___________________________
HENNESSY BALANCED
FUND
___________________________
March 8, 1996
THE HENNESSY FUNDS, INC.
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, California 94945
Telephone: (800) 966-4354
(FUND INFORMATION)
(800) 261-6950 (ACCOUNT INFORMATION)
THE HENNESSY FUNDS, INC. is an open end, non-diversified
management investment company consisting of a single portfolio,
the Hennessy Balanced Fund ("We" or the "Fund"). Our investment
objective is capital appreciation and current income.
HENNESSY BALANCED FUND
__________________________
THESE SECURITIES HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus sets forth concisely the information about the
Fund that prospective investors should know before investing.
Please read this Prospectus and retain it for future reference.
Additional information about the Fund has been filed with the
Securities and Exchange Commission in the form of a Statement of
Additional Information, dated March 8, 1996, which is
incorporated by reference in the Prospectus. Copies of the
Statement of Additional Information will be provided without
charge upon request to the Fund at the above address or
telephone number.
1. EXPENSES
The following information is provided in order to assist you
in understanding the various costs and expenses that, as an
investor in the Fund, you will bear directly or indirectly. It
should not be considered to be a representation of past or
future expenses. Actual expenses may be greater or lesser than
those shown. "Annual Operating Expenses" are based on the
estimated amount set forth in the table. The example assumes a
5% annual rate of return pursuant to requirements of the
Securities and Exchange Commission. The hypothetical rate of
return is not intended to be representative of past or future
performance of the Fund.
Shareholder Transaction Expenses
Maximum sales load imposed on purchasesNone Maximum sales
load imposed on reinvested dividendsNone Deferred sales
loadNone Redemption feeNone (1) Exchange feeNone
Annual Operating Expenses (as a percentage of average net
assets)
Management fees (after fee waivers)0.10%(2)
12b-1 fees 0.75% (2)
Other expenses 1.05%
Total fund operating expenses (after fee waivers) 1.90% (2)
(1) A fee of $10.00 is charged for each wire redemption.
(2) The maximum management fee is 0.85% per annum of the Fund's
average net assets. The investment adviser to the Fund has
voluntarily agreed to waive its management fee to the extent
necessary to ensure that combined management fees and 12b-1 fees
do not exceed 0.85% per annum of the Fund's average net assets.
The maximum level of distribution expenses is 0.75% per annum of
the Fund's average net assets. See "Purchases" for further
information. The distribution expenses for long-term
shareholders may total more than the maximum sales charge that
would have been permissible if imposed entirely as an initial
sales charge. Absent fee waivers, total fund operating expenses
would be 2.65% per annum of the Fund's average net assets.
Example
You would pay the following expenses on a $1,000 investment,
assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
1 Year $19 3 Years $60
2. OUR INVESTMENT STRATEGY
Our investment objective is capital appreciation and current
income. We utilize a conservative investment strategy which
results in our continuously investing approximately one-half of
our portfolio in U.S. Treasury securities having a remaining
maturity of approximately 1 year and the other half of our
portfolio in the ten highest yielding common stocks in the Dow
Jones Industrial Average ("DJIA").1 By utilizing this
investment strategy, we seek to achieve total returns that in
the long run will be substantially similar to that of the DJIA
but with less risk and volatility.
Around the first and fifteenth of each month, the Adviser will
determine the ten highest yielding common stocks in the DJIA.
The Adviser will make this determination by annualizing the last
quarterly or semi-annual ordinary dividend declared on each
common stock included in the DJIA and dividing the result by the
market value of the common stock on the last business day
preceding the date of determination. All purchases of common
stocks following such determination until the next determination
will be of the ten highest yielding common stocks so determined.
Unless we need to sell common stocks to fund redemption
requests as hereinafter discussed, we will hold for
approximately one year any common stocks purchased including
common stocks that are no longer one of the ten highest yielding
common stocks in the DJIA.
When we purchase common stock, we will also purchase an
approximately equal amount of U.S. Treasury securities having a
remaining maturity of approximately one year. (U.S. Treasury
securities are backed by the full faith and credit of the U.S.
Treasury. U.S. Treasury securities differ only in their
interest rates, maturities and dates of issuance. Treasury
bills have maturities of one year or less. Treasury notes have
maturities of one to ten years and Treasury bonds generally have
maturities of greater than ten years at the date of issuance.)
Consequently approximately half of our portfolio will at all
times consist of U.S. Treasury securities.
