|
)
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||||||
Net realized gain on:
|
||||||||
Investments
|
$
|
12,791,029
|
$
|
14,678,919
|
||||
Written options
|
—
|
31,308
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(15,177,094
|
)
|
(20,430,679
|
)
|
||||
Net loss on investments
|
(2,386,065
|
)
|
(5,720,452
|
)
|
||||
NET DECREASE IN NET ASSETS
|
||||||||
RESULTING FROM OPERATIONS
|
$
|
(3,402,799
|
)
|
$
|
(7,225,076
|
)
|
(1)
|
The period ended October 31, 2018, consists of 11 months due to the Fund’s fiscal year end change from November 30 to October 31, effective October 26, 2018.
|
(2)
|
Net of foreign taxes withheld of $20,578 and $9,465, respectively.
|
(3)
|
Effective November 28, 2017, Class C shares converted into Class A shares (redesignated as Investor Class shares). The amounts presented are inclusive of Class C sub-transfer agent expenses of $19,264 and Class C distribution fees of $59,132.
|
HENNESSYFUNDS.COM
|
STATEMENTS OF OPERATIONS
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statements of Changes in Net Assets
|
(1)
|
The period ended October 31, 2018, consists of 11 months due to the Fund’s fiscal year end change from November 30 to October 31, effective October 26, 2018.
|
(2)
|
Effective November 28, 2017, Class C shares converted into Class A shares (redesignated as Investor Class shares).
|
(3)
|
All distributions were from net investment income.
|
(4)
|
Includes accumulated net investment loss of $(3,269,605).
|
(5)
|
Includes accumulated net investment loss of $(1,725,723).
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
11 Months Ended
|
Year Ended
|
Year Ended
|
||||||||
October 31, 2018(1)
|
November 30, 2017
|
November 30, 2016
|
||||||||
$
|
(1,016,734
|
)
|
$
|
(1,504,624
|
)
|
$
|
(918,255
|
)
|
||
12,791,029
|
14,710,227
|
(12,251,964
|
)
|
|||||||
(15,177,094
|
)
|
(20,430,679
|
)
|
43,189,916
|
||||||
(3,402,799
|
)
|
(7,225,076
|
)
|
30,019,697
|
||||||
—
|
—
|
(202,924
|
)
|
|||||||
—
|
—
|
(202,924
|
)(3)
|
|||||||
4,580,057
|
4,800,150
|
4,780,718
|
||||||||
—
|
1,716,520
|
3,187,859
|
||||||||
27,159,764
|
38,623,311
|
31,506,175
|
||||||||
—
|
7,420,979
|
—
|
||||||||
—
|
—
|
201,492
|
||||||||
(8,125,374
|
)
|
(8,176,184
|
)
|
(7,562,686
|
)
|
|||||
—
|
(4,155,967
|
)
|
(1,811,437
|
)
|
||||||
(68,363,869
|
)
|
(37,713,776
|
)
|
(28,748,825
|
)
|
|||||
—
|
(7,420,979
|
)
|
—
|
|||||||
(44,749,422
|
)
|
(4,905,946
|
)
|
1,553,296
|
||||||
(48,152,221
|
)
|
(12,131,022
|
)
|
31,370,069
|
||||||
145,114,235
|
157,245,257
|
125,875,188
|
||||||||
$
|
96,962,014
|
$
|
145,114,235
|
(4)
|
$
|
157,245,257
|
(5)
|
|||
216,063
|
244,584
|
288,406
|
||||||||
—
|
88,930
|
200,589
|
||||||||
1,279,785
|
2,010,365
|
1,951,347
|
||||||||
—
|
389,181
|
—
|
||||||||
—
|
(394,345
|
)
|
—
|
|||||||
—
|
—
|
10,549
|
||||||||
(389,081
|
)
|
(425,815
|
)
|
(473,366
|
)
|
|||||
—
|
(219,288
|
)
|
(110,064
|
)
|
||||||
(3,263,694
|
)
|
(1,916,043
|
)
|
(1,889,870
|
)
|
|||||
(2,156,927
|
)
|
(222,431
|
)
|
(22,409
|
)
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Fund commenced operations on December 31, 2013.
|
(2)
|
Calculated using the average shares outstanding method.
|
(3)
|
Not annualized.
|
(4)
|
Annualized.
|
(5)
|
The period ended October 31, 2018, consists of 11 months due to the Fund’s fiscal year end change from November 30, to October 31, effective October 26, 2018.
|
(6)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Period Ended
|
Year Ended November 30,
|
Period Ended
|
||||||||||||||||
October 31,
|
November 30,
|
|||||||||||||||||
2018(5)
|
2017
|
2016
|
2015
|
2014(1)
|
||||||||||||||
$
|
19.47
|
$
|
20.54
|
$
|
16.41
|
$
|
20.45
|
$
|
20.00
|
|||||||||
(0.20
|
)
|
(0.23
|
)
|
(0.15
|
)
|
(0.10
|
)
|
(0.11
|
)
|
|||||||||
(0.95
|
)
|
(0.84
|
)
|
4.28
|
(3.46
|
)
|
0.56
|
|||||||||||
(1.15
|
)
|
(1.07
|
)
|
4.13
|
(3.56
|
)
|
0.45
|
|||||||||||
—
|
—
|
—
|
(0.48
|
)
|
—
|
|||||||||||||
—
|
—
|
—
|
(0.48
|
)
|
—
|
|||||||||||||
$
|
18.32
|
$
|
19.47
|
$
|
20.54
|
$
|
16.41
|
$
|
20.45
|
|||||||||
(5.91
|
)%(3)
|
(5.21
|
)%
|
25.17
|
%
|
(17.57
|
)%
|
2.25
|
%(3)
|
|||||||||
$
|
18.16
|
$
|
22.66
|
$
|
19.64
|
$
|
18.72
|
$
|
15.14
|
|||||||||
1.82
|
%(4)
|
1.87
|
%
|
1.89
|
%
|
1.87
|
%
|
1.98
|
%(4)
|
|||||||||
(1.05
|
)%(4)
|
(1.21
|
)%
|
(0.92
|
)%
|
(0.51
|
)%
|
(0.53
|
)%(4)
|
|||||||||
72
|
%(3)
|
84
|
%
|
83
|
%
|
79
|
%
|
72
|
%(3)
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Fund commenced operations on December 31, 2013.
|
(2)
|
Calculated using the average shares outstanding method.
|
(3)
|
Not annualized.
|
(4)
|
Annualized.
|
(5)
|
The period ended October 31, 2018, consists of 11 months due to the Fund’s fiscal year end change from November 30 to October 31, effective October 26, 2018.
|
(6)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Period Ended
|
Year Ended November 30,
|
Period Ended
|
||||||||||||||||
October 31,
|
November 30,
|
|||||||||||||||||
2018(5)
|
2017
|
2016
|
2015
|
2014(1)
|
||||||||||||||
$
|
19.61
|
$
|
20.64
|
$
|
16.46
|
$
|
20.45
|
$
|
20.00
|
|||||||||
(0.15
|
)
|
(0.19
|
)
|
(0.11
|
)
|
(0.04
|
)
|
(0.06
|
)
|
|||||||||
(0.96
|
)
|
(0.84
|
)
|
4.32
|
(3.47
|
)
|
0.51
|
|||||||||||
(1.11
|
)
|
(1.03
|
)
|
4.21
|
(3.51
|
)
|
0.45
|
|||||||||||
—
|
—
|
(0.03
|
)
|
—
|
—
|
|||||||||||||
—
|
—
|
—
|
(0.48
|
)
|
—
|
|||||||||||||
—
|
—
|
(0.03
|
)
|
(0.48
|
)
|
—
|
||||||||||||
$
|
18.50
|
$
|
19.61
|
$
|
20.64
|
$
|
16.46
|
$
|
20.45
|
|||||||||
(5.66
|
)%(3)
|
(4.99
|
)%
|
25.61
|
%
|
(17.32
|
)%
|
2.25
|
%(3)
|
|||||||||
$
|
78.81
|
$
|
122.45
|
$
|
126.92
|
$
|
100.05
|
$
|
68.31
|
|||||||||
1.57
|
%(4)
|
1.62
|
%
|
1.60
|
%
|
1.54
|
%
|
1.73
|
%(4)
|
|||||||||
(0.79
|
)%(4)
|
(0.98
|
)%
|
(0.65
|
)%
|
(0.20
|
)%
|
(0.28
|
)%(4)
|
|||||||||
72
|
%(3)
|
84
|
%
|
83
|
%
|
79
|
%
|
72
|
%(3)
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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 and investments in companies organized as partnerships for tax purposes. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for the 11-month period ended October 31, 2018, have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$1,552,995
|
$(1,552,995)
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
Derivatives – The Fund may invest in, or enter into, derivatives, such as options, futures contracts, options on futures contracts, and swaps, for a variety of reasons, including to hedge certain risks, provide a substitute for purchasing or selling particular securities, or increase potential income gain. Derivatives are financial
|
HENNESSY FUNDS
|
1-800-966-4354
|
contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives may allow the Fund to increase or decrease its level of risk more quickly and efficiently than transactions in other types of instruments. The main reason for utilizing derivative instruments is for hedging purposes.
|
|
The Fund follows the financial accounting reporting rules as required by the Derivatives and Hedging Topic of the FASB Accounting Standards Codification. Under such rules, the Fund is required to include enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivatives instruments affect an entity’s results of operations and financial position. During the 11-month period ended October 31, 2018, the Fund did not hold any derivative instruments. The effect of derivative instruments on the Statement of Operations for the year ended November 30, 2017, was as follows:
|
Change in Unrealized
|
||||
Appreciation/
|
||||
Realized Gain (Loss)
|
Depreciation
|
|||
Location of Gain (Loss) on
|
on Derivatives
|
on Derivatives
|
||
Instruments
|
Derivatives Recognized in Income
|
Recognized in Income
|
Recognized in Income
|
|
Equity Contracts:
|
Net realized gain (loss) on
|
$31,308
|
$ —
|
|
Call Option Written
|
transactions from written options
|
The average absolute notional value of options held during the year ended November 30, 2017, was $14,144.
|
|
j).
|
Partnership Accounting Policy – The Fund records its pro rata share of income/loss and capital gains/losses to the extent of distributions it has received, allocated from the underlying partnerships and accordingly adjusts the cost basis of the underlying partnerships for return of capital.
|
k).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
l).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
HENNESSY FUNDS
|
1-800-966-4354
|
foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
105,533,525
|
||
Gross tax unrealized appreciation
|
$
|
6,621,959
|
||
Gross tax unrealized depreciation
|
(14,882,125
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
(8,260,166
|
)
|
|
Undistributed ordinary income
|
$
|
—
|
||
Undistributed long-term capital gains
|
—
|
|||
Total distributable earnings
|
$
|
—
|
||
Other accumulated gain/(loss)
|
$
|
(800,624
|
)
|
|
Total accumulated gain/(loss)
|
$
|
(9,060,790
|
)
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
11-Month Period Ended
|
Year Ended
|
Year Ended
|
|||||||||
|
October 31, 2018
|
November 30, 2017
|
November 30, 2016
|
|||||||||
Ordinary income(1)
|
$
|
—
|
$
|
—
|
$
|
202,924
|
||||||
Long-term capital gain
|
—
|
—
|
—
|
|||||||||
|
$
|
—
|
$
|
—
|
$
|
202,924
|
Shares Issued
|
||||
Predecessor Fund
|
to Shareholders of
|
Fund
|
Combined
|
Tax Status
|
Net Assets
|
Predecessor Fund
|
Net Assets
|
Net Assets
|
of Transfer
|
$96,818,691(1)
|
5,275,159
|
$0
|
$96,818,691
|
Non-taxable
|
(1)
|
Includes accumulated net investment loss, accumulated realized gains and unrealized depreciation in the amounts of $(4,224,600), $821,745 and $(8,461,891), respectively.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES/REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
|||
Name, (Year of Birth),
|
|||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
|
with the Trust
|
of Service
|
During Past Five Years
|
|
Officers
|
|||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
||
Executive Vice President
|
Officer, and Secretary.
|
||
and Treasurer
|
|||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
||
Executive Vice President
|
|||
and Secretary
|
|||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
|
(1972)
|
since December 2013 and currently serves as its Chief
|
||
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
||
and Head of Distribution
|
|||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
|
(1977)(3)
|
as its General Counsel since June 2013.
|
||
Senior Vice President and
|
|||
Chief Compliance Officer
|
HENNESSY FUNDS
|
1-800-966-4354
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 858.90
|
$8.39
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,016.18
|
$9.10
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 860.50
|
$7.17
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,017.49
|
$7.78
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.79% for Investor Class shares or 1.53% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
|
(1)
|
A memorandum from outside legal counsel that described the fiduciary duties of the Board with respect to approving the advisory and sub-advisory agreements and the relevant factors for consideration;
|
|
(2)
|
A memorandum from the Advisor that listed the factors relevant to the Board’s approval of the advisory and sub-advisory agreements and also referenced the documents that had been provided to help the Board assess each such factor;
|
|
(3)
|
An inventory of the range of services to be provided by the Advisor and the Sub-Advisor to the Fund, and the distinction between the services to be provided by the Advisor as compared to the services to be provided by the Sub-Advisor;
|
|
(4)
|
A written discussion of economies of scale;
|
|
(5)
|
The forms of advisory and sub-advisory agreements;
|
|
(6)
|
A recent fact sheet of the predecessor Fund, which included, among other things, performance information over various periods during which the Sub-Advisor was the investment advisor to the predecessor Fund;
|
|
(7)
|
A peer expense comparison for the anticipated net expense ratio and the investment advisory fee of the Fund;
|
|
(8)
|
The Advisor’s financial statements from its most recent Form 10-K and Form 10-Q;
|
|
(9)
|
Information about the Fund’s compliance program;
|
|
(10)
|
The Advisor’s current Form ADV Part 1A (noting that the Advisor is not required to prepare and maintain Form ADV Part 2A or 2B);
|
|
(11)
|
A completed questionnaire from the Sub-Advisor;
|
|
(12)
|
The Sub-Advisor’s Code of Ethics;
|
|
(13)
|
The Sub-Advisor’s Form ADV Parts 1A, 2A, and 2B; and
|
|
(14)
|
Financial information of the Sub-Advisor.
|
HENNESSY FUNDS
|
1-800-966-4354
|
(1)
|
The nature and quality of the advisory services to be provided by the Advisor and the Sub-Advisor;
|
|
(2)
|
A comparison of the anticipated fees and expenses of the Fund to other similar funds;
|
|
(3)
|
Whether economies of scale would be recognized by the Fund;
|
|
(4)
|
The costs and profitability of the Fund to the Advisor and the Sub-Advisor;
|
|
(5)
|
The performance of the predecessor Fund; and
|
|
(6)
|
Any benefits to the Advisor and the Sub-Advisor from serving as an investment advisor to the Fund (other than the advisory fee and sub-advisory fee).
|
(1)
|
The Trustees considered the services identified below that are, or will be, provided by the Advisor. Based on this review, the Trustees concluded that the Advisor will provide high-quality services to the Fund, and they noted that their overall confidence in the Advisor is high. The Trustees also concluded that they were satisfied with the nature, extent, and quality of the advisory services provided to the other Hennessy Funds by the Advisor and that the nature and extent of the services to be provided by the Advisor are appropriate to assure that the Fund’s operations are conducted in compliance with applicable laws, rules, and regulations.
|
(a)
|
The Advisor will oversee the Sub-Advisor for the Fund, and the Sub-Advisor will act as the portfolio manager for the Fund.
|
||
(b)
|
The Advisor will perform a daily reconciliation of portfolio positions and cash for the Fund.
|
||
(c)
|
The Advisor will monitor the Fund’s compliance with its investment objectives and restrictions.
|
||
(d)
|
The Advisor will monitor compliance with federal securities laws and will perform or continue to perform activities such as maintaining a compliance program, conducting ongoing reviews of the compliance programs of the Sub-Advisor (including its Code of Ethics) and the Fund’s other service providers, monitoring incidents of abusive trading practices, reviewing Fund expense accruals, payments, and fixed expense ratios, evaluating insurance providers for fidelity bond, D&O/E&O, and cybersecurity insurance coverage, conducting employee compliance training, reviewing reports provided by service providers, maintaining books and records, and preparing an annual compliance report for the Board.
|
||
(e)
|
The Advisor will oversee the selection and continued employment of the Sub-Advisor, review the Fund’s investment performance, and monitor the Sub-Advisor’s adherence to the Fund’s investment objectives, policies, and restrictions.
|
HENNESSYFUNDS.COM
|
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
|
(f)
|
The Advisor will review the investment performance of the Fund on a regular basis, including a written summary prepared by the Fund’s portfolio managers of the Fund’s performance for the most recent 12-month period for each annual report of the Fund (or, for the 2018 annual report, the Fund’s most recent 11-month period).
|
||
(g)
|
The Advisor oversees service providers that will provide accounting, administration, distribution, transfer agency, custodial, sales, marketing, public relations, audit, information technology, and legal services to the Fund.
|
||
(h)
|
The Advisor maintains in-house marketing and distribution departments that will provide marketing and distribution services on behalf of the Fund.
|
||
(i)
|
The Advisor will be actively involved with preparing regulatory filings for the Fund, including writing and annually updating the Fund’s prospectus and related documents.
|
||
(j)
|
The Advisor will oversee distribution of the Fund through third-party broker/dealers and independent financial institutions such as Charles Schwab, Inc., Fidelity, TD Waterhouse, and Pershing. The Advisor participates in “no transaction fee” (“NTF”) programs with these companies on behalf of the Hennessy Funds, which allows customers to purchase the Fund through third-party distribution channels without paying a transaction fee. The Advisor compensates, in part, a number of these third-party providers of NTF programs out of its own revenues.
|
||
(k)
|
The Advisor pays the incentive compensation of the Trust’s compliance officers and employs other staff, such as legal, marketing, national accounts, distribution, sales, administrative, and trading oversight personnel, as well as management executives, all of whom will provide services to the Fund.
|
||
(l)
|
The Advisor provides a quarterly compliance certification to the Board.
|
||
(m)
|
The Advisor prepares or reviews Board materials, frequently presents to the Board or leads Board discussions, prepares or reviews meeting minutes, and arranges for Board training and education.
|
(2)
|
The Trustees considered the services identified below that will be provided by the Sub-Advisor. Based on this review, the Trustees concluded that the Sub-Advisor will provide high-quality services to the Fund. The Trustees also concluded that they were satisfied with the portfolio management services that the Sub-Advisor provided to the Predecessor Fund.
|
(a)
|
The Sub-Advisor will act as the portfolio manager for the Fund. In this capacity, the Sub-Advisor will do the following:
|
(i)
|
manage the composition of the Fund’s portfolio, including the purchase, retention, and disposition of portfolio securities in accordance with the Fund’s investment objectives, policies, and restrictions;
|
|||
(ii)
|
seek best execution for the Fund’s portfolio;
|
|||
(iii)
|
manage the use of soft dollars for the Fund; and
|
|||
(iv)
|
manage proxy voting for the Fund.
|
(b)
|
The Sub-Advisor will ensure that its compliance program includes policies and procedures relevant to the Fund and the Sub-Advisor’s duties as a portfolio manager to the Fund.
|
HENNESSY FUNDS
|
1-800-966-4354
|
(c)
|
The Sub-Advisor will prepare a written summary of the Fund’s performance for the most recent 12-month period for each annual report of the Fund (or, for the 2018 annual report, the Fund’s most recent 11-month period).
|
||
(d)
|
The Sub-Advisor will provide a quarterly compliance certification to the Board regarding trading and allocation practices, supervisory matters, its compliance program (including its code of ethics), compliance with the Fund’s policies, and general firm updates.
|
(3)
|
The Trustees considered the distinction between the services to be performed by the Advisor and the Sub-Advisor. The Trustees noted that the management of the Fund, including the oversight of the Sub-Advisor, would involve more comprehensive and substantive duties than the duties of the Sub-Advisor. Specifically, the Trustees considered the lists of services identified above and concluded that the services to be performed by the Advisor for the Fund would require a higher level of service and oversight than the services to be performed by the Sub-Advisor. Based on this determination, the Trustees concluded that the differential in advisory fees between the Advisor and the Sub-Advisor is reasonable.
|
|
(4)
|
The Trustees compared the performance of the predecessor Fund to benchmark indices over various periods and noted that the investment objectives and investment strategies of the Fund would be substantially similar to those of the predecessor Fund. Based on all such information, the Trustees believe that the Sub-Advisor had managed the predecessor Fund, and the Advisor and the Sub-Advisor will manage the Fund, in a manner that is materially consistent with its stated investment objective and style. The Trustees concluded that the approval of the advisory and sub-advisory agreements was warranted.
|
|
(5)
|
The Trustees reviewed the advisory fees and anticipated overall expense ratios of the Fund compared to other funds similar in asset size and investment objective using data from Morningstar. As part of the discussion with management, the Trustees ensured that they understood and were comfortable with the criteria used to determine the mutual funds included in the Morningstar categories for purposes of the materials considered at the meeting. The Trustees determined that the advisory fee and anticipated overall expense ratio of the Fund falls within the range of the advisory fees and overall expense ratios of other comparable funds and concluded that they are reasonable and warranted approval of the advisory and sub-advisory agreements.
|
|
(6)
|
The Trustees also considered whether the Advisor was likely to realize economies of scale that it should share with the Fund’s shareholders. The Trustees noted that many of the expenses that the Advisor will incur to manage the Fund are asset-based fees, so the Advisor would not realize material economies of scale as the assets of the Fund increase. For example, mutual fund platform fees would increase as the Fund’s assets grow. The Trustees also considered the Advisor’s agreement to waive fees for the Fund for two years. The Board noted that at current asset levels it did not appear likely that the Advisor would realize economies of scale and concluded that it would continue to monitor economies of scale in the future as circumstances changed.
|
|
(7)
|
The Trustees considered the profitability of the Advisor and the Sub-Advisor, including the impact of mutual fund platform fees on the Advisor’s profitability, and also considered the resources and revenues that the Advisor has put into managing
|
HENNESSYFUNDS.COM
|
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
|
and distributing the Fund. The Trustees then concluded that the anticipated profits of the Advisor and the Sub-Advisor are reasonable and not excessive when compared to profitability guidelines set forth in relevant court cases.
|
||
(8)
|
The Trustees considered the high level of professionalism and knowledge of the Advisor’s employees, along with a very low level of turnover, and concluded that this was beneficial to the Fund and its shareholders. The Trustees also considered the business backgrounds and key employees of the Sub-Advisor and determined that they believe these employees have the necessary expertise to manage the portfolio of the Fund for the benefit of the Fund and its shareholders.
|
|
(9)
|
The Trustees considered any anticipated benefits to the Advisor and the Sub-Advisor from serving as advisors to the Fund other than the advisory fee or sub-advisory fee. The Trustees noted that the Advisor and the Sub-Advisor in the future may derive ancillary benefits from, by way of example, their association with the Fund in the form of proprietary and third-party research products and services received from broker-dealers that execute portfolio trades for the Fund. The Trustees determined that they expected any such products and services to be used for legitimate purposes relating to the Fund by providing assistance in the investment decision-making process. The Trustees concluded that any additional benefits expected to be realized by the Advisor and the Sub-Advisor from their relationships with the Fund were reasonable.
|
HENNESSY FUNDS
|
1-800-966-4354
|
•
|
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.
|
HENNESSYFUNDS.COM
|
PRIVACY POLICY
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
10
|
Statements of Operations
|
11
|
Statements of Changes in Net Assets
|
12
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
18
|
Report of Independent Registered Public Accounting Firm
|
30
|
Trustees and Officers of the Fund
|
31
|
Expense Example
|
34
|
Proxy Voting Policy and Proxy Voting Records
|
36
|
Quarterly Schedule of Investments
|
36
|
Federal Tax Distribution Information
|
36
|
Important Notice Regarding Delivery of Shareholder Documents
|
36
|
Board Approval of Investment Advisory Agreements
|
37
|
Privacy Policy
|
42
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Since Inception
|
|
|
11 Months(1)
|
Year
|
(12/31/13)
|
Hennessy BP Midstream Fund –
|
|||
Investor Class (HMSFX)
|
-6.15%
|
-7.17%
|
-3.74%
|
Hennessy BP Midstream Fund –
|
|||
Institutional Class (HMSIX)
|
-5.94%
|
-6.96%
|
-3.50%
|
Alerian MLP Index
|
2.06%
|
0.68%
|
-5.49%
|
S&P 500 Index
|
4.15%
|
7.35%
|
10.49%
|
(1)
|
The period ended October 31, 2018, consists of 11 months because the Fund changed its fiscal year end from November 30 to October 31, effective October 26, 2018.
