(a)
|
|
Letter to Shareholders
|
2
|
|
Performance Overview
|
4
|
|
Financial Statements
|
||
Schedule of Investments
|
5
|
|
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
|
|
Expense Example
|
24
|
|
Proxy Voting Policy and Proxy Voting Records
|
25
|
|
Availability of Quarterly Portfolio Schedule
|
25
|
|
Federal Tax Distribution Information
|
25
|
|
Premium/Discount Information
|
25
|
|
Important Notice Regarding Delivery of Shareholder Documents
|
26
|
|
Board Approval of Investment Advisory Agreements
|
27
|
HENNESSY FUNDS
|
1-877-671-3199
|
![]() |
|
![]() |
|
Bill Davis
|
|
Portfolio Manager, Hennessy Stance ESG Large Cap ETF
|
|
Managing Director, Stance Capital, LLC
|
WWW.HENNESSYETFS.COM
|
LETTER TO SHAREHOLDERS
|
HENNESSY FUNDS
|
1-877-671-3199
|
Since
|
|||
Six
|
One
|
Inception
|
|
Months(1)
|
Year
|
(3/15/21)
|
|
Hennessy Stance ESG
|
|||
Large Cap ETF (STNC) – NAV(2)
|
5.20%
|
0.68%
|
2.38%
|
Hennessy Stance ESG
|
|||
Large Cap ETF (STNC) – Market Price(2)
|
5.23%
|
0.62%
|
2.48%
|
S&P 500® Index
|
1.26%
|
-7.69%
|
1.56%
|
(1)
|
Periods of less than one year are not annualized.
|
(2)
|
Fund performance is shown based on both a net asset value (“NAV”) and market price basis. The Fund’s per share NAV is the value of one share of the Fund. NAV is calculated by taking the Fund’s total assets
(including the fair value of securities owned), subtracting liabilities, and dividing by the number of shares outstanding. The NAV return is based on the NAV of the Fund, and the market price return is based on the market price per share of
the Fund. The price used to calculate market price return is determined using the Official Closing Price of the primary stock exchange (generally, 4:00 p.m. Eastern time) and may not represent the returns you would receive if shares were
traded at other times. NAV and market price returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively.
|
(3)
|
The Fund’s investment advisor has contractually agreed to limit expenses until December 31, 2024.
|
WWW.HENNESSYETFS.COM
|
PERFORMANCE OVERVIEW/SCHEDULE OF INVESTMENTS
|
Schedule of Investments as of February 28, 2023 (Unaudited)
|
TOP TEN HOLDINGS (EXCLUDING MONEY MARKET FUNDS)
|
% NET ASSETS
|
W.W. Grainger, Inc.
|
4.09%
|
Las Vegas Sands Corp.
|
3.92%
|
CDW Corp.
|
3.76%
|
Arista Networks, Inc.
|
3.75%
|
Dover Corp.
|
3.75%
|
Snap-on, Inc.
|
3.65%
|
Regeneron Pharmaceuticals, Inc.
|
3.55%
|
Genuine Parts Co.
|
3.51%
|
Fortive Corp.
|
3.50%
|
Edwards Lifesciences Corp.
|
3.48%
|
HENNESSY FUNDS
|
1-877-671-3199
|
COMMON STOCKS – 99.90%
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Communication Services – 2.76%
|
||||||||||||
T-Mobile US, Inc. (a)
|
8,524
|
$
|
1,211,942
|
2.76
|
%
|
|||||||
Consumer Discretionary – 15.73%
|
||||||||||||
AutoZone, Inc. (a)
|
595
|
1,479,492
|
3.37
|
%
|
||||||||
Expedia Group, Inc. (a)
|
2,930
|
319,282
|
0.73
|
%
|
||||||||
Genuine Parts Co.
|
8,697
|
1,538,151
|
3.51
|
%
|
||||||||
Las Vegas Sands Corp. (a)
|
29,913
|
1,719,100
|
3.92
|
%
|
||||||||
Tesla, Inc. (a)
|
2,197
|
451,945
|
1.03
|
%
|
||||||||
The Home Depot, Inc.
|
4,691
|
1,391,069
|
3.17
|
%
|
||||||||
|
6,899,039
|
15.73
|
%
|
|||||||||
Consumer Staples – 8.77%
|
||||||||||||
Costco Wholesale Corp.