We rebalance our stock investments after they have been held
for one year. Any stock which is no longer one of the ten
highest yielding common stocks will be sold and replaced with
stocks which are. Additionally a portion of the stocks which
remain in the portfolio may be sold such that after the
rebalancing is completed, the rebalanced portion of our
portfolio will consist of 50% U.S. Treasury securities and 50%
of the ten highest yielding common stocks in the DJIA (5% for
each common stock). We anticipate rebalancing at the beginning
of every month with respect to the portfolio securities
purchased one year earlier. For example, a rebalancing effected
at the beginning of February will relate to portfolio securities
purchased in January of the preceding calendar year.
Rebalancing our common stock investments more frequently would
increase transaction costs.
In an effort to minimize transaction costs, we may accumulate
funds and make purchases in larger blocks to avoid odd lot
transactions. We will invest such accumulated funds in money
market instruments such as U.S. Treasury securities with a
remaining maturity of one year or less, repurchase agreements,
commercial paper and other cash equivalents rated A-1 or A-2 by
Standard & Poor's Corporation ("S&P") or Prime-1 or Prime-2 by
Moody's Investors Service, Inc. ("Moody's"), including
commercial paper master notes (which are demand instruments
bearing interest at rates which are fixed to known lending rates
and automatically adjusted when such lending rates change) of
issuers whose commercial paper is rated A-1 or A-2 by S&P or
Prime-1 or Prime-2 by Moody's. We may also invest in securities
issued by other investment companies that invest in high
quality, short-term debt securities (i.e., money market
instruments). In addition to the advisory fees and other
expenses we bear directly in connection with our own operations,
as a shareholder of another investment company, we would bear
our pro rata portion of the other investment company's advisory
fees and other expenses, and such fees and other expenses will
be borne indirectly by our shareholders.
When funding redemption requests, we will first utilize any
accumulated funds described above. If it is necessary for us to
sell portfolio securities to meet redemption requests, we will
endeavor to obtain approximately one-half of the necessary
proceeds from the sale of U.S. Treasury securities and the
remainder from the sale of common stocks in proportion to their
respective percentages of our total portfolio of common stocks.
Again we may vary the percentage of each issue of common stock
sold to avoid odd lot transactions thereby reducing total
transaction costs.
Our investment allocations may be affected by the fact that we
must meet the diversification requirements of the Internal
Revenue Code and do not concentrate our investments. See "Our
Investment Restrictions." Additionally, we will not invest more
than 5% of our total assets in the common stock of any issuer
that derives more than 15% of its revenue from
securities-related activities, which limitation may affect our
investment allocations.
3. OUR INVESTMENT RESTRICTIONS
We have adopted certain fundamental investment restrictions
that may be changed only with the approval of a majority of our
outstanding shares including the following restrictions:
(1) We will not purchase the securities of any issuer if the
purchase would cause more than 5% of the value of our total
assets to be invested in securities of such issuer (except
securities of the U.S. government or any agency or
instrumentality thereof), or purchase more than 10% of the
outstanding voting securities of any one issuer, except that up
to 50% of our total assets may be invested without regard to
these limitations. As such we are classified as a
non-diversified investment company under the Investment Company
Act of 1940. A non-diversified portfolio may be more volatile
than a diversified portfolio.
(2) We will not invest 25% or more of our total assets at
the time of purchase in securities of issuers whose principal
business activities are in the same industry.
A list of our policies and restrictions, both fundamental and
nonfundamental, is set forth in the Statement of Additional
Information. In order to provide a degree of flexibility, our
investment objective, as well as other policies which are not
deemed fundamental, may be modified by our Board of Directors
without shareholder approval. Any change in our investment
objective may result in our having an investment objective
different from the investment objective which a shareholder
considered appropriate at the time of investment in the Fund.
However we will not change our investment objective without
sending written notice to shareholders at least 30 days in
advance of any such change.
4. REPORTS
As a shareholder of the Fund you will be provided at least
semi-annually with a report showing the Fund's portfolio and
other information. Annually, after the close of our June 30
fiscal year, you will be provided with an annual report
containing audited financial statements.
An individual account statement will be sent to you by Firstar
Trust Company after each purchase, including reinvestment of
dividends or redemption of our shares. You will also receive an
annual statement after the end of the calendar year listing all
your transactions in our shares during the year and a quarterly
statement following the end of each calendar quarter listing
year-to-date transactions.
If you have questions about your account you may call Firstar
Trust Company at (800) 261-6950. If you have general questions
about the Fund or want more information, you may call us at
(800) 966-4354 or write to us at THE HENNESSY FUNDS, INC., The
Courtyard Square, 750 Grant Avenue, Suite 100, Novato,
California 94945, Attention: Corporate Secretary.
