The
Henssler
Equity
Fund
SEMI-ANNUAL REPORT
October 31, 1998
The Henssler Equity Fund
1281 Kennestone Circle, Suite 100
Marietta, Georgia 30066
1-800-936-3863
www.henssler.com
<PAGE>
December 17, 1998
Dear Fellow Shareholders:
Thank you for investing in The Henssler Equity Fund ("The Fund"). After many
headaches and long hours of preparation, we were delighted to launch The Fund
on June 8, 1998.
We are pleased to report that The Fund has performed well since its
inception, particularly when compared to various major indices. Officially,
The Fund's Net Asset Value (NAV) decreased to $9.96, or 0.40%, as of October
31, 1998, from the initial price of $10.00. This compares favorably to the
S&P 500, which showed a decline of 0.96% and the Dow Jones Industrial
Average, which declined 4.57%, each for the same period. (Both comparisons
include reinvestment of dividends for the indices.)
Since all of our shareholders are new to the Fund, we thought it would be
helpful to provide you with some background information on our investment
philosophy. The investment strategy we follow is similar to the strategy that
our affiliate, G.W. Henssler & Associates, Ltd. ("GWH") has used as separate
account managers since 1993.
Our criteria for investments includes companies that are rated, the vast
majority of the time, in the top three categories for financial strength as
rated by Standard & Poor's and the Value Line Investment Survey. This limits
the universe of stocks considered for inclusion in The Fund to approximately
700 companies. As of October 31, 1998, The Fund's portfolio holds
approximately 65 stocks. We believe the financial strength of each of these
companies indicates that they will perform well under current economic
conditions.
We hope that you will view your investment in The Fund as a long-term
investment. When we manage separate accounts at GWH, we tell our clients that
they should not have any money invested in the stock market that they will
need within the next ten (10) years. This philosophy should enable an
investor to ride out any downturn in the stock market, without having to sell
any of their positions when the market is down. As an investor in The Fund,
we hope that you will follow this same philosophy.
The market has been very volatile since we started The Fund, and that has
affected The Fund's performance. The NAV for The Fund started at $10.00 per
share, and declined to a low of $8.49 per share on October 8th, before
rebounding to $9.96 per share by the end of October. Volatility is something
we all have to accept by being an investor in the stock market, but long-term
investors expect to earn higher returns over long periods when investing in
stocks rather than bonds or money market funds, which historically have a
lower return.
Of course, market volatility is not always a bad thing! We were able to take
advantage of the lower stock prices at the beginning of October to add to our
positions in companies such as MBNA Corp., Applied Materials, Inc., and Cisco
Systems, Inc. We believe these companies, because of their outstanding growth
prospects, offered excellent value when their prices recently declined.
Remember, it is important for the stock market to be higher in valuation when
you are ready to sell your positions, rather than when you add to your
positions. This is why we are not concerned when the market declines in
value. We view this as a buying opportunity.
<PAGE>
We firmly believe in managing money in the most tax-efficient manner
possible. Two of the highest expenses incurred by investors in mutual funds
are taxable income (in the form of capital gains and dividends) and expenses
that result from high portfolio turnover (i.e., frequent stock trading). When
capital gains and dividends are earned they become a detriment to an
investor's real returns when taking into account money paid for taxes. The
turnover harms an investor's returns due to the transaction costs involved.
Although portfolio turnover and capital gains considerations do not limit our
investment choices, we nevertheless try to minimize turnover, and offset
capital gains with capital losses whenever possible. This strategy is
designed to make The Fund as tax-efficient as possible for the investor.
It has been reported in various publications that several large mutual funds
will distribute more than 20% of their Net Asset Value (NAV) to their
shareholders by 1998 year-end. If an investor holds that investment in a
taxable account, the "real return" will be dramatically less than the nominal
return. We believe this issue will only become more significant to investors
as we approach April 15, 1999, when tax returns are due.
