December 8, 1999
Dear Fellow Shareholders:
Thank you for investing in The Henssler Equity Fund ("The Fund"). The Fund is
managed to be diversified through high quality common stocks. Our belief is that
strong long-term growth comes through diversification in different sectors.
Three of the sectors are technology, finance and healthcare. We seek reasonably
valued stocks for all our investments that are poised for long-term growth. We
have highlighted four stocks that are currently held in The Henssler Equity
Fund.
Dell Computer Corporation (DELL) is the leading seller in the world of personal
computers. Considered the pioneer in the direct marketing concept, the company's
daily sales of computers are in excess of $35 million (just on the Internet). PC
demand continues to accelerate hand-in-hand with the growth of the Internet.
Dell, with its consistent notoriety of offering the highest quality products,
continues to boast phenomenal sales and earnings growth well in excess of 30%,
annually, and is expected to continue at this rate over the next 5 years. The
company has almost $6 billion, or roughly half its assets in cash, and no net
debt. Dell continues to generate more than $1 billion in cash per quarter with
virtually no inventory on its books. Despite the PC market's commoditization and
subjectivity to falling component prices, Dell has been able to emerge as a
leader with a recognized brand name and reputation for quality. Dell is a
well-run company, boasting high scores for financial strength and earnings
predictability. We regard Dell as a long-term holding for the technology portion
of our portfolio.
Microsoft Corporation (MSFT) is the largest company in the world in terms of
market capitalization. Recognized as a leader in the software industry with
popular products such as Windows and Microsoft Office, the company is also at
the forefront of shaping the future of the Internet. With an estimated nearly
$20 billion in cash on hand, Microsoft is using its capital to spur investment
in many new technologies. It is our opinion that market leaders such as
Microsoft, armed with technical know-how and a solid financial position, will
play key roles in technological innovation and remain on the cutting edge of
their respective industries. A `watch list' stock for many months, we were
fortunate to have begun accumulating shares during a recent decline. We regard
shares of Microsoft as a key long-term holding.
SouthTrust Bank is a leading, rapidly growing regional bank, which operates in
the southeastern United States. During the summer of 1999, The Fund sold its
position in Regions Bank Corp (RGBK) in favor of SouthTrust (SOTR). SouthTrust
boasts one of the highest growth rates in the industry. Benefiting from the
continued boom in commercial construction, SOTR has a loan portfolio of high
credit quality commercial clientele, along with a thriving residential business.
Shares of SouthTrust, like other financials, came under pressure in late
summer/early fall, and we took advantage of that by increasing our position. We
are confident in SouthTrust's strong financial position, its ability to manage
interest rate risk, and its proven management team. With trading at 13 times
next year's earnings and less than 3 times book value, in our opinion, this
growth stock is a reasonable value in today's market.
<PAGE>
State Street Bank (STT) is a Boston based financial services company. While the
company's name may lead one to believe they are "just another bank," State
Street Bank is actually divesting itself of its banking division. In fact, State
Street Bank is a unique play in the financial sector in that they serve as
custodian and bookkeeping provider to asset management, mutual fund, and money
management firms. Their business is almost entirely fee-based, which makes them
less vulnerable to interest rate risk. State Street Bank has the potential to
benefit from continued net-inflows into mutual funds. During times when
investors rotate their money from one fund to another, State Street Bank is
still able to generate revenue as State Street Bank bills its clients on a
percentage of assets. State Street Bank serves as the custodian for
approximately $5 trillion. Trading at a respectable 20 times earnings with a
14-16% projected annual growth rate, State Street Bank represents a compelling
value.
The information concerning Dell Computer Corporation, Microsoft Corporation,
SouthTrust Bank, and State Street Bank is as of the date of this letter.
Investments and our views are subject to change at any time.
We are pleased to report that the turnover for The Fund's holdings was only
thirteen percent (13%) through October 31, 1999. We strongly believe that money
should be managed in the most tax-efficient manner possible. Two of the highest
costs incurred by investors in mutual funds are taxable income (in the form of
recognized capital gains and dividends), and the costs that result from high
portfolio turnover, i.e., frequent stock trading. As capital gain distributions
and dividends are earned, they become detrimental to an investor's real returns,
when tax implications are considered. In addition, the turnover harms an
investor's returns when transaction costs are considered. Although portfolio
turnover and capital gains considerations do not limit our investment choices,
we attempt 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 you, the investor.
Many computer systems used 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 Year 2000 readiness plan. As part of our plan, we have
updated our 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 should not negatively impact 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 might still be
adversely affected by Year 2000 related problems. Any such problems could
adversely affect The Fund. We will continue to inform you about the Year 2000
preparations.
If you would like to receive periodic information regarding The Fund, we
encourage you to visit our website often at www.hensslerfunds.com and review The
Henssler Equity Fund link from time to time. Each quarter we provide details on
our top 10 holdings, industry allocation, and other statistics. Our website,
when applicable, will also provide information on media appearances by The
Fund's staff, and links to articles in which the Fund's staff has been quoted.
