Securities Act Registration No. 33-_____
Investment Company Act Reg. No. 811-____
_________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
__________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. __ [_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. __ [_]
(Check appropriate box or boxes.)
______________________
THE HENNESSY FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, CA 94945
(Address of Principal Executive Offices) (Zip Code)
(800) 966-4354
(Registrant's Telephone Number, including Area Code)
Copy to:
Neil J. Hennessy
The Hennessy Management Co., L.P.
The Courtyard Square Richard L. Teigen
750 Grant Avenue Foley & Lardner
Suite 100 777 East Wisconsin Avenue
Novato, CA 94945 Milwaukee, Wisconsin 53202
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable
after the Registration Statement becomes effective.
In accordance with Rule 24f-2(a)(1) under the Investment Company Act of
1940, the Registrant declares that an indefinite number or amount of
shares of its common stock, $0.0001 par value, is being registered by this
Registration Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission acting
pursuant to said Section 8(a) may determine.
__________________________________________________________________________
The Exhibit Index is located at page __ of the sequential numbering
system.
Page 1 of __ Pages
<PAGE>
THE HENNESSY FUNDS, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 481 showing the location in the Prospectus and
the Statement of Additional Information of the responses to the Items of
Parts A and B of Form N-1A.)
Caption or Subheading in
Prospectus or Statement of
Item No. on Form N-1A Additional Information
PART A -INFORMATION REQUIRED IN PROSPECTUS
1. Cover Page Cover Page
2. Synopsis EXPENSES
3. Financial Highlights PERFORMANCE INFORMATION
4. General Description of OUR INVESTMENT STRATEGY;
Registrant PAST PERFORMANCE; OUR
INVESTMENT RESTRICTIONS
5. Management of the Fund OUR MANAGEMENT; BROKERAGE
TRANSACTIONS; GENERAL
INFORMATION
5A. Management's Discussion of *
Fund Performance
6. Capital Stock and Other REPORTS; CAPITAL GAINS
Securities DISTRIBUTIONS AND TAXES;
GENERAL INFORMATION
7. Purchase of Securities Being HOW WE DETERMINE OUR SHARE
Offered PRICE; PURCHASING SHARES;
DIVIDEND REINVESTMENT;
RETIREMENT PLANS
8. Redemption or Repurchase REDEMPTIONS
9. Legal Proceedings *
PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL
INFORMATION
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and *
History
13. Investment Objectives and Investment Restrictions;
Policies Investment Considerations
14. Management of the Fund Directors and Officers of
the Corporation
15. Control Persons and Directors and Officers of
Principal Holders of the Corporation; Ownership
Securities of Management and Principal
Shareholders; Investment
Adviser, Administrator,
Custodian, Transfer Agent
and Accounting Services
Agent
16. Investment Advisory and Investment Adviser,
Other Services Administrator, Custodian,
Transfer Agent and Account
Services Agent; Independent
Accountants
17. Brokerage Allocation Allocation of Portfolio
Brokerage
18. Capital Stock and Other Included in Prospectus
Securities under "GENERAL INFORMATION"
19. Purchase, Redemption and Included in Prospectus
Pricing of Securities Being under "HOW WE DETERMINE OUR
Offered SHARE PRICE"; "PURCHASING
SHARES"; "REDEMPTIONS";
Determination of Net Asset
Value; Distribution of
Shares; Systematic
Withdrawal Plan
20. Tax Status Taxes
21. Underwriters *
22. Calculations of Performance Performance Information
Data
23. Financial Statements Financial Statement
_______________________
* Answer negative or inapplicable
<PAGE>
___________________________
HENNESSY BALANCED
FUND
___________________________
__________, 1996
THE HENNESSY FUNDS, INC.
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, California 94945
Telephone: (800) 966-4354
(FUND INFORMATION)
(800) ___-____ (ACCOUNT INFORMATION)
THE HENNESSY FUNDS, INC.
is an open end, 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.
___________________________
THESE SECURITIES HAVE NOT BEEN
HENNESSY BALANCED APPROVED OR DISAPPROVED BY THE
FUND 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
________, 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 purchases . . . . . . . None
Maximum sales load imposed on dividends . . . . . . . None
Deferred sales load . . . . . . . . . . . . . . . . . None
Redemption fee . . . . . . . . . . . . . . . . . . . None (1)
Exchange fee . . . . . . . . . . . . . . . . . . . . None
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 $7.50 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
1 Year 3 Years
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: . . . . . . . . $19 $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").* 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.
______________
* 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.
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.
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.
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
diversify and do not concentrate our investments. 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. PAST PERFORMANCE
By utilizing our investment strategy, we seek to achieve
investment returns that in the long run will be substantially similar to
that of the DJIA but with less volatility. The chart below illustrates
the total return for each of the last twenty years of the DJIA and for a
portfolio consisting 50% of one-year Treasury bills and 50% of the ten
highest yielding common stocks in the DJIA as of the beginning of each
year determined in accordance with the principles set forth in "Our
Investment Strategy" (the "Model Portfolio").
Comparison of Total Return(1)
DJIA Total Model Portfolio
Year Return Total Return
1976 22.72% 20.24%
1977 -12.71% 2.75%
1978 2.69% 3.21%
1979 10.52% 11.03%
1980 21.41% 19.52%
1981 -3.40% 7.14%
1982 25.79% 19.43%
1983 25.68% 23.66%
1984 1.06% 8.82%
1985 32.78% 19.34%
1986 26.91% 19.84%
1987 6.02% 6.01%
1988 15.95% 16.59%
1989 31.71% 17.75%
1990 -0.57% 0.10%
1991 23.93% 23.05%
1992 7.43% 5.99%
1993 16.72% 15.44%
1994 4.95% 3.85%
1995 36.40% 20.45%
Average: 14.80% 13.30%
____________________
(1) Total return represents the sum of the following
components: (a) the percentage change in value of each
common stock from the first trading day on the New York
Stock Exchange in a given year to the last trading day in
that year; (b) the total dividends received in that year on
each common stock divided by the market value of the common
stock as of the first trading day in that year (without any
dividend reinvestment); and (c) the yield on one-year U.S.
Treasury bills as of the close of the first trading day in
that year. Total Return does not take into consideration
any commissions, expenses or taxes, and does not include
reinvestment of dividends.
The returns shown above are not guarantees of future performance
and should not be used as a predictor of returns to be expected in
connection with an investment in the Fund. As indicated above, the Model
Portfolio has both outperformed and underperformed the DJIA in the last
twenty years. There is no assurance that the investment returns of the
Fund will exceed that of the DJIA.
While the foregoing information is relevant to an investor's
decision to invest in the Fund, investors should be aware that our
performance will not be identical to that of the Model Portfolio for a
number of reasons including the fact that we (a) will reinvest dividends;
(b) have expenses; (c) purchase and sell investments continuously; and (d)
may not be able to be fully invested or invest in the exact proportions of
the Model Portfolio at all times.
4. 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 25% of our total assets may be invested without regard to
these limitations.
(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.
5. 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) ___-____. 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.
6. 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.
7. 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.
8. 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 ($1000 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) ___-____ 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 $15 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) ___-____, 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 $1000)
according to the aforementioned wiring instructions. You must notify
Firstar Trust Company at (800) ___-____ 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) ___-____ 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.
9. 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, Redemption request signed
Sole Proprietorship, by all person(s) required
Custodial (Uniform Gift To to sign for the account,
Minors Act), General exactly as it is
Partners 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 $7.50 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) ___-____ 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 $7.50 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 $1000. 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 $1000 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.
10. DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
We intend to distribute quarterly in April, July, October 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.
11. 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.
12. 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.
13. 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. Because of restrictions
of the Investment Company Act of 1940, we will not place portfolio orders
with Hennessy.
14. 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.
____________________ serves as our independent accountants and will audit
our financial statements annually. We are not involved in any litigation.
15. 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.
<PAGE>
____________________________
HENNESSY BALANCED
FUND
____________________________
NEW ACCOUNT APPLICATION
Please mail in the enclosed return envelope to:
Hennessy Balanced Fund, c/o Firstar Trust Company
Post Office Box 701, Milwaukee, Wisconsin 53201-0701
NEW ACCOUNT REGISTRATION (PLEASE TYPE OR PRINT)
Note: Do not use this application for IRAs or SEPs. Please complete the
enclosed reply card or call 1-800-___-____ or 1-800-966-4354 for the
appropriate application.
__________________________________________________________________________
Owner (Individual, Corporation, Social Security/
Partnership, Trust) Taxpayer I.D. Number
__________________________________________________________________________
Co-Owner* (if any) Social Security/Taxpayer I.D. Number
__________________________________________________________________________
Mailing Address (Individuals should provide their residence address)
___________________________________________________ (___)________________
City State Zip Code Daytime Phone
*Indicate nature of co-ownership:
[_] Community Property (No Right of Survivorship)
[_] Joint Tenants with Rights of Survivorship
[_] Tenants in Common
[_] Other (Please specify):
Any registration in the names of two or more co-owners will be without
right of survivorship, unless otherwise specified. Shares may be
registered in the name of a custodian for a minor under applicable state
law. In such cases, the name of the state should be indicated, and the
taxpayer identification or social security number should be that of the
minor. Shares registered in the name of a trust should also identify the
name(s) of Trustee(s) and Trust date.