|
1,991
|
964,002
|
2.20
|
%
|
||||||||
Keurig Dr. Pepper, Inc.
|
41,771
|
1,443,188
|
3.29
|
%
|
||||||||
The Kroger Co.
|
33,293
|
1,436,260
|
3.28
|
%
|
||||||||
|
3,843,450
|
8.77
|
%
|
|||||||||
Financials – 9.01%
|
||||||||||||
Cboe Global Markets, Inc.
|
11,838
|
1,493,600
|
3.41
|
%
|
||||||||
Nasdaq, Inc.
|
23,681
|
1,327,557
|
3.03
|
%
|
||||||||
T Rowe Price Group, Inc.
|
10,052
|
1,128,639
|
2.57
|
%
|
||||||||
|
3,949,796
|
9.01
|
%
|
|||||||||
Health Care – 29.03%
|
||||||||||||
Agilent Technologies, Inc.
|
9,811
|
1,392,867
|
3.18
|
%
|
||||||||
Biogen, Inc. (a)
|
5,390
|
1,454,545
|
3.32
|
%
|
||||||||
Edwards Lifesciences Corp. (a)
|
18,949
|
1,524,258
|
3.48
|
%
|
||||||||
Humana, Inc.
|
2,947
|
1,458,824
|
3.33
|
%
|
||||||||
Laboratory Corp. of America Holdings
|
6,250
|
1,496,000
|
3.41
|
%
|
||||||||
Mettler-Toledo International, Inc. (a)
|
708
|
1,015,067
|
2.31
|
%
|
||||||||
Regeneron Pharmaceuticals, Inc. (a)
|
2,045
|
1,555,060
|
3.55
|
%
|
||||||||
UnitedHealth Group, Inc.
|
2,806
|
1,335,488
|
3.04
|
%
|
||||||||
Vertex Pharmaceuticals, Inc. (a)
|
5,146
|
1,493,832
|
3.41
|
%
|
||||||||
|
12,725,941
|
29.03
|
%
|
|||||||||
Industrials – 22.16%
|
||||||||||||
Dover Corp.
|
10,972
|
1,644,702
|
3.75
|
%
|
||||||||
Fortive Corp.
|
23,007
|
1,533,647
|
3.50
|
%
|
||||||||
Jacobs Solutions, Inc.
|
12,162
|
1,453,359
|
3.32
|
%
|
WWW.HENNESSYETFS.COM
|
SCHEDULE OF INVESTMENTS
|
COMMON STOCKS
|
Number
|
% of
|
||||||||||
|
of Shares
|
Value
|
Net Assets
|
|||||||||
Industrials (Continued)
|
||||||||||||
Nordson Corp.
|
6,190
|
1,359,572
|
3.10
|
%
|
||||||||
Snap-on, Inc.
|
6,442
|
1,601,997
|
3.65
|
%
|
||||||||
United Rentals, Inc.
|
703
|
329,377
|
0.75
|
%
|
||||||||
W.W. Grainger, Inc.
|
2,681
|
1,792,060
|
4.09
|
%
|
||||||||
|
9,714,714
|
22.16
|
%
|
|||||||||
Information Technology – 12.44%
|
||||||||||||
Adobe, Inc. (a)
|
743
|
240,695
|
0.55
|
%
|
||||||||
Apple, Inc.
|
1,979
|
291,724
|
0.66
|
%
|
||||||||
Arista Networks, Inc. (a)
|
11,848
|
1,643,318
|
3.75
|
%
|
||||||||
Autodesk, Inc. (a)
|
1,324
|
263,065
|
0.60
|
%
|
||||||||
CDW Corp.
|
8,135
|
1,646,687
|
3.76
|
%
|
||||||||
Keysight Technologies, Inc. (a)
|
8,567
|
1,370,377
|
3.12
|
%
|
||||||||
|
5,455,866
|
12.44
|
%
|
|||||||||
Total Common Stocks
|
||||||||||||
(Cost $41,505,351)
|
43,800,748
|
99.90
|
%
|
|||||||||
|
||||||||||||
SHORT-TERM INVESTMENTS – 0.04%
|
||||||||||||
Money Market Funds – 0.04%
|
||||||||||||
First American Government Obligations Fund,
|
||||||||||||
Institutional Class, 4.37% (b)
|
16,794
|
16,794
|
0.04
|
%
|
||||||||
|
||||||||||||
Total Short-Term Investments
|
||||||||||||
(Cost $16,794)
|
16,794
|
0.04
|
%
|
|||||||||
|
||||||||||||
Total Investments
|
||||||||||||
(Cost $41,522,145) – 99.94%
|
43,817,542
|
99.94
|
%
|
|||||||||
Other Assets in Excess of Liabilities – 0.06%
|
25,909
|
0.06
|
%
|
|||||||||
|
||||||||||||
TOTAL NET ASSETS – 100.00%
|
$
|
43,843,451
|
100.00
|
%
|
(a)
|
Non-income-producing security.