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% TOTAL ASSETS
|
Energy Transfer Equity LP
|
14.45%
|
The Williams Companies, Inc.
|
9.44%
|
Enterprise Products Partners LP
|
9.09%
|
Targa Resources Corp.
|
7.35%
|
Kinder Morgan, Inc.
|
5.80%
|
MPLX LP
|
5.11%
|
Shell Midstream Partners LP
|
5.11%
|
CNX Midstream Partners LP
|
5.02%
|
Magellan Midstream Partners LP
|
4.85%
|
Plains All American Pipeline LP
|
4.79%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 27.13%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Gathering & Processing – 8.83%
|
||||||||||||
Targa Resources Corp.
|
140,093
|
$
|
7,238,605
|
8.83
|
%
|
|||||||
|
||||||||||||
Natural Gas/NGL Transportation – 18.30%
|
||||||||||||
Kinder Morgan, Inc.
|
335,438
|
5,709,155
|
6.96
|
%
|
||||||||
The Williams Companies, Inc.
|
382,053
|
9,295,349
|
11.34
|
%
|
||||||||
|
15,004,504
|
18.30
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $24,288,755)
|
22,243,109
|
27.13
|
%
|
|||||||||
|
||||||||||||
PARTNERSHIPS & TRUSTS – 91.95%
|
||||||||||||
|
||||||||||||
Crude Oil & Refined Products – 46.32%
|
||||||||||||
Andeavor Logistics LP
|
59,713
|
2,392,103
|
2.92
|
%
|
||||||||
BP Midstream Partners LP
|
126,629
|
2,310,979
|
2.82
|
%
|
||||||||
Enterprise Products Partners LP
|
333,755
|
8,951,309
|
10.92
|
%
|
||||||||
Hess Midstream Partners LP
|
126,693
|
2,848,059
|
3.47
|
%
|
||||||||
Holly Energy Partners LP
|
86,539
|
2,520,016
|
3.07
|
%
|
||||||||
Magellan Midstream Partners LP
|
77,462
|
4,777,856
|
5.83
|
%
|
||||||||
Phillips 66 Partners LP
|
90,718
|
4,437,017
|
5.41
|
%
|
||||||||
Plains All American Pipeline LP
|
216,636
|
4,716,166
|
5.75
|
%
|
||||||||
Shell Midstream Partners LP
|
246,015
|
5,028,546
|
6.13
|
%
|
||||||||
|
37,982,051
|
46.32
|
%
|
|||||||||
|
||||||||||||
Gathering & Processing – 21.56%
|
||||||||||||
Antero Midstream GP LP
|
141,570
|
2,280,693
|
2.78
|
%
|
||||||||
Antero Midstream Partners LP
|
28,800
|
868,320
|
1.06
|
%
|
||||||||
CNX Midstream Partners LP
|
270,611
|
4,938,651
|
6.02
|
%
|
||||||||
MPLX LP
|
149,649
|
5,029,703
|
6.14
|
%
|
||||||||
Noble Midstream Partners LP
|
40,697
|
1,389,395
|
1.70
|
%
|
||||||||
Western Gas Partners LP
|
80,080
|
3,167,965
|
3.86
|
%
|
||||||||
|
17,674,727
|
21.56
|
%
|
|||||||||
|
||||||||||||
Natural Gas/NGL Transportation – 24.07%
|
||||||||||||
Cheniere Energy Partners LP
|
41,245
|
1,388,719
|
1.69
|
%
|
||||||||
Energy Transfer Equity LP
|
915,275
|
14,223,370
|
17.35
|
%
|
||||||||
EQM Midstream Partners LP
|
89,892
|
4,126,942
|
5.03
|
%
|
||||||||
|
19,739,031
|
24.07
|
%
|
|||||||||
Total Partnerships & Trusts
|
||||||||||||
(Cost $78,851,763)
|
75,395,809
|
91.95
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
SHORT-TERM INVESTMENTS – 0.00% (b)
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 0.00% (b)
|
||||||||||||
Morgan Stanley Institutional Liquidity Funds – Government Portfolio,
|
||||||||||||
Institutional Class 2.05% (a)
|
142
|
$
|
142
|
0.00
|
%
|
|||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $142)
|
142
|
0.00
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $103,140,660) – 119.08%
|
97,639,060
|
119.08
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (19.08)%
|
(15,641,730
|
)
|
(19.08
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
81,997,330
|
100.00
|
%
|
(a)
|
The rate listed is the fund’s seven-day yield at October 31, 2018.
|
(b)
|
Amount calculated is less than 0.005%.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Gathering & Processing
|
$
|
7,238,605
|
$
|
—
|
$
|
—
|
$
|
7,238,605
|
||||||||
Natural Gas/NGL Transportation
|
15,004,504
|
—
|
—
|
15,004,504
|
||||||||||||
Total Common Stocks
|
$
|
22,243,109
|
$
|
—
|
$
|
—
|
$
|
22,243,109
|
||||||||
Partnerships & Trusts
|
||||||||||||||||
Crude Oil & Refined Products
|
$
|
37,982,051
|
$
|
—
|
$
|
—
|
$
|
37,982,051
|
||||||||
Gathering & Processing
|
17,674,727
|
—
|
—
|
17,674,727
|
||||||||||||
Natural Gas/NGL Transportation
|
19,739,031
|
—
|
—
|
19,739,031
|
||||||||||||
Total Partnerships & Trusts
|
$
|
75,395,809
|
$
|
—
|
$
|
—
|
$
|
75,395,809
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
142
|
$
|
—
|
$
|
—
|
$
|
142
|
||||||||
Total Short-Term Investments
|
$
|
142
|
$
|
—
|
$
|
—
|
$
|
142
|
||||||||
Total Investments
|
$
|
97,639,060
|
$
|
—
|
$
|
—
|
$
|
97,639,060
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $103,140,660)
|
$
|
97,639,060
|
||
Dividends and interest receivable
|
648,813
|
|||
Receivable for securities sold
|
150,560
|
|||
Receivable for fund shares sold
|
1,527
|
|||
Prepaid expenses and other assets
|
15,939
|
|||
Total Assets
|
98,455,899
|
|||
LIABILITIES:
|
||||
Loans payable
|
127,000
|
|||
Payable for fund shares redeemed
|
16,099,440
|
|||
Payable to advisor
|
84,790
|
|||
Payable to administrator
|
29,368
|
|||
Payable to auditor
|
56,981
|
|||
Accrued distribution fees
|
4,304
|
|||
Accrued service fees
|
273
|
|||
Accrued franchise tax
|
19,899
|
|||
Accrued trustees fees
|
3,450
|
|||
Accrued expenses and other payables
|
33,064
|
|||
Total Liabilities
|
16,458,569
|
|||
NET ASSETS
|
$
|
81,997,330
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
105,270,507
|
||
Total distributable earnings
|
(23,273,177
|
)
|
||
Total Net Assets
|
$
|
81,997,330
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
20,072,836
|
||
Shares issued and outstanding
|
1,585,162
|
|||
Net asset value, offering price and redemption price per share
|
$
|
12.66
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
61,924,494
|
||
Shares issued and outstanding
|
4,825,100
|
|||
Net asset value, offering price and redemption price per share
|
$
|
12.83
|
HENNESSYFUNDS.COM
|
STATEMENT OF ASSETS AND LIABILITIES/STATEMENTS OF OPERATIONS
|
Statements of Operations
|
11 Months Ended
|
Year Ended
|
|||||||
October 31, 2018(1)
|
November 30, 2017
|
|||||||
INVESTMENT INCOME:
|
||||||||
Distributions received from master limited partnerships
|
$
|
5,760,323
|
$
|
4,921,818
|
||||
Less: return of capital on distributions received
|
(5,740,549
|
)
|
(4,921,818
|
)
|
||||
Dividend income
|
388,201
|
288,824
|
||||||
Interest income
|
15,391
|
29,818
|
||||||
Other income
|
930
|
—
|
||||||
Total investment income
|
424,296
|
318,642
|
||||||
EXPENSES:
|
||||||||
Investment advisory fees (See Note 5)
|
1,104,181
|
901,198
|
||||||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
14,172
|
17,002
|
(2)
|
|||||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
72,141
|
65,503
|
||||||
Administration, fund accounting, custody
|
||||||||
and transfer agent fees (See Note 5)
|
173,370
|
157,030
|
||||||
Distribution fees – Investor Class (See Note 5)
|
39,396
|
50,502
|
(2)
|
|||||
Service fees – Investor Class (See Note 5)
|
273
|
—
|
||||||
Federal and state registration fees
|
49,221
|
72,493
|
||||||
Reports to shareholders
|
23,377
|
20,121
|
||||||
Compliance expense (See Note 5)
|
10,271
|
10,807
|
||||||
Audit fees
|
46,411
|
27,411
|
||||||
Trustees’ fees and expenses
|
17,661
|
13,555
|
||||||
Legal fees
|
4,946
|
10,381
|
||||||
Interest expense (See Note 7)
|
5,338
|
—
|
||||||
Franchise tax expense
|
20,651
|
5,826
|
||||||
Other expenses
|
24,488
|
41,564
|
||||||
Total expenses before reimbursement by advisor
|
1,605,897
|
1,393,393
|
||||||
Expense reimbursement by advisor – Investor Class
|
(11,873
|
)
|
(22,557
|
)
|
||||
Expense reimbursement by advisor – Institutional Class
|
(53,808
|
)
|
(91,065
|
)
|
||||
Total expenses before state franchise and income taxes
|
1,540,216
|
1,279,771
|
||||||
State franchise and income tax expense
|
272
|
17,880
|
||||||
Total expenses
|
1,540,488
|
1,297,651
|
||||||
NET INVESTMENT LOSS
|
$
|
(1,116,192
|
)
|
$
|
(979,009
|
)
|
||
REALIZED AND UNREALIZED LOSSES:
|
||||||||
Net realized gain (loss) on investments
|
$
|
(4,616,225
|
)
|
$
|
2,579,686
|
|||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(2,268,476
|
)
|
(7,705,161
|
)
|
||||
Net loss on investments
|
(6,884,701
|
)
|
(5,125,475
|
)
|
||||
NET DECREASE IN NET ASSETS
|
||||||||
RESULTING FROM OPERATIONS
|
$
|
(8,000,893
|
)
|
$
|
(6,104,484
|
)
|
(1)
|
The period ended October 31, 2018, consists of 11 months due to the Fund’s fiscal year end change from November 30 to October 31, effective October 26, 2018.
|
(2)
|
Effective November 28, 2017, Class C shares converted into Class A shares (redesignated as Investor Class shares). The amounts presented are inclusive of Class C sub-transfer agent expenses of $3,099 and Class C distribution fees of $15,743.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statements of Changes in Net Assets
|
(1)
|
The period ended October 31, 2018, consists of 11 months due to the Fund’s fiscal year end change from November 30 to October 31, effective October 26, 2018.
|
(2)
|
Effective November 28, 2017, Class C shares converted into Class A shares (redesignated as Investor Class shares).
|
(3)
|
Includes accumulated net investment loss of $(1,594,345).
|
(4)
|
Includes accumulated net investment loss of $(615,336).
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
11 Months Ended
|
Year Ended
|
Year Ended
|
||||||||
October 31, 2018(1)
|
November 30, 2017
|
November 30, 2016
|
||||||||
$
|
(1,116,192
|
)
|
$
|
(979,009
|
)
|
$
|
(359,288
|
)
|
||
(4,616,225
|
)
|
2,579,686
|
(2,131,928
|
)
|
||||||
(2,268,476
|
)
|
(7,705,161
|
)
|
8,783,980
|
||||||
(8,000,893
|
)
|
(6,104,484
|
)
|
6,292,764
|
||||||
(1,237,326
|
)
|
(878,781
|
)
|
(594,838
|
)
|
|||||
—
|
(159,349
|
)
|
(133,706
|
)
|
||||||
(6,588,759
|
)
|
(3,683,962
|
)
|
(1,690,839
|
)
|
|||||
(7,826,085
|
)
|
(4,722,092
|
)
|
(2,419,383
|
)
|
|||||
12,908,692
|
9,320,726
|
8,205,734
|
||||||||
—
|
881,860
|
781,503
|
||||||||
61,536,519
|
65,450,965
|
23,087,389
|
||||||||
—
|
2,418,423
|
—
|
||||||||
1,178,239
|
824,902
|
582,056
|
||||||||
—
|
134,926
|
112,132
|
||||||||
5,538,251
|
2,907,358
|
1,586,986
|
||||||||
(8,575,706
|
)
|
(7,382,602
|
)
|
(4,491,015
|
)
|
|||||
—
|
(395,943
|
)
|
(643,867
|
)
|
||||||
(74,214,680
|
)
|
(10,344,313
|
)
|
(10,511,018
|
)
|
|||||
—
|
(2,418,423
|
)
|
—
|
|||||||
(1,628,685
|
)
|
61,397,879
|
18,709,900
|
|||||||
(17,455,663
|
)
|
50,571,303
|
22,583,281
|
|||||||
99,452,993
|
48,881,690
|
26,298,409
|
||||||||
$
|
81,997,330
|
$
|
99,452,993
|
(3)
|
$
|
48,881,690
|
(4)
|
|||
943,640
|
172,119
|
549,681
|
||||||||
—
|
54,624
|
53,955
|
||||||||
4,254,660
|
4,105,091
|
1,632,576
|
||||||||
—
|
582,014
|
—
|
||||||||
84,132
|
51,651
|
38,802
|
||||||||
—
|
8,532
|
7,570
|
||||||||
391,738
|
180,611
|
106,199
|
||||||||
(605,087
|
)
|
(455,427
|
)
|
(343,289
|
)
|
|||||
—
|
(25,294
|
)
|
(43,305
|
)
|
||||||
(5,454,423
|
)
|
(646,034
|
)
|
(757,714
|
)
|
|||||
—
|
(174,005
|
)
|
—
|
|||||||
(385,340
|
)
|
3,853,882
|
1,244,475
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Fund commenced operations on December 31, 2013.
|
(2)
|
Calculated using the average shares outstanding method.
|
(3)
|
Not annualized.
|
(4)
|
Annualized.
|
(5)
|
Deferred tax expense estimate is derived from net investment loss and realized and unrealized gain/loss.
|
(6)
|
Includes state income tax expense and deferred tax expense from net investment loss only.
|
(7)
|
The period ended October 31, 2018, consists of 11 months due to the Fund’s fiscal year end change from November 30 to October 31, effective October 26, 2018.
|
(8)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Period Ended
|
Year Ended November 30,
|
Period Ended
|
||||||||||||||||
October 31,
|
November 30,
|
|||||||||||||||||
2018(7)
|
2017
|
2016
|
2015
|
2014(1)
|
||||||||||||||
$
|
14.51
|
$
|
16.54
|
$
|
15.45
|
$
|
22.25
|
$
|
20.00
|
|||||||||
(0.16
|
)
|
(0.22
|
)
|
(0.17
|
)
|
(0.20
|
)
|
(0.20
|
)
|
|||||||||
(0.66
|
)
|
(0.78
|
)
|
2.29
|
(5.60
|
)
|
2.87
|
|||||||||||
(0.82
|
)
|
(1.00
|
)
|
2.12
|
(5.80
|
)
|
2.67
|
|||||||||||
(1.03
|
)
|
(1.03
|
)
|
(1.03
|
)
|
(1.00
|
)
|
(0.42
|
)
|
|||||||||
(1.03
|
)
|
(1.03
|
)
|
(1.03
|
)
|
(1.00
|
)
|
(0.42
|
)
|
|||||||||
$
|
12.66
|
$
|
14.51
|
$
|
16.54
|
$
|
15.45
|
$
|
22.25
|
|||||||||
(6.15
|
)%(3)
|
(6.49
|
)%
|
14.78
|
%
|
(27.17
|
)%
|
13.37
|
%(3)
|
|||||||||
$
|
20.07
|
$
|
16.86
|
$
|
13.43
|
$
|
8.76
|
$
|
7.17
|
|||||||||
1.83
|
%(4)
|
1.89
|
%
|
2.21
|
%
|
2.70
|
%
|
4.04
|
%(4)
|
|||||||||
1.75
|
%(4)
|
1.75
|
%
|
1.74
|
%
|
1.74
|
%
|
1.75
|
%(4)
|
|||||||||
0.03
|
%
|
0.02
|
%
|
—
|
—
|
—
|
||||||||||||
—
|
—
|
—
|
(1.32
|
)%(5)
|
3.98
|
%(4)(5)
|
||||||||||||
1.78
|
%(4)
|
1.77
|
%
|
1.74
|
%
|
0.42
|
%
|
5.73
|
%(4)
|
|||||||||
(1.34
|
)%(4)
|
(1.50
|
)%
|
(1.60
|
)%
|
(1.97
|
)%
|
(3.28
|
)%(4)
|
|||||||||
(1.26
|
)%(4)
|
(1.36
|
)%
|
(1.13
|
)%
|
(1.01
|
)%
|
(0.99
|
)%(4)
|
|||||||||
64
|
%(3)
|
63
|
%
|
139
|
%
|
96
|
%
|
70
|
%(3)
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Fund commenced operations on December 31, 2013.
|
(2)
|
Calculated using the average shares outstanding method.
|
(3)
|
Not annualized.
|
(4)
|
Annualized.
|
(5)
|
Deferred tax expense estimate is derived from the net investment loss and realized and unrealized gain/loss.
|
(6)
|
Includes state income tax expense and deferred tax expense from net investment loss only.
|
(7)
|
The period ended October 31, 2018, consists of 11 months due to the Fund’s fiscal year end change from November 30 to October 31, effective October 26, 2018.
|
(8)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Period Ended
|
Year Ended November 30,
|
Period Ended
|
||||||||||||||||
October 31,
|
November 30,
|
|||||||||||||||||
2018(7)
|
2017
|
2016
|
2015
|
2014(1)
|
||||||||||||||
$
|
14.66
|
$
|
16.66
|
$
|
15.53
|
$
|
22.28
|
$
|
20.00
|
|||||||||
(0.14
|
)
|
(0.18
|
)
|
(0.12
|
)
|
(0.14
|
)
|
(0.15
|
)
|
|||||||||
(0.66
|
)
|
(0.79
|
)
|
2.28
|
(5.61
|
)
|
2.87
|
|||||||||||
(0.80
|
)
|
(0.97
|
)
|
2.16
|
(5.75
|
)
|
2.72
|
|||||||||||
(1.03
|
)
|
(1.03
|
)
|
(1.03
|
)
|
(1.00
|
)
|
(0.44
|
)
|
|||||||||
(1.03
|
)
|
(1.03
|
)
|
(1.03
|
)
|
(1.00
|
)
|
(0.44
|
)
|
|||||||||
$
|
12.83
|
$
|
14.66
|
$
|
16.66
|
$
|
15.53
|
$
|
22.28
|
|||||||||
(5.94
|
)%(3)
|
(6.25
|
)%
|
14.97
|
%
|
(26.90
|
)%
|
13.60
|
%(3)
|
|||||||||
$
|
61.92
|
$
|
82.59
|
$
|
33.22
|
$
|
15.72
|
$
|
7.79
|
|||||||||
1.56
|
%(4)
|
1.64
|
%
|
1.95
|
%
|
2.34
|
%
|
3.79
|
%(4)
|
|||||||||
1.50
|
%(4)
|
1.50
|
%
|
1.48
|
%
|
1.42
|
%
|
1.50
|
%(4)
|
|||||||||
0.02
|
%
|
0.02
|
%
|
—
|
—
|
—
|
||||||||||||
—
|
—
|
—
|
(1.24
|
)%(5)
|
3.98
|
%(4)(5)
|
||||||||||||
1.52
|
%(4)
|
1.52
|
%
|
1.48
|
%
|
0.18
|
%
|
5.48
|
%(4)
|
|||||||||
(1.15
|
)%(4)
|
(1.28
|
)%
|
(1.28
|
)%
|
(1.63
|
)%
|
(3.03
|
)%(4)
|
|||||||||
(1.09
|
)%(4)
|
(1.14
|
)%
|
(0.81
|
)%
|
(0.71
|
)%
|
(0.74
|
)%(4)
|
|||||||||
64
|
%(3)
|
63
|
%
|
139
|
%
|
96
|
%
|
70
|
%(3)
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – The Fund, taxed as a corporation, is obligated to pay U.S. federal and state income tax on its taxable income. Currently, the maximum marginal regular federal income tax rate for a corporation is 21%. The Fund invests its assets primarily in midstream energy infrastructure investments, which may include, but are not limited to, master limited partnerships (“MLPs”) and entities with economic characteristics similar to MLPs. MLPs are treated as partnerships for federal income tax purposes. As a limited partner in MLPs, the Fund reports its allocable share of each MLP’s taxable income in computing its own taxable income.
|
In calculating the Fund’s daily net asset value, the Fund will account for its deferred tax asset and liability balances. In accordance with U.S. GAAP, the Fund will accrue a deferred income tax liability balance for its future tax liability associated
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
with the capital appreciation of its investments and the distributions received by the Fund on equity securities of MLPs considered to be return of capital and for any net operating gains. This accrual will be based on the current effective U.S. federal income tax rate plus an estimated state income tax rate.
|
|
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that at least some portion of a deferred income tax asset will not be realized. From time to time, as new information becomes available, the Fund will modify its estimates or assumption regarding the deferred tax liabilities or assets. As of October 31, 2018, the Fund did not record a deferred tax asset or liability.
|
|
The Tax Cuts and Jobs Act of 2017 was signed on December 22, 2017, reducing the federal corporate income tax rate from 35% to 21% and repealing the corporate alternate minimum tax. As a result, the Fund’s net deferred tax asset balance of $2,767,593 on December 22, 2017, was reduced to $1,781,088, which continued to be offset by a full valuation allowance. Due to the full valuation allowance, the reduction in the federal corporate income tax rate had no impact on the Fund’s net asset value per share. If the Fund’s deferred tax asset were to change to a deferred tax liability, the liability would be reflected at the newly enacted corporate tax rate of 21% plus an estimated state and local income tax rate.
|
Deferred Tax Assets:
|
Total
|
|||
Net operating loss carryforwards
|
$
|
567,057
|
||
State net operating loss carryforwards
|
22,339
|
|||
Capital loss carryforwards (tax basis)
|
2,739,024
|
|||
Unrealized losses
|
376,281
|
|||
Alternative minimum tax credit
|
—
|
|||
Total Deferred Tax Assets (Before Valuation Allowance)
|
3,704,701
|
|||
Valuation Allowance
|
(3,688,806
|
)
|
||
Total Net Deferred Tax Asset / Liability
|
$
|
15,895
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets. Distributions received from the Fund’s investments in MLPs generally are comprised of ordinary income, capital gains and return of capital from the energy trusts of MLPs. The Fund records investment income on the ex-date of the distributions. For financial statement purposes, the
|
HENNESSY FUNDS
|
1-800-966-4354
|
Fund uses return of capital and income estimates to allocate the dividend income received. Such estimates are based on historical information available from each energy trust or MLP and other industry sources. These estimates may subsequently be revised based on information received from energy trusts and MLPs after their tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year end of the Fund.
|
|
e).
|
Distributions to Shareholders – The Fund intends to make quarterly cash distributions to its shareholders. Due to the tax treatment of the Fund’s allocations and distributions from MLPs, a significant portion of the Fund’s distributions to shareholders will likely be treated as return of capital to shareholders for U.S. federal income tax purposes (i.e., as distributions in excess of the Fund’s current and accumulated earnings and profits as described below). However, no assurance can be given in this regard; just as the Fund’s corporate income tax liability can fluctuate materially from year to year, the extent to which the Fund is able to make return-of-capital distributions also can vary materially from year to year depending on a number of different factors, including the composition of the Fund’s portfolio, the level of allocations of net income and other tax items for the Fund from its underlying MLP investments during a particular taxable year, the length of time the Fund has owned the MLP equity securities in its portfolio, and the extent to which the Fund disposes of MLP equity securities during a particular year, including, if necessary, to meet Fund shareholder redemption requests.
|
In general, a distribution will constitute a return of capital to a shareholder, rather than a dividend, to the extent such distribution exceeds the Fund’s current and accumulated earnings and profits. The portion of any distribution treated as a return of capital will constitute a tax-free return of capital to the extent of the shareholder’s basis in its Fund shares and thereafter generally will be taxable to the shareholder as a capital gain. Any such distribution, in turn, will result in a reduction in a shareholder’s basis in the Fund’s shares (but not below zero) to the extent of the return of capital and in the shareholder’s recognizing more gain or less loss (that is, will result in an increase of a shareholder’s tax liability) when the shareholder later sells shares of the Fund. To permit the Fund to maintain a more stable distribution rate, the Fund may distribute less or more than the entire amount of cash it receives from its investments in a particular period. Any undistributed cash would be available to supplement future distributions, and until distributed would add to the Fund’s net asset value. Correspondingly, such amounts, once distributed, will be deducted from the Fund’s net asset value. In addition, the Fund may determine not to make distributions in quarters in which the Fund believes that a distribution could cause adverse tax consequences to shareholders, including when the Fund believes that a distribution may not constitute a tax-free return of capital as described above.
|
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
Derivatives – The Fund may invest in, or enter into, derivatives, such as options, futures contracts, options on futures contracts, and swaps, for a variety of reasons, including to hedge certain risks, provide a substitute for purchasing or selling particular securities, or increase potential income gain. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives may allow the Fund to increase or decrease its level of risk more quickly and efficiently than transactions in other types of instruments. The main reason for utilizing derivative instruments is for hedging purposes.
|
The Fund follows the financial accounting reporting rules as required by the Derivatives and Hedging Topic of the FASB Accounting Standards Codification. Under such rules, the Fund is required to include enhanced disclosure that enables investors to understand how and why an entity uses derivatives, how derivatives are accounted for, and how derivatives instruments affect an entity’s results of operations and financial position. During the 11-month period ended October 31, 2018, and the year ended November 30, 2017, the Fund did not hold any derivative instruments.
|
|
j).
|
Partnership Accounting Policy – The Fund records its pro rata share of income/loss and capital gains/losses to the extent of distributions it has received, allocated from the underlying partnerships and accordingly adjusts the cost basis of the underlying partnerships for return of capital.
|
k).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
l).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure
|
HENNESSY FUNDS
|
1-800-966-4354
|
of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
October 31, 2021
|
|||
Investor Class
|
$
|
597
|
||
Institutional Class
|
$
|
2,321
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
100,000,804
|
||
Gross tax unrealized appreciation
|
$
|
4,967,160
|
||
Gross tax unrealized depreciation
|
(7,328,904
|
)
|
||
Net tax unrealized appreciation
|
$
|
(2,361,744
|
)
|
HENNESSY FUNDS
|
1-800-966-4354
|
Amount
|
Expiration
|
||||
$
|
1,511,860
|
10/31/2020
|
|||
2,137,300
|
10/31/2021
|
||||
7,987,383
|
10/31/2023
|
Amount
|
Expiration
|
||||
$
|
1,937,148
|
10/31/2037
|
|||
539,645
|
Indefinite
|
Total Tax Expense (Benefit)
|
Total
|
|||
Tax expense (benefit) at statutory rates
|
$
|
(1,680,187
|
)
|
|
State income tax expense, net of federal benefit
|
(200,745
|
)
|
||
Tax expense (benefit) on permanent items(1)
|
(42,681
|
)
|
||
Tax expense (benefit) due to change in effective state rates
|
—
|
|||
Total current tax expense (benefit)
|
—
|
|||
Change in Federal/State rate due to tax reform
|
986,505
|
|||
Change in valuation allowance
|
921,213
|
|||
Total tax expense
|
$
|
(15,895
|
)
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
11-Month Period Ended
|
Year Ended
|
Year Ended
|
|||||||||
|
October 31, 2018
|
November 30, 2017
|
November 30, 2016
|
|||||||||
Ordinary income(1)
|
$
|
—
|
$
|
637,466
|
$
|
—
|
||||||
Long-term capital gain
|
—
|
—
|
—
|
|||||||||
Return of capital
|
7,826,085
|
4,084,626
|
2,419,383
|
|||||||||
|
$
|
7,826,085
|
$
|
4,722,092
|
$
|
2,419,383
|
(1) Ordinary income includes short-term capital gains.
|
Shares Issued
|
|||||
Predecessor Fund
|
to Shareholders of
|
Fund
|
Combined
|
Tax Status
|
|
Net Assets
|
Predecessor Fund
|
Net Assets
|
Net Assets
|
of Transfer
|
|
$98,129,391(1)
|
7,698,159
|
$0
|
$98,129,391
|
Non-taxable
|
(1)
|
Includes accumulated net investment loss, accumulated realized gains and unrealized appreciation in the amounts of $(15,348,815), $(7,211,324) and $(5,832,377), respectively.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM/TRUSTEES AND OFFICERS
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
|||
Name, (Year of Birth),
|
|||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
|
with the Trust
|
of Service
|
During Past Five Years
|
|
Officers
|
|||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
||
Executive Vice President
|
Officer, and Secretary.