INITIAL INVESTMENT (MINIMUM $1000)
Please establish my account in Hennessy Balanced Fund.
[_] By Check: I have enclosed a check made payable to Hennessy
Balanced Fund for $___________________________________________
[_] By Wire: $____________________________ __________________________
Amount Date of Wire
A. Call 1-800-___-____ to insure proper credit
B. Complete and return this application
C. Wire your investment through any Federal Reserve bank, as
follows:
Firstar Bank Milwaukee, Wisconsin 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)
ELECTION REGARDING DISTRIBUTIONS
If no option is checked, all distributions will be reinvested.
[_] I would like all distributions to be reinvested in my account.
[_] I would like dividends to be paid in cash and capital gains
reinvested.
[_] I would like all distributions to be paid to me in cash.
TELEPHONE REDEMPTION (optional)
[_] Permits the redemption of a minimum of $1,000. The proceeds will
be mailed to the address above or deposited to your bank account.
_________________________________________________________________________
Name on Bank Account
_________________________________________________________________________
Bank Name Account Number
__________________________________________________________________________
Bank Address
To ensure proper crediting to your bank account, please attached a
deposit slip for the account shown above.
*A $7.50 fee will be applied to any redemption when the proceeds are
wired.
SIGNATURE AND CERTIFICATION
I (we) am (are) a citizen(s) of [_] U.S. [_] Other______________________
Please specify
I (we) certify under penalties of perjury that:
A. The Social Security Number(s) or other Tax I.D. Number(s) stated
above is (are) correct.
B. I am not subject to backup withholding because:*
(1) the IRS has not notified me that I am subject to backup
withholding; or
(2) the IRS has notified me that I am no longer subject to backup
withholding.
*If this statement is not true in your case, please strike out this part
before signing.
__________________________________________________________________________
Signature of Owner, Trustee, or Custodian Date
__________________________________________________________________________
Signature of Co-Owner, if any Date
<PAGE>
Table of Contents
Page No.
____________________________
1. EXPENSES
2. OUR INVESTMENT STRATEGY HENNESSY BALANCED
FUND
3. PAST PERFORMANCE
____________________________
4. OUR INVESTMENT
RESTRICTIONS
5. REPORTS
6. OUR MANAGEMENT
7. HOW WE DETERMINE OUR
SHARE PRICE
8. PURCHASING SHARES
9. REDEMPTIONS
10. DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES
11. DIVIDEND REINVESTMENT
12. RETIREMENT PLANS
13. BROKERAGE TRANSACTIONS
14. GENERAL INFORMATION
15. PERFORMANCE INFORMATION
No person has been authorized
to give any information or to
make any representations
other than those contained in APPLICATION AND PROSPECTUS
this Prospectus and the
Statement of Additional
Information dated Novato, California
___________, 1996, and, if _______________, 1996
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.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION ________, 1996
THE HENNESSY FUNDS, INC.
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, California 94945
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus of The Hennessy Funds,
Inc. dated ________, 1996. Requests for copies of the Prospectus should
be made by writing to The Hennessy Funds, Inc., The Courtyard Square, 750
Grant Avenue, Suite 100, Novato, California 94945, Attention: Corporate
Secretary, or by calling (415) 899-1555.
<PAGE>
The Hennessy Funds, Inc.
TABLE OF CONTENTS
Page No.
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
INVESTMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . 3
DIRECTORS AND OFFICERS OF THE CORPORATION . . . . . . . . . . . . . . . 4
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS . . . . . . . . . . 6
INVESTMENT ADVISER, ADMINISTRATOR, CUSTODIAN,
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT . . . . . . . . . . . . . 6
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . 8
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . 8
SYSTEMATIC WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . . . . 9
ALLOCATION OF PORTFOLIO BROKERAGE . . . . . . . . . . . . . . . . . . . 10
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
STOCKHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . 11
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 13
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . 14
FINANCIAL STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 14
INVESTMENT RESTRICTIONS
As set forth in the Prospectus dated ________, 1996 of The Hennessy
Funds, Inc. (the "Corporation") under the caption "OUR INVESTMENT
STRATEGY", the investment objective of the Hennessy Balanced Fund (the
"Fund") is capital appreciation and current income. Consistent with this
investment objective, the Fund has adopted the following investment
restrictions which are matters of fundamental policy and cannot be changed
without approval of the holders of the lesser of: (i) 67% of the Fund's
shares present or represented at a stockholder's meeting at which the
holders of more than 50% of such shares are present or represented; or
(ii) more than 50% of the outstanding shares of the Fund.
1. The Fund will not purchase securities of any issuer if the
purchase would cause more than 5% of the value of the Fund's 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 25% of the Fund's
total assets may be invested without regard to these limitations.
2. The Fund will not sell securities short.
3. The Fund will not purchase securities on margin (except for
such short term credits as are necessary for the clearance of
transactions) or write put or call options.
4. The Fund may not borrow money or issue senior securities
except for temporary bank borrowings (not exceeding 10% of the
Fund's total assets) or for emergency or extraordinary purposes.
The Fund will not borrow money for the purpose of investing in
securities and the Fund will not purchase any portfolio securities
so long as any borrowed amounts remain outstanding.
5. The Fund will not pledge or hypothecate its assets, except
to secure permitted borrowings.
6. The Fund will not act as an underwriter or distributor of
securities other than shares of the Fund (except to the extent that
the Fund may be deemed to be an underwriter within the meaning of
the Securities Act of 1933, as amended, in the disposition of
restricted securities).
7. The Fund will not make loans, including loans of securities,
except it may acquire debt securities from the issuer or others
which are publicly distributed or are of a type normally acquired by
institutional investors and enter into repurchase agreements.
8. The Fund will not invest 25% or more of its total assets at
the time of purchase in securities of issuers whose principal
business activities are in the same industry.
9. The Fund will not make investments for the purpose of
exercising control or management of any company.
10. The Fund will not purchase or sell real estate or real
estate mortgage loans and will not make any investments in real
estate limited partnerships.
11. The Fund will not purchase or sell commodities or commodity
contracts.
12. The Fund will not purchase or sell any interest in any oil,
gas or other mineral exploration or development program, including
any oil, gas or mineral leases.
The Fund has adopted certain other investment restrictions which
are not fundamental policies and which may be changed by the Fund's Board
of Directors without stockholder approval. These additional restrictions
are as follows:
1. The Fund will not acquire or retain any security issued by a
company, an officer or director of which is an officer or director
of the Fund or an officer, director or other affiliated person of
the Fund's investment adviser.
2. The Fund will not invest in securities of any issuer which
has a record of less than three (3) years of continuous operation,
including the operation of any predecessor business of a company
which came into existence as a result of a merger, consolidation,
reorganization or purchase of substantially all of the assets of
such predecessor business.
3. The Fund will not purchase illiquid securities.
4. The Fund will not purchase the securities of other
investment companies except: (a) as part of a plan of merger,
consolidation or reorganization approved by the stockholders of the
Fund; or (b) securities of registered open-end investment companies
that invest exclusively in high quality, short-term debt securities.
No purchases described in (b) will be made if as a result of such
purchases (i) the Fund and its affiliated persons would hold more
than 3% of any class of securities, including voting securities, of
any registered investment company; (ii) more than 5% of the Fund's
net assets would be invested in shares of any one registered
investment company; and (iii) more than 10% of the Fund's net assets
would be invested in shares of registered investment companies.
The aforementioned percentage restrictions on investment or
utilization of assets refer to the percentage at the time an investment is
made. If these restrictions are adhered to at the time an investment is
made, and such percentage subsequently changes as a result of changing
market values or some similar event, no violation of the Fund's
fundamental restrictions will be deemed to have occurred. Any changes in
the Fund's investment restrictions made by the Board of Directors will be
communicated to stockholders prior to their implementation.
INVESTMENT CONSIDERATIONS
The Dow Jones Industrial Average
The Dow Jones Industrial Average ("DJIA") currently consists of the
following 30 common stocks:
Allied-Signal, Inc. The Goodyear Tire & Rubber
Company
Aluminum Company of America International Business Machines
(ALCOA) Corporation (IBM)
American Express International Paper Company
AT&T Corporation McDonald's Corporation
Bethlehem Steel Corporation Merck & Co., Inc.
The Boeing Company Minnesota Mining &
Manufacturing Company (3M)
Caterpillar, Inc. J.P. Morgan & Co. Incorporated
Chevron Corporation Philip Morris Companies
The Coca-Cola Company The Procter & Gamble Company
The Walt Disney Company Sears, Roebuck & Co.
E.I du Pont De Nemours & Co. Texaco, Inc.
Eastman Kodak Company Union Carbide Corporation
Exxon Corporation United Technologies Corporation
General Electric Company Westinghouse Electric
Corporation
General Motors Corporation Woolworth Corporation
The DJIA is the property of Dow Jones & Company, Inc. Dow Jones &
Company, Inc. is not affiliated with the Fund, the Fund's investment
adviser, The Hennessy Management Co., L.P. or Edward J. Hennessy, Inc.,
the general partner to the investment 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 related thereto.
The first DJIA, consisting of 12 stocks, was published in The Wall
Street Journal in 1896. The list grew to 20 stocks in 1916 and to 30
stocks on October 1, 1928. Dow Jones & Company, Inc. from time to time
changes the stocks comprising the DJIA, although such changes are
infrequent.