Many computer systems in use today cannot recognize, calculate or accurately
process date-related information on or after January 1, 2000, due to the
manner in which such systems encode the year 2000. We are currently in the
final phases of implementing our own Year 2000 readiness plan. As part of our
plan, we have updated our own systems to ensure, as much as possible, that
they process Year 2000 dates correctly. In addition, we have asked our
vendors to keep us informed of the status of their Year 2000 preparations to
ensure that their services to The Fund will not be negatively impacted by
Year 2000-related problems. While we are taking steps to reduce the risks
associated with Year 2000 computer problems, our internal systems and/or the
systems of our service providers may still be affected by Year 2000-related
problems. Any such problems could adversely affect the Fund. We will continue
to keep you informed about our Year 2000 preparations in future reports.
If you would like to learn more about The Fund or monitor its daily NAV,
please look at our web-site www.henssler.com. The web-site provides
information on our firm, our staff, articles on various financial topics,
monthly commentary by me, and other topics. If you would like to receive
information on The Fund on a periodic basis please send us your fax number or
e-mail address to drgenehenssler.com.
On behalf of your Board of Directors and my staff, we want to thank you for
the trust and confidence you have shown us by investing in The Henssler
Equity Fund.
Yours very truly,
/s/ Gene W. Henssler
Gene W. Henssler, Ph.D.
Henssler Asset Management, LLC
<PAGE>
<TABLE>
<CAPTION>
The Henssler Equity Fund
STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)
- -----------------------------------------------------------------------------
<S> <C>
For the Period Ended October 31, 1998*
Increase in Net Assets
Operations:
Net investment income ............................. $ 6,191
Net realized loss on investments .................. (15,468)
Net change in unrealized appreciation on
investments ..................................... 9,517
-----------
Net increase in net assets resulting from operations 240
-----------
Increase in net assets from Fund share transactions . 7,367,956
-----------
Increase in net assets .............................. 7,368,196
Net Assets:
Beginning of period ............................... 0
-----------
End of period ..................................... $ 7,368,196
===========
<FN>
* The Henssler Equity Fund commenced operations on June 10, 1998.
See notes to financial statements.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
The Henssler Equity Fund
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
Per Share Data (For a Share Outstanding from June 10, 1998 through October 31,
1998)
For the Period
Ended
October 31, 1998
(Unaudited)
----------------
<S> <C>
Net Asset Value, Beginning of Period ................ $10.00
------
Income From Investment Operations:
Net investment income ............................. 0.01
Net gains (losses) on securities (both realized and
unrealized) ....................................... (0.05)
Total from investment operations ................ (0.04)
------
Net Asset Value, End of Period ...................... $ 9.96
======
Total Return ........................................ (0.40)%
Ratios/Supplemental Data
Net assets, end of period (in 000s) ............... $7,368
Ratio of expenses to average net assets:
Before expense reimbursement .................... 1.20%*
After expense reimbursement ..................... 1.20%*
Ratio of net investment income (loss) to average
net assets:
Before expense reimbursement .................... 0.32%*
After expense reimbursement ..................... 0.32%*
Portfolio turnover rate ........................... 7%
<FN>
* Annualized
See notes to financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
The Henssler Equity Fund
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 1998* (Unaudited)
- -----------------------------------------------------------------------------
<S> <C>
Investment Income:
Interest .......................................... $ 3,194
Dividends ......................................... 26,010
--------
Total investment income ......................... 29,204
--------
Expenses:
Investment advisory fees .......................... 9,589
Administration fee ................................ 13,424
--------
Total expenses .................................. 23,013
--------
Net investment (income) loss ...................... 6,191
--------
Realized gain (loss) on investments:
Net realized loss on investments .................. (15,468)
Net change in unrealized appreciation on
investments ...................................... 9,517
--------
Net realized loss ................................. (5,951)
--------
Net increase in net assets resulting from
operations ....................................... $ 240
========
<FN>
* The Henssler Equity Fund commenced operations on June 10, 1998.