|
||
and Treasurer
|
|||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
||
Executive Vice President
|
|||
and Secretary
|
|||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
|
(1972)
|
since December 2013 and currently serves as its Chief
|
||
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
||
and Head of Distribution
|
|||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
|
(1977)(3)
|
as its General Counsel since June 2013.
|
||
Senior Vice President and
|
|||
Chief Compliance Officer
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 981.00
|
$8.69
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,016.43
|
$8.84
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 982.70
|
$7.45
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,017.69
|
$7.58
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.74% for Investor Class shares or 1.49% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
|
(1)
|
A memorandum from outside legal counsel that described the fiduciary duties of the Board with respect to approving the advisory and sub-advisory agreements and the relevant factors for consideration;
|
|
(2)
|
A memorandum from the Advisor that listed the factors relevant to the Board’s approval of the advisory and sub-advisory agreements and also referenced the documents that had been provided to help the Board assess each such factor;
|
|
(3)
|
An inventory of the range of services to be provided by the Advisor and the Sub-Advisor to the Fund, and the distinction between the services to be provided by the Advisor as compared to the services to be provided by the Sub-Advisor;
|
|
(4)
|
A written discussion of economies of scale;
|
|
(5)
|
The forms of advisory and sub-advisory agreements;
|
|
(6)
|
A recent fact sheet of the predecessor Fund, which included, among other things, performance information over various periods during which the Sub-Advisor was the investment advisor to the predecessor Fund;
|
|
(7)
|
A peer expense comparison for the anticipated net expense ratio and the investment advisory fee of the Fund;
|
|
(8)
|
The Advisor’s financial statements from its most recent Form 10-K and Form 10-Q;
|
|
(9)
|
Information about the Fund’s compliance program;
|
|
(10)
|
The Advisor’s current Form ADV Part 1A (noting that the Advisor is not required to prepare and maintain Form ADV Part 2A or 2B);
|
|
(11)
|
A completed questionnaire from the Sub-Advisor;
|
|
(12)
|
The Sub-Advisor’s Code of Ethics;
|
|
(13)
|
The Sub-Advisor’s Form ADV Parts 1A, 2A, and 2B; and
|
|
(14)
|
Financial information of the Sub-Advisor.
|
HENNESSY FUNDS
|
1-800-966-4354
|
(1)
|
The nature and quality of the advisory services to be provided by the Advisor and the Sub-Advisor;
|
|
(2)
|
A comparison of the anticipated fees and expenses of the Fund to other similar funds;
|
|
(3)
|
Whether economies of scale would be recognized by the Fund;
|
|
(4)
|
The costs and profitability of the Fund to the Advisor and the Sub-Advisor;
|
|
(5)
|
The performance of the predecessor Fund; and
|
|
(6)
|
Any benefits to the Advisor and the Sub-Advisor from serving as an investment advisor to the Fund (other than the advisory fee and sub-advisory fee).
|
(1)
|
The Trustees considered the services identified below that are, or will be, provided by the Advisor. Based on this review, the Trustees concluded that the Advisor will provide high-quality services to the Fund, and they noted that their overall confidence in the Advisor is high. The Trustees also concluded that they were satisfied with the nature, extent, and quality of the advisory services provided to the other Hennessy Funds by the Advisor and that the nature and extent of the services to be provided by the Advisor are appropriate to assure that the Fund’s operations are conducted in compliance with applicable laws, rules, and regulations.
|
(a)
|
The Advisor will oversee the Sub-Advisor for the Fund, and the Sub-Advisor will act as the portfolio manager for the Fund.
|
||
(b)
|
The Advisor will perform a daily reconciliation of portfolio positions and cash for the Fund.
|
||
(c)
|
The Advisor will monitor the Fund’s compliance with its investment objectives and restrictions.
|
||
(d)
|
The Advisor will monitor compliance with federal securities laws and will perform or continue to perform activities such as maintaining a compliance program, conducting ongoing reviews of the compliance programs of the Sub-Advisor (including its Code of Ethics) and the Fund’s other service providers, monitoring incidents of abusive trading practices, reviewing Fund expense accruals, payments, and fixed expense ratios, evaluating insurance providers for fidelity bond, D&O/E&O, and cybersecurity insurance coverage, conducting employee compliance training, reviewing reports provided by service providers, maintaining books and records, and preparing an annual compliance report for the Board.
|
||
(e)
|
The Advisor will oversee the selection and continued employment of the Sub-Advisor, review the Fund’s investment performance, and monitor the Sub-Advisor’s adherence to the Fund’s investment objectives, policies, and restrictions.
|
HENNESSYFUNDS.COM
|
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
|
(f)
|
The Advisor will review the investment performance of the Fund on a regular basis, including a written summary prepared by the Fund’s portfolio managers of the Fund’s performance for the most recent 12-month period for each annual report of the Fund (or, for the 2018 annual report, the Fund’s most recent 11-month period).
|
||
(g)
|
The Advisor oversees service providers that will provide accounting, administration, distribution, transfer agency, custodial, sales, marketing, public relations, audit, information technology, and legal services to the Fund.
|
||
(h)
|
The Advisor maintains in-house marketing and distribution departments that will provide marketing and distribution services on behalf of the Fund.
|
||
(i)
|
The Advisor will be actively involved with preparing regulatory filings for the Fund, including writing and annually updating the Fund’s prospectus and related documents.
|
||
(j)
|
The Advisor will oversee distribution of the Fund through third-party broker/dealers and independent financial institutions such as Charles Schwab, Inc., Fidelity, TD Waterhouse, and Pershing. The Advisor participates in “no transaction fee” (“NTF”) programs with these companies on behalf of the Hennessy Funds, which allows customers to purchase the Fund through third-party distribution channels without paying a transaction fee. The Advisor compensates, in part, a number of these third-party providers of NTF programs out of its own revenues.
|
||
(k)
|
The Advisor pays the incentive compensation of the Trust’s compliance officers and employs other staff, such as legal, marketing, national accounts, distribution, sales, administrative, and trading oversight personnel, as well as management executives, all of whom will provide services to the Fund.
|
||
(l)
|
The Advisor provides a quarterly compliance certification to the Board.
|
||
(m)
|
The Advisor prepares or reviews Board materials, frequently presents to the Board or leads Board discussions, prepares or reviews meeting minutes, and arranges for Board training and education.
|
(2)
|
The Trustees considered the services identified below that will be provided by the Sub-Advisor. Based on this review, the Trustees concluded that the Sub-Advisor will provide high-quality services to the Fund. The Trustees also concluded that they were satisfied with the portfolio management services that the Sub-Advisor provided to the Predecessor Fund.
|
(a)
|
The Sub-Advisor will act as the portfolio manager for the Fund. In this capacity, the Sub-Advisor will do the following:
|
(i)
|
manage the composition of the Fund’s portfolio, including the purchase, retention, and disposition of portfolio securities in accordance with the Fund’s investment objectives, policies, and restrictions;
|
|||
(ii)
|
seek best execution for the Fund’s portfolio;
|
|||
(iii)
|
manage the use of soft dollars for the Fund; and
|
|||
(iv)
|
manage proxy voting for the Fund.
|
(b)
|
The Sub-Advisor will ensure that its compliance program includes policies and procedures relevant to the Fund and the Sub-Advisor’s duties as a portfolio manager to the Fund.
|
HENNESSY FUNDS
|
1-800-966-4354
|
(c)
|
The Sub-Advisor will prepare a written summary of the Fund’s performance for the most recent 12-month period for each annual report of the Fund (or, for the 2018 annual report, the Fund’s most recent 11-month period).
|
||
(d)
|
The Sub-Advisor will provide a quarterly compliance certification to the Board regarding trading and allocation practices, supervisory matters, its compliance program (including its code of ethics), compliance with the Fund’s policies, and general firm updates.
|
(3)
|
The Trustees considered the distinction between the services to be performed by the Advisor and the Sub-Advisor. The Trustees noted that the management of the Fund, including the oversight of the Sub-Advisor, would involve more comprehensive and substantive duties than the duties of the Sub-Advisor. Specifically, the Trustees considered the lists of services identified above and concluded that the services to be performed by the Advisor for the Fund would require a higher level of service and oversight than the services to be performed by the Sub-Advisor. Based on this determination, the Trustees concluded that the differential in advisory fees between the Advisor and the Sub-Advisor is reasonable.
|
|
(4)
|
The Trustees compared the performance of the predecessor Fund to benchmark indices over various periods and noted that the investment objectives and investment strategies of the Fund would be substantially similar to those of the predecessor Fund. Based on all such information, the Trustees believe that the Sub-Advisor had managed the predecessor Fund, and the Advisor and the Sub-Advisor will manage the Fund, in a manner that is materially consistent with its stated investment objective and style. The Trustees concluded that the approval of the advisory and sub-advisory agreements was warranted.
|
|
(5)
|
The Trustees reviewed the advisory fees and anticipated overall expense ratios of the Fund compared to other funds similar in asset size and investment objective using data from Morningstar. As part of the discussion with management, the Trustees ensured that they understood and were comfortable with the criteria used to determine the mutual funds included in the Morningstar categories for purposes of the materials considered at the meeting. The Trustees determined that the advisory fee and anticipated overall expense ratio of the Fund falls within the range of the advisory fees and overall expense ratios of other comparable funds and concluded that they are reasonable and warranted approval of the advisory and sub-advisory agreements.
|
|
(6)
|
The Trustees also considered whether the Advisor was likely to realize economies of scale that it should share with the Fund’s shareholders. The Trustees noted that many of the expenses that the Advisor will incur to manage the Fund are asset-based fees, so the Advisor would not realize material economies of scale as the assets of the Fund increase. For example, mutual fund platform fees would increase as the Fund’s assets grow. The Trustees also considered the Advisor’s agreement to waive fees for the Fund for two years. The Board noted that at current asset levels it did not appear likely that the Advisor would realize economies of scale and concluded that it would continue to monitor economies of scale in the future as circumstances changed.
|
|
(7)
|
The Trustees considered the profitability of the Advisor and the Sub-Advisor, including the impact of mutual fund platform fees on the Advisor’s profitability, and also considered the resources and revenues that the Advisor has put into managing
|
HENNESSYFUNDS.COM
|
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
|
and distributing the Fund. The Trustees then concluded that the anticipated profits of the Advisor and the Sub-Advisor are reasonable and not excessive when compared to profitability guidelines set forth in relevant court cases.
|
||
(8)
|
The Trustees considered the high level of professionalism and knowledge of the Advisor’s employees, along with a very low level of turnover, and concluded that this was beneficial to the Fund and its shareholders. The Trustees also considered the business backgrounds and key employees of the Sub-Advisor and determined that they believe these employees have the necessary expertise to manage the portfolio of the Fund for the benefit of the Fund and its shareholders.
|
|
(9)
|
The Trustees considered any anticipated benefits to the Advisor and the Sub-Advisor from serving as advisors to the Fund other than the advisory fee or sub-advisory fee. The Trustees noted that the Advisor and the Sub-Advisor in the future may derive ancillary benefits from, by way of example, their association with the Fund in the form of proprietary and third-party research products and services received from broker-dealers that execute portfolio trades for the Fund. The Trustees determined that they expected any such products and services to be used for legitimate purposes relating to the Fund by providing assistance in the investment decision-making process. The Trustees concluded that any additional benefits expected to be realized by the Advisor and the Sub-Advisor from their relationships with the Fund were reasonable.
|
HENNESSY FUNDS
|
1-800-966-4354
|
•
|
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.
|
HENNESSYFUNDS.COM
|
PRIVACY POLICY
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
11
|
Statement of Operations
|
12
|
Statements of Changes in Net Assets
|
13
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
17
|
Report of Independent Registered Public Accounting Firm
|
25
|
Trustees and Officers of the Fund
|
26
|
Expense Example
|
30
|
Proxy Voting Policy and Proxy Voting Records
|
32
|
Quarterly Schedule of Investments
|
32
|
Federal Tax Distribution Information
|
32
|
Important Notice Regarding Delivery of Shareholder Documents
|
32
|
Privacy Policy
|
33
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Gas Utility Fund –
|
|||
Investor Class (GASFX)
|
-2.86%
|
5.89%
|
11.52%
|
Hennessy Gas Utility Fund –
|
|||
Institutional Class (HGASX)(1)
|
-2.51%
|
6.02%
|
11.59%
|
AGA Stock Index
|
-1.58%
|
7.06%
|
12.45%
|
S&P 500 Index
|
7.35%
|
11.34%
|
13.24%
|
(1)
|
The inception date of Institutional Class shares is March 1, 2017. Performance shown prior to the inception of Institutional Class shares reflects the performance of Investor Class shares and includes expenses that are not applicable to, and are higher than, those of Institutional Class shares.
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
Kinder Morgan, Inc.
|
5.04%
|
The Southern Co.
|
5.02%
|
Cheniere Energy, Inc.
|
5.01%
|
Enbridge, Inc.
|
5.01%
|
Atmos Energy Corp.
|
4.98%
|
Dominion Resources, Inc.
|
4.94%
|
TransCanada Corp.
|
4.90%
|
Sempra Energy
|
4.83%
|
National Grid PLC - ADR
|
4.69%
|
WEC Energy Group, Inc.
|
3.94%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 97.82%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Energy – 21.27%
|
||||||||||||
Cheniere Energy, Inc. (a)
|
773,917
|
$
|
46,752,326
|
5.01
|
%
|
|||||||
Enbridge, Inc. (b)
|
1,500,765
|
46,688,799
|
5.01
|
%
|
||||||||
EQT Corp.
|
132,682
|
4,507,208
|
0.48
|
%
|
||||||||
Kinder Morgan, Inc.
|
2,764,101
|
47,044,999
|
5.04
|
%
|
||||||||
Tellurian, Inc. (a)
|
965,690
|
7,725,520
|
0.83
|
%
|
||||||||
TransCanada Corp. (b)
|
1,212,853
|
45,748,815
|
4.90
|
%
|
||||||||
|
198,467,667
|
21.27
|
%
|
|||||||||
|
||||||||||||
Financials – 0.56%
|
||||||||||||
Berkshire Hathaway, Inc., Class A (a)
|
17
|
5,230,985
|
0.56
|
%
|
||||||||
|
||||||||||||
Utilities – 75.99%
|
||||||||||||
Algonquin Power & Utilities Corp. (b)
|
293,664
|
2,930,767
|
0.31
|
%
|
||||||||
ALLETE, Inc.
|
1,475
|
109,150
|
0.01
|
%
|
||||||||
Ameren Corp.
|
113,240
|
7,313,039
|
0.78
|
%
|
||||||||
Atmos Energy Corp.
|
499,086
|
46,454,925
|
4.98
|
%
|
||||||||
Avangrid, Inc.
|
19,200
|
902,592
|
0.10
|
%
|
||||||||
Avista Corp.
|
64,572
|
3,320,292
|
0.36
|
%
|
||||||||
Black Hills Corp.
|
139,547
|
8,303,046
|
0.89
|
%
|
||||||||
Centerpoint Energy, Inc.
|
678,828
|
18,335,144
|
1.97
|
%
|
||||||||
Chesapeake Utilities Corp.
|
63,658
|
5,057,628
|
0.54
|
%
|
||||||||
CMS Energy Corp.
|
456,998
|
22,630,541
|
2.43
|
%
|
||||||||
Consolidated Edison, Inc.
|
309,936
|
23,555,136
|
2.53
|
%
|
||||||||
Corning Natural Gas Holding Corp.
|
14,599
|
283,520
|
0.03
|
%
|
||||||||
Dominion Resources, Inc.
|
645,296
|
46,087,040
|
4.94
|
%
|
||||||||
DTE Energy Co.
|
211,804
|
23,806,770
|
2.55
|
%
|
||||||||
Duke Energy Corp.
|
303,787
|
25,101,920
|
2.69
|
%
|
||||||||
Entergy Corp.
|
8,260
|
693,427
|
0.07
|
%
|
||||||||
Eversource Energy
|
162,075
|
10,252,865
|
1.10
|
%
|
||||||||
Exelon Corp.
|
264,631
|
11,593,484
|
1.24
|
%
|
||||||||
Fortis, Inc. (b)
|
357,776
|
11,817,341
|
1.27
|
%
|
||||||||
MDU Resources Group, Inc.
|
450,407
|
11,242,159
|
1.21
|
%
|
||||||||
MGE Energy, Inc.
|
33,229
|
2,076,148
|
0.22
|
%
|
||||||||
National Fuel Gas Co.
|
289,924
|
15,739,974
|
1.69
|
%
|
||||||||
National Grid PLC – ADR (b)
|
817,844
|
43,754,654
|
4.69
|
%
|
||||||||
New Jersey Resources Corp.
|
296,634
|
13,378,193
|
1.43
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Utilities (Continued)
|
||||||||||||
NiSource, Inc.
|
1,128,781
|
$
|
28,625,886
|
3.07
|
%
|
|||||||
Northwest Natural Holding Co.
|
149,803
|
9,705,736
|
1.04
|
%
|
||||||||
NorthWestern Corp.
|
52,398
|
3,078,906
|
0.33
|
%
|
||||||||
ONE Gas, Inc.
|
273,675
|
21,595,694
|
2.32
|
%
|
||||||||
PG&E Corp. (a)
|
677,449
|
31,711,388
|
3.40
|
%
|
||||||||
PPL Corp.
|
317,419
|
9,649,538
|
1.03
|
%
|
||||||||
Public Service Enterprise Group, Inc.
|
449,490
|
24,016,251
|
2.57
|
%
|
||||||||
RGC Resources, Inc.
|
44,091
|
1,251,303
|
0.13
|
%
|
||||||||
SCANA Corp.
|
127,966
|
5,125,038
|
0.55
|
%
|
||||||||
Sempra Energy
|
408,840
|
45,021,461
|
4.83
|
%
|
||||||||
South Jersey Industries, Inc.
|
353,671
|
10,447,441
|
1.12
|
%
|
||||||||
Southwest Gas Holdings, Inc.
|
223,317
|
17,255,705
|
1.85
|
%
|
||||||||
Spire, Inc.
|
221,491
|
16,075,817
|
1.72
|
%
|
||||||||
The Southern Co.
|
1,040,200
|
46,840,206
|
5.02
|
%
|
||||||||
UGI Corp.
|
236,752
|
12,562,061
|
1.35
|
%
|
||||||||
Unitil Corp.
|
45,298
|
2,152,108
|
0.23
|
%
|
||||||||
Vectren Corp.
|
237,628
|
16,997,531
|
1.82
|
%
|
||||||||
WEC Energy Group, Inc.
|
537,740
|
36,781,416
|
3.94
|
%
|
||||||||
Xcel Energy, Inc.
|
311,399
|
15,261,665
|
1.64
|
%
|
||||||||
|
708,894,906
|
75.99
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $554,235,399)
|
912,593,558
|
97.82
|
%
|
|||||||||
|
||||||||||||
PARTNERSHIPS – 1.06%
|
||||||||||||
|
||||||||||||
Energy – 1.06%
|
||||||||||||
Plains GP Holdings L.P., Class A
|
464,255
|
9,921,130
|
1.06
|
%
|
||||||||
|
||||||||||||
Total Partnerships
|
||||||||||||
(Cost $10,782,802)
|
9,921,130
|
1.06
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
SHORT-TERM INVESTMENTS – 1.20%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 1.20%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (c)
|
11,158,332
|
$
|
11,158,332
|
1.20
|
%
|
|||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $11,158,332)
|
11,158,332
|
1.20
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $576,176,533) – 100.08%
|
933,673,020
|
100.08
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.08)%
|
(737,909
|
)
|
(0.08
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
932,935,111
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
(b)
|
U.S.-traded security of a foreign corporation.
|
(c)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Energy
|
$
|
198,467,667
|
$
|
—
|
$
|
—
|
$
|
198,467,667
|
||||||||
Financials
|
5,230,985
|
—
|
—
|
5,230,985
|
||||||||||||
Utilities
|
708,894,906
|
—
|
—
|
708,894,906
|
||||||||||||
Total Common Stocks
|
$
|
912,593,558
|
$
|
—
|
$
|
—
|
$
|
912,593,558
|
||||||||
Partnerships
|
||||||||||||||||
Energy
|
$
|
9,921,130
|
$
|
—
|
$
|
—
|
$
|
9,921,130
|
||||||||
Total Partnerships
|
$
|
9,921,130
|
$
|
—
|
$
|
—
|
$
|
9,921,130
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
11,158,332
|
$
|
—
|
$
|
—
|
$
|
11,158,332
|
||||||||
Total Short-Term Investments
|
$
|
11,158,332
|
$
|
—
|
$
|
—
|
$
|
11,158,332
|
||||||||
Total Investments
|
$
|
933,673,020
|
$
|
—
|
$
|
—
|
$
|
933,673,020
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $576,176,533)
|
$
|
933,673,020
|
||
Dividends and interest receivable
|
872,542
|
|||
Receivable for fund shares sold
|
696,053
|
|||
Return of capital receivable
|
139,277
|
|||
Prepaid expenses and other assets
|
52,126
|
|||
Total Assets
|
935,433,018
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
1,537,514
|
|||
Payable to advisor
|
326,856
|
|||
Payable to administrator
|
87,301
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
188,645
|
|||
Accrued service fees
|
72,297
|
|||
Accrued trustees fees
|
5,962
|
|||
Accrued expenses and other payables
|
257,432
|
|||
Total Liabilities
|
2,497,907
|
|||
NET ASSETS
|
$
|
932,935,111
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
565,784,442
|
||
Total distributable earnings
|
367,150,669
|
|||
Total Net Assets
|
$
|
932,935,111
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
825,183,820
|
||
Shares issued and outstanding
|
28,772,409
|
|||
Net asset value, offering price and redemption price per share
|
$
|
28.68
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
107,751,291
|
||
Shares issued and outstanding
|
3,760,837
|
|||
Net asset value, offering price and redemption price per share
|
$
|
28.65
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income(1)
|
$
|
35,171,514
|
||
Interest income
|
111,961
|
|||
Total investment income
|
35,283,475
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
4,424,651
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
2,003,070
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
84,711
|
|||
Distribution fees – Investor Class (See Note 5)
|
1,510,841
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
1,057,661
|
|||
Service fees – Investor Class (See Note 5)
|
1,007,227
|
|||
Reports to shareholders
|
98,956
|
|||
Federal and state registration fees
|
44,497
|
|||
Compliance expense (See Note 5)
|
29,499
|
|||
Audit fees
|
22,503
|
|||
Trustees’ fees and expenses
|
20,415
|
|||
Interest expense (See Note 7)
|
10,290
|
|||
Legal fees
|
3,031
|
|||
Other expenses
|
519,152
|
|||
Total expenses
|
10,836,504
|
|||
NET INVESTMENT INCOME
|
$
|
24,446,971
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
108,812,839
|
||
Net change in unrealized appreciation/depreciation on investments
|
(180,455,187
|
)
|
||
Net loss on investments
|
(71,642,348
|
)
|
||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
(47,195,377
|
)
|
HENNESSYFUNDS.COM
|
STATEMENT OF OPERATIONS/STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
24,446,971
|
$
|
33,553,345
|
||||
Net realized gain on investments
|
108,812,839
|
11,936,515
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(180,455,187
|
)
|
96,396,614
|
|||||
Net increase (decrease) in net
|
||||||||
assets resulting from operations
|
(47,195,377
|
)
|
141,886,474
|
|||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(28,287,790
|
)
|
(54,176,348
|
)
|
||||
Distributable earnings – Institutional Class
|
(3,147,794
|
)
|
(376,747
|
)
|
||||
Total distributions
|
(31,435,584
|
)
|
(54,553,095
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
47,357,112
|
119,194,987
|
||||||
Proceeds from shares subscribed – Institutional Class
|
91,140,382
|
86,926,934
|
||||||
Dividends reinvested – Investor Class
|
27,211,310
|
51,110,167
|
||||||
Dividends reinvested – Institutional Class
|
2,284,927
|
280,823
|
||||||
Cost of shares redeemed – Investor Class
|
(483,654,388
|
)
|
(405,814,851
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(64,094,803
|
)
|
(2,635,338
|
)
|
||||
Net decrease in net assets derived
|
||||||||
from capital share transactions
|
(379,755,460
|
)
|
(150,937,278
|
)
|
||||
TOTAL DECREASE IN NET ASSETS
|
(458,386,421
|
)
|
(63,603,899
|
)
|
||||
NET ASSETS:
|
||||||||
Beginning of year
|
1,391,321,532
|
1,454,925,431
|
||||||
End of year
|
$
|
932,935,111
|
$
|
1,391,321,532
|
||||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
1,647,747
|
4,053,758
|
||||||
Shares sold – Institutional Class
|
3,149,149
|
2,868,864
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
938,546
|
1,768,098
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
79,037
|
9,411
|
||||||
Shares redeemed – Investor Class
|
(16,873,463
|
)
|
(13,691,570
|
)
|
||||
Shares redeemed – Institutional Class
|
(2,258,650
|
)
|
(86,974
|
)
|
||||
Net decrease in shares outstanding
|
(13,317,634
|
)
|
(5,078,413
|
)
|
(1)
|
Includes net investment income distributions of $34,370,968 and $376,747 and net realized gain distributions of $19,805,380 and $0 for Investor Class and Institutional Class, respectively.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Amount is less than $0.01.