The Fund's investment strategy is unlikely to be affected by the
requirement that it not concentrate its investments since currently no
more than three companies in the DJIA are engaged primarily in any one
industry. Similarly the Fund's investment strategy is unlikely to be
materially affected by the requirement that it diversify its investments
since it will normally have 50% of its assets invested in U.S. Treasury
securities and the remainder of its assets divided among at least ten
stocks. However the Fund's diversification requirement may preclude it
from effecting a purchase otherwise dictated by its investment strategy.
Finally because of the requirements of the Investment Company Act of 1940
(the "Act"), the Fund will not invest more than 5% of its total assets in
the common stock of any issuer that derives more than 15% of its revenues
from securities-related activities. From time to time this requirement
may preclude the Fund from effecting a purchase otherwise dictated by its
investment strategy.
Portfolio Turnover
The Fund will generally hold securities for approximately one year
irrespective of investment performance. Securities may be sold after
being held less than one year to fund redemption requests. Consequently
the Fund's annual portfolio turnover rate may vary from year to year.
Notwithstanding the foregoing, the Fund's portfolio turnover rate will
generally not exceed 100%. High portfolio turnover in any year will
result in the payment by the Fund of above-average transaction costs and
could result in the payment by shareholders of above-average amounts of
taxes on realized investment gains.
DIRECTORS AND OFFICERS OF THE CORPORATION
The name, age, address, principal occupation(s) during the past
five years, and other information with respect to each of the directors
and officers of the Corporation are as follows:
*Neil J. Hennessy -- Director, President and Treasurer. Mr.
Hennessy, 39, has been President of Edward J. Hennessy, Incorporated
("Hennessy") since 1989. His address is The Courtyard Square, 750 Grant
Avenue, Suite 100, Novato, CA 94945.
*Brian A. Hennessy -- Director. Mr. Hennessy, 43, has been a self-
employed dentist for more than five years. His address is 912 Grand
Avenue, San Rafael, CA 94901.
Robert T. Doyle -- Director. Mr. Doyle, 48, is currently the
Sheriff of Marin County, California and has been employed in the Marin
County Sheriff's Office in various capacities since 1969. His address is
87 Washington Street, Novato, CA 94947.
*Rodger D. Offenbach -- Director. Mr. Offenbach, 45, has been the
owner of Rays Catering since 1974. His address is 919 Eastman Lane,
Petaluma, CA 94952.
John D. DeSousa -- Director. Mr. DeSousa, 59, is a retired vice
president of the California State Automobile Association. He currently is
a private investor. His address is 682 Wilson Street, Novato, CA 94947.
Teresa M. Nilsen -- Vice President and Secretary. Ms. Nilsen, 29,
has been corporate secretary and financial officer of Hennessy since 1989.
Her address is The Courtyard Square, 750 Grant Avenue, Suite 100, Novato,
CA 94945.
_________________________
*Messrs. Neil Hennessy, Brian Hennessy and Offenbach are interested
persons of the Corporation (as defined in the Investment Company Act of
1940). Messrs. Neil Hennessy and Brian Hennessy are brothers.
The Corporation's standard method of compensating directors is to
pay each director who is not an interested person of the Corporation a fee
of $250 for each meeting of the Board of Directors attended. The
Corporation also may reimburse its directors for travel expenses incurred
in order to attend meetings of the Board of Directors.
The Corporation was incorporated on January 11, 1996. The table
below sets forth the compensation anticipated to be paid by the
Corporation to each of the current directors of the Corporation during the
fiscal year ending June 30, 1996:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Aggregate Pension or Retirement Estimated Annual Total Compensation from
Compensation from Benefits Accrued As Benefits Upon Corporation and Fund
Name of Person Corporation Part of Fund Expenses Retirement Complex Paid to Directors
<S> <C> <C> <C> <C>
Neil J. Hennessy $0 $0 $0 $0
Brian A. Hennessy 0 0 0 0
Robert T. Doyle 500 0 0 500
Rodger D. Offenbach 0 0 0 0
John D. DeSousa 500 0 0 500
</TABLE>
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
As of the date hereof, The Hennessy Management Co., L.P., the
Fund's investment adviser, owns 100% of its outstanding shares. As of
such date, The Hennessy Management Co., L.P. controlled the Fund and the
Corporation and owned sufficient shares of the Fund to approve or
disapprove all matters brought before stockholders of the Fund, including
the election of directors of the Corporation and the approval of auditors.
The Corporation does not control any person.
INVESTMENT ADVISER, ADMINISTRATOR, CUSTODIAN,
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
As set forth in the Prospectus under the caption "MANAGEMENT OF THE
FUND," the investment adviser to the Fund is The Hennessy Management Co.,
L.P., The Courtyard Square, 750 Grant Avenue, Suite 100, Novato,
California 94945 (the "Adviser"). Pursuant to the investment advisory
agreement entered into between the Corporation and the Adviser with
respect to the Fund (the "Advisory Agreement"), the Adviser furnishes
continuous investment advisory services to the Fund. The Adviser is
controlled by its general partner, Edward J. Hennessy, Incorporated, which
is in turn controlled by Neil J. Hennessy. Mr. Offenbach is a limited
partner of the Adviser.
The Adviser has undertaken to reimburse the Fund to the extent that
the aggregate annual operating expenses, including the investment advisory
fee and the administration fee but excluding interest, taxes, brokerage
commissions and other costs incurred in connection with the purchase or
sale of portfolio securities, and extraordinary items, exceed that
percentage of the average net assets of the Fund for such year, as
determined by valuations made as of the close of each business day of the
year, which is the most restrictive percentage provided by the state laws
of the various states in which the shares of the Fund are qualified for
sale or, if the states in which the shares of the Fund are qualified for
sale impose no such restrictions, 3%. As of the date of this Statement of
Additional Information, the percentage applicable to the Fund is 2-1/2% on
the first $30,000,000 of its average daily net assets, 2% on average daily
the next $70,000,000 of its average daily net assets and 1-1/2% on average
daily net assets in excess of $100,000,000. The Fund monitors its expense
ratio on a monthly basis. If the accrued amount of the expenses of the
Fund exceeds the expense limitation, the Fund creates an account
receivable from the Adviser for the amount of such excess. In such a
situation the monthly payment of the Adviser's fee will be reduced by the
amount of such excess (and if the amount of such excess in any month is
greater than the monthly payment of the Adviser's fee, the Adviser will
pay the Fund the amount of such difference), subject to adjustment month
by month during the balance of the Fund's fiscal year if accrued expenses
thereafter fall below this limit.
The Advisory Agreement will remain in effect as long as its
continuance is specifically approved at least annually (i) by the Board of
Directors of the Corporation or by the vote of a majority (as defined in
the Act) of the outstanding shares of the Fund, and (ii) by the vote of a
majority of the directors of the Fund who are not parties to the Advisory
Agreement or interested persons of the Adviser, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement provides that it may be terminated at any time without the
payment of any penalty, by the Board of Directors of the Corporation or by
vote of the majority of the Fund's stockholders on sixty (60) days'
written notice to the Adviser, and by the Adviser on the same notice to
the Corporation, and that it shall be automatically terminated if it is
assigned.
The Advisory Agreement provides that the Adviser shall not be
liable to the Corporation or its stockholders for anything other than
willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations or duties. The Advisory Agreement also provides that the
Adviser and its officers, directors and employees may engage in other
businesses, devote time and attention to any other business whether of a
similar or dissimilar nature, and render services to others.
As set forth in the Prospectus under the caption "WHO MANAGES THE
FUND?", the administrator to the Corporation is Firstar Trust Company, 615
East Michigan Street, Milwaukee, Wisconsin 53202 (the "Administrator").
The Fund Administration Servicing Agreement entered into between the
Corporation and the Administrator relating to the Fund (the
"Administration Agreement") will remain in effect until terminated by
either party. The Administration Agreement may be terminated at any time,
without the payment of any penalty, by the Board of Directors of the
Corporation upon the giving of ninety (90) days' written notice to the
Administrator, or by the Administrator upon the giving of ninety (90)
days' written notice to the Corporation.
Under the Administration Agreement, the Administrator shall
exercise reasonable care and is not liable for any error or judgment or
mistake of law or for any loss suffered by the Corporation in connection
with the performance of the Administration Agreement, except a loss
resulting from willful misfeasance, bad faith or negligence on the part of
the Administrator in the performance of its duties under the
Administration Agreement.
Firstar Trust Company also serves as custodian of the Corporation's
assets pursuant to a Custody Agreement. Under the Custody Agreement,
Firstar Trust Company has agreed to (i) maintain a separate account in the
name of the Fund, (ii) make receipts and disbursements of money on behalf
of the Fund, (iii) collect and receive all income and other payments and
distributions on account of the Fund's portfolio investments, (iv) respond
to correspondence from shareholders, security brokers and others relating
to its duties and (v) make periodic reports to the Fund concerning the
Fund's operations. Firstar Trust Company does not exercise any
supervisory function over the purchase and sale of securities. For its
services as custodian, Firstar Trust Company is entitled to receive a fee,
payable monthly, based on the annual rate of .02% of the net assets of the
Fund (subject to a minimum annual $3000 fee). In addition, Firstar Trust
Company, as custodian, is entitled to certain charges for securities
transactions and reimbursement for expenses.