See notes to financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
The Henssler Equity Fund
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) October 31, 1998
- -----------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at market (identified cost $7,330,425) . $7,339,942
Receivables:
Dividends and interest ............................ 4,742
Fund shares sold .................................. 64,797
----------
Total assets .................................... 7,409,481
----------
Liabilities:
Payables:
Investment securities purchased ................. 34,738
Accrued expenses ................................ 6,547
----------
Total liabilities ............................. 41,285
----------
Net Assets .......................................... $7,368,196
==========
Net Assets consist of:
Common stock ...................................... $ 739,567
Additional capital paid -- in ..................... 6,628,389
Undistributed net investment income ............... 6,191
Accumulated realized loss on investments .......... (15,468)
Net unrealized gain on investments ................ 9,517
----------
Net Assets, for 739,567 shares outstanding .......... $7,368,196
==========
Net Asset Value, offering and redemption price per
share .............................................. $ 9.96
==========
<FN>
See notes to financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
The Henssler Equity Fund
SCHEDULE OF INVESTMENTS (Unaudited) October 31, 1998
- -----------------------------------------------------------------------------
Shares Value
------ -----
<S> <C> <C>
COMMON STOCK -- 98.94%
FINANCE & INSURANCE -- 18.79%
Insurance Carriers -- 4.93%
American International Group, Inc. ............ 2,245 $ 191,386
Jefferson Pilot Corp. ......................... 2,825 171,619
----------
363,005
----------
Savings, Credit & Other Financial Institutions --
7.33%
Fannie Mae .................................... 4,130 292,456
MBNA Corp ..................................... 10,842 247,333
----------
539,789
----------
State, National & Regional Banks -- 6.53%
Banc One Corp.* ............................... 2,575 125,853
First Union Corp. ............................. 2,285 132,530
J. P. Morgan & Co. Inc. ....................... 1,345 126,766
Regions Financial Corp. ....................... 2,585 95,645
----------
480,794
----------
TOTAL FINANCE & INSURANCE ..................... 1,383,588
----------
MANUFACTURING -- 57.94%
Apparel -- 0.77%
St. John Knits, Inc. .......................... 2,815 56,828
----------
Builder -- 0.54%
Oakwood Homes Corporation ..................... 2,535 39,926
----------
Chemical & Allied Products -- 0.93%
PPG Industries, Inc. .......................... 1,195 68,339
----------
Computer & Office Equipment -- 12.91%
Applied Materials* ............................ 6,150 213,328
Cisco Systems, Inc. ........................... 2,625 165,375
Harris Corp. .................................. 2,885 101,155
Hewlett-Packard Co. ........................... 2,585 155,585
Honeywell, Inc. ............................... 1,295 103,438
Intel Corp. ................................... 2,385 212,712
----------
951,593
----------
5
<PAGE>
Consumer Products Cosmetics & Toiletries -- 6.16%
Gillette Co. .................................. 2,610 $ 117,287
Kimberly Clark Corp. .......................... 2,585 124,726
Procter & Gamble Co. .......................... 2,385 211,967
----------
453,980
----------
Food & Beverage -- 4.11%
Anheuser-Busch Companies, Inc. ................ 2,385 141,758
Pepsico, Inc. ................................. 4,775 161,156
----------
302,914
----------
Furniture, Fixtures & Appliances -- 2.99%
General Electric Co. .......................... 1,295 113,313
Newell Co. .................................... 2,435 107,140
----------
220,453
----------
Machinery -- 1.81%
Deere & Co. ................................... 3,765 133,187
----------
Misc. Containers -- 1.28%
Bemis Co. ..................................... 2,535 94,112
----------
Petroleum & Refining & Servicing -- 6.30%
Mobil Corp. ................................... 2,385 180,515
Repsol ADR .................................... 1,345 67,250
Royal Dutch Petroleum Co. ..................... 2,480 122,140
