Forward Looking Statements

Certain statements in this report are forward-looking within the meaning of the federal securities laws. Although management believes that the expectations reflected in the forward-looking statements are reasonable, future levels of activity, performance or achievements cannot be guaranteed. Additionally, management does not assume responsibility for the accuracy or completeness of these statements. There is no regulation requiring an update of any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations.

Our business activities are affected by many factors, including redemptions by mutual fund shareholders, general economic and financial conditions, movement of interest rates, competitive conditions, industry regulation, and others, many of which are beyond the control of our management. Statements regarding the following subjects are forward-looking by their nature:

• our business strategy, including our ability to identify and complete future acquisitions;

• market trends and risks;

• our estimates for future performance;

• our estimates regarding anticipated revenues and operating expenses; and

• our ability to retain the mutual fund assets we currently manage.

Although we seek to maintain cost controls, a significant portion of our expenses are fixed and do not vary greatly. As a result, substantial fluctuations in our revenue can directly impact our net income from period to period.

Overview

We derive our operating revenue from management fees and shareholder servicing fees paid to us by the Hennessy Funds. These fees are calculated as a percentage of the average daily net assets in each of our mutual funds and vary from fund to fund. The fees we receive fluctuate with changes in the total net asset value of the assets in our mutual funds, which are affected by our investment performance, redemptions, completed acquisitions of management agreements, market conditions and the success of our marketing efforts. Total assets under management were $1.90 billion as of March 31, 2007.

                                                               Assets Under Management
                                             At Each Quarter End, March 31, 2006 through March 31, 2007
                                      3/31/2006       6/30/2006       9/30/2006      12/31/2006       3/31/2007
                                                                   (In Thousands)
Beginning assets under management    $ 1,831,993     $ 2,249,995     $ 2,182,580     $ 2,056,253     $ 2,032,736
Organic inflows                          262,441         268,615         165,112         102,584          84,162
Redemptions                             (116,171 )      (173,620 )      (196,412 )      (296,568 )      (259,026 )
Market appreciation (depreciation)       271,732        (162,410 )       (95,027 )       170,467          42,072

Ending assets under management       $ 2,249,995     $ 2,182,580     $ 2,056,253     $ 2,032,736     $ 1,899,944

The principal asset on our balance sheet, management contracts - net of accumulated amortization, represents the capitalized costs incurred in connection with the acquisition of management agreements. As of March 31, 2007, this asset had a net balance of $19.4 million.

The principal liability on our balance sheet is the long-term bank debt incurred in connection with the acquisition of the management agreements for the Lindner Funds and the Henlopen Fund. As of March 31, 2007, this liability, including the current portion of long-term debt, had a balance of $9.6 million.

Results of Operations

The following table displays items in the statements of income as dollar amounts
and as percentages of total revenue for the three months ended March 31, 2007
and 2006:



                                                 Three Months Ended March 31,
                                                2007                      2006
                                              (In thousands, except percentages)
                                                     Percent                   Percent
                                                     of Total                  of Total
                                        Amounts      Revenue      Amounts      Revenue
     Revenue:
     Investment advisory fees           $  3,514         88.6 %   $  3,698         88.4 %
     Shareholder service fees                448         11.3          478         11.4
     Other                                     6          0.1            5          0.2

     Total revenue                         3,968        100.0        4,181        100.0

     Operating expenses:
     Compensation and benefits               876         22.1          808         19.3
     General and administrative              428         10.8          413          9.9
     Mutual fund distribution                769         19.4          831         19.9
     Amortization and depreciation           163          4.1          158          3.8

     Total operating expenses              2,236         56.4        2,210         52.9

     Operating income                      1,732         43.6        1,971         47.1
     Interest expense                        185          4.7          222          5.3
     Other income                           (118 )       (3.0 )        (68 )       (1.6 )

     Income before income tax expense      1,665         41.9        1,817         43.4
     Income tax expense                      670         16.8          726         17.3

     Net income                         $    995         25.1 %   $  1,091         26.1 %