Firstar Trust Company also serves as transfer agent and dividend
disbursing agent for the Fund under a Shareholder Servicing Agent
Agreement. As transfer and dividend disbursing agent, Firstar Trust
Company has agreed to (i) issue and redeem shares of the Fund, (ii) make
dividend and other distributions to shareholders of the Fund, (iii)
respond to correspondence by Fund shareholders and others relating to its
duties, (iv) maintain shareholder accounts, and (v) make periodic reports
to the Fund. For its transfer agency and dividend disbursing services,
Firstar Trust Company is entitled to receive fees at the rate of $13 per
shareholder account (subject to a minimum annual fee of $21,000). Also,
Firstar Trust Company is entitled to certain other transaction charges and
reimbursement for expenses.
In addition the Corporation has entered into a Fund Accounting
Servicing Agreement with Firstar Trust Company pursuant to which Firstar
Trust Company has agreed to maintain the financial accounts and records of
the Fund and provide other accounting services to the Fund. For its
accounting services, Firstar Trust Company is entitled to receive fees,
payable monthly, based on the total annual rate of $22,000 for the first
$40 million in average net assets of the Fund, .01% on the next $200
million of average net assets, and .0005% on average net assets exceeding
$240 million. Firstar Trust Company is also entitled to certain out of
pocket expenses, including pricing expenses.
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the caption "HOW IS THE FUND'S
SHARE PRICE DETERMINED?", the net asset value of the Fund will be
determined as of the close of regular trading (currently 4:00 p.m. Eastern
time) on each day the New York Stock Exchange is open for trading. The
New York Stock Exchange is open for trading Monday through Friday except
New Year's Day, Washington's Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Additionally, when any of the aforementioned holidays falls on a Saturday,
the New York Stock Exchange will not be open for trading on the preceding
Friday and when any such holiday falls on a Sunday, the New York Stock
Exchange will not be open for trading on the succeeding Monday, unless
unusual business conditions exist, such as the ending of a monthly or the
yearly accounting period. The New York Stock Exchange also may be closed
on national days of mourning.
DISTRIBUTION OF SHARES
The Fund has adopted a Service and Distribution Plan (the "Plan")
in anticipation that the Fund will benefit from the Plan through increased
sales of shares, thereby reducing the Fund's expense ratio and providing
an asset size that allows the Adviser greater flexibility in management.
The Plan may be terminated by the Fund at any time by a vote of the
directors of the Corporation who are not interested persons of the
Corporation and who have no direct or indirect financial interest in the
Plan or any agreement related thereto (the "Rule 12b-1 Directors") or by a
vote of a majority of the outstanding shares of the Fund. Messrs. Doyle
and DeSousa are currently the Rule 12b-1 Directors. Any change in the
Plan that would materially increase the distribution expenses of the Fund
provided for in the Plan requires approval of the stockholders of the Fund
and the Board of Directors, including the Rule 12b-1 Directors.
While the Plan is in effect, the selection and nomination of
directors who are not interested persons of the Corporation will be
committed to the discretion of the directors of the Corporation who are
not interested persons of the Corporation. The Board of Directors of the
Corporation must review the amount and purposes of expenditures pursuant
to the Plan quarterly as reported to it by a Distributor, if any, or
officers of the Corporation. The Plan will continue in effect for as long
as its continuance is specifically approved at least annually by the Board
of Directors, including the Rule 12b-1 Directors. The Fund did not begin
operations until ________________, 1996 and, thus, the Fund had not
incurred any distribution costs as of that date. Initially all payments
under the Plan will be made to the Adviser who directly bears all sales
and promotional expenses of the Fund, other than expenses incurred in
complying with laws regulating the issuance or sale of securities. 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
shares of the Fund sold other than through 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.
SYSTEMATIC WITHDRAWAL PLAN
An investor who owns Fund shares worth at least $10,000 at the
current net asset value may, by completing an application which may be
obtained from the Fund or Firstar Trust Company, create a Systematic
Withdrawal Plan from which a fixed sum will be paid to the investor at
regular intervals. To establish the Systematic Withdrawal Plan, the
investor deposits Fund shares with the Corporation and appoints it as
agent to effect redemptions of Fund shares held in the account for the
purpose of making monthly or quarterly withdrawal payments of a fixed
amount to the investor out of the account. Fund shares deposited by the
investor in the account need not be endorsed or accompanied by a stock
power if registered in the same name as the account; otherwise, a properly
executed endorsement or stock power, obtained from any bank, broker-dealer
or the Corporation is required. The investor's signature should be
guaranteed by a bank, a member firm of a national stock exchange or other
eligible guarantor.
The minimum amount of a withdrawal payment is $100. These payments
will be made from the proceeds of periodic redemptions of shares in the
account at net asset value. Redemptions will be made in accordance with
the schedule (e.g., monthly, bimonthly [every other month], quarterly or
yearly, but in no event more than monthly) selected by the investor. If a
scheduled redemption day is a weekend day or a holiday, such redemption
will be made on the next preceding business day. Establishment of a
Systematic Withdrawal Plan constitutes an election by the investor to
reinvest in additional Fund shares, at net asset value, all income
dividends and capital gains distributions payable by the Fund on shares
held in such account, and shares so acquired will be added to such
account. The investor may deposit additional Fund shares in his account
at any time.
Withdrawal payments cannot be considered as yield or income on the
investor's investment, since portions of each payment will normally
consist of a return of capital. Depending on the size or the frequency of
the disbursements requested, and the fluctuation in the value of the
Fund's portfolio, redemptions for the purpose of making such disbursements
may reduce or even exhaust the investor's account.
The investor may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address, by notifying Firstar Trust Company in writing thirty (30)
days prior to the next payment.
ALLOCATION OF PORTFOLIO BROKERAGE
The Fund's securities trading and brokerage policies and procedures
are reviewed by and subject to the supervision of the Corporation's Board
of Directors. Decisions to buy and sell securities for the Fund are made
by the Adviser subject to review by the Corporation's Board of Directors.
In placing purchase and sale orders for portfolio securities for the Fund,
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, as described in this and the following
paragraphs. Many of these transactions involve payment of a brokerage
commission by the Fund. In some cases, transactions are with firms who
act as principals of their own accounts. In selecting brokers to effect
portfolio transactions, the determination of what is expected to result in
best execution at the most favorable price involves a number of largely
judgmental considerations. Among these are the Adviser's evaluation of
the broker's efficiency in executing and clearing transactions, block
trading capability (including the broker's willingness to position
securities) and the broker's reputation, financial strength and stability.
The most favorable price to the Fund means the best net price without
regard to the mix between purchase or sale price and commission, if any.
Securities not listed on exchanges may be purchased and sold directly with
principal market makers who retain the difference in their cost in the
security and its selling price. In some instances, the Adviser feels that
better prices are available from non-principal market makers who are paid
commissions directly. Although the Fund does not initially intend to
market its shares through intermediary broker-dealers, the Fund may place
portfolio orders with broker-dealers who recommend the purchase of Fund
shares to clients (if the Adviser believes the commissions and transaction
quality are comparable to that available from other brokers) and may
allocate portfolio brokerage on that basis. Because of restriction of the
Act, the Adviser will not allocate portfolio brokerage to Hennessy.
In allocating brokerage business for the Fund, the Adviser also
takes into consideration the research, analytical, statistical and other
information and services provided by the broker, such as general economic
reports and information, reports or analyses of particular companies or
industry groups, market timing and technical information, and the
availability of the brokerage firm's analysts for consultation. While the
Adviser believes these services have substantial value, they are
considered supplemental to the Adviser's own efforts in the performance of
its duties under the Advisory Agreement. Other clients of the Adviser may
indirectly benefit from the availability of these services to the Adviser,
and the Fund may indirectly benefit from services available to the Adviser
as a result of transactions for other clients. The Advisory Agreement
provides that the Adviser may cause the Fund to pay a broker which
provides brokerage and research services to the Adviser a commission for
effecting a securities transaction in excess of the amount another broker
would have charged for effecting the transaction, if the Adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of brokerage and research services provided by the
executing broker viewed in terms of either the particular transaction or
the Adviser's overall responsibilities with respect to the Fund and the
other accounts as to which he exercises investment discretion. The Fund
did not commence operations until ____________________, 1996.
TAXES
As set forth in the Prospectus under the caption "TAXES," the Fund
will endeavor to qualify annually for and elect tax treatment applicable
to a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code").
Dividends from the Fund's earnings and profits, and distributions
of the Fund's net long-term realized capital gains, are taxable to
investors, whether received in cash or in additional shares of the Fund.
The 70% dividends-received deduction for corporations will apply only to
the proportionate share of the dividend attributable to dividends received
by the Fund from domestic corporations.
Redemption of shares will generally result in a capital gain or
loss for income tax purposes. Such capital gain or loss will be long term
or short term, depending upon the holding period. However, if a loss is
realized on shares held for six months or less, and the investor received
a capital gain distribution during that period, then such loss is treated
as a long-term capital loss to the extent of the capital gain distribution
received.