5. OUR MANAGEMENT
As a Maryland corporation, our business and affairs are
managed by our Board of Directors. We have entered into an
investment advisory agreement (the "Agreement") with The
Hennessy Management Co., L.P. (the "Adviser"), The Courtyard
Square, 750 Grant Avenue, Suite 100, Novato, California 94945,
under which the Adviser furnishes continuous investment advisory
services and management to us. The Adviser is a California
limited partnership organized on October 24, 1995 for the
purpose of becoming our investment adviser. The general partner
of the Adviser is Edward J. Hennessy, Incorporated ("Hennessy").
Hennessy is a registered broker-dealer and investment adviser.
Hennessy was organized in 1989 and is controlled by Neil J.
Hennessy, who is a director and the President of Hennessy.
Neither the Adviser nor Hennessy have prior experience managing
the investment portfolio of a registered investment company.
Hennessy, however, has served as a general partner of investment
partnerships which invest substantially all of their assets in
the ten highest yielding common stocks of the DJIA.
Neil J. Hennessy is primarily responsible for the day-to-day
management of our investment portfolio. He has held this
responsibility since we commenced operations. Mr. Hennessy also
has served as our President and a member of our Board of
Directors since our organization. Mr. Hennessy has been
President of Hennessy since 1989.
The Adviser supervises and manages our investment portfolio
and, subject to such policies as our Board of Directors may
determine, directs the purchase or sale of investment
securities in the day-to-day management of the Fund. Under the
Agreement, the Adviser, at its own expense and without separate
reimbursement from us, furnishes office space and all necessary
office facilities, equipment and executive personnel for
managing the Fund and maintaining our organization; bears all of
our sales and promotional expenses, other than expenses incurred
in complying with the laws regulating the issue or sale of
securities; and pays salaries and fees of all of our officers
and directors (except the fees paid to our disinterested
directors as such term is defined under the Investment Company
Act of 1940). For the foregoing, the Adviser receives a monthly
fee at the annual rate of 0.85% of the daily net assets of the
Fund. The rate of the annual advisory fee is higher than that
paid by most mutual funds.
We have adopted a Rule 12b-1 Plan (the "Plan") which
authorizes payments by us in connection with the distribution of
our shares at an annual rate, as determined from time to time by
our Board of Directors, of up to 0.75% of the Fund's average
daily net assets. Payments made pursuant to the Plan may only
be used to pay distribution expenses actually incurred.
Payments incurred in one plan year may be carried over into
future plan years. Amounts paid under the Plan by us may be
spent on any activities or expenses primarily intended to result
in the sale of our shares, including but not limited to,
advertising, compensation for sales and marketing activities of
financial institutions and others such as dealers and
distributors, shareholder account servicing, the printing and
mailing of prospectuses to other than current shareholders and
the printing and mailing of sales literature. The Plan permits
us to employ a distributor of its shares, in which event
payments under the Plan will be made to the distributor and may
be spent by the distributor on any activities or expenses
primarily intended to result in the sale of our shares,
including but not limited to, compensation to, and expenses
(including overhead and telephone expenses) of, employees of the
distributor who engage in or support distribution of our shares,
printing of prospectuses and reports for other than existing
shareholders, advertising and preparation and distribution of
sales literature. Allocation of overhead (rent, utilities,
etc.) and salaries will be based on the percentage of
utilization in, and time devoted to, distribution activities.
Initially all payments under the Plan will be made to the
Adviser who as indicated above directly bears all sales and
promotional expenses of the Fund, other than expenses incurred
in complying with laws regulating the issue or sale of
securities. (We indirectly bear sales and promotional expenses
to the extent we make payments under the Plan.) The Adviser has
voluntarily agreed to waive its investment advisory fee to the
extent necessary to ensure that combined investment advisory
fees and 12b-1 fees do not exceed 0.85% of the Fund's average
net assets. The Adviser has entered into an agreement with
Hennessy pursuant to which it will pay Hennessy an amount equal
to 1% of the net asset value of all our shares sold other than
shares sold pursuant to dividend reinvestments. This agreement
provides that Hennessy must repay any such fees with respect to
shares redeemed within one month after the date of the original
purchase other than shares redeemed as a result of the death or
disability of the shareholder. Such payments to Hennessy are a
permitted expenditure under the Plan.