|
(b)
|
The rate listed is the fund’s seven-day yield as of February 28, 2023.
|
HENNESSY FUNDS
|
1-877-671-3199
|
Common Stocks
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Communication Services
|
$
|
1,211,942
|
$
|
—
|
$
|
—
|
$
|
1,211,942
|
||||||||
Consumer Discretionary
|
6,899,039
|
—
|
—
|
6,899,039
|
||||||||||||
Consumer Staples
|
3,843,450
|
—
|
—
|
3,843,450
|
||||||||||||
Financials
|
3,949,796
|
—
|
—
|
3,949,796
|
||||||||||||
Health Care
|
12,725,941
|
—
|
—
|
12,725,941
|
||||||||||||
Industrials
|
9,714,714
|
—
|
—
|
9,714,714
|
||||||||||||
Information Technology
|
5,455,866
|
—
|
—
|
5,455,866
|
||||||||||||
Total Common Stocks
|
$
|
43,800,748
|
$
|
—
|
$
|
—
|
$
|
43,800,748
|
||||||||
Short-Term Investments
|
||||||||||||||||
Money Market Funds
|
$
|
16,794
|
$
|
—
|
$
|
—
|
$
|
16,794
|
||||||||
Total Short-Term Investments
|
$
|
16,794
|
$
|
—
|
$
|
—
|
$
|
16,794
|
||||||||
Total Investments
|
$
|
43,817,542
|
$
|
—
|
$
|
—
|
$
|
43,817,542
|
WWW.HENNESSYETFS.COM
|
SCHEDULE OF INVESTMENTS/STATEMENT OF ASSETS AND LIABILITIES
|
Statement of Assets and Liabilities as of February 28, 2023 (Unaudited)
|
ASSETS:
|
||||
Investments in securities, at value (cost $41,522,145)
|
$
|
43,817,542
|
||
Dividends and interest receivable
|
55,132
|
|||
Total assets
|
43,872,674
|
|||
LIABILITIES:
|
||||
Payable to advisor
|
29,223
|
|||
Total liabilities
|
29,223
|
|||
NET ASSETS
|
$
|
43,843,451
|
||
NET ASSETS CONSIST OF:
|
||||
Par value
|
$
|
1,690
|
||
Capital stock
|
44,372,455
|
|||
Accumulated deficit
|
(530,694
|
)
|
||
Total net assets
|
$
|
43,843,451
|
||
NET ASSETS:
|
||||
Shares authorized ($0.001 par value)
|
100,000,000
|
|||
Net assets applicable to outstanding shares
|
$
|
43,843,451
|
||
Shares issued and outstanding
|
1,690,000
|
|||
Net asset value, offering price, and redemption price per share
|
$
|
25.94
|
HENNESSY FUNDS
|
1-877-671-3199
|
Statement of Operations for the six months ended February 28, 2023 (Unaudited)
|
INVESTMENT INCOME:
|
||||
Dividend income
|
$
|
253,389
|
||
Interest income
|
1,901
|
|||
Total investment income
|
255,290
|
|||
EXPENSES:
|
||||
Investment advisory fees (See Note 5)
|
204,186
|
|||
Total expenses before waivers
|
204,186
|
|||
Expense reimbursement from advisor
|
(21,493
|
)
|
||
Net expenses
|
182,693
|
|||
NET INVESTMENT INCOME
|
$
|
72,597
|
||
REALIZED AND UNREALIZED GAINS (LOSSES):
|
||||
Net realized loss on investments
|
$
|
(1,133,652
|
)
|
|
Net realized gain from redemption in-kind
|
174,642
|
|||
Net change in unrealized appreciation/depreciation on investments
|
3,093,539
|
|||
Net gain on investments
|
2,134,529
|
|||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
2,207,126
|
WWW.HENNESSYETFS.COM
|
STATEMENT OF OPERATIONS/STATEMENTS OF CHANGES IN NET ASSETS
|
Statements of Changes in Net Assets
|
Six Months Ended
|
||||||||
February 28, 2023
|
Year Ended
|
|||||||
(Unaudited)
|
August 31, 2022
|
|||||||
OPERATIONS:
|
||||||||
Net investment income
|
$
|
72,597