On behalf of the board of directors and our staff, we thank you for the trust
and confidence you have shown us by investing in The Henssler Equity Fund.
Yours very truly,
Gene W. Henssler, Ph.D.
<PAGE>
THE HENSSLER EQUITY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) OCTOBER 31, 1999
- --------------------------------------------------------------------------------
Shares Value
-----------------------
COMMON STOCK -- 99.58%
CONSUMER CYCLICAL -- 1.72%
The Walt Disney Corp. 8,300 218,912
Genuine Parts Co. 4,065 105,944
------------
324,856
------------
CONSUMER STAPLES -- 15.65%
Anheuser-Busch Companies, Inc. 5,285 379,529
Gillette Co. 5,410 195,774
Kimberly Clark Corp. 5,485 346,241
Newell Co. 6,835 236,662
Pepsico, Inc. 17,575 609,633
Phillip Morris Co. 13,585 342,172
Procter & Gamble Co. 4,035 423,171
Sysco Corp. 10,825 416,086
------------
2,949,268
------------
ENERGY -- 7.01%
Mobil Corp. 5,285 510,002
Repsol SA ADR 10,885 223,143
Royal Dutch Petroleum Co. 5,680 340,445
Schlumberger, LTD 4,100 248,306
------------
1,321,896
------------
FINANCIALS -- 18.35%
American International Group, Inc. 6,456 664,564
Banc One Corp. 5,725 215,045
Charter One Financial, Inc. 8,785 215,782
Fannie Mae 8,130 575,197
J. P. Morgan & Co. Inc. 2,845 372,339
Jefferson Pilot Corp. 6,275 471,017
MBNA Corp. 14,842 410,010
Southtrust Corp. 5,550 222,000
State Street Corp. 4,100 312,112
------------
3,458,066
------------
HEALTH -- 15.62%
Abbott Laboratories 5,735 231,551
American Home Products Corp. 5,300 276,925
Amgen, Inc.* 2,700 215,325
Bristol-Myers Squibb Co. 5,340 410,179
Johnson & Johnson 5,385 564,079
Merck & Co. 5,490 436,798
Pharmacia & Upjohn, Inc. 2,800 151,025
Schering Plough Corp. 5,420 268,290
Shared Medical Systems Corp. 5,350 201,962
Watson Pharmaceuticals, Inc.* 5,900 187,325
------------
2,943,459
------------
<PAGE>
INDUSTRIAL CYCLICALS -- 9.29%
Deere & Co. 6,665 241,606
General Electric Co. 2,595 351,785
Nucor Corp. 4,065 210,872
Paccar, Inc. 5,400 254,475
Potash Corporation of Saskatchewan, Inc. 4,350 192,216
Valspar Corp. 5,535 167,088
Vulcan Materials Co. 8,035 331,946
------------
1,749,988
------------
RETAIL -- 6.55%
Albertson's, Inc. 3,945 143,253
Dayton Hudson Corp. 5,285 341,543
Home Depot, Inc. 4,180 315,590
Ross Stores, Inc. 14,270 294,319
Walgreen Co. 5,570 140,294
------------
1,234,999
------------
TECHNOLOGY -- 21.31%
Applied Materials, Inc.* 8,050 722,991
Cisco Systems, Inc.* 5,400 399,600
Computer Associates International, Inc. 6,840 386,460
Dell Computer Corp.* 5,400 216,675
Equifax, Inc. 13,580 366,660
Hewlett-Packard Co. 2,685 198,858
Intel Corp. 8,170 632,664
Lucent Technologies, Inc. 5,490 352,733
Microsoft Corp.* 2,700 249,919
Oracle Corp.* 10,290 489,418
------------
4,015,978
------------
TELECOMMUNICATIONS -- 4.08%
AT & T Corp. 6,000 280,500
CenturyTel, Inc. 6,472 261,712
Vodafone Group PLC ADR 4,725 226,505
------------
768,717
------------
TOTAL COMMON STOCK (COST $16,798,974) 18,767,227
REPURCHASE AGREEMENTS -- 0.45%
Fifth Third Bank, 4.66%, dated 10/29/99, due 11/01/99,
repurchase price $84,181 (collateralized by FNMA Pool
#313140, 7.50%, due 09/01/11, market value $86,779
(Cost $84,148) 84,148
------------
TOTAL INVESTMENTS (COST $16,883,122) -- 100.03% 18,851,375
LIABILITIES IN EXCESS OF OTHER ASSETS, NET -- (.03)% (5,693)
------------
NET ASSETS -- 100% 18,845,682
============
*Non-income producing investment
ADR-American Depository Receipt
<PAGE>
THE HENSSLER EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED) OCTOBER 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at market (identified cost $16,883,122) $ 18,851,375
Cash 788
Receivables:
Dividends and interest 12,308
Fund shares sold 88
------------
Total assets 18,864,559
------------
LIABILITIES:
Payables:
Fund shares purchased 675
Due to advisor 18,202
------------
Total liabilities 18,877
------------
NET ASSETS $ 18,845,682
============
NET ASSETS CONSIST OF:
Common stock $ 1,574,547
Additional capital paid - in 15,365,195
Undistributed net investment income 9,656
Accumulated realized loss on investments (71,969)
Net unrealized gain on investments 1,968,253
------------
Net Assets, for 1,574,547 shares outstanding $ 18,845,682
============
Net Asset Value, offering and redemption price per share $ 11.97
============
See notes to financial statements.