We will pay all of our expenses not assumed by the Adviser,
including, but not limited to, the costs of preparing and
printing our registration statements required under the
Securities Act of 1933 and the Investment Company Act of 1940
and any amendments thereto, the expenses of registering our
shares with the Securities and Exchange Commission and in the
various states, the printing and distribution cost of
prospectuses mailed to existing shareholders, the cost of
director and officer liability insurance, reports to
shareholders, reports to government authorities and proxy
statements, interest charges, brokerage commissions, and
expenses incurred in connection with portfolio transactions. We
will also pay the fees of our directors who are not officers,
salaries of administrative and clerical personnel, association
membership dues, auditing and accounting services, fees and
expenses of any custodian or trustees having custody of our
assets, expenses of calculating the net asset value and
repurchasing and redeeming shares, and charges and expenses of
dividend disbursing agents, registrars, and share transfer
agents, including the cost of keeping all necessary shareholder
records and accounts and handling any problems relating thereto.
We also have entered into an administration agreement (the
"Administration Agreement") with Firstar Trust Company (the
"Administrator"), 615 East Michigan Street, Milwaukee, Wisconsin
53202. Under the Administration Agreement, the Administrator
maintains the books, accounts and other documents required by
the Act, responds to shareholder inquiries, prepares our
financial statements and tax returns, prepares certain reports
and filings with the Securities and Exchange Commission and with
state Blue Sky authorities, furnishes statistical and research
data, clerical, accounting and bookkeeping services and
stationery and office supplies, keeps and maintains our
financial and accounting records and generally assists in all
aspects of our operations. The Administrator, at its own
expense and without reimbursement from us, furnishes office
space and all necessary office facilities, equipment and
executive personnel for performing the services required to be
performed by it under the Administration Agreement. For the
foregoing, the Administrator receives from us a fee, paid
monthly, at an annual rate of .05% of the first $100,000,000 of
our average net assets, .04% of the next $400,000,000 of our
average net assets, and .03% of our net assets in excess of
$500,000,000. Notwithstanding the foregoing, the
Administrator's minimum annual fee is $30,000.
Firstar Trust Company also provides custodial, transfer agency
and accounting services for us. Information regarding the fees
payable by us to Firstar Trust Company for these services is
provided in the Statement of Additional Information.
6. HOW WE DETERMINE OUR SHARE PRICE
Our net asset value (or "price") per share is determined by
dividing the total value of our investments and other assets
less any liabilities, by the number of our outstanding shares.
The net asset value per share is determined once daily on each
day that the New York Stock Exchange is open, as of the close of
regular trading on the Exchange (normally 3:00 p.m. Central
time). Purchase orders for our shares accepted or shares
tendered for redemption prior to the close of regular trading on
a day the New York Stock Exchange is open for trading will be
valued as of the close of trading, and purchase orders accepted
and shares tendered for redemption after that time will be
valued as of the close of regular trading on the next trading
day.
Our common stock investments are valued at the last quoted
sales price on the day the valuation is made utilizing price
information taken from the New York Stock Exchange where the
security is primarily traded. Securities which are not traded
on the valuation date are valued at the most recent bid prices.
Debt securities are valued at the latest bid prices furnished by
independent pricing services. Other assets are valued at fair
value as determined in good faith by the Adviser in accordance
with procedures approved by the Board of Directors of the Fund.
Short-term instruments (those with remaining maturities of 60
days or less) are valued at amortized cost, which approximates
market value.
7. PURCHASING SHARES
BY MAIL. Please complete and sign the New Account Application
form included with this Prospectus and send it, together with
your check or money order ($1,000 minimum), made payable to
Hennessy Balanced Fund, TO: THE HENNESSY FUNDS, INC., c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. Note: A different procedure is used for
establishing Individual Retirement Accounts. Please call
Firstar Trust Company at (800) 261-6950 for details. All
purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. No cash will be accepted. Firstar Trust Company
will charge a $20 fee against a shareholder's account for any
check returned to it for insufficient funds. The shareholder
will also be responsible for any losses suffered by us as a
result.
BY OVERNIGHT OR EXPRESS MAIL. Please use the following
address to insure proper delivery: Firstar Trust Company,
Mutual Fund Services, 3rd Floor, 615 East Michigan Street,
Milwaukee, Wisconsin 53202.
BY WIRE. To establish a new account by wire please first call
Firstar Trust Company, (800) 261-6950, to advise it of the
investment and the dollar amount. This will ensure prompt and
accurate handling of your investment. A completed New Account
Application form must also be sent to us at the address above
immediately after your investment is made so the necessary
remaining information can be recorded to your account. Your
purchase request should be wired through the Federal Reserve
Bank as follows:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA Number 075000022
For credit to Firstar Trust M.F.S.