|
(2)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
30.35
|
$
|
28.57
|
$
|
27.69
|
$
|
31.30
|
$
|
26.69
|
|||||||||
0.65
|
0.70
|
0.62
|
0.69
|
0.62
|
||||||||||||||
(1.52
|
)
|
2.20
|
1.58
|
(2.69
|
)
|
5.18
|
||||||||||||
(0.87
|
)
|
2.90
|
2.20
|
(2.00
|
)
|
5.80
|
||||||||||||
(0.64
|
)
|
(0.72
|
)
|
(0.69
|
)
|
(0.70
|
)
|
(0.59
|
)
|
|||||||||
(0.16
|
)
|
(0.40
|
)
|
(0.63
|
)
|
(0.91
|
)
|
(0.60
|
)
|
|||||||||
(0.80
|
)
|
(1.12
|
)
|
(1.32
|
)
|
(1.61
|
)
|
(1.19
|
)
|
|||||||||
—
|
—
|
—
|
—
|
0.00
|
(1)
|
|||||||||||||
$
|
28.68
|
$
|
30.35
|
$
|
28.57
|
$
|
27.69
|
$
|
31.30
|
|||||||||
(2.86
|
)%
|
10.39
|
%
|
8.52
|
%
|
(6.59
|
)%
|
22.49
|
%
|
|||||||||
$
|
825.18
|
$
|
1,306.70
|
$
|
1,454.93
|
$
|
1,649.21
|
$
|
2,254.98
|
|||||||||
1.01
|
%
|
1.01
|
%
|
1.01
|
%
|
0.93
|
%
|
0.77
|
%
|
|||||||||
2.18
|
%
|
2.34
|
%
|
2.25
|
%
|
2.33
|
%
|
2.26
|
%
|
|||||||||
14
|
%
|
18
|
%
|
38
|
%
|
37
|
%
|
20
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
Year Ended
|
Period Ended
|
|||||||
October 31, 2018
|
October 31, 2017(1)
|
|||||||
PER SHARE DATA:
|
||||||||
Net asset value, beginning of period
|
$
|
30.32
|
$
|
29.68
|
||||
Income from investment operations:
|
||||||||
Net investment income
|
0.71
|
0.62
|
||||||
Net realized and unrealized gains (losses) on investments
|
(1.47
|
)
|
0.72
|
|||||
Total from investment operations
|
(0.76
|
)
|
1.34
|
|||||
Less distributions:
|
||||||||
Dividends from net investment income
|
(0.75
|
)
|
(0.70
|
)
|
||||
Dividends from net realized gains
|
(0.16
|
)
|
—
|
|||||
Total distributions
|
(0.91
|
)
|
(0.70
|
)
|
||||
Net asset value, end of period
|
$
|
28.65
|
$
|
30.32
|
||||
TOTAL RETURN
|
(2.51
|
)%
|
4.56
|
%(2)(3)
|
||||
SUPPLEMENTAL DATA AND RATIOS:
|
||||||||
Net assets, end of period (millions)
|
$
|
107.75
|
$
|
84.62
|
||||
Ratio of expenses to average net assets
|
0.65
|
%
|
0.64
|
%(4)
|
||||
Ratio of net investment income to average net assets
|
2.47
|
%
|
1.23
|
%(4)
|
||||
Portfolio turnover rate(5)
|
14
|
%
|
18
|
%(2)
|
(1)
|
Institutional Class shares commenced operations on March 1, 2017.
|
(2)
|
Not annualized.
|
(3)
|
Actual return from inception date of March 1, 2017, to the year end of October 31, 2017.
|
(4)
|
Annualized.
|
(5)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS/NOTES TO THE FINANCIAL STATEMENTS
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(14,068,317)
|
$14,068,317
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid at the end of each calendar quarter. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Equity Securities – Equity securities, including common stocks, preferred stocks, foreign-issued common stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”) will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
644,588,436
|
||
Gross tax unrealized appreciation
|
$
|
372,505,808
|
||
Gross tax unrealized depreciation
|
(83,421,224
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
289,084,584
|
||
Undistributed ordinary income
|
$
|
84,398
|
||
Undistributed long-term capital gains
|
77,979,918
|
|||
Total distributable earnings
|
$
|
78,064,316
|
||
Other accumulated gain/(loss)
|
$
|
1,769
|
||
Total accumulated gain/(loss)
|
$
|
367,150,669
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
27,292,416
|
$
|
34,747,715
|
||||
Long-term capital gain
|
4,143,168
|
19,805,380
|
||||||
|
$
|
31,435,584
|
$
|
54,553,095
|
|
Long-term
|
Investor Class
|
$2.48261
|
Institutional Class
|
$2.50030
|
Investor Class
|
$0.12129264
|
Institutional Class
|
$0.16312707
|
HENNESSYFUNDS.COM
|
NOTES/REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
|||
Name, (Year of Birth),
|
|||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
|
with the Trust
|
of Service
|
During Past Five Years
|
|
Officers
|
|||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
||
Executive Vice President
|
Officer, and Secretary.
|
||
and Treasurer
|
|||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
||
Executive Vice President
|
|||
and Secretary
|
|||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
|
(1972)
|
since December 2013 and currently serves as its Chief
|
||
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
||
and Head of Distribution
|
|||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
|
(1977)(3)
|
as its General Counsel since June 2013.
|
||
Senior Vice President and
|
|||
Chief Compliance Officer
|
HENNESSY FUNDS
|
1-800-966-4354
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$1,031.50
|
$5.07
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.21
|
$5.04
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$1,033.20
|
$3.28
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,021.98
|
$3.26
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 0.99% for Investor Class shares or 0.64% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
10
|
Statement of Operations
|
11
|
Statements of Changes in Net Assets
|
13
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
18
|
Report of Independent Registered Public Accounting Firm
|
27
|
Trustees and Officers of the Fund
|
28
|
Expense Example
|
32
|
Proxy Voting Policy and Proxy Voting Records
|
34
|
Quarterly Schedule of Investments
|
34
|
Federal Tax Distribution Information
|
34
|
Important Notice Regarding Delivery of Shareholder Documents
|
34
|
Privacy Policy
|
35
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
![]() |
![]() |
Tadahiro Fujimura
|
Masakazu Takeda
|
Portfolio Manager,
|
Portfolio Manager,
|
Hennessy Japan Small Cap Fund;
|
Hennessy Japan Fund;
|
Chief Investment Officer
|
Fund Manager
|
SPARX Asset Management Co., Ltd.
|
SPARX Asset Management Co., Ltd.
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Japan Fund –
|
|||
Investor Class (HJPNX)
|
2.70%
|
11.32%
|
13.27%
|
Hennessy Japan Fund –
|
|||
Institutional Class (HJPIX)
|
3.14%
|
11.67%
|
13.57%
|
Russell/Nomura Total MarketTM Index
|
-4.88%
|
5.96%
|
7.32%
|
Tokyo Price Index (TOPIX)
|
-4.12%
|
5.85%
|
7.38%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
Fast Retailing Co., Ltd.
|
5.48%
|
Nidec Corp.
|
5.29%
|
Mitsubishi UFJ Financial Group, Inc.
|
5.08%
|
Rohto Pharmaceutical Co., Ltd.
|
5.07%
|
Recruit Holdings Co., Ltd.
|
5.07%
|
Softbank Group Co.
|
5.04%
|
Daikin Industries
|
4.98%
|
Terumo Corp.
|
4.97%
|
Shimano, Inc.
|
4.94%
|
Unicharm Corp.
|
4.94%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 93.04%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 5.04%
|
||||||||||||
Softbank Group Co.
|
320,600
|
$
|
25,371,905
|
5.04
|
%
|
|||||||
Consumer Discretionary – 19.37%
|
||||||||||||
Asics Corp.
|
930,000
|
13,460,384
|
2.68
|
%
|
||||||||
Fast Retailing Co., Ltd.
|
54,800
|
27,592,095
|
5.48
|
%
|
||||||||
Isuzu Motors, Ltd.
|
438,900
|
5,754,220
|
1.14
|
%
|
||||||||
Ryohin Keikaku Co., Ltd.
|
29,600
|
7,824,166
|
1.56
|
%
|
||||||||
Shimano, Inc.
|
182,000
|
24,856,690
|
4.94
|
%
|
||||||||
Toyota Motor Corp.
|
306,900
|
17,978,500
|
3.57
|
%
|
||||||||
|
97,466,055
|
19.37
|
%
|
|||||||||
Consumer Staples – 14.95%
|
||||||||||||
Japan Tobacco, Inc.
|
870,600
|
22,370,352
|
4.45
|
%
|
||||||||
Kao Corp.
|
372,500
|
24,779,530
|
4.93
|
%
|
||||||||
Pigeon Corp.
|
75,400
|
3,188,836
|
0.63
|
%
|
||||||||
Unicharm Corp.
|
915,800
|
24,844,495
|
4.94
|
%
|
||||||||
|
75,183,213
|
14.95
|
%
|
|||||||||
Financials – 8.38%
|
||||||||||||
Mitsubishi UFJ Financial Group, Inc.
|
4,225,900
|
25,577,229
|
5.08
|
%
|
||||||||
Sumitomo Mitsui Financial Group, Inc.
|
425,800
|
16,578,565
|
3.30
|
%
|
||||||||
|
42,155,794
|
8.38
|
%
|
|||||||||
Health Care – 10.04%
|
||||||||||||
Rohto Pharmaceutical Co., Ltd.
|
805,900
|
25,524,875
|
5.07
|
%
|
||||||||
Terumo Corp.
|
463,000
|
24,993,636
|
4.97
|
%
|
||||||||
|
50,518,511
|
10.04
|
%
|
|||||||||
Industrials – 29.57%
|
||||||||||||
Daikin Industries
|
216,400
|
25,083,341
|
4.98
|
%
|
||||||||
Kubota Corp.
|
1,570,700
|
24,796,320
|
4.93
|
%
|
||||||||
Misumi Group, Inc.
|
1,106,600
|
22,177,145
|
4.41
|
%
|
||||||||
Mitsubishi Corp.
|
873,900
|
24,596,188
|
4.89
|
%
|
||||||||
Nidec Corp.
|
207,100
|
26,600,934
|
5.29
|
%
|
||||||||
Recruit Holdings Co., Ltd.
|
949,700
|
25,489,561
|
5.07
|
%
|
||||||||
|
148,743,489
|
29.57
|
%
|
|||||||||
Information Technology – 4.29%
|
||||||||||||
Keyence Corp.
|
44,200
|
21,592,576
|
4.29
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Materials – 1.40%
|
||||||||||||
Fuji Seal International, Inc.
|
232,200
|
$
|
7,043,638
|
1.40
|
%
|
|||||||
|
||||||||||||
Total Common Stocks
|
||||||||||||
(Cost $398,170,188)
|
468,075,181
|
93.04
|
%
|
|||||||||
|
||||||||||||
SHORT-TERM INVESTMENTS – 7.56%
|
||||||||||||
|
||||||||||||
Money Market Funds – 7.56%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (a)
|
24,528,000
|
24,528,000
|
4.88
|
%
|
||||||||
The Government & Agency Portfolio, Institutional Class, 2.08% (a)
|
13,483,614
|
13,483,614
|
2.68
|
%
|
||||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $38,011,614)
|
38,011,614
|
7.56
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $436,181,802) – 100.60%
|
506,086,795
|
100.60
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.60)%
|
(3,001,246
|
)
|
(0.60
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
503,085,549
|
100.00
|
%
|
(a)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
—
|
$
|
25,371,905
|
$
|
—
|
$
|
25,371,905
|
||||||||
Consumer Discretionary
|
—
|
97,466,055
|
—
|
97,466,055
|
||||||||||||
Consumer Staples
|
—
|
75,183,213
|
—
|
75,183,213
|
||||||||||||
Financials
|
—
|
42,155,794
|
—
|
42,155,794
|
||||||||||||
Health Care
|
—
|
50,518,511
|
—
|
50,518,511
|
||||||||||||
Industrials
|
—
|
148,743,489
|
—
|
148,743,489
|
||||||||||||
Information Technology
|
—
|
21,592,576
|
—
|
21,592,576
|
||||||||||||
Materials
|
—
|
7,043,638
|
—
|
7,043,638
|
||||||||||||
Total Common Stocks
|
$
|
—
|
$
|
468,075,181
|
$
|
—
|
$
|
468,075,181
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
38,011,614
|
$
|
—
|
$
|
—
|
$
|
38,011,614
|
||||||||
Total Short-Term Investments
|
$
|
38,011,614
|
$
|
—
|
$
|
—
|
$
|
38,011,614
|
||||||||
Total Investments
|
$
|
38,011,614
|
$
|
468,075,181
|
$
|
—
|
$
|
506,086,795
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $436,181,802)
|
$
|
506,086,795
|
||
Dividends and interest receivable
|
2,130,012
|
|||
Receivable for fund shares sold
|
2,844,651
|
|||
Prepaid expenses and other assets
|
51,238
|
|||
Total Assets
|
511,112,696
|
|||
LIABILITIES:
|
||||
Payable for securities purchased
|
6,022,535
|
|||
Payable for fund shares redeemed
|
1,506,792
|
|||
Payable to advisor
|
350,908
|
|||
Payable to administrator
|
44,323
|
|||
Payable to auditor
|
21,901
|
|||
Accrued distribution fees
|
19,282
|
|||
Accrued service fees
|
9,468
|
|||
Accrued trustees fees
|
5,963
|
|||
Accrued expenses and other payables
|
45,975
|
|||
Total Liabilities
|
8,027,147
|
|||
NET ASSETS
|
$
|
503,085,549
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
432,732,094
|
||
Total distributable earnings
|
70,353,455
|
|||
Total Net Assets
|
$
|
503,085,549
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
103,330,179
|
||
Shares issued and outstanding
|
3,072,953
|
|||
Net asset value, offering price and redemption price per share
|
$
|
33.63
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
399,755,370
|
||
Shares issued and outstanding
|
11,529,940
|
|||
Net asset value, offering price and redemption price per share
|
$
|
34.67
|
HENNESSYFUNDS.COM
|
STATEMENT OF ASSETS AND LIABILITIES/STATEMENT OF OPERATIONS
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income(1)
|
$
|
5,917,052
|
||
Interest income
|
455,265
|
|||
Total investment income
|
6,372,317
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
3,455,857
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
262,634
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
193,589
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
415,000
|
|||
Distribution fees – Investor Class (See Note 5)
|
164,320
|
|||
Service fees – Investor Class (See Note 5)
|
109,547
|
|||
Federal and state registration fees
|
59,892
|
|||
Reports to shareholders
|
44,939
|
|||
Compliance expense (See Note 5)
|
29,499
|
|||
Audit fees
|
23,146
|
|||
Trustees’ fees and expenses
|
18,598
|
|||
Legal fees
|
4,319
|
|||
Other expenses
|
28,739
|
|||
Total expenses
|
4,810,079
|
|||
NET INVESTMENT INCOME
|
$
|
1,562,238
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized loss on investments
|
$
|
(652,030
|
)
|
|
Net change in unrealized appreciation/depreciation on investments
|
(3,199,977
|
)
|
||
Net loss on investments
|
(3,852,007
|
)
|
||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
(2,289,769
|
)
|
(1)
|
Net of foreign taxes withheld of $655,907.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
1,562,238
|
$
|
233,529
|
||||
Net realized loss on investments
|
(652,030
|
)
|
(281,051
|
)
|
||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(3,199,977
|
)
|
36,173,877
|
|||||
Net increase (decrease) in net
|
||||||||
assets resulting from operations
|
(2,289,769
|
)
|
36,126,355
|
|||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(15,953
|
)
|
—
|
|||||
Distributable earnings – Institutional Class
|
(192,575
|
)
|
—
|
|||||
Total distributions
|
(208,528
|
)
|
—
|
|||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
68,964,189
|
48,195,357
|
||||||
Proceeds from shares subscribed – Institutional Class
|
371,916,788
|
115,058,173
|
||||||
Dividends reinvested – Investor Class
|
15,517
|
—
|
||||||
Dividends reinvested – Institutional Class
|
171,054
|
—
|
||||||
Cost of shares redeemed – Investor Class
|
(51,079,674
|
)
|
(38,068,126
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(146,269,372
|
)
|
(29,067,977
|
)
|
||||
Net increase in net assets derived
|
||||||||
from capital share transactions
|
243,718,502
|
96,117,427
|
||||||
TOTAL INCREASE IN NET ASSETS
|
241,220,205
|
132,243,782
|
||||||
NET ASSETS:
|
||||||||
Beginning of year
|
261,865,344
|
129,621,562
|
||||||
End of year
|
$
|
503,085,549
|
$
|
261,865,344
|
||||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
1,945,260
|
1,683,845
|
||||||
Shares sold – Institutional Class
|
10,243,014
|
3,882,507
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
445
|
—
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
4,774
|
—
|
||||||
Shares redeemed – Investor Class
|
(1,451,162
|
)
|
(1,329,272
|
)
|
||||
Shares redeemed – Institutional Class
|
(3,991,370
|
)
|
(990,930
|
)
|
||||
Net increase in shares outstanding
|
6,750,961
|
3,246,150
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Amount is less than $(0.01).
|
(2)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
32.75
|
$
|
27.81
|
$
|
24.07
|
$
|
21.77
|
$
|
19.68
|
|||||||||
(0.00
|
)(1)
|
(0.03
|
)
|
(0.11
|
)
|
(0.10
|
)
|
(0.06
|
)
|
|||||||||
0.89
|
4.97
|
3.85
|
2.40
|
2.15
|
||||||||||||||
0.89
|
4.94
|
3.74
|
2.30
|
2.09
|
||||||||||||||
(0.01
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
—
|
—
|
—
|
—
|
—
|
||||||||||||||
(0.01
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
$
|
33.63
|
$
|
32.75
|
$
|
27.81
|
$
|
24.07
|
$
|
21.77
|
|||||||||
2.70
|
%
|
17.76
|
%
|
15.54
|
%
|
10.56
|
%
|
10.62
|
%
|
|||||||||
$
|
103.33
|
$
|
84.44
|
$
|
61.85
|
$
|
61.56
|
$
|
27.26
|
|||||||||
1.43
|
%
|
1.46
|
%
|
1.50
|
%
|
1.53
|
%
|
1.70
|
%
|
|||||||||
(0.02
|
)%
|
(0.15
|
)%
|
(0.38
|
)%
|
(0.44
|
)%
|
(0.18
|
)%
|
|||||||||
1
|
%
|
0
|
%
|
5
|
%
|
21
|
%
|
22
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
33.64
|
$
|
28.45
|
$
|
24.55
|
$
|
22.15
|
$
|
19.98
|
|||||||||
0.15
|
0.03
|
(0.01
|
)
|
(0.02
|
)
|
0.07
|
||||||||||||
0.91
|
5.16
|
3.91
|
2.42
|
2.10
|
||||||||||||||
1.06
|
5.19
|
3.90
|
2.40
|
2.17
|
||||||||||||||
(0.03
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
—
|
—
|
—
|
—
|
—
|
||||||||||||||
(0.03
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
$
|
34.67
|
$
|
33.64
|
$
|
28.45
|
$
|
24.55
|
$
|
22.15
|
|||||||||
3.14
|
%
|
18.24
|
%
|
15.89
|
%
|
10.84
|
%
|
10.86
|
%
|
|||||||||
$
|
399.76
|
$
|
177.42
|
$
|
67.78
|
$
|
54.13
|
$
|
25.75
|
|||||||||
1.01
|
%
|
1.05
|
%
|
1.17
|
%
|
1.27
|
%
|
1.50
|
%
|
|||||||||
0.49
|
%
|
0.30
|
%
|
(0.03
|
)%
|
(0.08
|
)%
|
0.26
|
%
|
|||||||||
1
|
%
|
0
|
%
|
5
|
%
|
21
|
%
|
22
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$6,121,138
|
$(6,121,138)
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
Foreign Currency – Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from fluctuations resulting from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain/loss on investments. Foreign investments present additional risks due to currency fluctuations, economic and political factors, lower liquidity, government regulations, differences in accounting standards, and other factors.
|
j).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure
|
HENNESSY FUNDS
|
1-800-966-4354
|
Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
k).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, foreign-issued common stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”) will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be
|
HENNESSY FUNDS
|
1-800-966-4354
|
determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
436,311,692
|
||
Gross tax unrealized appreciation
|
$
|
94,180,873
|
||
Gross tax unrealized depreciation
|
(24,408,547
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
69,772,326
|
||
Undistributed ordinary income
|
$
|
861,036
|
||
Undistributed long-term capital gains
|
—
|
|||
Total distributable earnings
|
$
|
861,036
|
||
Other accumulated gain/(loss)
|
$
|
(279,907
|
)
|
|
Total accumulated gain/(loss)
|
$
|
70,353,455
|
$ 31,383
|
Unlimited Long-Term
|
$248,524
|
Unlimited Short-Term
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
208,528
|
$
|
—
|
||||
Long-term capital gain
|
—
|
—
|
||||||
|
$
|
208,528
|
$
|
—
|
HENNESSY FUNDS
|
1-800-966-4354
|
Investor Class
|
$0.01193503
|
Institutional Class
|
$0.10566737
|
HENNESSYFUNDS.COM
|
NOTES/REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSY FUNDS
|
1-800-966-4354
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 954.00
|
$7.09
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,017.95
|
$7.32
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 955.90
|
$4.98
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.11
|
$5.14
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.44% for Investor Class shares or 1.01% for Institutional Class shares, as applicable, 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
|
|
Gross Foreign Income
|
Foreign Tax Paid
|
Japan
|
$6,574,319
|
$655,907
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
11
|
Statement of Operations
|
12
|
Statements of Changes in Net Assets
|
13
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
17
|
Report of Independent Registered Public Accounting Firm
|
25
|
Trustees and Officers of the Fund
|
26
|
Expense Example
|
30
|
Proxy Voting Policy and Proxy Voting Records
|
32
|
Quarterly Schedule of Investments
|
32
|
Federal Tax Distribution Information
|
32
|
Important Notice Regarding Delivery of Shareholder Documents
|
32
|
Privacy Policy
|
33
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
![]() |
![]() |
Tadahiro Fujimura
|
Masakazu Takeda
|
Portfolio Manager,
|
Portfolio Manager,
|
Hennessy Japan Small Cap Fund;
|
Hennessy Japan Fund;
|
Chief Investment Officer
|
Fund Manager
|
SPARX Asset Management Co., Ltd.
|
SPARX Asset Management Co., Ltd.
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Japan Small Cap Fund –
|
|||
Investor Class (HJPSX)
|
2.64%
|
13.95%
|
15.87%
|
Hennessy Japan Small Cap Fund –
|
|||
Institutional Class (HJSIX)(1)
|
3.12%
|
14.20%
|
15.99%
|
Russell/Nomura Small CapTM Index
|
-6.62%
|
8.32%
|
10.46%
|
Tokyo Price Index (TOPIX)
|
-4.12%
|
5.85%
|
7.38%
|
(1)
|
The inception date of Institutional Class shares is June 15, 2015. Performance shown prior to the inception of Institutional Class shares reflects the performance of Investor Class shares and includes expenses that are not applicable to, and are higher than, those of Institutional Class shares.
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
Asahi Holdings, Inc.
|
2.80%
|
NS Solutions Corp.
|
2.78%
|
OBIC Business Consultants Co., Ltd.
|
2.74%
|
Nippon Yusoki Co., Ltd.
|
2.62%
|
DCM Holdings Co., Ltd.
|
2.49%
|
Takuma Co., Ltd.
|
2.46%
|
Sato Holdings Corp.
|
2.37%
|
SBS Holdings, Inc.
|
2.36%
|
Nihon Kohden Corp.
|
2.35%
|
Hamakyorex Co., Ltd.
|
2.31%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 99.37%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 3.48%
|
||||||||||||
Kakaku.com., Inc.
|
196,600
|
$
|
3,560,840
|
1.78
|
%
|
|||||||
Macromill, Inc.
|
171,100
|
3,385,870
|
1.70
|
%
|
||||||||
|
6,946,710
|
3.48
|
%
|
|||||||||
Consumer Discretionary – 15.69%
|
||||||||||||
Bic Camera, Inc.
|
237,400
|
3,134,229
|
1.57
|
%
|
||||||||
DCM Holdings Co., Ltd.
|
511,100
|
4,969,941
|
2.49
|
%
|
||||||||
Doshisha Co., Ltd.
|
200,300
|
4,124,401
|
2.07
|
%
|
||||||||
Hiramatsu, Inc.
|
505,100
|
2,111,338
|
1.06
|
%
|
||||||||
Kasai Kogyo Co., Ltd.
|
272,900
|
2,516,043
|
1.26
|
%
|
||||||||
Komeda Holdings Co., Ltd.
|
167,500
|
3,295,018
|
1.65
|
%
|
||||||||
Pacific Industrial Co., Ltd.
|
253,100
|
3,697,842
|
1.86
|
%
|
||||||||
Saizeriya Co., Ltd.
|
167,100
|
3,171,246
|
1.59
|
%
|
||||||||
Seiren Co., Ltd.
|
169,800
|
2,415,767
|
1.21
|
%
|
||||||||
TPR Co., Ltd.
|
75,600
|
1,841,341
|
0.93
|
%
|
||||||||
|
31,277,166
|
15.69
|
%
|
|||||||||
Consumer Staples – 4.60%
|
||||||||||||
Kobe Bussan Co., Ltd.
|
159,400
|
4,047,504
|
2.03
|
%
|
||||||||
Nishimoto Co., Ltd.
|
80,600
|
3,652,205
|
1.83
|
%
|
||||||||
Soiken Holdings, Inc.
|
348,600
|
1,480,881
|
0.74
|
%
|
||||||||
|
9,180,590
|
4.60
|
%
|
|||||||||
Financials – 3.01%
|
||||||||||||
Aozora Bank, Ltd.
|
110,400
|
3,809,507
|
1.91
|
%
|
||||||||
Lifenet Insurance Co. (a)
|
389,800
|
2,185,322
|
1.10
|
%
|
||||||||
|
5,994,829
|
3.01
|
%
|
|||||||||
Health Care – 4.05%
|
||||||||||||
JEOL Ltd.
|
58,800
|
968,779
|
0.49
|
%
|
||||||||
Nihon Kohden Corp.
|
156,800
|
4,694,311
|
2.35
|
%
|
||||||||
Ship Healthcare Holdings, Inc.
|
66,800
|
2,415,212
|
1.21
|
%
|
||||||||
|
8,078,302
|
4.05
|
%
|
|||||||||
Industrials – 41.66%
|
||||||||||||
BELLSYSTEM24 Holdings, Inc.
|
297,700
|
3,932,346
|
1.97
|
%
|
||||||||
Benefit One, Inc.
|
157,700
|
4,065,001
|
2.04
|
%
|
||||||||
Daihen Corp.
|
61,400
|
1,439,222
|
0.72
|
%
|
||||||||
EF-ON, Inc.
|
299,100
|
2,871,310
|
1.44
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Industrials (Continued)
|
||||||||||||
Hamakyorex Co., Ltd.
|
142,400
|
$
|
4,597,940
|
2.31
|
%
|
|||||||
Hanwa Co., Ltd.
|
122,200
|
4,001,930
|
2.01
|
%
|
||||||||
Hito Communication, Inc.
|
231,800
|
4,100,317
|
2.06
|
%
|
||||||||
Juki Corp.
|
90,700
|
1,015,700
|
0.51
|
%
|
||||||||
Kanematsu Corp.
|
296,600
|
3,808,323
|
1.91
|
%
|
||||||||
KAWADA TECHNOLOGIES, Inc.
|
20,400
|
1,173,808
|
0.59
|
%
|
||||||||
Kito Corp.
|
176,000
|
2,661,080
|
1.33
|
%
|
||||||||
Maeda Kosen Co., Ltd.
|
143,800
|
2,784,270
|
1.40
|
%
|
||||||||
METAWATER Co., Ltd.
|
116,700
|
2,992,447
|
1.50
|
%
|
||||||||
MIRAIT Holdings Corp.
|
277,100
|
4,474,280
|
2.24
|
%
|
||||||||
Nihon Flush Co., Ltd.