|
$
|
285,024
|
||||
Net realized loss on investments
|
(959,010
|
)
|
(1,557,093
|
)
|
||||
Net change in unrealized
|
||||||||
appreciation/depreciation on investments
|
3,093,539
|
(3,140,125
|
)
|
|||||
Net increase (decrease) in net
|
||||||||
assets resulting from operations
|
2,207,126
|
(4,412,194
|
)
|
|||||
DISTRIBUTIONS TO SHAREHOLDERS:
|
||||||||
Distributable earnings
|
(247,449
|
)
|
(164,737
|
)
|
||||
Total distributions
|
(247,449
|
)
|
(164,737
|
)
|
||||
CAPITAL SHARE TRANSACTIONS:
|
||||||||
Proceeds from shares subscribed
|
1,643,330
|
34,013,802
|
||||||
Cost of shares redeemed
|
(2,289,126
|
)
|
(24,191,858
|
)
|
||||
Net increase (decrease) in net assets derived
|
||||||||
from capital share transactions
|
(645,796
|
)
|
9,821,944
|
|||||
TOTAL INCREASE IN NET ASSETS
|
1,313,881
|
5,245,013
|
||||||
NET ASSETS:
|
||||||||
Beginning of period
|
42,529,570
|
37,284,557
|
||||||
End of period
|
$
|
43,843,451
|
$
|
42,529,570
|
||||
CHANGES IN SHARES OUTSTANDING:
|
||||||||
Shares sold
|
65,000
|
1,245,000
|
||||||
Shares redeemed
|
(90,000
|
)
|
(870,000
|
)
|
||||
Net increase (decrease) in shares outstanding
|
(25,000
|
)
|
375,000
|
HENNESSY FUNDS
|
1-877-671-3199
|
Financial Highlights
|
(1)
|
Inception date of the Fund was March 15, 2021.
|
(2)
|
Calculated using the average shares outstanding method.
|
(3)
|
Total investment return/(loss) on net asset value is calculated assuming a purchase of shares at NAV on the first day of the period, reinvestment of dividends and distributions at NAV during the period, and a sale
of shares on the last day of the period.
|
(4)
|
Total investment return/(loss) on market price is calculated assuming a purchase of shares at the market price on the first day of the period, reinvestment of dividends and distributions at market price during the
period, and a sale of shares at market price on the last day of the period.
|
(5)
|
Not annualized.
|
(6)
|
Annualized.
|
(7)
|
Excludes effect of in-kind transfers.
|
WWW.HENNESSYETFS.COM
|
FINANCIAL HIGHLIGHTS
|
Period Ended
|
|||||||||||
February 28,
|
Year Ended
|
Period Ended
|
|||||||||
2023
|
August 31,
|
August 31,
|
|||||||||
(Unaudited)
|
2022
|
2021(1)
|
|||||||||
$
|
24.80
|
$
|
27.82
|
$
|
25.00
|
||||||
0.04
|
0.20
|
0.02
|
|||||||||
1.25
|
(3.10
|
)
|
2.80
|
||||||||
1.29
|
(2.90
|
)
|
2.82
|
||||||||
(0.15
|
)
|
(0.10
|
)
|
—
|
|||||||
—
|
(0.02
|
)
|
—
|
||||||||
(0.15
|
)
|
(0.12
|
)
|
—
|
|||||||
$
|
25.94
|
$
|
24.80
|
$
|
27.82
|
||||||
$
|
25.98
|
$
|
24.83
|
$
|
27.91
|
||||||
5.20
|
%(5)
|
-10.50
|
%
|
11.23
|
%(5)
|
||||||
5.23
|
%(5)
|
-10.63
|
%
|
11.56
|
%(5)
|
||||||
$
|
43.84
|
$
|
42.53
|
$
|
37.29
|
||||||
0.95
|
%(6)
|
0.95
|
%
|
0.95
|
%(6)
|
||||||
0.85
|
%(6)
|
0.85
|
%
|
0.85
|
%(6)
|
||||||
0.24
|
%(6)
|
0.64
|
%
|
0.09
|
%(6)
|
||||||
0.34
|
%(6)
|
0.74
|
%
|
0.19
|
%(6)
|
||||||
136
|
%(5)
|
290
|
%
|
180
|
%(5)
|
HENNESSY FUNDS
|
1-877-671-3199
|
Notes to the Financial Statements February 28, 2023 (Unaudited)
|
a).