This section is not intended to be a full discussion of present or
proposed federal income tax laws and the effect of such laws on an
investor. Investors are urged to consult with their respective tax
advisers for a complete review of the tax ramifications of an investment
in the Fund.
STOCKHOLDER MEETINGS
The Maryland General Corporation Law permits registered investment
companies, such as the Corporation, to operate without an annual meeting
of stockholders under specified circumstances if an annual meeting is not
required by the Act. The Corporation has adopted the appropriate
provisions in its Bylaws and may, at its discretion, not hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Act.
The Corporation's Bylaws also contain procedures for the removal of
directors by its stockholders. At any meeting of stockholders, duly
called and at which a quorum is present, the stockholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be
cast thereon, remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for the unexpired
terms of removed directors.
Upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting, the Secretary of the Corporation shall promptly call a special
meeting of stockholders for the purpose of voting upon the question of
removal of any director. Whenever ten or more stockholders of record who
have been such for at least six months preceding the date of application,
and who hold in the aggregate either shares having a net asset value of at
least $25,000 or at least one percent (1%) of the total outstanding
shares, whichever is less, shall apply to the Corporation's Secretary in
writing, stating that they wish to communicate with other stockholders
with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request
which they wish to transmit, the Secretary shall within five business days
after such application either: (1) afford to such applicants access to a
list of the names and addresses of all stockholders as recorded on the
books of the Corporation; or (2) inform such applicants as to the
approximate number of stockholders of record and the approximate cost of
mailing to them the proposed communication and form of request.
If the Secretary elects to follow the course specified in clause
(2) of the last sentence of the preceding paragraph, the Secretary, upon
the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall,
with reasonable promptness, mail such material to all stockholders of
record at their addresses as recorded on the books unless within five
business days after such tender the Secretary shall mail to such
applicants and file with the Securities and Exchange Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their
opinion either such material contains untrue statements of fact or omits
to state facts necessary to make the statements contained therein not
misleading, or would be in violation of applicable law, and specifying the
basis of such opinion.
After opportunity for hearing upon the objections specified in the
written statement so filed, the Securities and Exchange Commission may,
and if demanded by the Board of Directors or by such applicants shall,
enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the Secretary shall mail
copies of such material to all stockholders with reasonable promptness
after the entry of such order and the renewal of such tender.
PERFORMANCE INFORMATION
Average annual total return measures both the net investment income
generated by, and the effect of any realized or unrealized appreciation or
depreciation of, the underlying investments in the Fund's investment
portfolio. The Fund's average annual total return figures are computed in
accordance with the standardized method prescribed by the Securities and
Exchange Commission by determining the average annual compounded rates of
return over the periods indicated, that would equate the initial amount
invested to the ending redeemable value, according to the following
formula:
n
P(1 + T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the
period of a hypothetical $1,000 payment made
at the beginning of such period
This calculation (i) assumes all dividends and distributions are
reinvested at net asset value or the appropriate reinvestment dates as
described in the Prospectus, and (ii) deducts all recurring fees, such as
advisory fees, charged as expenses to all investor accounts.
Total return is the cumulative rate of investment growth which
assumes that income dividends and capital gains are reinvested. It is
determined by assuming a hypothetical investment at the net asset value at
the beginning of the period, adding in the reinvestment of all income
dividends and capital gains, calculating the ending value of the
investment at the net value as of the end of the specified time period,
subtracting the amount of the original investment, and dividing this
amount by the amount of the original investment. This calculated amount
is then expressed as a percentage by multiplying by 100.
Performance results are based on historical earnings and should
not be considered as representative of the performance of the Fund in the
future. An investment in the Fund will fluctuate in value and at
redemption its value may be more or less than the initial investment.
INDEPENDENT ACCOUNTANTS
______________________________________________________________________,
has been selected as the independent accountants for the Fund. As such
____________________ performs an audit of the Fund's financial statements
and considers the Fund's internal control structure.
FINANCIAL STATEMENT
The following financial statement for the Fund is attached hereto:
- Report of Independent Public Accountants
- Statement of Assets and Liabilities
- Notes to the Financial Statement
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder and
Board of Directors of
The Hennessy Funds, Inc.:
We have audited the statement of assets and liabilities of the Hennessy
Balanced Fund (the "Fund"), a series of The Hennessy Funds, Inc., a
Maryland corporation. This financial statement is the responsibility of
the Fund's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the net assets of the Fund as
of ________________________, 1996, in conformity with generally accepted
accounting principles.
[NAME OF ACCOUNTANTS]
[City, State]
_________________, 1996
<PAGE>
THE HENNESSY FUNDS, INC.
Statement of Assets and Liabilities
_________________________, 1996
Hennessy
Balanced Fund
ASSETS
Cash . . . . . . . . . . . . . . . $100,000
Unamortized organizational costs .
Prepaid initial registration ________
expenses . . . . . . . . . . . . .
Total Assets . . . . . . . . . . ________
LIABILITIES
Payable to Adviser . . . . . . . . ________
Total Liabilities . . . . . . . ________
NET ASSETS $100,000
========
Capital Stock, $0.0001 par value;
250,000,000 shares authorized;
10,000 shares outstanding . . . . . $100,000
========
Offering and redemption price/net
asset value per share (based on
10,000 shares of capital stock issued
and outstanding) . . . . . . . . . $10.00
======
The accompanying notes to financial statement are an integral part of this
statement.
NOTES TO FINANCIAL STATEMENT
1. The Hennessy Funds, Inc. was incorporated under the laws of
the state of Maryland on __________, 1996 and has had no operations to
date other than those relating to organizational matters and the sale of
10,000 shares of its common stock to its original stockholder, The
Hennessy Management Co., L.P., (the "Adviser").
2. The Hennessy Funds, Inc., which consists solely of the
Hennessy Balanced Fund (the "Fund"), has an agreement with the Adviser,
with whom certain officers and directors of The Hennessy Funds, Inc. are
affiliated, to furnish investment advisory services to the Fund. Under
the terms of this agreement, the Fund will pay the Adviser a monthly fee
based on the Fund's average daily net assets at the annual rate of 0.85%.
Under the investment advisory agreement, if the aggregate annual
operating expenses (including the investment advisory fee and the
administration fee but excluding interest, taxes, brokerage commissions
and other costs incurred in connection with the purchase or sale of
portfolio securities, and extraordinary items) exceed the lowest
limitations imposed by state securities administrators, the Adviser will
reimburse the Fund for the amount of such excess. Additionally, the
Adviser has agreed to reimburse the Fund to the extent aggregate annual
operating expenses exceed 3.00% of the average daily net assets of the
Fund.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted a Service and Distribution Plan (the "Plan"). Under
the Plan, the Fund is authorized to pay expenses incurred for the purpose
of financing activities intended to result in the sale of shares of the
Fund at an annual rate of up to 0.75% of the Fund's average daily net
assets. Initially all payments under the Plan will be made to the
Adviser. The Adviser has entered into an agreement with its general
partner, Edward J. Hennessy, Incorporated, pursuant to which it will pay
Edward J. Hennessy, Incorporated an amount equal to 1% of the net assets
of all shares of the Fund sold other than through dividend reinvestment.
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 stockholder.
3. Organizational costs and initial registration expenses are
being deferred and amortized over the period of benefit, but not to exceed
sixty months from the Fund's commencement of operations. These costs were
advanced by the Adviser and will be reimbursed by the Fund. The proceeds
of any redemption of the initial shares by the original stockholder or any
transferee will be reduced by a pro-rata portion of any then unamortized
organizational expenses in the same proportion as the number of initial
shares being redeemed bears to the number of initial shares outstanding at
the time of such redemption.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Financial Statement (included in Part B)
Report of Independent Accountants
Statement of Assets and Liabilities
Notes to Financial Statement
(b.) Exhibits
(1) Registrant's Articles of Incorporation.
(2) Registrant's Bylaws.
(3) None
(4) None
(5) Investment Advisory Agreement with The Hennessy
Management Co., L.P. relating to the Hennessy Balanced
Fund (submitted in draft form).
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company
(submitted in draft form).
(9.1) Fund Administration Servicing Agreement with Firstar
Trust Company relating to the Hennessy Balanced Fund
(submitted in draft form).
(9.2) Transfer Agent Agreement with Firstar Trust Company
relating to Prudent Bear Fund (submitted in draft form).
(9.3) Fund Accounting Servicing Agreement with Firstar Trust
Company (submitted in draft form).
(10) Opinion of Foley & Lardner, counsel for Registrant
(submitted in draft form).
(11) Consent of Independent Accountants (to be filed by
amendment).
(12) None
(13) Subscription Agreement (submitted in draft form).
(14) Individual Retirement Custodial Account.
(15) Service and Distribution Plan (submitted in draft form).
(15.1) Agreement pursuant to Distribution Plan
(15.2) Distribution Agreement
(16) None
(17) Financial Data Schedule (to be filed by amendment)
(18) None
Item 25. Persons Controlled by or under Common Control with Registrant
Registrant is controlled by The Hennessy Management Co., L.P., a
California limited partnership, which owned 100% of its voting securities
as of ______________________, 1996. Registrant neither controls any
person nor is under common control with any other person.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of , 1996
Class A Common Stock, $0.0001 _____
par value (Hennessy Balanced
Fund)
Item 27. Indemnification
Pursuant to the authority of the Maryland General Corporation
Law, particularly Section 2-418 thereof, Registrant's Board of Directors
has adopted the following bylaw which is in full force and effect and has
not been modified or cancelled:
Article VII
GENERAL PROVISIONS
Section 7. Indemnification.