|
143,300
|
2,745,915
|
1.38
|
%
|
||||||||
Nippon Koei Co., Ltd.
|
173,800
|
3,912,189
|
1.96
|
%
|
||||||||
Nippon Yusoki Co., Ltd.
|
439,200
|
5,222,081
|
2.62
|
%
|
||||||||
Nissei ASB Machine Co., Ltd.
|
35,600
|
1,192,973
|
0.60
|
%
|
||||||||
Okamura Corp.
|
332,400
|
4,531,001
|
2.27
|
%
|
||||||||
Sato Holdings Corp.
|
159,700
|
4,719,250
|
2.37
|
%
|
||||||||
SBS Holdings, Inc.
|
371,700
|
4,704,836
|
2.36
|
%
|
||||||||
Shibuya Corp.
|
110,400
|
3,710,088
|
1.86
|
%
|
||||||||
Takeei Corp.
|
313,500
|
1,991,796
|
1.00
|
%
|
||||||||
Takuma Co., Ltd.
|
384,700
|
4,903,534
|
2.46
|
%
|
||||||||
Tocalo Co., Ltd.
|
171,200
|
1,489,811
|
0.75
|
%
|
||||||||
|
83,041,448
|
41.66
|
%
|
|||||||||
|
||||||||||||
Information Technology – 18.51%
|
||||||||||||
Digital Garage, Inc.
|
119,700
|
3,273,437
|
1.64
|
%
|
||||||||
Elecom Co., Ltd.
|
176,500
|
4,178,820
|
2.10
|
%
|
||||||||
Macnica Fuji Electronics Holdings, Inc.
|
252,400
|
3,648,896
|
1.83
|
%
|
||||||||
Mimaki Engineering Co., Ltd.
|
442,900
|
4,548,398
|
2.28
|
%
|
||||||||
Nihon Unisys, Ltd.
|
152,400
|
3,339,733
|
1.68
|
%
|
||||||||
Nippon Signal Company, Ltd.
|
231,900
|
2,123,307
|
1.06
|
%
|
||||||||
NS Solutions Corp.
|
185,500
|
5,535,734
|
2.78
|
%
|
||||||||
OBIC Business Consultants Co., Ltd.
|
68,400
|
5,466,984
|
2.74
|
%
|
||||||||
Sun Corp.
|
293,500
|
1,410,029
|
0.71
|
%
|
||||||||
UMC Electronics Co., Ltd.
|
180,900
|
3,365,957
|
1.69
|
%
|
||||||||
|
36,891,295
|
18.51
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Materials – 8.37%
|
||||||||||||
Asahi Holdings, Inc.
|
260,800
|
$
|
5,584,766
|
2.80
|
%
|
|||||||
Asia Pile Holdings Co.
|
692,000
|
3,993,263
|
2.00
|
%
|
||||||||
Kuriyama Holdings Corp.
|
175,900
|
2,733,051
|
1.37
|
%
|
||||||||
Stella Chemifa Corp.
|
143,900
|
4,379,255
|
2.20
|
%
|
||||||||
|
16,690,335
|
8.37
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $194,388,845)
|
198,100,675
|
99.37
|
%
|
|||||||||
|
||||||||||||
SHORT-TERM INVESTMENTS – 0.69%
|
||||||||||||
Money Market Funds – 0.69%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (b)
|
1,368,475
|
1,368,475
|
0.69
|
%
|
||||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $1,368,475)
|
1,368,475
|
0.69
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $195,757,320) – 100.06%
|
199,469,150
|
100.06
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.06)%
|
(116,910
|
)
|
(0.06
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
199,352,240
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
(b)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
—
|
$
|
6,946,710
|
$
|
—
|
$
|
6,946,710
|
||||||||
Consumer Discretionary
|
—
|
31,277,166
|
—
|
31,277,166
|
||||||||||||
Consumer Staples
|
—
|
9,180,590
|
—
|
9,180,590
|
||||||||||||
Financials
|
—
|
5,994,829
|
—
|
5,994,829
|
||||||||||||
Health Care
|
—
|
8,078,302
|
—
|
8,078,302
|
||||||||||||
Industrials
|
—
|
83,041,448
|
—
|
83,041,448
|
||||||||||||
Information Technology
|
—
|
36,891,295
|
—
|
36,891,295
|
||||||||||||
Materials
|
—
|
16,690,335
|
—
|
16,690,335
|
||||||||||||
Total Common Stocks
|
$
|
—
|
$
|
198,100,675
|
$
|
—
|
$
|
198,100,675
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
1,368,475
|
$
|
—
|
$
|
—
|
$
|
1,368,475
|
||||||||
Total Short-Term Investments
|
$
|
1,368,475
|
$
|
—
|
$
|
—
|
$
|
1,368,475
|
||||||||
Total Investments
|
$
|
1,368,475
|
$
|
198,100,675
|
$
|
—
|
$
|
199,469,150
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $195,757,320)
|
$
|
199,469,150
|
||
Dividends and interest receivable
|
1,435,971
|
|||
Receivable for fund shares sold
|
479,652
|
|||
Prepaid expenses and other assets
|
34,318
|
|||
Total Assets
|
201,419,091
|
|||
LIABILITIES:
|
||||
Payable for securities purchased
|
579,624
|
|||
Payable for fund shares redeemed
|
1,237,908
|
|||
Payable to advisor
|
143,911
|
|||
Payable to administrator
|
18,458
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
19,660
|
|||
Accrued service fees
|
8,976
|
|||
Accrued trustees fees
|
5,964
|
|||
Accrued expenses and other payables
|
30,450
|
|||
Total Liabilities
|
2,066,851
|
|||
NET ASSETS
|
$
|
199,352,240
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
189,397,047
|
||
Total distributable earnings
|
9,955,193
|
|||
Total Net Assets
|
$
|
199,352,240
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
100,934,185
|
||
Shares issued and outstanding
|
6,735,449
|
|||
Net asset value, offering price and redemption price per share
|
$
|
14.99
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
98,418,055
|
||
Shares issued and outstanding
|
6,637,191
|
|||
Net asset value, offering price and redemption price per share
|
$
|
14.83
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income(1)
|
$
|
3,377,962
|
||
Interest income
|
177,614
|
|||
Total investment income
|
3,555,576
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
1,642,461
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
256,062
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
53,213
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
196,932
|
|||
Distribution fees – Investor Class (See Note 5)
|
167,647
|
|||
Service fees – Investor Class (See Note 5)
|
111,765
|
|||
Federal and state registration fees
|
55,963
|
|||
Reports to shareholders
|
31,517
|
|||
Compliance expense (See Note 5)
|
29,499
|
|||
Audit fees
|
23,181
|
|||
Trustees’ fees and expenses
|
17,310
|
|||
Legal fees
|
1,581
|
|||
Other expenses
|
15,180
|
|||
Total expenses
|
2,602,311
|
|||
NET INVESTMENT INCOME
|
$
|
953,265
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
8,566,596
|
||
Net change in unrealized appreciation/depreciation on investments
|
(13,684,693
|
)
|
||
Net loss on investments
|
(5,118,097
|
)
|
||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
(4,164,832
|
)
|
(1)
|
Net of foreign taxes withheld of $375,218.
|
HENNESSYFUNDS.COM
|
STATEMENT OF OPERATIONS/STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
953,265
|
$
|
174,013
|
||||
Net realized gain on investments
|
8,566,596
|
2,713,582
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(13,684,693
|
)
|
13,111,946
|
|||||
Net increase (decrease) in net
|
||||||||
assets resulting from operations
|
(4,164,832
|
)
|
15,999,541
|
|||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(1,780,476
|
)
|
(550,773
|
)
|
||||
Distributable earnings – Institutional Class
|
(1,109,923
|
)
|
(37,604
|
)
|
||||
Total distributions
|
(2,890,399
|
)
|
(588,377
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
111,702,386
|
49,025,671
|
||||||
Proceeds from shares subscribed – Institutional Class
|
137,676,100
|
27,290,706
|
||||||
Dividends reinvested – Investor Class
|
1,748,813
|
545,989
|
||||||
Dividends reinvested – Institutional Class
|
1,109,776
|
37,604
|
||||||
Cost of shares redeemed – Investor Class
|
(80,170,785
|
)
|
(18,881,862
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(64,230,751
|
)
|
(4,516,415
|
)
|
||||
Net increase in net assets derived
|
||||||||
from capital share transactions
|
107,835,539
|
53,501,693
|
||||||
TOTAL INCREASE IN NET ASSETS
|
100,780,308
|
68,912,857
|
||||||
NET ASSETS:
|
||||||||
Beginning of year
|
98,571,932
|
29,659,075
|
||||||
End of year
|
$
|
199,352,240
|
$
|
98,571,932
|
(2)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
6,964,885
|
3,750,829
|
||||||
Shares sold – Institutional Class
|
8,685,841
|
2,024,977
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
113,712
|
49,783
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
72,917
|
3,468
|
||||||
Shares redeemed – Investor Class
|
(5,026,572
|
)
|
(1,440,939
|
)
|
||||
Shares redeemed – Institutional Class
|
(4,071,372
|
)
|
(380,799
|
)
|
||||
Net increase in shares outstanding
|
6,739,411
|
4,007,319
|
(1)
|
Includes net investment income distributions of $307,249 and $7,754 and net realized gain distributions of $243,524 and $29,850 for the Investor Class and Institutional Class, respectively.
|
(2)
|
Includes accumulated net investment loss of $(37,056).
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
14.92
|
$
|
11.29
|
$
|
10.29
|
$
|
10.51
|
$
|
11.70
|
|||||||||
0.05
|
0.08
|
0.03
|
(0.02
|
)
|
(0.04
|
)
|
||||||||||||
0.35
|
3.77
|
1.31
|
0.71
|
1.36
|
||||||||||||||
0.40
|
3.85
|
1.34
|
0.69
|
1.32
|
||||||||||||||
(0.05
|
)
|
(0.12
|
)
|
—
|
—
|
—
|
||||||||||||
(0.28
|
)
|
(0.10
|
)
|
(0.34
|
)
|
(0.91
|
)
|
(2.51
|
)
|
|||||||||
(0.33
|
)
|
(0.22
|
)
|
(0.34
|
)
|
(0.91
|
)
|
(2.51
|
)
|
|||||||||
$
|
14.99
|
$
|
14.92
|
$
|
11.29
|
$
|
10.29
|
$
|
10.51
|
|||||||||
2.64
|
%
|
34.82
|
%
|
13.44
|
%
|
7.37
|
%
|
13.99
|
%
|
|||||||||
$
|
100.93
|
$
|
69.86
|
$
|
26.23
|
$
|
22.68
|
$
|
19.36
|
|||||||||
1.46
|
%
|
1.60
|
%
|
1.91
|
%
|
2.12
|
%
|
2.24
|
%
|
|||||||||
0.21
|
%
|
0.26
|
%
|
0.25
|
%
|
(0.38
|
)%
|
(0.39
|
)%
|
|||||||||
35
|
%
|
41
|
%
|
22
|
%
|
75
|
%
|
63
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
Period Ended
|
||||||||||||||||
Year Ended October 31,
|
October 31,
|
|||||||||||||||
2018
|
2017
|
2016
|
2015(1)
|
|||||||||||||
PER SHARE DATA:
|
||||||||||||||||
Net asset value, beginning of period
|
$
|
14.72
|
$
|
11.33
|
$
|
10.30
|
$
|
10.89
|
||||||||
Income from
|
||||||||||||||||
investment operations:
|
||||||||||||||||
Net investment income (loss)
|
0.11
|
0.05
|
0.06
|
(0.01
|
)
|
|||||||||||
Net realized and unrealized
|
||||||||||||||||
gains (losses) on investments
|
0.36
|
3.78
|
1.31
|
(0.58
|
)
|
|||||||||||
Total from investment operations
|
0.47
|
3.83
|
1.37
|
(0.59
|
)
|
|||||||||||
Less distributions:
|
||||||||||||||||
Dividends from net
|
||||||||||||||||
investment income
|
(0.08
|
)
|
(0.10
|
)
|
—
|
—
|
||||||||||
Dividends from net realized gains
|
(0.28
|
)
|
(0.34
|
)
|
(0.34
|
)
|
—
|
|||||||||
Total distributions
|
(0.36
|
)
|
(0.44
|
)
|
(0.34
|
)
|
—
|
|||||||||
Net asset value, end of period
|
$
|
14.83
|
$
|
14.72
|
$
|
11.33
|
$
|
10.30
|
||||||||
TOTAL RETURN
|
3.12
|
%
|
35.17
|
%
|
13.73
|
%
|
(5.42
|
)%(2)
|
||||||||
SUPPLEMENTAL
|
||||||||||||||||
DATA AND RATIOS:
|
||||||||||||||||
Net assets, end of period (millions)
|
$
|
98.42
|
$
|
28.71
|
$
|
3.42
|
$
|
2.65
|
||||||||
Ratio of expenses to
|
||||||||||||||||
average net assets
|
1.04
|
%
|
1.19
|
%
|
1.63
|
%
|
1.86
|
%(3)
|
||||||||
Ratio of net investment income
|
||||||||||||||||
(loss) to average net assets
|
0.77
|
%
|
0.80
|
%
|
0.63
|
%
|
(1.04
|
)%(3)
|
||||||||
Portfolio turnover rate(4)
|
35
|
%
|
41
|
%
|
22
|
%
|
75
|
%(2)
|
(1)
|
Institutional Class shares commenced operations on June 15, 2015.
|
(2)
|
Not annualized.
|
(3)
|
Annualized.
|
(4)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS/NOTES TO THE FINANCIAL STATEMENTS
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(2,438,804)
|
$2,438,804
|
HENNESSY FUNDS
|
1-800-966-4354
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
Foreign Currency – Values of investments denominated in foreign currencies are converted into U.S. dollars using the spot market rate of exchange at the time of valuation. Purchases and sales of investments and income are translated into U.S. dollars using the spot market rate of exchange prevailing on the respective dates of such transactions. The Fund does not isolate the portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from fluctuations resulting from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain/loss on investments. Foreign investments present additional risks due to currency fluctuations, economic and political factors, lower liquidity, government regulations, differences in accounting standards, and other factors.
|
j).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
k).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
HENNESSY FUNDS
|
1-800-966-4354
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, foreign-issued common stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”) will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
195,799,022
|
||
Gross tax unrealized appreciation
|
$
|
22,448,859
|
||
Gross tax unrealized depreciation
|
(18,782,297
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
3,666,562
|
||
Undistributed ordinary income
|
$
|
275,368
|
||
Undistributed long-term capital gains
|
6,013,263
|
|||
Total distributable earnings
|
$
|
6,288,631
|
||
Other accumulated gain/(loss)
|
$
|
—
|
||
Total accumulated gain/(loss)
|
$
|
9,955,193
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
583,714
|
$
|
588,377
|
||||
Long-term capital gain
|
2,306,685
|
—
|
||||||
|
$
|
2,890,399
|
$
|
588,377
|
|
Long-term
|
Short-term
|
Investor Class
|
$0.46558
|
$0.00020
|
Institutional Class
|
$0.45707
|
$0.00020
|
Investor Class
|
$ —
|
|
Institutional Class
|
$0.04449547
|
HENNESSYFUNDS.COM
|
NOTES/REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSY FUNDS
|
1-800-966-4354
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 914.60
|
$7.09
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,017.80
|
$7.48
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 916.00
|
$5.07
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,019.91
|
$5.35
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.47% for Investor Class shares or 1.05% for Institutional Class shares, as applicable, 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
|
|
Gross Foreign Income
|
Foreign Tax Paid
|
Japan
|
$3,753,180
|
$375,218
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
10
|
Statement of Operations
|
11
|
Statements of Changes in Net Assets
|
13
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
17
|
Report of Independent Registered Public Accounting Firm
|
25
|
Trustees and Officers of the Fund
|
26
|
Expense Example
|
30
|
Proxy Voting Policy and Proxy Voting Records
|
32
|
Quarterly Schedule of Investments
|
32
|
Federal Tax Distribution Information
|
32
|
Important Notice Regarding Delivery of Shareholder Documents
|
32
|
Privacy Policy
|
33
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Large Cap Financial Fund –
|
|||
Investor Class (HLFNX)
|
1.82%
|
8.31%
|
9.92%
|
Hennessy Large Cap Financial Fund –
|
|||
Institutional Class (HILFX)(1)
|
2.16%
|
8.59%
|
10.07%
|
Russell 1000® Financial Services Index
|
3.72%
|
11.52%
|
10.68%
|
Russell 1000® Index
|
6.98%
|
11.05%
|
13.42%
|
(1)
|
The inception date of Institutional Class shares is June 15, 2015. Performance shown prior to the inception of Institutional Class shares reflects the performance of Investor Class shares and includes expenses that are not applicable to, and are higher than, those of Institutional Class shares.
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
Visa, Inc., Class A
|
5.25%
|
The PNC Financial Services Group, Inc.
|
5.16%
|
Mastercard, Inc., Class A
|
5.16%
|
JPMorgan Chase & Co.
|
5.03%
|
Bank of America Corp.
|
5.02%
|
Capital One Financial Corp.
|
5.02%
|
Berkshire Hathaway, Inc., Class B
|
4.94%
|
PayPal Holdings, Inc.
|
4.90%
|
Citigroup, Inc.
|
4.27%
|
Moody’s Corp.
|
4.09%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 90.11%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 2.59%
|
||||||||||||
Zillow Group, Inc. (a)
|
32,000
|
$
|
1,291,840
|
2.59
|
%
|
|||||||
|
||||||||||||
Financials – 63.42%
|
||||||||||||
American Express Co.
|
9,000
|
924,570
|
1.85
|
%
|
||||||||
Bank of America Corp.
|
91,000
|
2,502,500
|
5.02
|
%
|
||||||||
Berkshire Hathaway, Inc., Class B (a)
|
12,000
|
2,463,360
|
4.94
|
%
|
||||||||
Capital One Financial Corp.
|
28,000
|
2,500,400
|
5.02
|
%
|
||||||||
Citigroup, Inc.
|
32,500
|
2,127,450
|
4.27
|
%
|
||||||||
Citizens Financial Group, Inc.
|
47,000
|
1,755,450
|
3.52
|
%
|
||||||||
Fifth Third Bancorp
|
20,000
|
539,800
|
1.08
|
%
|
||||||||
JPMorgan Chase & Co.
|
23,000
|
2,507,460
|
5.03
|
%
|
||||||||
KeyCorp
|
60,000
|
1,089,600
|
2.19
|
%
|
||||||||
Moody’s Corp.
|
14,000
|
2,036,720
|
4.09
|
%
|
||||||||
Morgan Stanley
|
34,000
|
1,552,440
|
3.11
|
%
|
||||||||
MSCI, Inc.
|
7,500
|
1,127,850
|
2.26
|
%
|
||||||||
State Street Corp.
|
14,000
|
962,500
|
1.93
|
%
|
||||||||
SunTrust Banks, Inc.
|
27,000
|
1,691,820
|
3.39
|
%
|
||||||||
The Charles Schwab Corp.
|
39,000
|
1,803,360
|
3.62
|
%
|
||||||||
The Goldman Sachs Group, Inc.
|
5,500
|
1,239,535
|
2.49
|
%
|
||||||||
The PNC Financial Services Group, Inc.
|
20,000
|
2,569,800
|
5.16
|
%
|
||||||||
U.S. Bancorp (c)
|
22,000
|
1,149,940
|
2.31
|
%
|
||||||||
Wells Fargo & Co.
|
20,000
|
1,064,600
|
2.14
|
%
|
||||||||
|
31,609,155
|
63.42
|
%
|
|||||||||
|
||||||||||||
Information Technology – 24.10%
|
||||||||||||
Global Payments, Inc.
|
15,000
|
1,713,450
|
3.44
|
%
|
||||||||
Mastercard, Inc., Class A
|
13,000
|
2,569,710
|
5.16
|
%
|
||||||||
PayPal Holdings, Inc. (a)
|
29,000
|
2,441,510
|
4.90
|
%
|
||||||||
SS&C Technologies Holdings, Inc.
|
7,500
|
383,700
|
0.77
|
%
|
||||||||
Total System Services, Inc.
|
17,000
|
1,549,550
|
3.11
|
%
|
||||||||
Visa, Inc., Class A
|
19,000
|
2,619,150
|
5.25
|
%
|
||||||||
Worldpay, Inc. (a)
|
8,000
|
734,720
|
1.47
|
%
|
||||||||
|
12,011,790
|
24.10
|
%
|
|||||||||
|
||||||||||||
Total Common Stocks
|
||||||||||||
(Cost $39,311,908)
|
44,912,785
|
90.11
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
SHORT-TERM INVESTMENTS – 12.39%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 12.39%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (b)
|
2,436,000
|
$
|
2,436,000
|
4.89
|
%
|
|||||||
Morgan Stanley Institutional Liquidity Fund Government Portfolio,
|
||||||||||||
Institutional Class, 2.05% (b)
|
1,302,912
|
1,302,912
|
2.61
|
%
|
||||||||
The Government & Agency Portfolio, Institutional Class, 2.08% (b)
|
2,436,000
|
2,436,000
|
4.89
|
%
|
||||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $6,174,912)
|
6,174,912
|
12.39
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $45,486,820) – 102.50%
|
51,087,697
|
102.50
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (2.50)%
|
(1,244,795
|
)
|
(2.50
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
49,842,902
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
(b)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
(c)
|
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, 2018, are as follows:
|
Issuer
|
U.S. Bancorp
|
|||||
Beginning Cost
|
$
|
838,120
|
||||
Purchase Cost
|
$
|
1,155,804
|
||||
Sales Cost
|
$
|
(848,280
|
)
|
|||
Ending Cost
|
$
|
1,145,644
|
||||
Dividend Income
|
$
|
21,240
|
||||
Net Change in
|
||||||
Unrealized Depreciation
|
$
|
(82,044
|
)
|
|||
Realized Gain
|
$
|
50,621
|
||||
Shares
|
22,000
|
|||||
Market Value
|
$
|
1,149,940
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
1,291,840
|
$
|
—
|
$
|
—
|
$
|
1,291,840
|
||||||||
Financials
|
31,609,155
|
—
|
—
|
31,609,155
|
||||||||||||
Information Technology
|
12,011,790
|
—
|
—
|
12,011,790
|
||||||||||||
Total Common Stocks
|
$
|
44,912,785
|
$
|
—
|
$
|
—
|
$
|
44,912,785
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
6,174,912
|
$
|
—
|
$
|
—
|
$
|
6,174,912
|
||||||||
Total Short-Term Investments
|
$
|
6,174,912
|
$
|
—
|
$
|
—
|
$
|
6,174,912
|
||||||||
Total Investments
|
$
|
51,087,697
|
$
|
—
|
$
|
—
|
$
|
51,087,697
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in unaffiliated securities, at value (cost $44,341,176)
|
$
|
49,937,757
|
||
Investments in affiliated securities, at value (cost $1,145,644)
|
1,149,940
|
|||
Total investments in securities, at value (cost $45,486,820)
|
51,087,697
|
|||
Dividends and interest receivable
|
55,963
|
|||
Receivable for fund shares sold
|
33,877
|
|||
Receivable for securities sold
|
246,097
|
|||
Prepaid expenses and other assets
|
15,197
|
|||
Total Assets
|
51,438,831
|
|||
LIABILITIES:
|
||||
Payable for securities purchased
|
1,479,002
|
|||
Payable for fund shares redeemed
|
19,521
|
|||
Payable to advisor
|
39,198
|
|||
Payable to administrator
|
4,590
|
|||
Payable to auditor
|
21,900
|
|||
Accrued distribution fees
|
8,586
|
|||
Accrued service fees
|
3,576
|
|||
Accrued interest payable
|
91
|
|||
Accrued trustees fees
|
5,960
|
|||
Accrued expenses and other payables
|
13,505
|
|||
Total Liabilities
|
1,595,929
|
|||
NET ASSETS
|
$
|
49,842,902
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
43,876,268
|
||
Total distributable earnings
|
5,966,634
|
|||
Total Net Assets
|
$
|
49,842,902
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
40,989,982
|
||
Shares issued and outstanding
|
1,912,926
|
|||
Net asset value, offering price and redemption price per share
|
$
|
21.43
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
8,852,920
|
||
Shares issued and outstanding
|
413,800
|
|||
Net asset value, offering price and redemption price per share
|
$
|
21.39
|
HENNESSYFUNDS.COM
|
STATEMENT OF ASSETS AND LIABILITIES/STATEMENT OF OPERATIONS
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income from unaffiliated securities
|
$
|
542,564
|
||
Dividend income from affiliated securities
|
21,240
|
|||
Interest income
|
32,642
|
|||
Total investment income
|
596,446
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
428,499
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
69,674
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
5,749
|
|||
Distribution fees – Investor Class (See Note 5)
|
59,248
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
45,895
|
|||
Service fees – Investor Class (See Note 5)
|
39,499
|
|||
Federal and state registration fees
|
34,329
|
|||
Compliance expense (See Note 5)
|
29,500
|
|||
Audit fees
|
22,501
|
|||
Trustees’ fees and expenses
|
16,727
|
|||
Reports to shareholders
|
16,621
|
|||
Interest expense (See Note 7)
|
4
|
|||
Other expenses
|
5,936
|
|||
Total expenses
|
774,182
|
|||
NET INVESTMENT LOSS
|
$
|
(177,736
|
)
|
|
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on:
|
||||
Unaffiliated investments
|
$
|
1,150,798
|
||
Affiliated investments
|
50,621
|
|||
Net change in unrealized appreciation/depreciation on:
|
||||
Unaffiliated investments
|
(1,576,046
|
)
|
||
Affiliated investments
|
(82,044
|
)
|
||
Net loss on investments
|
(456,671
|
)
|
||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
(634,407
|
)
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment loss
|
$
|
(177,736
|
)
|
$
|
(116,337
|
)
|
||
Net realized gain on investments
|
1,201,419
|
4,459,225
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(1,658,090
|
)
|
4,725,077
|
|||||
Net increase (decrease) in net
|
||||||||
assets resulting from operations
|
(634,407
|
)
|
9,067,965
|
|||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(1,219,312
|
)
|
(158,906
|
)
|
||||
Distributable earnings – Institutional Class
|
(296,176
|
)
|
(29,650
|
)
|
||||
Total distributions
|
(1,515,488
|
)
|
(188,556
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
24,589,903
|
5,666,734
|
||||||
Proceeds from shares subscribed – Institutional Class
|
7,641,988
|
5,259,686
|
||||||
Dividends reinvested – Investor Class
|
1,178,036
|
154,596
|
||||||
Dividends reinvested – Institutional Class
|
296,176
|
29,650
|
||||||
Cost of shares redeemed – Investor Class
|
(9,240,403
|
)
|
(14,389,624
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(4,636,260
|
)
|
(458,597
|
)
|
||||
Net increase (decrease) in net assets derived
|
||||||||
from capital share transactions
|
19,829,440
|
(3,737,555
|
)
|
|||||
TOTAL INCREASE IN NET ASSETS
|
17,679,545
|
5,141,854
|
||||||
NET ASSETS:
|
||||||||
Beginning of year
|
32,163,357
|
27,021,503
|
||||||
End of year
|
$
|
49,842,902
|
$
|
32,163,357
|
(2)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
1,072,989
|
289,553
|
||||||
Shares sold – Institutional Class
|
339,855
|
265,747
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
54,162
|
8,027
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
13,686
|
1,551
|
||||||
Shares redeemed – Investor Class
|
(410,285
|
)
|
(745,488
|
)
|
||||
Shares redeemed – Institutional Class
|
(205,942
|
)
|
(22,449
|
)
|
||||
Net increase (decrease) in shares outstanding
|
864,465
|
(203,059
|
)
|
(1)
|
All distributions were from net investment income.
|
(2)
|
Includes accumulated undistributed net investment loss of $(114,001).