|
Securities Valuation – All investments in securities are valued in accordance with the Fund’s valuation policies and procedures, as described in Note 3.
|
b).
|
Federal Income Taxes – 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. As a result, the Fund has made no provision for federal income taxes or excise taxes. 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-basis 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.
|
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 tax 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
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NOTES TO THE FINANCIAL STATEMENTS
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positions taken or expected to be taken on a tax return. The Fund’s major tax jurisdictions are U.S. federal and Delaware.
|
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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. Market discounts, original issue discounts, and market premiums on debt securities are accreted or amortized to interest income over the life of a security with a corresponding increase or decrease, as
applicable, in the cost basis of such security using the yield-to-maturity method or, where applicable, the first call date of the security. Other non-cash dividends are recognized as investment income at the fair value of the property
received. Expenses and fees, including investment advisory fees, are accrued daily and taken into account for the purpose of determining the net asset value (“NAV”) of the Fund. As discussed further in Note 5, most expenses of the Fund are
paid by Hennessy Advisors, Inc. (the “Advisor”) under a unitary fee arrangement.
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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.
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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 – Preparing financial statements in accordance 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, as well as the reported change in net assets during the reporting period. Actual results could differ from those estimates.
|
h).
|
Share Valuation – The 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 Fund shares outstanding, rounded to the nearest $0.01. Fund shares are not priced on days the New York Stock Exchange is closed for trading.
|
i).
|
Illiquid Securities – Pursuant to Rule 22e-4 under the 1940 Act, the Fund has adopted a Liquidity Risk Management Program (the “Liquidity Program”). The Liquidity Program requires, among other things, that the Fund
limit its illiquid investments to no more than 15% of its net assets. An illiquid investment is any investment that the Fund reasonably expects cannot be sold or disposed of by the Fund in current market conditions in seven calendar days or
less without the sale or disposition significantly changing the market value of the investment.
|
j).
|
Recent Accounting Pronouncements and Regulatory Updates – In October 2020, the SEC adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). Rule 18f-4 imposes
limits on the amount of derivatives a fund can enter into, eliminates the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, and requires funds whose use of derivatives is greater than a limited
specified amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager. The Fund has adopted procedures in accordance with Rule 18f-4.
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HENNESSY FUNDS
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1-877-671-3199
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In December 2020, the SEC adopted a new rule providing a framework for fund valuation practices (“Rule 2a-5”). Rule 2a-5 establishes
requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 permits fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. Rule
2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must fair value a security. In connection with Rule 2a-5, the SEC also adopted related
recordkeeping requirements and is rescinding previously issued guidance, including with respect to the role of a board in determining fair value and the accounting and auditing of fund investments. The Fund has adopted procedures in
accordance with Rule 2a-5.
|
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, and real estate investment trusts, that
are traded on a securities exchange for which a last-quoted sales price is readily available generally are 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”) generally are 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
generally are 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
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NOTES TO THE FINANCIAL STATEMENTS
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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, generally are priced at the ending NAV
provided by the applicable mutual fund’s service agent and are 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 for equity securities. 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 exceeds 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 value hierarchy depending on the inputs used and market activity levels for specific securities.
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HENNESSY FUNDS
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1-877-671-3199
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NOTES TO THE FINANCIAL STATEMENTS
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HENNESSY FUNDS
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1-877-671-3199
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Investments
|
|||||
Cost of investments for tax purposes
|
$
|
43,430,659
|
|||
Gross unrealized appreciation
|
$
|
1,560,802
|
|||
Gross unrealized depreciation
|
(2,487,787
|
)
|
|||
Net unrealized appreciation/(depreciation)
|
$
|
(926,982
|
)
|
Undistributed ordinary income
|
$
|
69,170
|
|||
Undistributed long-term capital gains
|
30,318
|
||||
Unrealized appreciation on investments
|
2,014,900
|
||||
Total distributable earnings
|
$
|
2,114,388
|
Six Months Ended
|
Year Ended
|
||||||||
February 28, 2023
|
August 31, 2022
|
||||||||
Ordinary income(1)
|
$
|
247,449
|
$
|
134,419
|
|||||
Long-term capital gains
|
—
|
30,318
|
|||||||
Total distributions
|
$
|
247,449
|
$
|
164,737
|
(1) Ordinary income includes short-term capital gains.