A. The Corporation shall indemnify all of its corporate
representatives against expenses, including attorneys fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Insofar as indemnification for and with respect to liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to the foregoing
provisions or otherwise, Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by Registrant of expenses incurred or paid by a
director, officer or controlling person or Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Incorporated by reference to pages 4 through 7 of the Statement
of Additional Information pursuant to Rule 411 under the Securities Act of
1933.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are in the
physical possession of Registrant and Registrant's Administrator as
follows: the documents required to be maintained by paragraphs (5), (6),
(7), (10) and (11) of Rule 31a-1(b) will be maintained by the Registrant
at The Courtyard Square, 750 Grant Avenue, Suite 100, Novato, California
94945; and all other records will be maintained by the Registrant's
Administrator, Firstar Trust Company, 615 East Michigan Street, Milwaukee,
Wisconsin.
Item 31. Management Services
All management-related service contracts entered into by
Registrant are discussed in Parts A and B of this Registration Statement.
Item 32. Undertakings
Registrant undertakes to file a post-effective amendment to this
Registration Statement within four to six months of the effective date of
this Registration Statement which will contain financial statements (which
need not be certified) as of and for the time period reasonably close or
as soon as practicable to the date of such post-effective amendment.
With respect to stockholder meetings, Registrant undertakes to
call stockholder meetings in accordance with the provisions of Article II
of its Bylaws, which are discussed in Parts A and B of this Registration
Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Novato and State of California
on the 15th day of January, 1996.
THE HENNESSY FUNDS, INC.
(Registrant)
By: /s/ Neil J. Hennessy
Neil J. Hennessy, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacities and on the date(s) indicated.
Name Title Date
/s/ Neil J. Hennessy President and Treasurer January 15, 1996
Neil J. Hennessy (Principal Executive,
Financial and Accounting
Officer) and a Director
/s/ Brian A. Hennessy Director January 15, 1996
Brian A. Hennessy
/s/ Robert T. Doyle Director January 15, 1996
Robert T. Doyle
/s/ Rodger D. Director January 15, 1996
Offenbach
Rodger D. Offenbach
/s/ John D. De Sousa Director January 15, 1996
John D. DeSousa
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1) Registrant's Articles of
Incorporation
(2) Registrant's Bylaws
(3) None
(4) None
(5) Investment Advisory Agreement with
The Hennessy Management Co., L.P.
relating to Hennessy Balanced
Fund*
(6) None
(7) None
(8) Custodian Agreement with Firstar
Trust Company*
(9.1) Fund Administration Servicing
Agreement with Firstar Trust
Company relating to Hennessy
Balanced Fund*
(9.2) Transfer Agent Agreement with
Firstar Trust Company*
(9.3) Fund Accounting Servicing
Agreement with Firstar Trust
Company*
(10) Opinion of Foley & Lardner,
counsel for Registrant*
(11) Consent of _____________________**
(12) None
(13) Subscription Agreement*
(14) Individual Retirement Custodial
Account
(15) Service and Distribution Plan*
(15.1) Agreement pursuant to Distribution
Plan*
(15.2) Distribution Agreement*
(16) None
(17) Financial Data Schedule**
(18) None
__________________________________
* Submitted in draft form.
** To be filed by amendment.
EXHIBIT 1
ARTICLES OF INCORPORATION
OF
THE HENNESSY FUNDS, INC.
The undersigned sole incorporator, being at least eighteen years
of age, hereby adopts the following Articles of Incorporation for the
purpose of forming a Maryland corporation under the general laws of the
State of Maryland:
ARTICLE I
The name of the corporation (hereinafter called "Corporation")
is:
THE HENNESSY FUNDS, INC.
ARTICLE II
The period of existence shall be perpetual.
ARTICLE III
The purposes for which the Corporation is formed are to engage
in any lawful business for which corporations may be organized under the
Maryland General Corporation Law.
ARTICLE IV
A. The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is Five Hundred Million
(500,000,000) shares, all with a par value of One Hundredth of a Cent
($0.0001) per share, to be known and designated as "Common Stock." The
aggregate par value of the authorized shares of the Corporation is Fifty
Thousand Dollars ($50,000). The Board of Directors of the Corporation may
increase or decrease the aggregate number of authorized shares of Common
Stock pursuant to Section 2-105 of the Maryland General Corporation Law or
any successor provision thereto. The Board of Directors of the
Corporation may classify or reclassify any unissued shares of Common Stock
and may designate or redesignate the name of any class of outstanding
Common Stock. The Board of Directors may fix the number of shares of
Common Stock in any such class and, except as specifically set forth in
these Articles of Incorporation, may set or change the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions of redemption of any
class of unissued shares of Common Stock. A total of One Hundred Million
(100,000,000) shares of Common Stock shall initially be classified as
"Class A Common Stock" (the "Hennessy Balanced Fund" or such other name
designated by the Corporation's Board of Directors).
B. Notwithstanding the authority granted to the Board of
Directors of the Corporation with respect to the designation,
classification and reclassification of the unissued shares of Common Stock
of the Corporation, each class of Common Stock shall have the following
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption:
1. Each holder of shares of Common Stock of the
Corporation, irrespective of the class, shall be entitled to one
(1) vote for each full share (and a fractional vote for each
fractional share) then standing in his or her name on the books
of the Corporation; provided, however, that shares of any class
of Common Stock owned, other than in a fiduciary capacity, by
the Corporation or by another corporation in which the
Corporation owns shares entitled to cast a majority of all the
votes entitled to be cast by all shares outstanding and entitled
to vote of such corporation, shall not be voted at any meeting
of stockholders. On any matter submitted to a vote of
stockholders all shares of the Corporation's Common Stock then
issued and outstanding and entitled to vote, irrespective of the
class, shall be voted in the aggregate and not by class, except
that: (a) when otherwise expressly provided by the Maryland
General Corporation Law, the Investment Company Act of 1940 and
the regulations thereunder, or other applicable law, shares
shall be voted by individual class; and (b) when the matter to
be acted upon does not affect any interest of a particular class
of the Corporation's Common Stock, then only shares of the
affected class shall be entitled to vote thereon. At all
elections of directors of the Corporation, each stockholder
shall be entitled to vote the shares owned of record by him for
as many persons as there are directors to be elected, but shall
not be entitled to exercise any right of cumulative voting.
2. All consideration received by the Corporation for the
issue or sale of shares of any class of the Corporation's Common
Stock, together with all assets in which such consideration is
invested and reinvested, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any such funds or payments derived
from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to the class of the
Corporation's Common Stock with respect to which such assets,
payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and shall be
so handled upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange
or liquidation thereof, and any assets derived from any
reinvestment of such proceeds in whatever form, are herein
referred to as "assets belonging to" such class. Any assets,
income, earnings, profits and proceeds thereof, funds or
payments which are not readily attributable to any particular
class of the Corporation's Common Stock shall be allocable among
any one or more of the classes of the Corporation's Common Stock
in such manner and on such basis as the Board of Directors, in
its sole discretion, shall deem fair and equitable. The power
to make such allocations may be delegated by the Board of
Directors from time to time to one or more of the officers of
the Corporation.
3. The assets belonging to any class of the Corporation's
Common Stock shall be charged with the liabilities in respect of
such class of the Corporation's Common Stock, and shall also be
charged with the share of the general liabilities of the
Corporation allocated to such class determined as hereinafter
provided. The determination of the Board of Directors shall be
conclusive as to: (a) the amount of such liabilities, including
the amount of accrued expenses and reserves; (b) any allocation
of the same to a given class; and (c) whether the same are
allocable to one or more classes. The liabilities so allocated
to a class are herein referred to as "liabilities belonging to"
such class. Any liabilities which are not readily attributable
to any particular class of the Corporation's Common Stock shall
be allocable among any one or more of the classes of the
Corporation's Common Stock in such manner and on such basis as
the Board of Directors, in its sole discretion, shall deem fair
and equitable. The power to make such allocations may be
delegated by the Board of Directors from time to time to one or
more of the officers of the Corporation.
4. Shares of a class of the Corporation's Common Stock
shall be entitled to such dividends and distributions, in stock
or in cash or both, as may be declared from time to time by the
Board of Directors, acting in its sole discretion, with respect
to such class; provided, however, that dividends and
distributions on shares of a class of the Corporation's Common
Stock shall be paid only out of the lawfully available "assets
belonging to" such class as such phrase is defined in this
Article IV.
5. In the event of the liquidation or dissolution of the
Corporation, stockholders of a class of the Corporation's Common
Stock shall be entitled to receive, as a class, out of the
assets of the Corporation available for distribution to
stockholders, but other than general assets not belonging to any
particular class, the assets belonging to such class, and the
assets so distributable to the holders of any class of the
Corporation's Common Stock shall be distributed among such
holders in proportion to the number of shares of such class of
the Corporation's Common Stock held by them and recorded on the
books of the Corporation. In the event that there are any
general assets not belonging to any particular class of the
Corporation's Common Stock and available for distribution, such
distribution shall be made to the holders of all classes of the
Corporation's Common Stock in proportion to the net asset values
of the respective classes of the Corporation's Common Stock
determined as set forth in the Bylaws of the Corporation.