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Amount is less than $0.01.
|
(2)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
22.02
|
$
|
16.23
|
$
|
18.36
|
$
|
20.87
|
$
|
19.01
|
|||||||||
(0.07
|
)
|
(0.08
|
)
|
0.07
|
0.01
|
0.00
|
(1)
|
|||||||||||
0.48
|
5.97
|
(0.49
|
)
|
(0.40
|
)
|
2.44
|
||||||||||||
0.41
|
5.89
|
(0.42
|
)
|
(0.39
|
)
|
2.44
|
||||||||||||
—
|
(0.10
|
)
|
(0.02
|
)
|
—
|
—
|
||||||||||||
(1.00
|
)
|
—
|
(1.69
|
)
|
(2.12
|
)
|
(0.58
|
)
|
||||||||||
(1.00
|
)
|
(0.10
|
)
|
(1.71
|
)
|
(2.12
|
)
|
(0.58
|
)
|
|||||||||
$
|
21.43
|
$
|
22.02
|
$
|
16.23
|
$
|
18.36
|
$
|
20.87
|
|||||||||
1.82
|
%
|
36.41
|
%
|
(2.57
|
)%
|
(2.57
|
)%
|
13.04
|
%
|
|||||||||
$
|
40.99
|
$
|
26.33
|
$
|
26.67
|
$
|
100.73
|
$
|
98.07
|
|||||||||
1.69
|
%
|
1.81
|
%
|
1.66
|
%
|
1.57
|
%
|
1.49
|
%
|
|||||||||
(0.44
|
)%
|
(0.41
|
)%
|
0.16
|
%
|
0.03
|
%
|
(0.01
|
)%
|
|||||||||
64
|
%
|
76
|
%
|
141
|
%
|
74
|
%
|
58
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
Period Ended
|
||||||||||||||||
Year Ended October 31,
|
October 31,
|
|||||||||||||||
2018
|
2017
|
2016
|
2015(1)
|
|||||||||||||
PER SHARE DATA:
|
||||||||||||||||
Net asset value, beginning of period
|
$
|
21.91
|
$
|
16.26
|
$
|
18.39
|
$
|
19.72
|
||||||||
Income from
|
||||||||||||||||
investment operations:
|
||||||||||||||||
Net investment income (loss)
|
0.03
|
0.18
|
0.02
|
0.01
|
||||||||||||
Net realized and unrealized
|
||||||||||||||||
gains (losses) on investments
|
0.45
|
5.78
|
(0.36
|
)
|
(1.34
|
)
|
||||||||||
Total from investment operations
|
0.48
|
5.96
|
(0.34
|
)
|
(1.33
|
)
|
||||||||||
Less distributions:
|
||||||||||||||||
Dividends from net
|
||||||||||||||||
investment income
|
—
|
(0.31
|
)
|
(0.09
|
)
|
—
|
||||||||||
Dividends from net realized gains
|
(1.00
|
)
|
—
|
(1.70
|
)
|
—
|
||||||||||
Total distributions
|
(1.00
|
)
|
(0.31
|
)
|
(1.79
|
)
|
—
|
|||||||||
Net asset value, end of period
|
$
|
21.39
|
$
|
21.91
|
$
|
16.26
|
$
|
18.39
|
||||||||
TOTAL RETURN
|
2.16
|
%
|
36.92
|
%
|
(2.14
|
)%
|
(6.74
|
)%(2)
|
||||||||
SUPPLEMENTAL
|
||||||||||||||||
DATA AND RATIOS:
|
||||||||||||||||
Net assets, end of period (millions)
|
$
|
8.85
|
$
|
5.83
|
$
|
0.35
|
$
|
0.29
|
||||||||
Ratio of expenses to
|
||||||||||||||||
average net assets
|
1.34
|
%
|
1.50
|
%
|
1.24
|
%
|
1.19
|
%(3)
|
||||||||
Ratio of net investment income
|
||||||||||||||||
(loss) to average net assets
|
(0.07
|
)%
|
(0.17
|
)%
|
0.52
|
%
|
0.25
|
%(3)
|
||||||||
Portfolio turnover rate(4)
|
64
|
%
|
76
|
%
|
141
|
%
|
74
|
%(2)
|
(1)
|
Institutional Class shares commenced operations on June 15, 2015.
|
(2)
|
Not annualized.
|
(3)
|
Annualized.
|
(4)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS/NOTES TO THE FINANCIAL STATEMENTS
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(64,607)
|
$64,607
|
HENNESSY FUNDS
|
1-800-966-4354
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, foreign-issued common stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”)
|
HENNESSY FUNDS
|
1-800-966-4354
|
will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
46,213,309
|
||
Gross tax unrealized appreciation
|
$
|
7,356,788
|
||
Gross tax unrealized depreciation
|
(2,482,400
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
4,874,388
|
||
Undistributed ordinary income
|
$
|
—
|
||
Undistributed long-term capital gains
|
1,232,897
|
|||
Total distributable earnings
|
$
|
1,232,897
|
||
Other accumulated gain/(loss)
|
$
|
(140,651
|
)
|
|
Total accumulated gain/(loss)
|
$
|
5,966,634
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
—
|
$
|
187,217
|
||||
Long-term capital gain
|
1,515,488
|
1,339
|
||||||
|
$
|
1,515,488
|
$
|
188,556
|
|
Long-term
|
Investor Class
|
$0.58896
|
Institutional Class
|
$0.59199
|
HENNESSYFUNDS.COM
|
NOTES/REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSY FUNDS
|
1-800-966-4354
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 965.30
|
$8.27
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,016.79
|
$8.49
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 967.00
|
$6.40
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,018.70
|
$6.56
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.67% for Investor Class shares or 1.29% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
10
|
Statement of Operations
|
11
|
Statements of Changes in Net Assets
|
13
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
18
|
Report of Independent Registered Public Accounting Firm
|
26
|
Trustees and Officers of the Fund
|
27
|
Expense Example
|
30
|
Proxy Voting Policy and Proxy Voting Records
|
32
|
Quarterly Schedule of Investments
|
32
|
Federal Tax Distribution Information
|
32
|
Important Notice Regarding Delivery of Shareholder Documents
|
32
|
Privacy Policy
|
33
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Small Cap Financial Fund –
|
|||
Investor Class (HSFNX)
|
-8.79%
|
6.98%
|
9.41%
|
Hennessy Small Cap Financial Fund –
|
|||
Institutional Class (HISFX)
|
-8.42%
|
7.37%
|
9.74%
|
Russell 2000® Financial Services Index
|
-1.99%
|
9.28%
|
10.20%
|
Russell 2000® Index
|
1.85%
|
8.01%
|
12.44%
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
Hingham Institution for Savings
|
5.17%
|
Union Bankshares Corp.
|
4.87%
|
Brookline Bancorp, Inc.
|
4.77%
|
OceanFirst Financial Corp.
|
4.74%
|
Meridian Bancorp, Inc.
|
4.27%
|
Kearny Financial Corp. of Maryland
|
4.19%
|
Eagle Bancorp, Inc.
|
3.74%
|
First BanCorp.
|
3.69%
|
ConnectOne Bancorp, Inc.
|
3.55%
|
Independent Bank Corp.
|
3.48%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 89.67%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Financials – 89.67%
|
||||||||||||
Axos Financial, Inc. (a)
|
45,000
|
$
|
1,366,200
|
0.87
|
%
|
|||||||
Banc of California, Inc.
|
264,000
|
4,210,800
|
2.67
|
%
|
||||||||
BankUnited, Inc.
|
120,000
|
3,972,000
|
2.52
|
%
|
||||||||
Banner Corp.
|
60,000
|
3,469,200
|
2.20
|
%
|
||||||||
Beneficial Bancorp, Inc.
|
225,000
|
3,516,750
|
2.23
|
%
|
||||||||
Blue Hills Bancorp, Inc.
|
125,000
|
2,901,250
|
1.84
|
%
|
||||||||
Brookline Bancorp, Inc.
|
485,000
|
7,517,500
|
4.77
|
%
|
||||||||
Capstar Financial Holdings, Inc.
|
10,000
|
147,800
|
0.09
|
%
|
||||||||
Columbia Financial, Inc. (a)
|
360,000
|
5,428,800
|
3.44
|
%
|
||||||||
ConnectOne Bancorp, Inc.
|
270,000
|
5,597,100
|
3.55
|
%
|
||||||||
Dime Community Bancshares, Inc.
|
80,000
|
1,289,600
|
0.82
|
%
|
||||||||
Eagle Bancorp, Inc. (a)
|
120,000
|
5,900,400
|
3.74
|
%
|
||||||||
FCB Financial Holdings, Inc., Class A (a)
|
105,000
|
4,108,650
|
2.61
|
%
|
||||||||
First BanCorp. (a)(b)
|
630,000
|
5,814,900
|
3.69
|
%
|
||||||||
Flushing Financial Corp.
|
5,000
|
113,450
|
0.07
|
%
|
||||||||
Green Bancorp, Inc.
|
175,000
|
3,237,500
|
2.05
|
%
|
||||||||
HarborOne Bancorp, Inc. (a)
|
290,000
|
5,278,000
|
3.35
|
%
|
||||||||
Hingham Institution for Savings
|
40,000
|
8,144,000
|
5.17
|
%
|
||||||||
IBERIABANK Corp.
|
52,500
|
3,910,725
|
2.48
|
%
|
||||||||
Independent Bank Corp.
|
70,000
|
5,491,500
|
3.48
|
%
|
||||||||
Kearny Financial Corp. of Maryland
|
510,000
|
6,599,400
|
4.19
|
%
|
||||||||
Lakeland Bancorp, Inc.
|
170,000
|
2,799,900
|
1.78
|
%
|
||||||||
Meridian Bancorp, Inc.
|
425,000
|
6,732,000
|
4.27
|
%
|
||||||||
Midland States Bancorp, Inc.
|
45,000
|
1,213,650
|
0.77
|
%
|
||||||||
OceanFirst Financial Corp.
|
295,000
|
7,469,400
|
4.74
|
%
|
||||||||
Opus Bank
|
180,000
|
3,418,200
|
2.17
|
%
|
||||||||
PacWest Bancorp
|
92,500
|
3,757,350
|
2.38
|
%
|
||||||||
People’s United Financial, Inc.
|
140,000
|
2,192,400
|
1.39
|
%
|
||||||||
Provident Financial Services, Inc.
|
15,000
|
366,000
|
0.23
|
%
|
||||||||
Sterling Bancorp
|
250,000
|
4,495,000
|
2.85
|
%
|
||||||||
The Bank of N.T. Butterfield & Son Ltd. (b)
|
30,000
|
1,208,700
|
0.77
|
%
|
||||||||
Union Bankshares Corp.
|
225,000
|
7,681,500
|
4.87
|
%
|
||||||||
United Financial Bancorp, Inc.
|
230,000
|
3,553,500
|
2.25
|
%
|
||||||||
Washington Federal, Inc.
|
140,000
|
3,942,400
|
2.50
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Financials (Continued)
|
||||||||||||
Western Alliance Bancorp (a)
|
15,000
|
$
|
723,600
|
0.46
|
%
|
|||||||
Wintrust Financial Corp.
|
50,000
|
3,807,000
|
2.41
|
%
|
||||||||
|
141,376,125
|
89.67
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $128,374,584)
|
141,376,125
|
89.67
|
%
|
|||||||||
|
||||||||||||
SHORT-TERM INVESTMENTS – 10.05%
|
||||||||||||
Money Market Funds – 10.05%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (c)
|
7,911,000
|
7,911,000
|
5.02
|
%
|
||||||||
Morgan Stanley Institutional Liquidity Fund, Government Portfolio,
|
||||||||||||
Institutional Class, 2.05% (c)
|
89,297
|
89,297
|
0.05
|
%
|
||||||||
The Government & Agency Portfolio, Institutional Class, 2.08% (c)
|
7,849,000
|
7,849,000
|
4.98
|
%
|
||||||||
|
15,849,297
|
10.05
|
%
|
|||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $15,849,297)
|
15,849,297
|
10.05
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $144,223,881) – 99.72%
|
157,225,422
|
99.72
|
%
|
|||||||||
Other Assets in Excess of Liabilities – 0.28%
|
436,313
|
0.28
|
%
|
|||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
157,661,735
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
|
(b)
|
U.S.-traded security of a foreign corporation.
|
|
(c)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Financials
|
$
|
141,376,125
|
$
|
—
|
$
|
—
|
$
|
141,376,125
|
||||||||
Total Common Stocks
|
$
|
141,376,125
|
$
|
—
|
$
|
—
|
$
|
141,376,125
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
15,849,297
|
$
|
—
|
$
|
—
|
$
|
15,849,297
|
||||||||
Total Short-Term Investments
|
$
|
15,849,297
|
$
|
—
|
$
|
—
|
$
|
15,849,297
|
||||||||
Total Investments
|
$
|
157,225,422
|
$
|
—
|
$
|
—
|
$
|
157,225,422
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $144,223,881)
|
$
|
157,225,422
|
||
Dividends and interest receivable
|
130,120
|
|||
Receivable for fund shares sold
|
154,311
|
|||
Receivable for securities sold
|
1,330,052
|
|||
Prepaid expenses and other assets
|
22,071
|
|||
Total Assets
|
158,861,976
|
|||
LIABILITIES:
|
||||
Payable for securities purchased
|
655,633
|
|||
Payable for fund shares redeemed
|
295,502
|
|||
Payable to advisor
|
127,743
|
|||
Payable to administrator
|
15,425
|
|||
Payable to auditor
|
21,899
|
|||
Accrued distribution fees
|
26,086
|
|||
Accrued service fees
|
10,971
|
|||
Accrued trustees fees
|
5,964
|
|||
Accrued expenses and other payables
|
41,018
|
|||
Total Liabilities
|
1,200,241
|
|||
NET ASSETS
|
$
|
157,661,735
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
135,883,798
|
||
Total distributable earnings
|
21,777,937
|
|||
Total Net Assets
|
$
|
157,661,735
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
121,997,850
|
||
Shares issued and outstanding
|
5,556,065
|
|||
Net asset value, offering price and redemption price per share
|
$
|
21.96
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
35,663,885
|
||
Shares issued and outstanding
|
2,686,067
|
|||
Net asset value, offering price and redemption price per share
|
$
|
13.28
|
HENNESSYFUNDS.COM
|
STATEMENT OF ASSETS AND LIABILITIES/STATEMENT OF OPERATIONS
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income
|
$
|
3,092,630
|
||
Interest income
|
137,076
|
|||
Total investment income
|
3,229,706
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
1,757,915
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
344,353
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
26,717
|
|||
Distribution fees – Investor Class (See Note 5)
|
236,954
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
188,398
|
|||
Service fees – Investor Class (See Note 5)
|
157,969
|
|||
Federal and state registration fees
|
44,405
|
|||
Compliance expense (See Note 5)
|
29,500
|
|||
Reports to shareholders
|
23,763
|
|||
Audit fees
|
22,500
|
|||
Trustees’ fees and expenses
|
17,265
|
|||
Legal fees
|
1,184
|
|||
Other expenses
|
16,173
|
|||
Total expenses
|
2,867,096
|
|||
NET INVESTMENT INCOME
|
$
|
362,610
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
12,332,055
|
||
Net change in unrealized appreciation/depreciation on investments
|
(27,410,886
|
)
|
||
Net loss on investments
|
(15,078,831
|
)
|
||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
(14,716,221
|
)
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment income (loss)
|
$
|
362,610
|
$
|
(3,352
|
)
|
|||
Net realized gain on investments
|
12,332,055
|
19,986,888
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(27,410,886
|
)
|
17,014,799
|
|||||
Net increase (decrease) in net assets resulting from operations
|
(14,716,221
|
)
|
36,998,335
|
|||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(12,667,248
|
)
|
(20,280,034
|
)
|
||||
Distributable earnings – Institutional Class
|
(2,810,391
|
)
|
(3,532,520
|
)
|
||||
Total distributions
|
(15,477,639
|
)
|
(23,812,554
|
)(1)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
21,302,624
|
100,903,651
|
||||||
Proceeds from shares subscribed – Institutional Class
|
22,839,938
|
35,239,059
|
||||||
Dividends reinvested – Investor Class
|
12,401,989
|
19,917,344
|
||||||
Dividends reinvested – Institutional Class
|
2,696,156
|
3,189,710
|
||||||
Cost of shares redeemed – Investor Class
|
(62,443,809
|
)
|
(90,350,351
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(20,874,270
|
)
|
(23,511,159
|
)
|
||||
Net increase (decrease) in net
|
||||||||
assets derived from capital share transactions
|
(24,077,372
|
)
|
45,388,254
|
|||||
TOTAL INCREASE (DECREASE) IN NET ASSETS
|
(54,271,232
|
)
|
58,574,035
|
|||||
NET ASSETS:
|
||||||||
Beginning of year
|
211,932,967
|
153,358,932
|
||||||
End of year
|
$
|
157,661,735
|
$
|
211,932,967
|
||||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
852,589
|
3,914,617
|
||||||
Shares sold – Institutional Class
|
1,489,112
|
2,297,508
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
506,624
|
782,880
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
182,573
|
206,594
|
||||||
Shares redeemed – Investor Class
|
(2,490,267
|
)
|
(3,635,991
|
)
|
||||
Shares redeemed – Institutional Class
|
(1,402,574
|
)
|
(1,581,565
|
)
|
||||
Net increase (decrease) in shares outstanding
|
(861,943
|
)
|
1,984,043
|
(1)
|
Includes net investment income distributions of $483,756 and $414,103 and net realized gain distributions of $19,796,278 and $3,118,417 for the Investor Class and Institutional Class, respectively.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Calculated based on average shares outstanding method.
|
(2)
|
Amount is less than $0.01 or $(0.01).
|
(3)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
26.02
|
$
|
23.48
|
$
|
23.81
|
$
|
24.13
|
$
|
25.40
|
|||||||||
0.03
|
(0.04
|
)
|
0.10
|
0.03
|
(1)
|
(0.10
|
)
|
|||||||||||
(2.12
|
)
|
5.83
|
1.20
|
2.99
|
0.49
|
|||||||||||||
(2.09
|
)
|
5.79
|
1.30
|
3.02
|
0.39
|
|||||||||||||
(0.00
|
)(2)
|
(0.06
|
)
|
(0.03
|
)
|
—
|
(0.06
|
)
|
||||||||||
(1.97
|
)
|
(3.19
|
)
|
(1.60
|
)
|
(3.34
|
)
|
(1.60
|
)
|
|||||||||
(1.97
|
)
|
(3.25
|
)
|
(1.63
|
)
|
(3.34
|
)
|
(1.66
|
)
|
|||||||||
—
|
—
|
—
|
—
|
0.00
|
(2)
|
|||||||||||||
$
|
21.96
|
$
|
26.02
|
$
|
23.48
|
$
|
23.81
|
$
|
24.13
|
|||||||||
(8.79
|
)%
|
25.03
|
%
|
5.80
|
%
|
14.51
|
%
|
1.40
|
%
|
|||||||||
$
|
122.00
|
$
|
174.01
|
$
|
132.09
|
$
|
218.50
|
$
|
193.09
|
|||||||||
1.54
|
%
|
1.52
|
%
|
1.54
|
%
|
1.50
|
%
|
1.44
|
%
|
|||||||||
0.11
|
%
|
(0.06
|
)%
|
0.38
|
%
|
0.17
|
%
|
(0.36
|
)%
|
|||||||||
28
|
%
|
46
|
%
|
46
|
%
|
49
|
%
|
47
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
Calculated based on average shares outstanding method.
|
(2)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
15.69
|
$
|
14.23
|
$
|
14.39
|
$
|
14.53
|
$
|
15.96
|
|||||||||
0.07
|
0.02
|
0.09
|
0.06
|
(1)
|
(0.09
|
)
|
||||||||||||
(1.27
|
)
|
3.56
|
0.75
|
1.81
|
0.40
|
|||||||||||||
(1.20
|
)
|
3.58
|
0.84
|
1.87
|
0.31
|
|||||||||||||
(0.02
|
)
|
(0.17
|
)
|
(0.04
|
)
|
—
|
(0.14
|
)
|
||||||||||
(1.19
|
)
|
(1.95
|
)
|
(0.96
|
)
|
(2.01
|
)
|
(1.60
|
)
|
|||||||||
(1.21
|
)
|
(2.12
|
)
|
(1.00
|
)
|
(2.01
|
)
|
(1.74
|
)
|
|||||||||
$
|
13.28
|
$
|
15.69
|
$
|
14.23
|
$
|
14.39
|
$
|
14.53
|
|||||||||
(8.42
|
)%
|
25.56
|
%
|
6.22
|
%
|
14.91
|
%
|
1.70
|
%
|
|||||||||
$
|
35.66
|
$
|
37.92
|
$
|
21.27
|
$
|
25.94
|
$
|
42.23
|
|||||||||
1.15
|
%
|
1.15
|
%
|
1.17
|
%
|
1.17
|
%
|
1.12
|
%
|
|||||||||
0.51
|
%
|
0.30
|
%
|
0.72
|
%
|
0.48
|
%
|
(0.04
|
)%
|
|||||||||
28
|
%
|
46
|
%
|
46
|
%
|
49
|
%
|
47
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(2,752,574)
|
$2,752,574
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSY FUNDS
|
1-800-966-4354
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, foreign-issued common stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”)
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
144,911,472
|
||
Gross tax unrealized appreciation
|
$
|
20,712,537
|
||
Gross tax unrealized depreciation
|
(8,398,587
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
12,313,950
|
||
Undistributed ordinary income
|
$
|
304,362
|
||
Undistributed long-term capital gains
|
9,159,625
|
|||
Total distributable earnings
|
$
|
9,463,987
|
||
Other accumulated gain/(loss)
|
$
|
—
|
||
Total accumulated gain/(loss)
|
$
|
21,777,937
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income(1)
|
$
|
1,372,736
|
$
|
897,859
|
||||
Long-term capital gain
|
14,104,903
|
22,914,695
|
||||||
|
$
|
15,477,639
|
$
|
23,812,554
|
|
Long-term
|
Short-term
|
Investor Class
|
$1.31958
|
$0.00162
|
Institutional Class
|
$0.82307
|
$0.00101
|
Investor Class
|
$0.07118721
|
|
Institutional Class
|
$0.18030516
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM/ TRUSTEES AND OFFICERS
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 901.10
|
$7.38
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,017.44
|
$7.83
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 902.80
|
$5.47
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,019.46
|
$5.80
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.54% for Investor Class shares or 1.14% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Letter to Shareholders
|
2
|
Performance Overview
|
4
|
Financial Statements
|
|
Schedule of Investments
|
7
|
Statement of Assets and Liabilities
|
11
|
Statement of Operations
|
12
|
Statements of Changes in Net Assets
|
13
|
Financial Highlights
|
14
|
Notes to the Financial Statements
|
18
|
Report of Independent Registered Public Accounting Firm
|
26
|
Trustees and Officers of the Fund
|
27
|
Expense Example
|
30
|
Proxy Voting Policy and Proxy Voting Records
|
32
|
Quarterly Schedule of Investments
|
32
|
Federal Tax Distribution Information
|
32
|
Important Notice Regarding Delivery of Shareholder Documents
|
32
|
Privacy Policy
|
33
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-800-966-4354
|
|
One
|
Five
|
Ten
|
|
Year
|
Years
|
Years
|
Hennessy Technology Fund –
|
|||
Investor Class (HTECX)
|
7.25%
|
7.85%
|
11.02%
|
Hennessy Technology Fund –
|
|||
Institutional Class (HTCIX)(1)
|
7.54%
|
8.18%
|
11.28%
|
NASDAQ Composite Index
|
9.74%
|
14.58%
|
16.92%
|
S&P 500 Index
|
7.35%
|
11.34%
|
13.24%
|
Expense ratios:
|
Gross 4.12%, Net 1.24%(2) (Investor Class);
|
|
Gross 3.70%, Net 0.99%(2) (Institutional Class)
|
(1)
|
The inception date of Institutional Class shares is March 12, 2010. Performance shown prior to the inception of Institutional Class shares reflects the performance of Investor Class shares and includes expenses that are not applicable to, and are higher than, those of Institutional Class shares.
|
(2)
|
The Fund’s investment advisor has contractually agreed to limit expenses until February 28, 2019.