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WWW.HENNESSYETFS.COM
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NOTES TO THE FINANCIAL STATEMENTS
|
HENNESSY FUNDS
|
1-877-671-3199
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Shares Issued to
|
||||
Predecessor
|
Shareholders of
|
Fund
|
Combined
|
Tax Status
|
Fund Net Assets
|
Predecessor Fund
|
Net Assets
|
Net Assets
|
of Transfer
|
$42,147,609(1)
|
1,670,000
|
$0
|
$42,147,609
|
Non-taxable
|
(1)
|
Includes accumulated net investment income, accumulated realized gains, and unrealized appreciation in the amounts of $14,189, $5,465,299, and $2,059,710, respectively.
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NOTES TO THE FINANCIAL STATEMENTS
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HENNESSY FUNDS
|
1-877-671-3199
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Beginning
|
Ending
|
||
Account Value
|
Account Value
|
Expenses Paid
|
|
September 1, 2022
|
February 28, 2023
|
During Period(1)
|
|
Investor Class
|
|||
Actual
|
$1,000.00
|
$1,052.00
|
$4.32
|
Hypothetical (5% return before expenses)
|
$1,000.00
|
$1,020.58
|
$4.26
|
(1)
|
Expenses are equal to the Fund’s annualized expense ratio of 0.85%, multiplied by the average account value over the period, multiplied by 181/365 days (to reflect the half-year period).
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WWW.HENNESSYETFS.COM
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EXPENSE EXAMPLE — PREMIUM/DISCOUNT INFORMATION
|
HENNESSY FUNDS
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IMPORTANT NOTICE/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 outside legal counsel that described the differences between an exchange-traded fund (an “ETF”) and a mutual fund;
|
|
(3)
|
The Advisor’s financial statements from its most recent Form 10-K and Form 10-Q;
|
|
(4)
|
The forms of advisory and sub-advisory agreements;
|
|
(5)
|
A summary of the information provided by each Sub-Advisor in response to the request for information by the Advisor regarding the predecessor Fund and relevant information from each Sub-Advisor’s Form ADV Parts 1
and 2;
|
|
(6)
|
A completed questionnaire from Stance Capital;
|
|
(7)
|
Recent fact sheets of the predecessor Fund and material regarding the same strategy that had been managed by Stance Capital in a separately managed account format since 2014 (the “Strategy”), which included, among
other things, performance information over various periods during which Stance Capital provided portfolio management services and Vident provided trading services to the predecessor Fund and the Strategy;
|
|
(8)
|
A competitor analysis for the predecessor Fund;
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HENNESSY FUNDS
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1-877-671-3199
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(9)
|
An investor presentation for the Strategy;
|
|
(10)
|
Financial information of Stance Capital;
|
|
(11)
|
Biographies of the portfolio managers for Stance Capital and key personnel of Vident;
|
|
(12)
|
Form ADV Part 2A of each Sub-Advisor; and
|
|
(13)
|
The Code of Ethics of each Sub-Advisor.
|
(1)
|
The expected nature and quality of the advisory services to be provided by the Advisor and the Sub-Advisors;
|
|
(2)
|
A comparison of the anticipated fees and expenses of the Fund to other similar funds;
|
|
(3)
|
Whether economies of scale were likely to be recognized by the Fund;
|
|
(4)
|
The expected costs and profitability of the Fund to the Advisor and the Sub-Advisors;
|
|
(5)
|
The performance of the predecessor Fund and the Strategy as reported in the predecessor Fund’s prospectus; and
|
|
(6)
|
Any expected benefits to the Advisor and the Sub-Advisors from serving as an investment advisor to the Fund (other than the advisory fee and sub-advisory fees).
|
(1)
|
The Trustees considered that they were satisfied with the services that the Advisor has historically provided to the Hennessy Funds complex and that they anticipated that the services to be provided to the Fund
would be of a similar quality and nature. The Trustees noted that their overall confidence in the Advisor was high. The Trustees also concluded that the nature and extent of the services expected to be provided by the Advisor and the
Sub-Advisors would be appropriate to assure that the operations of the Fund would be conducted in compliance with applicable laws, rules, and regulations.