6. Each share of each class of Common Stock of the
Corporation now or hereafter issued shall be subject to
redemption by the stockholders of the Corporation and, subject
to the suspension of such right of redemption as provided in the
Bylaws, each holder of shares of any class of Common Stock of
the Corporation, upon request to the Corporation accompanied by
surrender of the appropriate stock certificate or certificates,
if any, in proper form for transfer and after complying with any
other redemption procedures established by the Board of
Directors, shall be entitled to require the Corporation to
redeem all or any part of the shares of such class of Common
Stock standing in the name of such holder on the books of the
Corporation at the net asset value of such shares. In the event
that no certificates have been issued to the holder, the Board
of Directors may require the submission of a stock power with an
appropriate signature guarantee. All shares of any class of its
Common Stock redeemed by the Corporation shall be deemed to be
cancelled and restored to the status of authorized but unissued
shares. The method of computing the net asset value of shares
of each class of Common Stock of the Corporation for purposes of
the issuance and sale, or redemption, thereof, as well as the
time as of which such net asset value shall be computed, shall
be as set forth in the Bylaws. Payment of the net asset value
of each share of each class of Common Stock of the Corporation
surrendered to it for redemption shall be made by the
Corporation within seven (7) days after surrender of such stock
to the Corporation for such purpose, or within such other
reasonable period as may be determined from time to time by the
Board of Directors. The Board of Directors of the Corporation
may, upon reasonable notice to the stockholders of the
Corporation, impose a fee for the privilege of redeeming shares,
such fee to be not in excess of one percent (1.0%) of the
proceeds of any such redemption. The Board shall have
discretionary authority to rescind the imposition of any such
fee and to reimpose the redemption fee from time to time upon
reasonable notice. Any fee so imposed shall be uniform as to
all stockholders to the extent required by the Investment
Company Act of 1940.
7. If, at any time when a request for transfer or
redemption of the shares of any class of Common Stock is
received by the Corporation or its agent, the value (computed as
set forth in the Bylaws) of the shares of such class in a
stockholder's account is less than One Thousand Dollars
($1000.00), after giving effect to such transfer or redemption,
the Corporation may cause the remaining shares of such class in
such stockholder's account to be redeemed in accordance with
such procedures as the Board of Directors shall adopt.
8. Each holder of shares of the Corporation's Common
Stock, irrespective of the class, may, upon request to the
Corporation accompanied by surrender of the appropriate stock
certificate or certificates, if any, in proper form for transfer
and after complying with any other conversion procedures
established by the Board of Directors, convert such shares into
shares of any other class of the Corporation's Common Stock on
the basis of their relative net asset values (determined in
accordance with the Bylaws of the Corporation) less a conversion
charge or discount determined by the Board of Directors. Any
fee so imposed shall be uniform as to all stockholders to the
extent required by the Investment Company Act of 1940.
9. No holder of shares of any class of Common Stock of
the Corporation shall, as such holder, have any right to
purchase or subscribe for any shares of any class of the Common
Stock of the Corporation which it may issue or sell (whether out
of the number of shares authorized by these Articles of
Incorporation, or out of any shares of any class of Common Stock
of the Corporation acquired by it after the issue thereof, or
otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
ARTICLE V
The number of directors constituting the Board of Directors
shall initially be five (5), and the names of the initial directors are
Neil J. Hennessy, Robert T. Doyle, Rodger D. Offenbach, Brian A. Hennessy
and John D. DeSousa. Thereafter, the number of directors shall be such
number as is fixed from time to time by the Bylaws.
ARTICLE VI
The Corporation reserves the right to enter into, from time to
time, investment advisory and administration agreements providing for the
management and supervision of the investments of the Corporation, the
furnishing of advice to the Corporation with respect to the desirability
of investing in, purchasing or selling securities or other property and
the furnishing of clerical and administrative services to the Corporation.
Such agreements shall contain such other terms, provisions and conditions
as the Board of Directors of the Corporation may deem advisable and as are
permitted by the Investment Company Act of 1940.
The Corporation may designate custodians, transfer agents,
registrars and/or disbursing agents for the stock and assets of the
Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such custodian, transfer agent,
registrar and/or disbursing agent.
ARTICLE VII
The following provisions define, limit and regulate the powers
of the Corporation, the Board of Directors and the stockholders:
A. The Corporation may issue and sell shares of any class of
its own Common Stock in such amounts and on such terms and conditions, for
such purposes and for such amount or kind of consideration now or
hereafter permitted by the laws of the State of Maryland, the Bylaws and
these Articles of Incorporation, as its Board of Directors may determine;
provided, however, that the consideration per share to be received by the
Corporation upon the sale of any shares of any class of its Common Stock
shall not be less than the net asset value per share of such class of
Common Stock outstanding at the time as of which the computation of said
net asset value shall be made.
B. The Board of Directors may, in its sole and absolute
discretion, reject in whole or in part orders for the purchase of shares
of any class of Common Stock and may, in addition, require such orders to
be in such minimum amounts as it shall determine.
C. The holders of any fractional shares of any class Common
Stock shall be entitled to the payment of dividends on such fractional
shares, to receive the net asset value thereof upon redemption, to share
in the assets of the Corporation upon liquidation and to exercise voting
rights with respect thereto.
D. The Board of Directors shall have full power in accordance
with good accounting practice: (a) to determine what receipts of the
Corporation shall constitute income available for payment of dividends and
what receipts shall constitute principal and to make such allocation of
any particular receipt between principal and income as it may deem proper;
and (b) from time to time, in its discretion (i) to determine whether any
and all expenses and other outlays paid or incurred (including any and all
taxes, assessments or governmental charges which the Corporation may be
required to pay or hold under any present or future law of the United
States of America or of any other taxing authority therein) shall be
charged to or paid from principal or income or both, and (ii) to apportion
any and all of said expenses and outlays, including taxes, between
principal and income.
E. The Board of Directors shall have the power to determine
from time to time whether and to what extent and at what time and places
and under what conditions and regulations the books, accounts and
documents of the Corporation or any of them, shall be open to the
inspection of stockholders, except as otherwise provided by applicable
law; and except as so provided, no stockholder shall have any right to
inspect any book, account or document of the Corporation unless authorized
to do so by resolution of the Board of Directors.
ARTICLE VIII
The address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202.
ARTICLE IX
The address of the initial registered office is c/o The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202.
ARTICLE X
The name of the initial registered agent at such address is The
Corporation Trust Incorporated, a Maryland corporation.
ARTICLE XI
The name and address of the sole incorporator is:
Name Address
Richard L. Teigen c/o Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
IN WITNESS WHEREOF, the undersigned incorporator who executed
the foregoing Articles of Incorporation hereby acknowledges the same to be
his act and further acknowledges that, to the best of his knowledge, the
matters and facts set forth therein are true in all material respects
under the penalties of perjury.
Dated this 9th day of January, 1996.
/s/ Richard L. Teigen
Richard L. Teigen
Sole Incorporator
EXHIBIT 2
BYLAWS
OF
THE HENNESSY FUNDS, INC.
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. Place of Meetings. All meetings of stockholders shall be
held at such location as the Board of Directors shall direct.
Section 2. Annual Meeting.
(a) The annual meeting of stockholders for the election of
directors and the transaction of such other business as may properly come
before it, if the annual meeting shall be held, shall be held during the
month of March of each year (or during such other month as the Board of
Directors shall determine), commencing in 1997, at such date and time as
shall be fixed by the Board of Directors and stated in the notice of such
meeting, but in no event more than one hundred twenty (120) days after the
occurrence of the event requiring the meeting to elect directors. Any
business of the corporation may be transacted at the annual meeting
without being specifically designated in the notice, except such business
as is specifically required by statute to be stated in the notice.
(b) The corporation shall not be required to hold an annual
meeting in any year in which the election of directors is not required to
be acted on by stockholders under the Investment Company Act of 1940.
Section 3. Special Meeting. Special meetings of the stockholders may
be called by the board of directors, the president, any vice president, or
the secretary, and shall be called by the secretary upon the written
request of the holders of shares entitled to not less than ten percent
(10%) of all the votes entitled to be cast at such meeting; provided that
such holders prepay the costs to the corporation of preparing and mailing
the notice of the meeting. The business transacted at any special meeting
of stockholders shall be limited to the purposes stated in the notice.
Section 4. Notice of Meeting. Not less than ten (10) days nor more
than ninety (90) days before the date of every stockholders' meeting, the
secretary shall give to each stockholder entitled to vote at such meeting
and to each other stockholder entitled to notice of such meeting under
applicable law, written or printed notice stating the time and place of
the meeting, and in the case of a special meeting (or where required by
applicable law) the purpose or purposes for which the meeting is called,
either by mail, by presenting it to him personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to
the stockholder at his post office address as it appears on the records of
the corporation, with postage thereon prepaid.
Section 5. Quorum. At any meeting of stockholders the presence in
person or by proxy of stockholders entitled to cast a majority of the
votes thereat shall constitute a quorum; but this section shall not affect
any requirement under statute or under the charter for the vote necessary
for the adoption of any measure. If at any meeting a quorum is not
present or represented, the chairman of the meeting or the holders of a
majority of the stock present or represented may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until
a quorum is present or represented. At such adjourned meeting at which a
quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally called.