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of October 31, 2018
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
Red Hat, Inc.
|
2.31%
|
Xerox Corp.
|
1.85%
|
CDW Corp. of Delaware
|
1.81%
|
NCR Corp.
|
1.74%
|
Amkor Technology, Inc.
|
1.72%
|
Ituran Location and Control Ltd.
|
1.72%
|
Cadence Design Systems, Inc.
|
1.71%
|
Ubiquiti Networks, Inc.
|
1.71%
|
Celestica, Inc.
|
1.71%
|
The Western Union Co.
|
1.70%
|
HENNESSY FUNDS
|
1-800-966-4354
|
COMMON STOCKS – 94.00%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 1.55%
|
||||||||||||
Match Group, Inc. (a)
|
1,321
|
$
|
68,322
|
1.55
|
%
|
|||||||
|
||||||||||||
Consumer Discretionary – 3.15%
|
||||||||||||
JD.com, Inc. – ADR (a)(b)
|
3,106
|
73,053
|
1.66
|
%
|
||||||||
Vipshop Holdings Ltd. – ADR (a)(b)
|
13,463
|
65,431
|
1.49
|
%
|
||||||||
|
138,484
|
3.15
|
%
|
|||||||||
|
||||||||||||
Information Technology – 89.30%
|
||||||||||||
Accenture PLC, Class A (b)
|
435
|
68,565
|
1.56
|
%
|
||||||||
Adobe, Inc. (a)
|
283
|
69,550
|
1.58
|
%
|
||||||||
Advanced Micro Devices, Inc. (a)
|
2,717
|
49,477
|
1.12
|
%
|
||||||||
Amkor Technology, Inc. (a)
|
10,576
|
75,618
|
1.72
|
%
|
||||||||
Apple, Inc.
|
334
|
73,099
|
1.66
|
%
|
||||||||
Applied Materials, Inc.
|
2,002
|
65,826
|
1.50
|
%
|
||||||||
Arista Networks, Inc. (a)
|
298
|
68,644
|
1.56
|
%
|
||||||||
Autodesk, Inc. (a)
|
491
|
63,462
|
1.44
|
%
|
||||||||
Automatic Data Processing, Inc.
|
493
|
71,031
|
1.61
|
%
|
||||||||
Booz Allen Hamilton Holding Corp.
|
1,501
|
74,360
|
1.69
|
%
|
||||||||
Box, Inc., Class A (a)
|
3,627
|
65,286
|
1.48
|
%
|
||||||||
Broadridge Financial Solutions, Inc.
|
603
|
70,515
|
1.60
|
%
|
||||||||
Cadence Design Systems, Inc. (a)
|
1,689
|
75,279
|
1.71
|
%
|
||||||||
CDW Corp. of Delaware
|
885
|
79,659
|
1.81
|
%
|
||||||||
Celestica, Inc. (a)(b)
|
7,228
|
75,027
|
1.71
|
%
|
||||||||
Citrix Systems, Inc. (a)
|
685
|
70,192
|
1.60
|
%
|
||||||||
Cornerstone OnDemand, Inc. (a)
|
1,404
|
69,147
|
1.57
|
%
|
||||||||
DXC Technology Co.
|
845
|
61,541
|
1.40
|
%
|
||||||||
F5 Networks, Inc. (a)
|
410
|
71,865
|
1.63
|
%
|
||||||||
Fair Isaac Corp. (a)
|
338
|
65,136
|
1.48
|
%
|
||||||||
Fiserv, Inc. (a)
|
919
|
72,877
|
1.66
|
%
|
||||||||
Fortinet, Inc. (a)
|
868
|
71,332
|
1.62
|
%
|
||||||||
Hewlett Packard Enterprise Co.
|
4,633
|
70,653
|
1.61
|
%
|
||||||||
Hortonworks, Inc. (a)
|
3,143
|
56,134
|
1.28
|
%
|
||||||||
Ichor Holdings, Ltd. (a)(b)
|
3,711
|
65,870
|
1.50
|
%
|
||||||||
Intuit, Inc.
|
336
|
70,896
|
1.61
|
%
|
||||||||
Ituran Location and Control Ltd. (b)
|
2,215
|
75,576
|
1.72
|
%
|
||||||||
Jabil Circuit, Inc.
|
2,915
|
72,088
|
1.64
|
%
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Information Technology (Continued)
|
||||||||||||
KLA-Tencor Corp.
|
751
|
$
|
68,747
|
1.56
|
%
|
|||||||
Lam Research Corp.
|
502
|
71,148
|
1.62
|
%
|
||||||||
LG Display Co., Ltd – ADR (a)(b)
|
9,169
|
67,300
|
1.53
|
%
|
||||||||
Logitech International S.A. (b)
|
1,785
|
65,902
|
1.50
|
%
|
||||||||
Mastercard, Inc., Class A
|
355
|
70,173
|
1.60
|
%
|
||||||||
NCR Corp. (a)
|
2,845
|
76,388
|
1.74
|
%
|
||||||||
NetApp, Inc.
|
928
|
72,839
|
1.66
|
%
|
||||||||
Palo Alto Networks, Inc. (a)
|
352
|
64,430
|
1.46
|
%
|
||||||||
Paychex, Inc.
|
1,063
|
69,616
|
1.58
|
%
|
||||||||
Paycom Software, Inc. (a)
|
540
|
67,608
|
1.54
|
%
|
||||||||
Paylocity Holding Corp. (a)
|
1,017
|
66,908
|
1.52
|
%
|
||||||||
Proofpoint, Inc. (a)
|
759
|
69,031
|
1.57
|
%
|
||||||||
Red Hat, Inc. (a)
|
591
|
101,439
|
2.31
|
%
|
||||||||
Sabre Corp.
|
3,007
|
74,123
|
1.69
|
%
|
||||||||
Sanmina Corp. (a)
|
2,920
|
73,876
|
1.68
|
%
|
||||||||
Science Applications International Corp.
|
971
|
67,494
|
1.53
|
%
|
||||||||
Seagate Technology PLC (b)
|
1,629
|
65,535
|
1.49
|
%
|
||||||||
ServiceNow, Inc. (a)
|
412
|
74,588
|
1.70
|
%
|
||||||||
SMART Global Holdings, Inc. (a)(b)
|
2,317
|
64,899
|
1.48
|
%
|
||||||||
SYNNEX Corp.
|
836
|
64,882
|
1.47
|
%
|
||||||||
Texas Instruments, Inc.
|
716
|
66,466
|
1.51
|
%
|
||||||||
The Ultimate Software Group, Inc. (a)
|
248
|
66,124
|
1.50
|
%
|
||||||||
The Western Union Co.
|
4,145
|
74,776
|
1.70
|
%
|
||||||||
Ubiquiti Networks, Inc.
|
808
|
75,217
|
1.71
|
%
|
||||||||
Versum Materials, Inc.
|
2,175
|
68,643
|
1.56
|
%
|
||||||||
Vishay Intertechnology, Inc.
|
3,954
|
72,358
|
1.64
|
%
|
||||||||
Wix.com Ltd. (a)(b)
|
693
|
67,464
|
1.53
|
%
|
||||||||
Xerox Corp.
|
2,923
|
81,464
|
1.85
|
%
|
||||||||
|
3,928,143
|
89.30
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $4,087,704)
|
4,134,949
|
94.00
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
SHORT-TERM INVESTMENTS – 6.54%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Money Market Funds – 6.54%
|
||||||||||||
Fidelity Government Portfolio, Institutional Class, 2.06% (c)
|
215,000
|
$
|
215,000
|
4.89
|
%
|
|||||||
The Government & Agency Portfolio, Institutional Class, 2.08% (c)
|
72,501
|
72,501
|
1.65
|
%
|
||||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $287,501)
|
287,501
|
6.54
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $4,375,205) – 100.54%
|
4,422,450
|
100.54
|
%
|
|||||||||
Liabilities in Excess of Other Assets – (0.54)%
|
(23,848
|
)
|
(0.54
|
)%
|
||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
4,398,602
|
100.00
|
%
|
(a)
|
Non-income producing security.
|
(b)
|
U.S.-traded security of a foreign corporation.
|
(c)
|
The rate listed is the fund’s seven-day yield as of October 31, 2018.
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
68,322
|
$
|
—
|
$
|
—
|
$
|
68,322
|
||||||||
Consumer Discretionary
|
138,484
|
—
|
—
|
138,484
|
||||||||||||
Information Technology
|
3,928,143
|
—
|
—
|
3,928,143
|
||||||||||||
Total Common Stocks
|
$
|
4,134,949
|
$
|
—
|
$
|
—
|
$
|
4,134,949
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
287,501
|
$
|
—
|
$
|
—
|
$
|
287,501
|
||||||||
Total Short-Term Investments
|
$
|
287,501
|
$
|
—
|
$
|
—
|
$
|
287,501
|
||||||||
Total Investments
|
$
|
4,422,450
|
$
|
—
|
$
|
—
|
$
|
4,422,450
|
HENNESSYFUNDS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of October 31, 2018
|
ASSETS:
|
||||
Investments in securities, at value (cost $4,375,205)
|
$
|
4,422,450
|
||
Dividends and interest receivable
|
2,774
|
|||
Receivable for fund shares sold
|
176
|
|||
Prepaid expenses and other assets
|
16,217
|
|||
Due from Advisor
|
8,057
|
|||
Total Assets
|
4,449,674
|
|||
LIABILITIES:
|
||||
Payable for fund shares redeemed
|
7,156
|
|||
Payable to administrator
|
404
|
|||
Payable to auditor
|
21,899
|
|||
Accrued distribution fees
|
6,841
|
|||
Accrued service fees
|
287
|
|||
Accrued trustees fees
|
5,961
|
|||
Accrued expenses and other payables
|
8,524
|
|||
Total Liabilities
|
51,072
|
|||
NET ASSETS
|
$
|
4,398,602
|
||
NET ASSETS CONSIST OF:
|
||||
Capital stock
|
$
|
3,829,622
|
||
Total distributable earnings
|
568,980
|
|||
Total Net Assets
|
$
|
4,398,602
|
||
NET ASSETS
|
||||
Investor Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Investor Class shares
|
$
|
3,308,812
|
||
Shares issued and outstanding
|
183,382
|
|||
Net asset value, offering price and redemption price per share
|
$
|
18.04
|
||
Institutional Class:
|
||||
Shares authorized (no par value)
|
Unlimited
|
|||
Net assets applicable to outstanding Institutional Class shares
|
$
|
1,089,790
|
||
Shares issued and outstanding
|
59,007
|
|||
Net asset value, offering price and redemption price per share
|
$
|
18.47
|
HENNESSY FUNDS
|
1-800-966-4354
|
Statement of Operations for the year ended October 31, 2018
|
INVESTMENT INCOME:
|
||||
Dividend income(1)
|
$
|
36,306
|
||
Interest income
|
2,944
|
|||
Total investment income
|
39,250
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
33,671
|
|||
Federal and state registration fees
|
32,563
|
|||
Compliance expense (See Note 5)
|
29,500
|
|||
Audit fees
|
22,499
|
|||
Trustees’ fees and expenses
|
16,623
|
|||
Reports to shareholders
|
6,022
|
|||
Sub-transfer agent expenses – Investor Class (See Note 5)
|
5,871
|
|||
Sub-transfer agent expenses – Institutional Class (See Note 5)
|
4
|
|||
Distribution fees – Investor Class (See Note 5)
|
5,067
|
|||
Administration, fund accounting, custody and transfer agent fees (See Note 5)
|
4,008
|
|||
Service fees – Investor Class (See Note 5)
|
3,378
|
|||
Interest expense (See Note 7)
|
31
|
|||
Other expenses
|
4,001
|
|||
Total expenses before reimbursement by advisor
|
163,238
|
|||
Expense reimbursement by advisor – Investor Class (See Note 5)
|
(83,351
|
)
|
||
Expense reimbursement by advisor – Institutional Class (See Note 5)
|
(26,820
|
)
|
||
Net expenses
|
53,067
|
|||
NET INVESTMENT LOSS
|
$
|
(13,817
|
)
|
|
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized gain on investments
|
$
|
629,547
|
||
Net change in unrealized appreciation/depreciation on investments
|
(302,826
|
)
|
||
Net gain on investments
|
326,721
|
|||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
312,904
|
(1)
|
Net of foreign taxes withheld and issuance fees of $721.
|
HENNESSYFUNDS.COM
|
STATEMENT OF OPERATIONS/STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Year Ended
|
Year Ended
|
|||||||
October 31, 2018
|
October 31, 2017
|
|||||||
OPERATIONS:
|
||||||||
Net investment loss
|
$
|
(13,817
|
)
|
$
|
(41,753
|
)
|
||
Net realized gain on investments
|
629,547
|
632,539
|
||||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
(302,826
|
)
|
31,853
|
|||||
Net increase in net assets resulting from operations
|
312,904
|
622,639
|
||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
||||||||
Distributable earnings – Investor Class
|
(284,124
|
)
|
—
|
|||||
Distributable earnings – Institutional Class
|
(107,305
|
)
|
—
|
|||||
Total distributions
|
(391,429
|
)
|
—
|
|||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed – Investor Class
|
552,927
|
422,345
|
||||||
Proceeds from shares subscribed – Institutional Class
|
88,271
|
218,028
|
||||||
Dividends reinvested – Investor Class
|
278,793
|
—
|
||||||
Dividends reinvested – Institutional Class
|
106,216
|
—
|
||||||
Cost of shares redeemed – Investor Class
|
(654,226
|
)
|
(587,405
|
)
|
||||
Cost of shares redeemed – Institutional Class
|
(308,951
|
)
|
(74,362
|
)
|
||||
Net increase (decrease) in net assets derived
|
||||||||
from capital share transactions
|
63,030
|
(21,394
|
)
|
|||||
TOTAL INCREASE (DECREASE) IN NET ASSETS
|
(15,495
|
)
|
601,245
|
|||||
NET ASSETS:
|
||||||||
Beginning of year
|
4,414,097
|
3,812,852
|
||||||
End of year
|
$
|
4,398,602
|
$
|
4,414,097
|
(1)
|
|||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold – Investor Class
|
29,132
|
24,507
|
||||||
Shares sold – Institutional Class
|
4,606
|
12,743
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Investor Class
|
16,634
|
—
|
||||||
Shares issued to holders as reinvestment
|
||||||||
of dividends – Institutional Class
|
6,208
|
—
|
||||||
Shares redeemed – Investor Class
|
(35,601
|
)
|
(35,133
|
)
|
||||
Shares redeemed – Institutional Class
|
(16,346
|
)
|
(4,356
|
)
|
||||
Net increase (decrease) in shares outstanding
|
4,633
|
(2,239
|
)
|
(1)
|
Includes accumulated net investment loss of $(22,185).
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
The Fund’s current expense limitation agreement, which became effective on February 28, 2017, was in effect for eight months of the year ended October 31, 2017. The Fund previously had an expense limitation agreement in effect from October 26, 2012, to February 28, 2015.
|
(2)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INVESTOR CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
18.46
|
$
|
15.82
|
$
|
15.36
|
$
|
14.86
|
$
|
13.57
|
|||||||||
(0.05
|
)
|
(0.23
|
)
|
(0.68
|
)
|
(0.38
|
)
|
(0.23
|
)
|
|||||||||
1.26
|
2.87
|
1.14
|
0.88
|
1.52
|
||||||||||||||
1.21
|
2.64
|
0.46
|
0.50
|
1.29
|
||||||||||||||
(1.63
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
(1.63
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
$
|
18.04
|
$
|
18.46
|
$
|
15.82
|
$
|
15.36
|
$
|
14.86
|
|||||||||
7.25
|
%
|
16.69
|
%
|
2.99
|
%
|
3.36
|
%
|
9.51
|
%
|
|||||||||
$
|
3.31
|
$
|
3.20
|
$
|
2.91
|
$
|
4.04
|
$
|
4.99
|
|||||||||
3.70
|
%
|
4.16
|
%
|
3.61
|
%
|
3.13
|
%
|
2.92
|
%
|
|||||||||
1.23
|
%
|
2.15
|
%(1)
|
3.61
|
%
|
2.75
|
%
|
1.95
|
%
|
|||||||||
(2.83
|
)%
|
(3.16
|
)%
|
(2.92
|
)%
|
(2.30
|
)%
|
(2.53
|
)%
|
|||||||||
(0.36
|
)%
|
(1.15
|
)%(1)
|
(2.92
|
)%
|
(1.92
|
)%
|
(1.55
|
)%
|
|||||||||
225
|
%
|
267
|
%
|
80
|
%
|
163
|
%
|
204
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Financial Highlights
|
(1)
|
The Fund’s current expense limitation agreement, which became effective on February 28, 2017, was in effect for eight months of the year ended October 31, 2017. The Fund previously had an expense limitation agreement in effect from October 26, 2012, to February 28, 2015.
|
(2)
|
Portfolio turnover is calculated on the basis of the Fund as a whole.
|
HENNESSYFUNDS.COM
|
FINANCIAL HIGHLIGHTS — INSTITUTIONAL CLASS
|
Year Ended October 31,
|
||||||||||||||||||
2018
|
2017
|
2016
|
2015
|
2014
|
||||||||||||||
$
|
18.85
|
$
|
16.11
|
$
|
15.58
|
$
|
15.02
|
$
|
13.68
|
|||||||||
0.01
|
(0.12
|
)
|
(0.43
|
)
|
(0.25
|
)
|
(0.26
|
)
|
||||||||||
1.28
|
2.86
|
0.96
|
0.81
|
1.60
|
||||||||||||||
1.29
|
2.74
|
0.53
|
0.56
|
1.34
|
||||||||||||||
(1.67
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
(1.67
|
)
|
—
|
—
|
—
|
—
|
|||||||||||||
$
|
18.47
|
$
|
18.85
|
$
|
16.11
|
$
|
15.58
|
$
|
15.02
|
|||||||||
7.54
|
%
|
17.01
|
%
|
3.40
|
%
|
3.73
|
%
|
9.80
|
%
|
|||||||||
$
|
1.09
|
$
|
1.22
|
$
|
0.90
|
$
|
0.95
|
$
|
0.93
|
|||||||||
3.27
|
%
|
3.74
|
%
|
3.28
|
%
|
2.76
|
%
|
2.60
|
%
|
|||||||||
0.98
|
%
|
1.77
|
%(1)
|
3.28
|
%
|
2.44
|
%
|
1.70
|
%
|
|||||||||
(2.41
|
)%
|
(2.74
|
)%
|
(2.59
|
)%
|
(1.92
|
)%
|
(2.23
|
)%
|
|||||||||
(0.12
|
)%
|
(0.77
|
)%(1)
|
(2.59
|
)%
|
(1.60
|
)%
|
(1.33
|
)%
|
|||||||||
225
|
%
|
267
|
%
|
80
|
%
|
163
|
%
|
204
|
%
|
HENNESSY FUNDS
|
1-800-966-4354
|
Notes to the Financial Statements October 31, 2018
|
a).
|
Securities Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
|
b).
|
Federal Income Taxes – No provision for federal income taxes or excise taxes has been made because the Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all of its taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Net investment income/loss and realized gains/losses for federal income tax purposes may differ from those reported in 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. The Fund recognizes interest and penalties related to income tax benefits, if any, in the Statement of Operations as an income tax expense. 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. The Fund may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes.
|
Due to inherent differences in the recognition of income, expenses, and realized gains/losses under GAAP and federal income tax regulations, permanent differences between book and tax basis for reporting for fiscal year 2018 have been identified and appropriately reclassified in the Statement of Assets and Liabilities. The adjustments are as follows:
|
Total
|
|
Distributable
|
|
Earnings
|
Capital Stock
|
$(52,368)
|
$52,368
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
c).
|
Accounting for Uncertainty in Income Taxes – The Fund has accounting policies regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The tax returns of the Fund for the prior three fiscal years are open for examination. The Fund has reviewed all open tax years in major jurisdictions and concluded that there is no impact on the Fund’s 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. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
d).
|
Income and Expenses – Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund. Interest income, which includes the amortization of premium and accretion of discount, is recognized on an accrual basis. Other non-cash dividends are recognized as investment income at the fair value of the property received. The Fund is charged for those expenses that are directly attributable to its portfolio, such as advisory, administration, and certain shareholder service fees. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains/losses on investments are allocated to each class of shares based on such class’s net assets.
|
e).
|
Distributions to Shareholders – Dividends from net investment income for the Fund, if any, are declared and paid annually, usually in December. Distributions of net realized capital gains, if any, are declared and paid annually, usually in December.
|
f).
|
Security Transactions – Investment and shareholder transactions are recorded on the trade date. The Fund determines the realized gain/loss from an investment transaction by comparing the original cost of the security lot sold with the net sale proceeds. Discounts and premiums on securities purchased are accreted or amortized, respectively, over the life of each such security.
|
g).
|
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.
|
h).
|
Share Valuation – The net asset value (“NAV”) per share of the Fund is calculated by dividing (i) the total value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by (ii) the total number of shares outstanding for the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on days the New York Stock Exchange is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s NAV per share.
|
i).
|
New Accounting Pronouncements – In August 2018, the FASB issued Accounting Standards Update No. 2018-13 “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). ASU 2018-13 eliminates the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the timing of transfers between levels of the fair value hierarchy, and the valuation processes for Level 3 fair value measurements. ASU 2018-13 does not eliminate the requirement to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements, and the changes in unrealized gains and losses for recurring Level 3 fair value measurements. ASU 2018-13 requires that information is provided about the measurement uncertainty of Level 3 fair value measurements as of the reporting date. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Management has
|
HENNESSY FUNDS
|
1-800-966-4354
|
evaluated the impact of this change in guidance, and due to the permissibility of early adoption, modified the Fund’s fair value disclosures for the current reporting period.
|
|
j).
|
New Rule Issuances – In August 2018, the Securities and Exchange Commission issued Final Rule Release No. 33 10532, Disclosure Update and Simplification, which in part amends certain financial statement disclosure requirements of Regulation S-X that have become redundant, duplicative, overlapping, outdated, or superseded, in light of other Commission disclosure requirements, GAAP, or changes in the information environment. The amendments are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amendments to Rule 6-04.17 of Regulation S-X (balance sheet) were amended to require presentation of the total, rather than the components of net assets, of distributable earnings on the balance sheet. Consistent with GAAP, funds will be required to disclose total distributable earnings. The amendments to Rule 6-09 of Regulation S-X (statement of changes in net assets) omit the requirement to separately state the sources of distributions paid as well as omit the requirement to parenthetically state the book basis amount of undistributed net investment income. Instead, consistent with GAAP, funds will be required to disclose the total amount of distributions paid, except that any tax return of capital must be separately disclosed. The requirements of the Final Rule Release are effective November 5, 2018 and the Fund’s Statement of Assets and Liabilities and the Statement of Changes in Net Assets for the current and prior reporting period have been modified accordingly.
|
Level 1 –
|
Unadjusted, quoted prices in active markets for identical instruments that the Fund has the ability to access at the date of measurement.
|
|
Level 2 –
|
Other significant observable inputs (including, but not limited to, quoted prices in active markets for similar instruments, quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets, such as interest rates, prepayment speeds, credit risk curves, default rates, and similar data).
|
|
Level 3 –
|
Significant unobservable inputs (including the Fund’s own assumptions about what market participants would use to price the asset or liability based on the best available information) when observable inputs are unavailable.
|
Equity Securities – Equity securities, including common stocks, preferred stocks, foreign-issued common stocks, exchange-traded funds, closed-end mutual funds, partnerships, rights, and real estate investment trusts, that are traded on a securities exchange for which a last-quoted sales price is readily available will generally be valued at the last sales price as reported by the primary exchange on which the securities are listed. Securities listed on The NASDAQ Stock Market (“NASDAQ”)
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
will generally be valued at the NASDAQ Official Closing Price, which may differ from the last sales price reported. Securities traded on a securities exchange for which a last-quoted sales price is not readily available will generally be valued at the mean between the bid and ask prices. To the extent these securities are actively traded and valuation adjustments are not applied, they are classified in Level 1 of the fair value hierarchy. Securities traded on foreign exchanges generally are not valued at the same time the Fund calculates its NAV because most foreign markets close well before such time. The earlier close of most foreign markets gives rise to the possibility that significant events, including broad market moves, may have occurred in the interim. In certain circumstances, it may be determined that a foreign security needs to be fair valued because it appears that the value of the security might have been materially affected by events occurring after the close of the market in which the security is principally traded, but before the time the Fund calculates its NAV, such as by a development that affects an entire market or region (e.g., a weather-related event) or a potentially global development (e.g., a terrorist attack that may be expected to have an effect on investor expectations worldwide).
|
|
Registered Investment Companies – Investments in open-end registered investment companies, commonly referred to as mutual funds, are generally priced at the ending NAV provided by the applicable mutual fund’s service agent and will be classified in Level 1 of the fair value hierarchy.
|
|
Debt Securities – Debt securities, including corporate bonds, asset-backed securities, mortgage-backed securities, municipal bonds, U.S. Treasuries, and U.S. government agency issues, are generally valued at market on the basis of valuations furnished by an independent pricing service that utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. In addition, the model may incorporate observable market data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued primarily using dealer quotations. These securities are generally classified in Level 2 of the fair value hierarchy.
|
|
Short-Term Securities – Short-term equity investments, including money market funds, are valued in the manner specified above. Short-term debt investments with an original term to maturity of 60 days or less are valued at amortized cost, which approximates fair market value. If the original term to maturity of a short-term debt investment exceeded 60 days, then the values as of the 61st day prior to maturity are amortized. Amortized cost is not used if its use would be inappropriate due to credit or other impairments of the issuer, in which case the security’s fair value would be determined, as described below. Short-term securities are generally classified in Level 1 or Level 2 of the fair market hierarchy depending on the inputs used and market activity levels for specific securities.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
October 31,
|
October 31,
|
||||||||||
|
2020
|
2021
|
Total
|
|||||||||
Investor Class
|
$
|
58,612
|
$
|
83,351
|
$
|
141,963
|
||||||
Institutional Class
|
$
|
20,906
|
$
|
26,820
|
$
|
47,726
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
NOTES TO THE FINANCIAL STATEMENTS
|
|
Investments
|
|||
Cost of investments for tax purposes
|
$
|
4,400,905
|
||
Gross tax unrealized appreciation
|
$
|
423,601
|
||
Gross tax unrealized depreciation
|
(402,056
|
)
|
||
Net tax unrealized appreciation/(depreciation)
|
$
|
21,545
|
||
Undistributed ordinary income
|
$
|
381,138
|
||
Undistributed long-term capital gains
|
166,307
|
|||
Total distributable earnings
|
$
|
547,445
|
||
Other accumulated gain/(loss)
|
$
|
(10
|
)
|
|
Total accumulated gain/(loss)
|
$
|
568,980
|
|
Year Ended
|
Year Ended
|
||||||
|
October 31, 2018
|
October 31, 2017
|
||||||
Ordinary income
|
$
|
—
|
$
|
—
|
||||
Long-term capital gain
|
391,429
|
—
|
||||||
|
$
|
391,429
|
$
|
—
|
|
Long-term
|
Short-term
|
Investor Class
|
$0.68615
|
$1.57251
|
Institutional Class
|
$0.70239
|
$1.60970
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM/TRUSTEES AND OFFICERS
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Disinterested Trustees and Advisers
|
|||
J. Dennis DeSousa
|
January 1996
|
Mr. DeSousa is a real estate investor.
|
None.
|
(1936)
|
|||
Trustee
|
|||
Robert T. Doyle
|
January 1996
|
Mr. Doyle has been the Sheriff of
|
None.
|
(1947)
|
Marin County, California since 1996.
|
||
Trustee
|
|||
Gerald P. Richardson
|
May 2004
|
Mr. Richardson is an independent
|
None.
|
(1945)
|
consultant in the securities industry.
|
||
Trustee
|
|||
Brian Alexander
|
March 2015
|
Mr. Alexander has worked for the
|
None.