|
|
(2)
|
The Trustees considered the distinction between the services to be performed by the Advisor and the Sub-Advisors. The Trustees noted that the management of the Fund, including the oversight of the Sub-Advisors,
would involve more
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BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
|
comprehensive and substantive duties than the duties of any one of the Sub-Advisors. Specifically, the Trustees considered that the services to be performed by the Advisor would require a higher level of service and
oversight than the services performed by either of the Sub-Advisors providing its services. Based on this determination, the Trustees concluded that the differential in advisory fees between the Advisor and each of the Sub-Advisors is
reasonable.
|
||
(3)
|
The Trustees compared the performance of the predecessor Fund and the Strategy to a benchmark index and to similar ETFs over various periods. The Trustees concluded that the performance of the predecessor Fund and
the Strategy over various periods warranted the approval of the advisory and sub-advisory agreements.
|
|
(4)
|
The Trustees reviewed the proposed unitary fee for the Fund as compared to similar ETFs 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 ETFs included in the Morningstar comparison for purposes of the materials considered at the meeting. The Trustees determined that the proposed unitary fee of the Fund falls within a
reasonable range of fees of similar ETFs and concluded that the unitary fee is reasonable and warranted approval of the advisory and sub-advisory agreements.
|
|
(5)
|
The Trustees also considered whether the Advisor was expected to realize economies of scale that should be shared with the shareholders of the Fund. The Trustees noted that the Advisor was unlikely to realize
economies of scale given the small amount of assets that the predecessor Fund currently holds and the short period during which the predecessor Fund had been in operation.
|
|
(6)
|
The Trustees considered the expected profitability of the Fund to the Advisor and the Sub-Advisors and also considered the expected resources and revenues that the Advisor and Sub-Advisors would be putting into
managing and distributing the Fund. The Trustees then concluded that the expected profits of the Advisor and the Sub-Advisors are reasonable and not excessive when compared to profitability guidelines set forth in relevant court cases.
|
|
(7)
|
The Trustees considered the high level of professionalism of the Advisor’s employees and concluded that this would be beneficial to the Fund and its shareholders.
|
|
(8)
|
The Trustees considered any expected benefits to the Advisor and the Sub-Advisors from serving as an advisor to the Fund other than the advisory fee or sub-advisory fees. The Trustees concluded that any such
benefits were expected to be minimal.
|
|
(9)
|
The Trustees considered that the following factors with respect to the Reorganization:
|
(a)
|
The Reorganization would be done on a federal tax-free basis so that shareholders would not experience any income tax consequence as a direct result of the Reorganization;
|
||
(b)
|
There would not be any material changes to the investment objectives, restrictions, or policies of the predecessor Fund as a result of the Reorganization;
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HENNESSY FUNDS
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1-877-671-3199
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(c)
|
Any expense limitation arrangements would remain in effect for two years;
|
||
(d)
|
All of the costs and expenses to be incurred in connection with the Reorganization would be borne by the Advisor and the Sub-Advisors and not by predecessor Fund or its shareholders; and
|
||
(e)
|
Each shareholder of the predecessor Fund would receive a number of shares of the Fund that was exactly equal in value to shares held prior to the Reorganization and therefore the interests of the shareholders of the
predecessor Fund would not be diluted as a result of the Reorganization.
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BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
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(b)
|
Not applicable.
|
(a)
|
Not applicable for semi-annual reports.
|
(b)
|
Not Applicable.
|
(a)
|
The Schedules of Investments are included as part of the reports to shareholders filed under Item 1 of this Form.
|
(b)
|
Not applicable.
|
(a)
|
The registrant’s principal executive officer and principal financial officer have reviewed the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a
date within 90 days of the filing date of this report, as required by Rule 30a‑3(b) under the Act and Rules 13a-15(b) or 15d‑15(b) under the Exchange Act. 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 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. Not applicable.
|
By: /s/Neil J. Hennessy
Neil J. Hennessy, President and Principal Executive Officer |
Date: May 3, 2023
|
By: /s/Teresa M. Nilsen
Teresa M. Nilsen, Treasurer and Principal Financial Officer
|
Date: May 3, 2023
|