Account Number 112-952-137
For further credit to Hennessy Balanced Fund
(Your account name and account number)
ADDITIONAL INVESTMENTS. You may add to your account at any
time by purchasing shares by mail (minimum $100) or by wire
(minimum $100) according to the aforementioned wiring
instructions. You must notify Firstar Trust Company at (800)
261-6950 prior to sending your wire. A remittance form which is
attached to your individual account statement should accompany
any investments made through the mail, when possible. All
purchase requests must include your account registration number
in order to assure that your funds are credited properly.
BY TELEPHONE. By using our telephone purchase option you may
move money from your bank account to your Fund account at your
request. Only bank accounts held at domestic financial
institutions that are Automated Clearing House (ACH) members may
be used for telephone transactions. To have our shares
purchased at the net asset value determined as of the close of
regular trading on a given date, Firstar Trust Company must
receive both your purchase order and payment by Electronic Funds
Transfer through the ACH System before the close of regular
trading on such date. Most transfers are completed within three
business days. You may not use telephone transactions for
initial purchases of our shares. The minimum amount that can be
transferred by telephone is $100.
AUTOMATIC INVESTMENT. If you choose the Automatic Investment
option, you may move money from your bank account to your Fund
account on the schedule (e.g., monthly, bimonthly (every other
month), quarterly or yearly) you select and may be in any amount
subject to a $100 minimum. You may establish this option and
the telephone purchase option by completing the appropriate
section of the New Account Application. Please call Firstar
Trust Company at (800) 261-6950 if you have questions. Please
wait three weeks before using the service.
You pay no sales commissions when you purchase our shares, so
all of your investment is used to purchase shares. All shares
purchased will be credited to your account and confirmed by a
statement mailed to your address. We do not issue stock
certificates for shares purchased. Since certificates are not
issued, you are relieved of the responsibility for safekeeping
of certificates and the need to deliver them upon redemption.
You may also invest in the Fund by purchasing shares through a
registered broker-dealer, who may charge you a fee, either at
the time of purchase or redemption. The fee, if charged, is
retained by the broker-dealer and not remitted to us or the
Adviser. You will not be charged a fee when you purchase our
shares through Hennessy. We may accept telephone orders from
broker-dealers who we have previously approved. It is the
responsibility of the registered broker-dealer to promptly remit
purchase and redemption orders to Firstar Trust Company.
ALL APPLICATIONS ARE SUBJECT TO ACCEPTANCE BY US, AND ARE NOT
BINDING UNTIL SO ACCEPTED. WE RESERVE THE RIGHT TO REJECT
APPLICATIONS IN WHOLE OR IN PART. The minimum purchase amounts
set forth above are subject to change at any time and may be
waived for purchases by retirement plans, or the Adviser's or
Hennessy's employees and their family members. You will be
advised at least 30 days in advance of any increases in such
minimum amounts and our prospectus will be appropriately
supplemented. Applications without Social Security or Tax
Identification numbers will not be accepted.
8. REDEMPTIONS
At any time during normal business hours you may request us to
redeem your shares in whole or in part. Written redemption
requests must be directed to THE HENNESSY FUNDS, INC., c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. If a redemption request is inadvertently sent to us
at our corporate address, it will be forwarded to Firstar Trust
Company, but the effective date of redemption will be delayed
until the request is received by Firstar Trust Company.
Requests for redemption which are subject to any special
conditions or which specify an effective date other than as
provided herein cannot be honored.
A redemption request must be received in "Good Order" by
Firstar Trust Company for the request to be processed. "Good
Order" means the request for redemption must include:
_ Your letter of instruction specifying our name and either the
number of shares or the dollar amount of shares to be redeemed.
The letter of instruction must be signed by all registered
shareholders exactly as the shares are registered and must
include your account registration number and the additional
requirements listed below that apply to the particular account.
Type of Registration Requirements
Individual, Joint Tenants, Sole Proprietorship, Custodial
(Uniform Gift To Minors Act), General Partners Redemption
request signed by all person(s) required to sign for the
account, exactly as it is registered.
Corporations, Associations Redemption request and a corporate
resolution, signed by person(s) required to sign for the
account, accompanied by signature guarantee(s).
Trusts Redemption request signed by the trustee(s), with a
signature guarantee. (If the Trustee's name is not registered
on the account, a copy of the trust document certified within
the last 60 days is also required).
_ Signature guarantees if proceeds of redemption are to be sent
by wire transfer, to a person other than the registered holder,
to an address other than the address of record, and if a
redemption request includes a change of address. Transfers of
shares also require signature guarantees. Signature guarantees
may be obtained from any commercial bank or trust company in the
United States or a member of the New York Stock Exchange and
some savings and loan associations.