|
(1981)
|
Sutter Health organization since
|
||
Adviser to the Board
|
2011 in various positions. He has
|
||
served as the Chief Executive Officer
|
|||
of the Sutter Roseville Medical
|
|||
Center since 2018. From 2016 through
|
|||
2018, he served as the Vice President
|
|||
of Strategy for the Sutter Health Valley
|
|||
Area, which includes 11 hospitals,
|
|||
13 ambulatory surgery centers,
|
|||
16,000 employees, and 1,900 physicians.
|
|||
From 2013 through 2016, Mr. Alexander
|
|||
served as Sutter Novato Community
|
|||
Hospital’s Chief Administrative Officer,
|
|||
and from 2011 through 2012, he
|
|||
served as a Director of Strategy
|
|||
within Sutter’s West Bay Region.
|
HENNESSY FUNDS
|
1-800-966-4354
|
Other
|
|||
Directorships
|
|||
Held Outside
|
|||
Name, (Year of Birth),
|
of Fund
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
Complex During
|
with the Trust
|
of Service
|
During Past Five Years
|
Past Five Years(1)
|
Doug Franklin
|
March 2016
|
Mr. Franklin is a retired insurance
|
None.
|
(1964)
|
industry executive. From 1987
|
||
Adviser to the Board
|
through 2015, he was employed
|
||
by the Allianz-Fireman’s Fund
|
|||
Insurance Company in various
|
|||
positions, including as its Chief
|
|||
Actuary and Chief Risk Officer.
|
|||
Claire Knoles
|
December 2015
|
Ms. Knoles is a founder of Kiosk and
|
None.
|
(1974)
|
has served as its Chief Operating
|
||
Adviser to the Board
|
Officer since 2004. Kiosk is a full
|
||
service marketing agency with
|
|||
offices in the San Francisco Bay
|
|||
Area, Toronto, and Liverpool, UK.
|
|||
Interested Trustee(2)
|
|||
Neil J. Hennessy
|
January 1996 as
|
Mr. Neil Hennessy has been employed
|
Hennessy
|
(1956)
|
a Trustee and
|
by Hennessy Advisors, Inc. since
|
Advisors, Inc.
|
Trustee, Chairman of
|
June 2008 as
|
1989 and currently serves as its
|
|
the Board, Chief
|
an Officer
|
Chairman and Chief Executive Officer.
|
|
Investment Officer,
|
|||
Portfolio Manager,
|
|||
and President
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
Officers
|
||
Teresa M. Nilsen
|
January 1996
|
Ms. Nilsen has been employed by Hennessy Advisors, Inc.
|
(1966)
|
since 1989 and currently serves as its President, Chief Operating
|
|
Executive Vice President
|
Officer, and Secretary.
|
|
and Treasurer
|
||
Daniel B. Steadman
|
March 2000
|
Mr. Steadman has been employed by Hennessy Advisors, Inc.
|
(1956)
|
since 2000 and currently serves as its Executive Vice President.
|
|
Executive Vice President
|
||
and Secretary
|
||
Brian Carlson
|
December 2013
|
Mr. Carlson has been employed by Hennessy Advisors, Inc.
|
(1972)
|
since December 2013 and currently serves as its Chief
|
|
Senior Vice President
|
Compliance Officer and Senior Vice President.
|
|
and Head of Distribution
|
||
Jennifer Cheskiewicz
|
June 2013
|
Ms. Cheskiewicz has been employed by Hennessy Advisors, Inc.
|
(1977)(3)
|
as its General Counsel since June 2013.
|
|
Senior Vice President and
|
||
Chief Compliance Officer
|
HENNESSYFUNDS.COM
|
TRUSTEES AND OFFICERS OF THE FUND
|
Name, (Year of Birth),
|
||
and Position Held
|
Start Date
|
Principal Occupation(s)
|
with the Trust
|
of Service
|
During Past Five Years
|
David Ellison
|
October 2012
|
Mr. Ellison has been employed by Hennessy Advisors, Inc. since
|
(1958)(4)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Large Cap Financial Fund and the Hennessy Small
|
|
and Portfolio Manager
|
Cap Financial Fund since inception. Mr. Ellison also served as a
|
|
Portfolio Manager of the Hennessy Technology Fund from its
|
||
inception until February 2017. Mr. Ellison served as Director,
|
||
CIO and President of FBR Fund Advisers, Inc. from December
|
||
1999 to October 2012.
|
||
Ryan C. Kelley
|
March 2013
|
Mr. Kelley has been employed by Hennessy Advisors, Inc. since
|
(1972)(5)
|
October 2012. He has served as a Portfolio Manager of the
|
|
Senior Vice President
|
Hennessy Gas Utility Fund, the Hennessy Large Cap Financial
|
|
and Portfolio Manager
|
Fund, and the Hennessy Small Cap Financial Fund since
|
|
October 2014. He served as Co-Portfolio Manager of the same
|
||
funds from March 2013 through September 2014, and as a
|
||
Portfolio Analyst for the Hennessy Funds from October 2012
|
||
through February 2013. Mr. Kelley has also served as a Portfolio
|
||
Manager of the Hennessy Cornerstone Growth Fund, the
|
||
Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy
|
||
Cornerstone Large Growth Fund, and the Hennessy
|
||
Cornerstone Value Fund since February 2017, as a Co-Portfolio
|
||
Manager of the Hennessy Technology Fund since February
|
||
2017, and as a Portfolio Manager of the Hennessy Total Return
|
||
Fund and the Hennessy Balanced Fund since May 2018.
|
||
Mr. Kelley served as Portfolio Manager of FBR Fund Advisers,
|
||
Inc. from January 2008 to October 2012.
|
||
Tania Kelley
|
October 2003
|
Ms. Kelley has been employed by Hennessy Advisors, Inc.
|
(1965)
|
since October 2003.
|
|
Senior Vice President
|
||
and Head of Marketing
|
||
Daniel P. Hennessy
|
December 2016
|
Mr. Daniel Hennessy has been employed by Hennessy Advisors,
|
(1990)
|
Inc. since 2015. He has served as an Associate Analyst or
|
|
Vice President
|
Analyst of the Hennessy Technology Fund since February 2017.
|
|
and Analyst
|
Mr. Daniel Hennessy previously served as a Mutual Fund
|
|
Specialist at U.S. Bancorp Fund Services, LLC (now doing
|
||
business as U.S. Bank Global Fund Services) from November
|
||
2014 to July 2015. Prior to that, he attended the University of
|
||
San Diego, where he earned a degree in Political Science.
|
(1)
|
Messrs. DeSousa, Doyle, N. Hennessy, and Richardson previously served on the Board of Directors of Hennessy Mutual Funds, Inc. (“HMFI”), The Hennessy Funds, Inc. (“HFI”), and Hennessy SPARX Funds Trust (“HSFT”). Pursuant to an internal reorganization effective as of February 28, 2014, the series of HFMI, HFI, and HSFT were reorganized into corresponding series of the Trust that mirrored them. Subsequent to the reorganization, HFMI, HFI, and HSFT were dissolved.
|
(2)
|
Mr. N. Hennessy is considered an “interested person,” as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Hennessy Funds.
|
(3)
|
The address of this officer is 4800 Bee Caves Road, Suite 100, Austin, TX 78746.
|
(4)
|
The address of this officer is 101 Federal Street, Suite 1900, Boston, MA 02110.
|
(5)
|
The address of this officer is 1340 Environ Way, Suite 332, Chapel Hill, NC 27517.
|
HENNESSY FUNDS
|
1-800-966-4354
|
HENNESSYFUNDS.COM
|
EXPENSE EXAMPLE
|
Expenses Paid
|
|||
Beginning
|
Ending
|
During Period(1)
|
|
Account Value
|
Account Value
|
May 1, 2018 –
|
|
May 1, 2018
|
October 31, 2018
|
October 31, 2018
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$ 992.80
|
$6.18
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,019.00
|
$6.26
|
Institutional Class
|
|||
Actual
|
$1,000.00
|
$ 994.60
|
$4.93
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.27
|
$4.99
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 1.23% for Investor Class shares or 0.98% for Institutional Class shares, as applicable, 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
|
HENNESSYFUNDS.COM
|
PROXY VOTING — PRIVACY POLICY
|
•
|
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.
|
HENNESSY FUNDS
|
1-800-966-4354
|
FYE 10/31/2018
|
FYE 10/31/2017
|
|
Audit Fees
|
$313,500
|
$249,200
|
Audit-Related Fees
|
-
|
-
|
Tax Fees
|
$64,200
|
$49,000
|
All Other Fees
|
-
|
-
|
FYE 10/31/2018
|
FYE 10/31/2017
|
|
Audit-Related Fees
|
0%
|
0%
|
Tax Fees
|
0%
|
0%
|
All Other Fees
|
0%
|
0%
|
(a)
|
The Registrant’s President 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 providers.
|
(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.
|
(a)
|
(1) Code of ethics, or amendments 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 of an exhibit. Filed herewith.
|
(b)
|
Certifications pursuant to Rule 30a‑2(b) under the Act and Section 906 of the Sarbanes‑Oxley Act of 2002. Furnished herewith.
|
By: /s/ Neil J. Hennessy
Neil J. Hennessy, President |
Date: January 9, 2019
|
By: /s/ Teresa M. Nilsen
Teresa M. Nilsen, Treasurer |
Date: January 9, 2019
|
I.
|
GENERAL
|
1
|
A.
|
Introduction
|
1
|
B.
|
Definitions
|
1
|
II.
|
STANDARDS OF BUSINESS CONDUCT
|
2
|
A.
|
General Standards
|
2
|
B.
|
Specific Duties and Responsibilities
|
3
|
C.
|
Reporting Violations
|
4
|
III.
|
PERSONAL SECURITIES INVESTMENT TRANSACTIONS POLICY
|
5
|
A.
|
General
|
5
|
B.
|
Accounts Covered
|
6
|
C.
|
Exempt Securities and Transactions
|
6
|
D.
|
Restrictions and Limitations on Personal Securities Transactions
|
7
|
E.
|
Reporting Procedures
|
8
|
IV.
|
INSIDER TRADING POLICY
|
11
|
A.
|
What is Material Information?
|
11
|
B.
|
What is Non Public Information?
|
12
|
C.
|
What are the Penalties for Insider Trading?
|
12
|
D.
|
Compliance Procedures
|
13
|
E.
|
Securities Issued By the Adviser
|
14
|
V.
|
COMPLIANCE
|
16
|
A.
|
Approval of the Code of Ethics
|
16
|
B.
|
Annual Certification
|
16
|
C.
|
Prohibition on Self Clearance
|
16
|
D.
|
Other Obligations
|
17
|
E.
|
Maintenance of Records
|
17
|
F.
|
Interpretation and Enforcement
|
17
|
1.
|
“Access Person” means any director, trustee, officer or employee of HFT or the Adviser, but excluding any director of the Adviser who meets independence requirements under applicable law.
|
2.
|
“Adviser” has the meaning set forth in Section I.A.
|
3.
|
A Covered Security is “being considered for purchase or sale” when a recommendation to purchase or sell such Covered Security has been made and communicated and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation.
|
4.
|
“beneficial ownership” shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, in determining whether a person has a pecuniary interest in a security for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
|
5.
|
“CCO” means Chief Compliance Officer per Rule 38a-1 of the Investment Company Act and Rule 206(4)-7 of the Investment Advisers Act.
|
6.
|
“control” has the meaning set forth in Section 2(a)(9) of the Investment Company Act.
|
7.
|
“Covered Security” means a security as defined in Section 2(a)(36) of the Investment Company Act, except that it does not include:
|
a.
|
direct obligations of the Government of the United States;
|
b.
|
bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and
|
c.
|
shares issued by open-end registered investment companies (but not exchange‑traded funds) other than HFT.
|
8.
|
“Disinterested Trustee” means a trustee of HFT who is not an “interested person” of HFT within the meaning of Section 2(a)(19) of the Investment Company Act and the rules and regulations promulgated thereunder.
|
9.
|
“Fund” means, individually, any series of HFT and collectively all such series shall be referred to as the “Funds”.
|
10.
|
“HFT” has the meaning set forth in Section I.A.
|
11.
|
“Initial Public Offering” means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended.
|
12.
|
“Investment Advisers Act” has the meaning set forth in Section I.A.
|
13.
|
“Investment Company Act” has the meaning set forth in Section I.A.
|
14.
|
“Investment Personnel” means (1) any employee of HFT or the Adviser or of any company in a control relationship to HFT or the Adviser who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities by a Fund and (2) any natural person who controls HFT or the Adviser and who obtains information concerning recommendations made to a Fund regarding the purchase or sale of securities by such Fund.
|
15.
|
“Laws” means the laws, rules and regulations of federal, state and local governments (both United States and foreign) and other applicable regulatory agencies.
|
16.
|
“personal securities transaction” has the meaning set forth in Section III.A.
|
17.
|
“SEC” means the Securities and Exchange Commission.
|
1.
|
always act in an honest and ethical manner, including in connection with, and the handling and avoidance of, actual or apparent conflicts of interest between personal and professional relationships;
|
2.
|
fully comply with all applicable Laws;
|
3.
|
proactively promote full, fair, accurate, timely and understandable disclosure in reports and documents that HFT and the Adviser file with or submit to the SEC and in other public communications made by HFT or the Adviser; and
|
4.
|
proactively promote ethical and honest behavior with HFT and the Adviser, including, without limitation, by promptly reporting violations of, and being accountable for adherence to, this Code.
|
1.
|
They shall handle all conflicts of interest between personal and professional relationships in an ethical and honest manner, and shall disclose in advance to the CCO of HFT or the Adviser, as applicable, the relevant details of any transaction or relationship that reasonably could be expected to give rise to an actual or apparent conflict of interest between themselves and HFT or the Adviser. Such CCO shall, as appropriate, discuss such disclosures with the Board of Trustees of HFT or the Board of Directors of the Adviser, as applicable, which Board shall thereafter take such action with respect to the conflict of interest as it deems appropriate. The general policy of HFT and the Adviser is to avoid conflicts of interest whenever practicable.
|
2.
|
They shall use their best efforts to ensure the timely and understandable disclosure of information that, in all material respects, is accurate, complete, objective and relevant in all reports and documents HFT or the Adviser file with or submit to the SEC or in any other public communications made by HFT or the Adviser.
|
3.
|
They shall use their best efforts to ensure compliance in all material respects with all applicable Laws by HFT and the Adviser.
|
4.
|
They shall respect the confidentiality of information acquired in the course of their work and shall not disclose confidential information, except when they believe they are authorized for business purposes or legally obliged to disclose confidential information. They may not use confidential information acquired in the course of their work for their personal advantage.
|
5.
|
They shall not take or direct or allow any other person to take or direct any action to fraudulently influence, coerce, manipulate or mislead the independent auditing firm of HFT or the Adviser.
|
6.
|
They may not engage the auditing firms of HFT or the Adviser to perform audit or non-audit services without the prior approval of the Board of Trustees of HFT or the Board of Directors or Audit Committee of the Adviser.
|
7.
|
The independent directors of the Adviser shall not have access to, and shall not seek from any employee of the Adviser, any of the portfolio rebalancing information related to any of the Funds until such time as the rebalancing of such Funds has been entirely concluded except that certain limited access to such information may be granted with permission, in advance, from the CCO of HFT.
|
8.
|
If they are Investment Personnel, they shall not, without the prior approval of the CCO of HFT or the Adviser, as applicable, receive any gift or participate in any entertainment event of more than de minimis value from or with any person or entity that does or is seeking to do business with or on behalf of a Fund or the Adviser. The annual receipt of gifts from the same source valued at $100 or less shall be considered de minimis, while the annual receipt of entertainment from the same source valued at $1,000 or less shall be considered de minimis. Additionally, the receipt of an occasional dinner, a ticket to a sporting event or the theater or comparable entertainment event also shall be considered to be of de minimis value.
|
9.
|
If they are Investment Personnel, except for service that began prior to March 2, 1996, they shall not serve on the board of directors of publicly traded companies absent prior authorization of the Board of Trustees of HFT. The Board of Trustees of HFT may so authorize such board service only if it determines that such board service is consistent with the interests of the Funds and their shareholders.
|
10.
|
They shall promptly report any suspected violations of this Code to the CCOs of HFT and the Adviser in accordance with Section II.C below.
|
●
|
a violation or potential violation of a Law by HFT or the Adviser;
|
●
|
a belief that such director, trustee, officer or employee is being asked to violate this Code or any Law in the performance of his or her duties for HFT or the Adviser; or
|
●
|
any other violation or potential violation of this Code by any person.
|
·
|
such Access Person has obtained pre‑clearance of such transaction in accordance with the procedures described in Section III.D.7 below; and
|
·
|
the transaction is reported in writing to the CCOs of HFT and the Adviser on a quarterly basis in accordance with the requirements of Section III.E.3 below.
|
●
|
such person;
|
●
|
such person’s spouse or minor child;
|
●
|
a relative (including in‑laws, stepchildren or stepparents) sharing the same house; or
|
●
|
anyone else if such person is able to:
|
o
|
obtain benefits substantially equivalent to ownership of the securities; or
|
o
|
obtain ownership of the securities immediately or at some future time.
|
1.
|
Exemptions from Pre‑Clearance and Reporting Requirements
|
a.
|
purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control; and
|
b.
|
purchases or sales that are non-volitional on the part of the Access Person.
|
2.
|
Exemptions from Pre‑Clearance Requirements Only
|
a.
|
purchases that are part of an automatic dividend reinvestment plan;
|
b.
|
purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired;
|
c.
|
purchases, sales, or gifts of common stock of issuers in the Dow Jones Industrial Average provided that the number of shares purchased or sold of any one such issuer on any day does not exceed 5,000 shares;
|
d.
|
purchases, sales, or gifts of shares issued by HFT; and
|
e.
|
purchases, sales, or gifts of exchange‑traded funds.
|
1.
|
Participation in Initial Public Offerings
|
2.
|
Participation in Private Placements
|
3.
|
Trading in a Security on a Day When There is a “Buy” or “Sell” Order or Serious Consideration Thereof
|
4.
|
Blackout Period
|
5.
|
Short‑Swing Profits; Day Trading
|
6.
|
Restricted List
|
7.
|
Pre‑Clearance Requirements
|
1.
|
Limited Reporting Obligations for Disinterested Trustees
|
2.
|
Initial Holdings Report
|
a.
|
the title and type of security, the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Covered Security in which such Access Person had any direct or indirect beneficial ownership at the time the person became an Access Person;
|
b.
|
the name of any broker, dealer or bank with whom such Access Person maintained an account in which any securities (regardless of whether such securities were Covered Securities) were held for the direct or indirect benefit of such Access Person; and
|
c.
|
the date the report is submitted by such Access Person.
|
3.
|
Quarterly Transaction Report
|
a.
|
with respect to any personal securities transaction during the quarter in a Covered Security in which the Access Person had any direct or indirect beneficial ownership (except that personal securities transactions pursuant to an automatic dividend reinvestment plan do not need to be reported in a quarterly transaction report):
|
i.
|
the date of the personal securities transaction, the title, exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares and the principal amount of each security involved;
|
ii.
|
the nature of the personal securities transaction (i.e., purchase, sale or any other type of acquisition or disposition);
|
iii.
|
the price of the Covered Security at which the personal securities transaction was effected;
|
iv.
|
the name of the broker, dealer or bank with or through whom the personal securities transaction was effected; and
|
v.
|
the date that the report is submitted by such Access Person.
|
b.
|
with respect to any account established by such Access Person during the quarter in which any securities (regardless of whether such securities were Covered Securities) were held for the direct or indirect benefit of such Access Person:
|
i.
|
the name of the broker, dealer or bank with whom such Access Person established the account;
|
ii.
|
the date the account was established; and
|
iii.
|
the date the report is submitted by such Access Person.
|
4.
|
Annual Holdings Report
|
a.
|
the title and type of security, the exchange ticker symbol or CUSIP number, number of shares and principal amount of each Covered Security in which such Access Person had any direct or indirect beneficial ownership;
|
b.
|
the name of any broker, dealer or bank with whom such Access Person maintains an account in which any securities (regardless of whether such securities were Covered Securities) are held for the direct or indirect benefit of such Access Person; and
|
c.
|
the date the report is submitted by such Access Person.
|
5.
|
Review of Periodic Reports; Identification of Access Person
|
●
|
earnings estimates or changes in previously released earnings estimates;
|
●
|
pending changes in corporate policy (such as dividend changes or stock splits);
|
●
|
significant new products, services or processes;
|
●
|
pending large commercial or government contracts;
|
●
|
the gain or loss of a substantial customer;
|
●
|
pending litigation or changes in the status of litigation;
|
●
|
a significant refinancing transaction;
|
●
|
news of a pending acquisition or sale of assets or a proposed merger or tender offer;
|
●
|
government investigations; or
|
●
|
changes in management.
|
·
|
termination of such individual’s employment or other relationship with HFT and the Adviser;
|
·
|
criminal sanctions, which may include a fine of up to $5 million and up to 20 years imprisonment;
|
·
|
disgorgement of the profits gained or losses avoided through insider trading and a penalty of up to three times such amount;
|
·
|
an SEC order permanently barring such individual from the securities industry; and
|
·
|
a lawsuit by investors seeking to recover damages for insider trading violations.
|
·
|
civil penalties of up to the greater of $1 million or three times the amount of profits gained or losses avoided by such individual;
|
·
|
criminal fines of up to $25 million; and
|
·
|
restrictions on their ability to conduct their business activities.
|
1.
|
Identifying Inside Information
|
a.
|
Is the information material? Would an investor consider this information important in making his or her investment decision? If disclosed, would this information substantially affect the market price of the securities?
|
b.
|
Is the information non‑public? Has the information been effectively communicated to the marketplace by appearing in publications of general circulation? Is the information readily available to a significant number of other investors in the market? How much time has passed since the information was disseminated?
|
a. |
immediately report the information to the CCO of HFT or the Adviser;
|
b. |
refrain from purchasing or selling any securities to which the information is relevant; and
|
c. |
refrain from communicating the information to anyone inside or outside of HFT and the Adviser other than the CCOs of HFT and the Adviser and other persons who “need to know” such information in order to perform their job responsibilities.
|
2.
|
Restricting Access to Material Non‑Public Information
|
a.
|
Communications
|
b.
|
Information Handling
|
1.
|
General
|
●
|
“tips” about material non‑public information regarding the Adviser should never be given to anyone who may, directly or indirectly, use such information to derive an improper personal benefit through personal trading in the Adviser’s stock or by passing the tip on to others; and
|
●
|
all inquiries regarding the Adviser from the press or other news media must be referred to the President or an Executive Vice President of the Adviser (who may authorize any employee to speak to the press or other news media outlet about the Adviser on a case‑by‑case basis).
|
2.
|
Quiet Period
|
3.
|
Reporting of Stock Transactions to SEC
|
4.
|
No Short Sales
|
1.
|
The Board of Trustees of HFT, including a majority of the Disinterested Trustees, and the Board of Directors of the Adviser shall approve this Code and any material changes thereto. Prior to approving this Code and any material changes thereto, the Board of Trustees of HFT, including a majority of the Disinterested Trustees, must determine that this Code contains provisions reasonably necessary to prevent Access Persons from violating Rule 17j-1(b) under the Investment Company Act.
|
2.
|
No less frequently than annually, the CCOs of HFT and the Adviser shall furnish a report to the Board of Trustees of HFT and the Board of Directors of the Adviser that includes the following:
|
a.
|
a description of all issues arising under the Code since the last report to such Boards, including, but not limited to, information about material violations of this Code and sanctions imposed in response to such material violations;
|
b.
|
a list of Access Persons under this Code; and
|
c.
|
a certification that HFT and the Adviser have adopted such procedures as are reasonably necessary to prevent Access Persons from violating this Code.
|
3.
|
This Code may not be waived or amended except by the approval of the Board of Trustees of HFT and the Board of Directors or Audit Committee of the Adviser.
|
1.
|
This is a combined Code of Ethics for HFT and the Adviser. The Board of Directors of the Adviser (or a committee thereof) is responsible for overseeing the interpretation and enforcement of this Code in all matters related to the Adviser. The Board of Trustees of HFT is responsible for overseeing the interpretation and enforcement of this Code in all matters related to HFT. When either governing body considers any matter related to this Code, it shall act in executive session.
|
2.
|
Each director, trustee, officer and employee will be held accountable for his or her adherence to this Code by the Board of Trustees of HFT or the Board of Directors of the Adviser, as applicable. Directors, trustees, officers and employees who fail to adhere to this Code will be subject to appropriate disciplinary action, ranging from warnings to possible termination or removal.
|
I.
|
GENERAL
|
1
|
A.
|
Introduction
|
1
|
B.
|
Definitions
|
1
|
II.
|
STANDARDS OF BUSINESS CONDUCT
|
|
A.
|
General Standards
|
|
B.
|
Specific Duties and Responsibilities
|
3
|
C.
|
Reporting Violations
|
|
III.
|
PERSONAL SECURITIES INVESTMENT TRANSACTIONS POLICY
|
5
|
A.
|
General
|
5
|
B.
|
Accounts Covered
|
6
|
C.
|
Exempt Securities and Transactions
|
6
|
D.
|
Restrictions and Limitations on Personal Securities Transactions
|
7
|
E.
|
Reporting Procedures
|
|
IV.
|
INSIDER TRADING POLICY
|
11
|
A.
|
What is Material Information?
|
|
B.
|
What is Non Public Information?
|
12
|
C.
|
What are the Penalties for Insider Trading?
|
|
D.
|
Compliance Procedures
|
13
|
E.
|
Securities Issued By the Adviser
|
|
V.
|
COMPLIANCE
|
16
|
A.
|
Approval of the Code of Ethics
|
16
|
B.
|
Annual Certification
|
|
C.
|
Prohibition on Self Clearance
|
|
D.
|
Other Obligations
|
17
|
E.
|
Maintenance of Records
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F.
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Interpretation and Enforcement
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7.
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“Covered Security” means a security as defined in Section 2(a)(36) of the Investment Company Act, except that it does not include:
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a.
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direct obligations of the Government of the United States;
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b.
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bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; and
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c.
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shares issued by open-end registered investment companies (but not exchange‑traded funds) other than HFT
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e.
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purchases, sales, or gifts of exchange‑traded funds.
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Last Three Digits
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1.
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I have reviewed this report on Form N-CSR of Hennessy Funds Trust;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during 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; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: January 9, 2019
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/s/ Neil J. Hennessy
Neil J. Hennessy President
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1.
|
I have reviewed this report on Form N-CSR of Hennessy Funds Trust;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during 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; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: January 9, 2019
|
/s/ Teresa M. Nilsen
Teresa M. Nilsen Treasurer
|
/s/ Neil J. Hennessy
Neil J. Hennessy
President
Hennessy Funds Trust
|
/s/ Teresa M. Nilsen
Teresa M. Nilsen
Treasurer
Hennessy Funds Trust
|
Date: January 9, 2019
|
Date: January 9, 2019
|
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