Schlumberger, LTD ............................. 1,800 94,500
----------
464,405
----------
Pharmaceutical -- 11.63%
Abbott Labs ................................... 2,535 118,987
American Home Products ........................ 1,800 87,750
Amgen, Inc.* .................................. 1,250 98,203
Bristol-Myers Squibb Co. ...................... 1,195 132,122
Merck & Co. ................................... 1,395 188,674
Pharmacia & Upjohn, Inc. ...................... 1,000 52,938
Schering Plough Corp. ......................... 1,735 178,488
----------
857,162
----------
Precision Instruments & Medical Supplies -- 2.86%
Johnson & Johnson ............................. 2,585 210,678
----------
Paint & Related Products -- 1.04%
Valspar Corp. ................................. 2,735 76,751
----------
6
<PAGE>
Steel Production -- 1.33%
Nucor Corporation ............................. 2,165 $ 98,102
----------
Telecommunications Equipment -- 1.35%
Lucent Technologies ........................... 1,245 99,833
----------
Tobacco -- 1.93%
Phillip Morris Co. ............................ 2,785 142,383
----------
TOTAL MANUFACTURING ........................... 4,270,646
----------
SERVICES -- 9.23%
Automotive -- 1.61%
Genuine Parts Co. ............................. 1,965 61,898
Paccar, Inc. .................................. 1,300 56,713
----------
118,611
----------
Communications -- 3.13%
Century Telephone Enterprises ................. 1,815 103,115
Vodafone Group PLC, ADR ....................... 945 127,221
----------
230,336
----------
Computer Services -- 3.00%
Equifax, Inc. ................................. 3,380 130,764
Oracle Corp.* ................................. 3,060 90,461
----------
221,225
----------
Fertilizers -- 0.94%
Potash Corporation of Saskatchewan, Inc. ...... 1,000 69,375
----------
Multimedia -- 0.55%
The Walt Disney Corp. ......................... 1,500 40,406
----------
TOTAL SERVICES ................................ 679,953
----------
WHOLESALE & RETAIL TRADE -- 12.98%
Retail Stores -- 9.15%
Albertson's, Inc. ............................. 1,145 63,619
Dayton Hudson Corp. ........................... 2,635 111,658
Home Depot, Inc. .............................. 3,480 151,380
Ross Stores, Inc. ............................. 2,585 84,013
Sysco Corp. ................................... 5,175 139,401
Walgreen Co. .................................. 2,535 123,422
----------
673,493
----------
Retail Building Materials -- 2.08%
Vulcan Materials Co. .......................... 1,295 153,619
----------
7
<PAGE>
Wholesale Electronic Equip. & Computers -- 1.75%
Avnet, Inc. ................................... 2,585 $ 128,603
----------
TOTAL WHOLESALE & RETAIL TRADE ................ 955,715
----------
TOTAL COMMON STOCK (Cost $7,280,385) --
98.94% ..................................... 7,289,902
----------
MISCELLANEOUS ASSETS -- 0.68%
Star Treasury Fund (Cost $50,040) ............... 50,040 50,040
----------
TOTAL INVESTMENTS (Cost $7,330,425) -- 99.62% ....... $7,339,942
==========
OTHER ASSETS AND LIABILITIES, NET -- 0.38% .......... 28,254
----------
NET ASSETS -- 100.00% ............................... $7,368,196
==========
<FN>
* Non-income producing security.
ADR -- American Depository Receipt
See notes to financial statements.
</TABLE>
8
<PAGE>
The Henssler Equity Fund
NOTES TO THE FINANCIAL STATEMENTS
October 31, 1998
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Henssler Funds, Inc. (the "Company") was incorporated under the
laws of the state of Maryland on February 12, 1998, and consists solely of
The Henssler Equity Fund (the "Fund"). The Company is registered as a
no-load, open-end diversified management investment company of the series
type under the Investment Company Act of 1940 (the "1940 Act"). The Fund's
investment strategy is to emphasize long-term capital appreciation and safety
of principal. The Fund became effective with the U.S. Securities and Exchange
Commission ("SEC") on June 8, 1998 and commenced operations on June 10, 1998.
The costs incurred in connection with the organization, initial
registration and public offering of shares have been paid by Henssler Asset
Management, LLC (the "Adviser"). Accordingly, no organization costs have been
recorded by the Fund.