If you have an IRA, you must indicate on your redemption request
whether or not to withhold federal income tax. Redemption
requests not indicating an election to have federal tax withheld
will be subject to withholding. If you are uncertain of the
redemption requirements, please contact, in advance, Firstar
Trust Company.
The redemption price is the next determined net asset value
after Firstar Trust Company receives a redemption request in
"Good Order". The amount paid will depend on the market value
of the investments in our portfolio at the time of determination
of net asset value, and may be more or less than the cost of the
shares redeemed. Payment for shares redeemed will be mailed to
you typically within one or two days, but no later than the
seventh day after receipt by Firstar Trust Company of the
redemption request in "Good Order" unless we are requested to
redeem shares for which we have not yet received good payment
(e.g. cash, bank money order or certified check on a U.S. bank.)
In such event we may delay the mailing of a redemption check
until such time as we have assured ourself that good payment for
the purchase price of the shares has been collected which may
take up to 12 days or more. Wire transfers may be arranged
through Firstar Trust Company, which will assess a $10.00 wiring
charge against your account.
You may redeem our shares by telephone. To redeem shares by
telephone, you must check the appropriate box on the New Account
Application (as we do not make this feature available to
shareholders automatically). Once this feature has been
requested, you may redeem shares by phoning Firstar Trust
Company at (800) 261-6950 and giving the account name, account
number and either the number of shares or the dollar amount to
be redeemed. For your protection, you may be asked to give the
social security number or tax identification number listed on
the account as further verification. Proceeds redeemed by
telephone will be mailed or wired only to your address or bank
of record as shown on the records of Firstar Trust Company.
Telephone redemptions must be in amounts of $1,000 or more. If
the proceeds are sent by wire, a $10.00 wire fee will apply.
In order to arrange for telephone redemptions after a Fund
account has been opened or to change the bank, account or
address designated to receive redemption proceeds, you must send
a written request to Firstar Trust Company. The request must be
signed by each registered holder of the account with the
signatures guaranteed by a commercial bank or trust company in
the United States, a member firm of the New York Stock Exchange
or other eligible guarantor institution. Further documentation
may be requested from corporations, executors, administrators
trustees and guardians.
We reserve the right to refuse a telephone redemption if we
believe it is advisable to do so. Procedures for redeeming our
shares by telephone may be modified or terminated by us at any
time. Neither the Fund nor Firstar Trust Company will be liable
for following instructions for telephone redemption transactions
which they reasonably believe to be genuine, provided reasonable
procedures are used to confirm the genuineness of the telephone
instructions, but may be liable for unauthorized transactions if
they fail to follow such procedures. These procedures include
requiring you to provide some form of personal identification
prior to acting upon your telephone instructions and recording
all telephone calls.
You should be aware that during periods of substantial
economic or market change, telephone or wire redemptions may be
difficult to implement. If you are unable to contact Firstar
Trust Company by telephone, you may redeem shares by delivering
the redemption request to Firstar Trust Company by mail as
described above.
If you select our systematic withdrawal option, you may move
money automatically from your Fund account to your bank account
according to the schedule you select. The systematic withdrawal
option may be in any amount subject to a $100 minimum. To
select the systematic withdrawal option you must check the
appropriate box on the New Account Application.
We reserve the right to redeem the shares held in any account
if at the time of any transfer or redemption of Fund shares in
the account, the value of the remaining shares in the account
falls below $1,000. You will be notified in writing that the
value of your account is less than the minimum and allowed at
least 60 days to make an additional investment. The receipt of
proceeds from the redemption of shares held in an Individual
Retirement Account ("IRA") will constitute a taxable
distribution of benefits from the IRA unless a qualifying
rollover contribution is made. Involuntary redemptions will not
be made because the value of shares in an account falls below
$1,000 solely because of a decline in our net asset value.
Your right to redeem our shares will be suspended and your
right to payment postponed for more than seven days for any
period during which the New York Stock Exchange is closed
because of financial conditions or any other extraordinary
reason and may be suspended for any period during which (a)
trading on the New York Stock Exchange is restricted pursuant to
rules and regulations of the Securities and Exchange Commission,
(b) the Securities and Exchange Commission has by order
permitted such suspension or (c) such emergency, as defined by
rules and regulations of the Securities and Exchange Commission,
exists as a result of which it is not reasonably practicable for
the Fund to dispose of its securities or fairly to determine the
value of its net assets.
9. DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
We intend to distribute quarterly in March, June, September
and December any net investment income and annually in December
any net realized capital gains to shareholders. Dividend and
capital gains distributions may be automatically reinvested or
received in cash.
We intend to continue to qualify for taxation as a "regulated
investment company" under the Internal Revenue Code so that we
will not be subject to federal income tax to the extent our
income is distributed to shareholders. Dividends paid by us
from net investment income and net short-term capital gains,
whether received in cash or reinvested in additional shares,
will be taxable to shareholders as ordinary income.
Distributions paid by us from long-term capital gains, whether
received in cash or reinvested in additional shares, are taxable
as long-term capital gains, regardless of the length of time you
have owned our shares. Capital gains distributions are made
when we realize net capital gains on sales of portfolio
securities during the year. We do not seek to realize any
particular amount of capital gains during a year; rather,
realized gains are a by-product of portfolio management
activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year; there will be
no capital gains distributions in years when we realize net
capital losses.
Note that if you accept capital gains distributions in cash,
instead of reinvesting them in additional shares, you are in
effect reducing the capital at work for you in the Fund. Also,
keep in mind that if you purchase our shares shortly before the
record date for a dividend or capital gains distribution, a
portion of your investment will be returned to you as a taxable
distribution, regardless of whether you are reinvesting your
distributions or receiving them in cash.
We will notify you annually as to the tax status of dividend
and capital gains distributions paid by the Fund. A sale or
redemption of our shares is a taxable event and may result in a
capital gain or loss. Dividend distributions, capital gains
distributions, and capital gains or losses from redemptions may
be subject to state and local taxes.
We are required to withhold 31% of taxable dividends, capital
gains distributions, and redemptions paid to shareholders who
have not complied with IRS taxpayer identification regulations.
You may avoid this withholding requirement by certifying on your
New Account Application your proper Social Security or Taxpayer
Identification Number and by certifying that you are not subject
to backup withholding.
The tax discussion set forth above is included for general
information purposes only. Prospective investors should consult
their own tax advisers concerning the tax consequences of an
investment in the Fund.
10. DIVIDEND REINVESTMENT
You may elect to have all income dividends and capital gains
distributions reinvested in our shares or paid in cash, or to
have capital gains distributions reinvested and income dividends
paid in cash. Please refer to the New Account Application form
accompanying this Prospectus for further information. If you
do not specify an election, all dividends and capital gains
distributions will automatically be reinvested in full and
fractional shares of the Fund calculated to the nearest 1,000th
of a share. Shares are purchased at the net asset value in
effect on the business day after the dividend record date and
are credited to your account on the dividend payment date. Cash
dividends are also paid on such date. You will be advised of
the number of shares purchased and the price following each
reinvestment. An election to reinvest or receive dividends and
distributions in cash will apply to all our shares registered in
your name, including those previously purchased. See
"DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES" for a
discussion of certain tax consequences.
You may change an election at any time by notifying us in
writing. If such a notice is received between a dividend
declaration date and payment date, it will become effective on
the day following the payment date. We may modify or terminate
our dividend reinvestment program at any time on thirty days'
notice to participants.
11. RETIREMENT PLANS
We offer the following retirement plans that may fit your
needs and allow you to shelter some of your income from taxes:
_ INDIVIDUAL RETIREMENT ACCOUNT ("IRA"). Individual
shareholders may establish their own tax-deferred IRA. Earnings
on amounts held in the IRA are not taxed until withdrawal.
_ SIMPLIFIED EMPLOYEE PENSION PLAN (SEP/IRA). The SEP/IRA is a
pension plan in which both the employer and the employee may
contribute to an IRA. The SEP/IRA is also available to
self-employed individuals.
Contact us for complete information kits, including forms,
concerning the above plans, their benefits, provisions and fees.
Consultation with a competent financial and tax adviser
regarding these plans is recommended.
12. BROKERAGE TRANSACTIONS
The Agreement authorizes the Adviser to select the brokers or
dealers that will execute the purchases and sales of our
portfolio securities. In placing purchase and sale orders for
us, it is the policy of the Adviser to seek the best execution
of orders at the most favorable price in light of the overall
quality of brokerage and research services provided.
The Agreement permits the Adviser to cause us to pay a broker
which provides brokerage and research services to the Adviser a
commission for effecting securities transactions in excess of
the amount another broker would have charged for executing the
transaction, provided the Adviser believes this to be in our
best interests. Although we do not initially intend to market
our shares through intermediary broker-dealers, we may place
portfolio orders with broker-dealers who recommend the purchase
of our shares to clients if the Adviser believes the commissions
and transaction quality are comparable to that available from
other brokers and allocate portfolio brokerage on that basis.