Revenues: Total revenue decreased by $0.2 million or 5.1%, in the three months ended March 31, 2007, from $4.2 million in the prior comparable period, primarily due to decreased average assets under management. Investment management fees decreased by $0.2 million, or 5.0%, in the three months ended March 31, 2007, from $3.7 million in the prior comparable period, and shareholder service fees decreased by $0.03 million, or 6.3%, in the three months ended March 31, 2007 from $0.5 million in the prior comparable period. These decreases resulted from decreases in the average daily net assets of our mutual funds, which can differ considerably from total net assets of our mutual funds at the end of an accounting period. Total net assets in our mutual funds decreased by $350.1 million, or 15.6%, as of March 31, 2007, from $2.250 billion as of the end of the prior comparable period. The $350.1 million decrease in net mutual funds assets is attributable to redemptions of $925.6 million and market depreciation of $44.9 million, partly offset by organic inflows of $620.4 million. Redemptions as a percentage of assets under management increased from an average of 2.0% per month to 4.4% per month during the same period, mainly due to increasing redemptions.

Operating Expenses: Total operating expenses increased by $.03 million, or 1.2%, in the three months ended March 31, 2007, from $2.2 million in the prior comparable period. The increase resulted from increases in compensation and benefits, several components of general and administrative expense, and depreciation expense, partly offset by decreased mutual fund distribution expense. As a percentage of total revenue, total operating expenses increased by 3.5% to 56.4% in the three months ended March 31, 2007, as compared to 52.9% in the prior comparable period.

General and Administrative Expenses: General and administrative expense increased by $0.02 million, or 3.6%, in the three months ended March 31, 2007, from $0.4 million in the prior comparable period, primarily due to increases in business insurance and professional service expenses. As a percentage of total revenue, general and administrative expense increased by 0.9% to 10.8% in the three months ended March 31, 2007, from 9.9% in the prior comparable period.

Mutual Fund Distribution Expenses: Distribution expenses decreased by $0.06 million, or 7.5%, in the three months ended March 31, 2007, from $0.8 million in the prior comparable period. As a percentage of total revenue, distribution expenses decreased by 0.5% to 19.4% for the three months ended March 31, 2007, compared to 19.9% in the prior comparable period. The decreased costs are due to decreased assets held through mutual fund supermarkets such as Charles Schwab, Fidelity and TD Ameritrade.

Amortization and Depreciation Expense: Amortization and depreciation expense increased by $0.05 million, or 3.2%, in the three months ended March 31, 2007, from $0.2 million in the prior comparable period. The increase is related to a larger fixed asset balance being depreciated in the current period. As a percentage of total revenue, amortization and depreciation expenses increased by 0.3% to 4.1% for the three months ended March 31, 2007, compared to 3.8% in the prior comparable period.

Interest Expense: Interest expense decreased by $0.04 million from the prior comparable period due to a loan amendment decreasing the interest rate to prime less one percent effective February 1, 2007. Additionally, the principal balance has decreased $2.1 million since the prior period due to monthly payments. As a percentage of total revenue, interest expense decreased by 0.6% to 4.7% for the three months ended March 31, 2007, compared to 5.3% in the prior comparable period.

Other Income: Other income increased by $0.05 million from the prior comparable period due to a higher cash balance earning interest. As a percentage of total revenue, other income increased by 1.4% to 3.0% for the three months ended March 31, 2007, compared to 1.6% in the prior comparable period.

Income Taxes: The provision for income taxes decreased by $0.06 million, or 7.7%, in the three months ended March 31, 2007, from $0.7 million in the prior comparable period.

Net Income: Net income decreased by $0.1 million, or 8.8%, in the three months ended March 31, 2007, compared to $1.1 million in the prior comparable period, as a result of the factors discussed above.

                                                  Six Months Ended March 31,
                                                2007                      2006
                                              (In thousands, except percentages)
                                                     Percent                   Percent
                                                     of Total                  of Total
                                        Amounts      Revenue      Amounts      Revenue
     Revenue:
     Investment advisory fees           $  7,398         88.5 %   $  6,955         88.4 %
     Shareholder service fees                946         11.3          900         11.4
     Other                                    11          0.2            9          0.2

     Total revenue                         8,355        100.0        7,864        100.0

     Operating expenses:
     Compensation and benefits             1,770         21.2        1,471         18.7
     General and administrative              900         10.8          845         10.7
     Mutual fund distribution              1,636         19.6        1,572         20.0
     Amortization and depreciation           326          3.8          309          4.0

     Total operating expenses              4,632         55.4        4,197         53.4