The following is a summary of significant accounting policies
consistently followed by the Fund.
a) Investment Valuation -- Common stocks and other equity-type securities
listed on a securities exchange are valued at the last quoted sales price on
the day of the valuation. Price information on listed stocks is taken from
the exchange where the security is primarily traded. Securities that are
listed on an exchange but which are not rated on the valuation date are
valued at the most recent bid prices. Other assets and securities for which
no quotations are readily available are valued at fair value as determined in
good faith by the Adviser under the supervision of the Board of Directors.
Short-term instruments (those with remaining maturities of 60 days or less)
are valued at amortized cost, which approximates market.
b) Federal Income Taxes -- No provision for federal income taxes has been
made since the Fund has complied to date with the provision of the Internal
Revenue Code applicable to regulated investment companies and intends to so
comply in the future and to distribute substantially all of its net
investment income and realized capital gains in order to relieve the Fund
from all federal income taxes.
c) Distributions to Shareholders -- Dividends from net investment income and
distributions of net realized capital gains, if any, will be declared and
paid at least annually. Income and capital gain distributions are determined
in accordance with income tax regulations that may differ from generally
accepted accounting principles.
d) Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles 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 amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
e) Other -- Investment and shareholder transactions are recorded on trade
date. The Fund determines the gain or loss realized from the investment
transactions by comparing the original cost of the security lot sold with the
net sales proceeds. Dividend income is recognized on the ex-dividend date or
as soon as information is available to the Fund, and interest income is
recognized on an accrual basis.
9
<PAGE>
2. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund for the period ended October 31,
1998 were as follows:
<TABLE>
<CAPTION>
Shares Amount
------ ------
<S> <C> <C>
Sold ................................................ 744,916 $7,420,229
Redeemed ............................................ (5,349) (52,273)
------- ----------
Net Increase ........................................ 739,567 $7,367,956
======= ==========
</TABLE>
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, by the Fund for the five months ended October 31, 1998, were as
follows:
<TABLE>
<S> <C>
Purchases:
U.S. Government ............................... $ 0
Other ......................................... 7,632,575
Sales:
U.S. Government ............................... 0
Other ......................................... 336,722
</TABLE>
At October 31, 1998, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
<TABLE>
<CAPTION>
<S> <C>
Appreciation ........................................ $ 383,696
(Depreciation) ...................................... (374,179)
Net appreciation on investments ..................... 9,517
</TABLE>
At October 31, 1998, the cost of investments for federal income tax
purposes was $7,330,425.
4. AGREEMENTS
The Fund has entered into a Management Agreement with Henssler Asset
Management, LLC (the "Adviser") to provide investment management services to
the Fund. Pursuant to the Advisory Agreement, the Adviser is entitled to
receive a fee, calculated daily and payable monthly, at the annual rate of
0.50% as applied to the Fund's daily net assets.
The Fund has entered into an Operating Services Agreement (the
"Servicing Agreement") with the Adviser to provide or arrange for day-to-day
operational services to the Fund. Pursuant to the Servicing Agreement, the
Adviser is entitled to receive a fee, calculated daily and payable monthly at
the annual rate of 0.70% as applied to the Fund's daily net assets.
10
<PAGE>
The Fund and the Adviser have entered into an Investment Company
Services Agreement (the "ICSA") with Declaration Service Company to provide
day-to-day operational services to the Fund including, but not limited to,
accounting, administrative, transfer agent, dividend disbursing, registrar
and recordkeeping services.
The Fund and the Adviser have entered into a Distribution Agreement with
Declaration Distributors, Inc. to provide distribution services to the Fund.
Declaration Distributors, Inc. serves as underwriter/distributor of the Fund.
Star Bank, N.A., Cincinnati, Ohio serves as custodian for the Fund.
11
<PAGE>
Adviser
Henssler Asset Management, LLC
1281 Kennestone Circle, Suite 100
Marietta, Georgia 30066
Distributor
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
Custodian
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, Ohio 45202
Transfer, Redemption, and Dividend Disbursing Agent
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
Independent Accountants
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, Ohio 44145
Legal Counsel
Kilpatrick Stockton LLP
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309
This report is not authorized for distribution
to prospective investors unless preceded or
accompanied by a current prospectus.
Semi-Annual Report to Shareholders
for the period ended October 31, 1998