We may place portfolio orders with Hennessy if the quality of
the transaction and the commissions are comparable to what they
would be with other qualified brokerage firms.
13. GENERAL INFORMATION
We are organized as a Maryland corporation. Our Articles of
Incorporation permit our Board of Directors to issue 500,000,000
shares of common stock, with a $.0001 par value. Our Board of
Directors has the power to designate one or more classes
("series") of shares of common stock and to classify or
reclassify any unissued shares with respect to such series.
Currently we are offering one class of shares.
Our shares are fully paid and non-assessable; have no
preference as to conversion, exchange, dividends, retirement or
other features; and have no preemptive rights. Our shares have
non-cumulative voting rights, meaning that the holders of more
than 50% of the shares voting for the election of Directors can
elect 100% of the Directors if they so choose.
Annual meetings of shareholders will not be held except as
required by the Investment Company Act of 1940 and other
applicable law. An annual meeting will be held to vote on the
removal of a Director or Directors of the Fund if requested in
writing by the holders of not less than 10% of the outstanding
shares of the Fund.
All of our securities and cash are held by Firstar Trust
Company, which also serves as our transfer and dividend
disbursing agent. KPMG Peat Marwick LLP serves as our
independent accountants and will audit our financial statements
annually. We are not involved in any litigation.
14. PERFORMANCE INFORMATION
We may provide from time to time in advertisements, reports to
shareholders and other communications with shareholders our
average annual total return. An average total return refers to
the rate of return which, if applied to an initial investment at
the beginning of a stated period and compounded over the period,
would result in the redeemable value of the investment at the
end of the stated period assuming reinvestment of all dividends
and distribution and reflecting the effect of all recurring
fees. When considering "average" total return figures for
periods longer than one year, you should note that our annual
total return for any one year in the period might have been
greater or less than the average for the entire period. We may
use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in
the Fund for a specific period (again reflecting changes in our
share price and assuming reinvestment of dividends and
distributions).
We may also compare our performance to other mutual funds with
similar investment objectives and to the industry as a whole as
reported by Lipper Analytical Services, Inc., Morningstar
OnDisc, Money, Forbes, Business Week and Barron's magazines and
The Wall Street Journal, (Lipper Analytical Services, Inc. and
Morningstar OnDisc are independent ranking services that rank
mutual funds based upon total return performance.) We may also
compare our performance to the DJIA, NASDAQ Composite Index,
NASDAQ Industrials Index, Value Line Composite Index, the
Standard & Poor's 500 Stock Index, and the Consumer Price Index.
Our performance quotations represent our past performance and
should not be considered as representative of future results.
The investment return and principal value of an investment in
the Fund will fluctuate so that your shares, when redeemed, may
be worth more or less than their original cost.
Table of Contents
Page No. ______________________________________
1. EXPENSES 1
2. OUR INVESTMENT STRATEGY 2 HENNESSY BALANCED
3. OUR INVESTMENT RESTRICTIONS 3 FUND
4. REPORTS 3 ______________________________________
5. OUR MANAGEMENT 4
6. HOW WE DETERMINE OUR SHARE PRICE 5
7. PURCHASING SHARES 6
8. REDEMPTIONS 7
9. DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES 9
10. DIVIDEND REINVESTMENT 10
11. RETIREMENT PLANS 10
12. BROKERAGE TRANSACTIONS 11
13. GENERAL INFORMATION 11
14. PERFORMANCE INFORMATION 11
No person has been authorized to give any information or
to make any representations other than those contained in this
Prospectus and the Statement of Additional Information dated
March 8, 1996, and, if given or made, such information or
representation may not be relied upon as having been authorized
by The Hennessy Funds, Inc. This Prospectus does not constitute
an offer to sell securities in any state or jurisdiction in
which such offering may not lawfully be made.
PROSPECTUS Novato, California March 8, 1996
C:\WP51\DOCS\HENNESSY\663.NEW|03/14/96|37S022|RLT:dkp
1 The Dow Jones Industrial Average is the property of Dow
Jones & Company, Inc. Dow Jones & Company, Inc. is not
affiliated with the Fund, The Hennessy Management Co., L.P., the
Fund's investment adviser (the "Adviser"), or Edward J.
Hennessy, Inc., the general partner to the Adviser. Dow Jones &
Company, Inc. has not participated in any way in the creation of
the Fund or in the selection of stocks included in the Fund and
has not approved any information included herein relating
thereto.