     Operating income                      3,723         44.6        3,667         46.6
     Interest expense                        404          4.8          444          5.6
     Other income                           (235 )       (2.8 )        (86 )       (1.1 )

     Income before income tax expense      3,554         42.6        3,309         42.1
     Income tax expense                    1,424         17.1        1,323         16.9

     Net income                         $  2,130         25.5 %   $  1,986         25.2 %

Revenues: Total revenue increased by $0.5 million or 6.2%, in the six months ended March 31, 2007, from $7.9 million in the prior comparable period, primarily due to fees earned from increased average assets under management. Investment management fees increased by $0.4 million, or 6.4%, in the six months ended March 31, 2007, from $7.0 million in the prior comparable period, and shareholder service fees increased by $0.05 million, or 5.1%, in the six months ended March 31, 2007 from $0.9 million in the prior comparable period. These increases resulted from increases in the average daily net assets of our mutual funds, which can differ considerably from total net assets of our mutual funds at the end of an accounting period. Total net assets in our mutual funds decreased by $350.1 million, or 15.6%, as of March 31, 2007, from $2.250 billion as of the end of the prior comparable period. The $350.1 million decrease in net mutual funds assets is attributable to redemptions of $925.6 million and market depreciation of $44.9 million, partly offset by organic inflows of $620.4 million. Redemptions as a percentage of assets under management increased from an average of 2.0% per month to 4.4% per month during the same period, mainly due to increasing redemptions.

Operating Expenses: Total operating expenses increased by $0.4 million, or 10.4%, in the six months ended March 31, 2007, from $4.2 million in the prior comparable period. The increase resulted from increases in compensation and benefits, several components of general and administrative expense, increased mutual fund distribution costs, and increased depreciation expense. As a percentage of total revenue, total operating expenses increased by 2.0% to 55.4% in the six months ended March 31, 2007, as compared to 53.4% in the prior comparable period.

General and Administrative Expenses: General and administrative expense increased by $0.06 million, or 6.5%, in the six months ended March 31, 2007, from $0.8 million in the prior comparable period, primarily due to increases in office rental and business insurance expenses. As a percentage of total revenue, general and administrative expense increased by 0.1% to 10.8% in the six months ended March 31, 2007, from 10.7% in the prior comparable period.

Mutual Fund Distribution Expenses: Distribution expenses increased by $0.06 million, or 4.1%, in the six months ended March 31, 2007, from $1.6 million in the prior comparable period. As a percentage of total revenue, distribution expenses decreased by 0.4% to 19.6% for the six months ended March 31, 2007, compared to 20.0% in the prior comparable period. The increased costs are due to increased assets held through mutual fund supermarkets such as Charles Schwab, Fidelity and TD Ameritrade.

Amortization and Depreciation Expense: Amortization and depreciation expense increased by $0.02 million, or 5.5%, in the six months ended March 31, 2007, from $0.3 million in the prior comparable period. The increase is related to a larger fixed asset balance being depreciated in the current period. As a percentage of total revenue, amortization and depreciation expense decreased by 0.2% to 3.8% for the six months ended March 31, 2007, compared to 4.0% in the prior comparable period.

Interest Expense: Interest expense decreased by $0.04 million from the prior comparable period due to a loan amendment decreasing the interest rate to prime less one percent effective February 1, 2007. Additionally, the principal balance has decreased $2.1 million since the prior period due to monthly payments. As a percentage of total revenue, interest expense decreased by 0.8% to 4.8% for the six months ended March 31, 2007, compared to 5.6% in the prior comparable period.

Other Income: Other income increased by $0.1 million from the prior comparable period due to a higher cash balance earning interest. As a percentage of total revenue, other income increased by 1.7% to 2.8% for the six months ended March 31, 2007, compared to 1.1% in the prior comparable period.

Income Taxes: The provision for income taxes increased by $0.1 million, or 7.6%, in the six months ended March 31, 2007, from $1.3 million in the prior comparable period.

Net Income: Net income increased by $0.1 million, or 7.3%, in the six months ended March 31, 2007, compared to $2.0 million in the prior comparable period, as a result of the factors discussed above.