<PAGE>
THE HENSSLER EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 1, 1999 THROUGH OCTOBER 31, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 6,849
Dividends 110,405
---------
Total investment income 117,254
---------
EXPENSES:
Investment advisory fees 43,999
Administration fee 61,598
---------
Total expenses 105,597
---------
Net investment income 11,657
---------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (75,898)
Net change in unrealized appreciation
on investments 404,243
---------
Net gain on investments 328,345
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 340,002
=========
See notes to financial statements.
<PAGE>
THE HENSSLER EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
October 31, 1999 Period Ended
(Unaudited) April 30, 1999*
------------ -----------
Operations:
<S> <C> <C>
Net investment income $ 11,657 12,747
Net realized gain (loss) on investments (75,898) 3,929
Net change in unrealized appreciation on investments 404,243 1,564,010
------------ -----------
Net increase in net assets resulting from operations 340,002 1,580,686
------------ -----------
Distributions to shareholders from:
Net investment income -- (14,748)
------------ -----------
Capital Share Transactions:
Proceeds from shares sold 6,403,256 14,897,761
Proceeds from shares issued to holders in
reinvestment of dividends -- 14,749
Cost of shares redeemed (3,577,446) (798,578)
------------ -----------
Increase in net assets from Fund share transactions 2,825,810 14,113,932
------------ -----------
Increase in net assets 3,165,812 15,679,870
NET ASSETS:
Beginning of period 15,679,870 --
------------ -----------
End of period $ 18,845,682 782,109
============ ===========
</TABLE>
* The Henssler Equity Fund commenced operations on June 10, 1998.
See notes to financial statements.
<PAGE>
THE HENSSLER EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
FOR THE PERIOD
ENDED FOR THE PERIOD
OCTOBER 31, 1999 ENDED
(UNAUDITED) APRIL 30, 1999*
------------- ---------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.74 $ 10.00
---------- ----------
Income From Investment Operations:
Net investment income 0.01 0.02
Net gains (losses) on securities
(both realized and unrealized) 0.22 1.74
---------- ----------
Total from investment operations 0.23 1.76
---------- ----------
Distributions:
Net investment income -- (0.02)
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 11.97 $ 11.74
========== ==========
TOTAL RETURN 1.96% 17.57%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 18,846 $ 15,680
Ratio of expenses to average net assets 1.2%1 1.20%1
Ratio of net investment income
to average net assets 0.13%1 0.17%1
Portfolio turnover rate 13% 14%
* The Henssler Equity Fund commenced operations on June 10, 1998.
1 Annualized
See notes to financial statements.
<PAGE>
THE HENSSLER EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Henssler Equity Fund (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 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 "Advisor"). 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
Investment manager 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
realize 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
<PAGE>
THE HENSSLER EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES-(CONTINUED)
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
form 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.
2. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
PERIOD ENDED PERIOD ENDED
OCTOBER 31, 1999 APRIL 30, 1999
---------------- --------------
Sold ................................. 546,584 1,404,150
Reinvested ........................... -- 1,323
Redeemed ............................. (307,416) (70,094)
-------- ----------
Net Increase ......................... 239,168 1,335,379
======== ==========
3. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, by the Fund for the period ended October 31, 1999, were as follows:
Purchases: $5,339,655
Sales: 2,257,501
At October 31, 1999, gross unrealized appreciation and depreciation of
investments for tax purposes were as follows:
Appreciation .................................... $ 2,941,987
(Depreciation) .................................. (973,734)
-----------
Net appreciation on investments ................. 1,968,253
<PAGE>
THE HENSSLER EQUITY FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 1999
3. INVESTMENT TRANSACTIONS-(CONTINUED)
At October 31, 1999, the cost of investments for federal income tax
purposes was $16,883,122.
4. ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
The Fund has entered into a Management Agreement with Henssler Asset
Management, LLC (the "Advisor") to provide investment management services to the
Fund. Pursuant to the Advisory Agreement, the Advisor 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. For the period ended October 31, 1999, the
Advisor received advisory fees of $43,999.
The Fund has entered into an Operating Services Agreement (the "Servicing
Agreement") with the Advisor to provide or arrange for day-to-day operational
services to the Fund. Pursuant to the Servicing Agreement, the Advisor 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. For the period ended
October 31, 1999, the Advisor received fees of $61,598.
The Fund and the Advisor 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 Advisor 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.
Certain directors and officers of the Fund are directors and officers of
the Advisor.