In June 2001, the Financial Accounting Standards Board issued FASB Statement No. 142, "Goodwill and Other Intangible Assets." FASB No. 142 addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB No. 17, Intangible Assets. Under FASB Statement No. 142, goodwill and intangible assets that have indefinite useful lives are not amortized, but are tested at least annually for impairment. We consider the management agreements acquired to be intangible assets with an indefinite life. We fully implemented the provisions of FASB Statement No. 142 on October 1, 2002, at which time we ceased amortization of these intangible assets. Impairment analysis is conducted quarterly and coincides with our quarterly and annual financial reporting. Based on our detailed assessment of current fair market value, the value of the management agreements acquired has not been impaired. If future valuations in the marketplace decline significantly, the valuation of management agreements acquired may become impaired and net earnings would be negatively impacted by the resulting impairment adjustment.

In December 2004, the Financial Accounting Standards Board issued FASB Statement No. 123R, "Share-Based Payment," which amended the provisions of FASB Statement No. 123 "Accounting for Stock-Based Compensation." FASB Statement No. 123R requires public companies to recognize as an expense the fair value of stock-based payment arrangements at the date of grant, including stock options and employee stock purchase plans. The statement eliminates proforma accounting for share-based payments using the intrinsic value method previously allowed under the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."

Effective October 1, 2005, we adopted the fair value recognition of FASB Statement No. 123R under the "Modified Perspective" method in accordance with the transition and disclosure provisions of FASB Statement No. 148, "Accounting for Stock-based Compensation - Transition and Disclosure." All compensation costs related to restricted stock units vested during the three and six months ended March 31, 2007 and 2006 have been recognized in our financial statements.

In November, 2005, the FASB issued FASB Staff Position 115-1 and 124-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" (FSP 115-1 and 124-1), which addresses the determination as to when an investment is considered impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. The guidance in FSP SFAS 115-1 and 124-1 amends FASB Statement No. 115, "Accounting for Certain Investments in Debit and Equity Securities." We currently account for investments held in publicly traded mutual funds as trading securities under FASB Statement No. 115. Accordingly, any unrealized gains and losses on the investments are recognized currently in operations, and impairment is therefore not an issue.

In February, 2006, the FASB issued FASB Staff Position FAS 123R-4, "Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event." FSP FAS 123R-4 addresses the classification of options and similar instruments issued as employee compensation that allow for cash settlement upon the occurrence of a contingent event and amends paragraphs 32 and A229 of SFAS 123R. The adoption of FSP FAS 123R-4 has not had an impact on the Company's financial position or results of operations.

In July, 2006, the FASB issued Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48"), which is a change in accounting for income taxes. FIN 48 provides guidance on the threshold for recognizing the financial statement effects of a tax position. This interpretation is effective for fiscal years beginning after December 15, 2006. We do not expect the adoption of FIN 48 to have a material effect on our financial statements or results of operations.

In September, 2006, the FASB issued SFAS No 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans" ("FAS 158"). FAS 158 requires companies to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their financial statements. As we do not have defined benefit pensions or other postretirement plans, FAS 158 will have no impact on our financial statements or results of operations.

In October, 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("FAS 157"). This standard defines fair value, establishes a framework for measuring fair value and expands disclosures about the use of fair value to measure assets and liabilities. FAS 157 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of FAS 157 to have a material effect on our financial statements or results of operations.

In February, 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("FAS 159"). This standard permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing an opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply a complex hedge accounting provision. FAS 159 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of FAS 159 to have a material effect on our financial statements or results of operations.

Liquidity and Capital Resources

We continually review our capital requirements to ensure that we have sufficient funding available to support our growth strategies. Management anticipates that cash and other liquid assets on hand as of March 31, 2007 will be sufficient to meet our short-term capital requirements. To the extent that liquid resources and cash provided by operations are not adequate to meet long-term capital requirements, management plans to raise additional capital through debt or equity markets. There can be no assurance that we will be able to borrow funds or raise additional equity.

Total assets under management as of March 31, 2007 were $1.900 billion, which was a decrease of $156.3 million, or 7.6%, from September 30, 2006. Property and equipment, management agreements, and non-compete agreement acquired totaled $20.4 million as of March 31, 2007. Our remaining assets are very liquid, consisting primarily of cash and receivables derived from mutual fund asset management activities. As of March 31, 2007, we had cash and cash equivalents of $11.2 million.