Section 6. Stock Entitled to Vote. Each issued share of each class of
stock shall be entitled to vote at any meeting of stockholders except
shares owned, other than in a fiduciary capacity, by the corporation or by
another corporation in which the corporation owns shares entitled to cast
a majority of all the votes entitled to be cast by all shares outstanding
and entitled to vote of such corporation.
Section 7. Voting. Each outstanding share of each class of stock
entitled to vote at a meeting of stockholders shall be entitled to one
vote on each matter submitted to a vote. In all elections for directors
every stockholder shall have the right to vote the shares of each class
owned of record by him for as many persons as there are directors to be
elected, but shall not be entitled to exercise any right of cumulative
voting. A stockholder may vote the shares owned of record by him either
in person or by proxy executed in writing by the stockholder or by his
authorized attorney-in-fact. No proxy shall be valid after eleven (11)
months from its date unless otherwise provided in the proxy. At all
meetings of stockholders, unless the voting is conducted by inspectors,
all questions relating to the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided by the
chairman of the meeting. A majority of the votes cast at a meeting of
stockholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize any action which may properly come before
the meeting, unless a greater number is required by statute or by the
charter.
Section 8. Informal Action. Any action required or permitted to be
taken at any meeting of stockholders may be taken without a meeting, if a
consent in writing, setting forth such action, is signed by all the
stockholders entitled to vote on the subject matter thereof and such
consent is filed with the records of the corporation.
ARTICLE II
DIRECTORS
Section 1. Number. The number of directors of the corporation shall
be five (5). By vote of a majority of the entire board of directors, the
number of directors fixed by the charter or by these bylaws may be
increased or decreased from time to time to not more than fifteen nor less
than three, but the tenure of office of a director shall not be affected
by any decrease in the number of directors so made by the board.
Section 2. Election and Qualification. Until the first annual meeting
of stockholders and until successors are duly elected and qualify, the
board of directors shall consist of the persons named as such in the
charter. At the first annual meeting of stockholders, the stockholders
shall elect directors to hold office until their successors are elected
and qualify. A director need not be a stockholder of the corporation, but
must be eligible to serve as a director of a registered investment company
under the Investment Company Act of 1940.
Section 3. Vacancies. Any vacancy on the board of directors occurring
between stockholders' meetings called for the purpose of electing
directors may be filled, if immediately after filling any such vacancy at
least two-thirds of the directors then holding office shall have been
elected to such office at an annual or special meeting of stockholders, in
the following manner: (i) for a vacancy occurring other than by reason of
an increase in directors, by a majority of the remaining members of the
board, although such majority is less than a quorum; and (ii) for a
vacancy occurring by reason of an increase in the number of directors, by
action of a majority of the entire board. A director elected by the board
to fill a vacancy shall be elected to hold office until the next annual
meeting of stockholders or until his successor is elected and qualifies.
If by reason of the death, disqualification or bona fide resignation of
any director or directors, more than sixty percent (60%) of the members of
the board of directors are interested persons of the corporation, as
defined in the Investment Company Act of 1940, such vacancy shall be
filled within thirty (30) days if it may be filled by the board, or within
sixty (60) days if a vote of stockholders is required to fill such
vacancy; provided that such vacancy may be filled within such longer
period as the Securities and Exchange Commission may prescribe by rules
and regulations, upon its own motion or by order upon application. In the
event that at any time less than a majority of the directors were elected
by the stockholders, the board or proper officer shall forthwith cause to
be held as promptly as possible, and in any event within sixty (60) days,
a meeting of the stockholders for the purpose of electing directors to
fill any existing vacancies in the board, unless the Securities and
Exchange Commission shall by order extend such period.
Section 4. Powers. The business and affairs of the corporation shall
be managed under the direction of the board of directors, which may
exercise all of the powers of the corporation, except such as are by law
or by the charter or by these bylaws conferred upon or reserved to the
stockholders.
Section 5. Removal.
(a) At any meeting of stockholders, duly called and at which a
quorum is present, the stockholders may, by the affirmative vote of the
holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors
to fill any resulting vacancies for the unexpired terms of removed
directors.
(b) Notwithstanding any other provisions of these bylaws, the
secretary of the corporation shall promptly call a special meeting of
stockholders for the purpose of voting upon the question of removal of any
director upon the written request of the holders of shares entitled to not
less than ten percent (10%) of all the votes entitled to be cast at such
meeting.
(c) Whenever ten or more stockholders of record who have been
such for at least six months preceding the date of application, and who
hold in the aggregate either shares having a net asset value of at least
$25,000 or at least one percent (1%) of the total outstanding shares,
whichever is less, shall apply to the corporation's secretary in writing,
stating that they wish to communicate with other stockholders with a view
to obtaining signatures to a request for a meeting pursuant to subsection
(b) above and accompanied by a form of communication and request which
they wish to transmit, the secretary shall within five business days after
such application either: (1) afford to such applicants access to a list
of the names and addresses of all stockholders as recorded on the books of
the corporation; or (2) inform such applicants as to the approximate
number of stockholders of record and the approximate cost of mailing to
them the proposed communication and form of request.
(d) If the secretary elects to follow the course specified in
clause (2) of subsection (c) above, the secretary, upon the written
request of such applicants, accompanied by a tender of the material to be
mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all stockholders of record at their
addresses as recorded on the books, unless within five (5) business days
after such tender the secretary shall mail to such applicants and file
with the Securities and Exchange Commission, together with a copy of the
material to be mailed, a written statement signed by at least a majority
of the board of directors to the effect that in their opinion either such
material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or
would be in violation of applicable law, and specifying the basis of such
opinion.
(e) After opportunity for hearing upon the objections specified
in the written statement so filed, the Securities and Exchange Commission
may, and if demanded by the board of directors or by such applicants
shall, enter an order either sustaining one or more of such objections or
refusing to sustain any of them. If the Securities and Exchange
Commission shall enter an order refusing to sustain any of such
objections, or if, after the entry of an order sustaining one or more of
such objections, the Securities and Exchange Commission shall find, after
notice and opportunity for hearing, that all objections so sustained have
been met, and shall enter an order so declaring, the secretary shall mail
copies of such material to all shareholders with reasonable promptness
after the entry of such order and the renewal of such tender.
Section 6. Place of Meetings. Meetings of the board of directors,
regular or special, may be held at any place in or out of the State of
Maryland as the board may from time to time determine or as may be
specified in the notice of meeting.
Section 7. First Meeting of Newly Elected Board. The first meeting of
each newly elected board of directors shall be held without notice
immediately after and at the same general place as the annual meeting of
the stockholders, for the purpose of organizing the board, electing
officers and transacting any other business that may properly come before
the meeting.
Section 8. Regular Meetings. Regular meetings of the board of
directors may be held without notice at such time and place as shall from
time to time be determined by the board.
Section 9. Special Meetings. Special meetings of the board of
directors may be called at any time either by the board, the president, a
vice president or a majority of the directors in writing with or without a
meeting. Notice of special meetings shall either be mailed by the
secretary to each director at least three (3) days before the meeting or
shall be given personally or telegraphed to each director at least one (1)
day before the meeting. Such notice shall set forth the time and place of
such meeting but need not, unless otherwise required by law, state the
purposes of the meeting.
Section 10. Quorum and Vote Required for Action. At all meetings of
the board of directors a majority of the entire board shall constitute a
quorum for the transaction of business, and the action of a majority of
the directors present at any meetings at which a quorum is present shall
be the action of the board of directors unless the concurrence of a
greater proportion is required for such action by statute, the articles of
incorporation or these bylaws. If at any meeting a quorum is not present,
a majority of the directors present may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a
quorum is present. Members of the board of directors or a committee of
the board may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the
meeting can hear each other at the same time; provided, however, that a
director may not participate in a meeting by means of a conference
telephone or similar communications equipment if the purpose of the
meeting is to approve the corporation's investment advisory agreement
and/or to approve the selection of the corporation's auditors, or if
participation in such a manner would otherwise violate the Investment
Company Act of 1940 or other applicable laws. Except as set forth in the
preceding sentence, participation in a meeting by these means constitutes
presence in person at the meeting.
Section 11. Executive and Other Committees. The board of directors may
appoint from among its members an executive and other committees composed
of two (2) or more directors. The board may delegate to such committees in
the intervals between meetings of the board any of the powers of the board
to manage the business and affairs of the corporation, except the power
to: (i) declare dividends or distributions upon the stock of the
corporation; (ii) issue stock of the corporation; (iii) recommend to the
stockholders any action which requires stockholder approval; (iv) amend
the bylaws; (v) approve any merger or share exchange which does not
require stockholder approval; or (vi) take any action required by the
Investment Company Act of 1940 to be taken by the independent directors of
the corporation or by the full board of directors.
Section 12. Informal Action. Except as set forth in the following
sentence, any action required or permitted to be taken at any meeting of
the board of directors or of a committee of the board may be taken without
a meeting, if a written consent to such action is signed by all members of
the board or the committee, as the case may be, and such written consent
is filed with the minutes of proceedings of the board or committee.
Notwithstanding the preceding sentence, no action may be taken by the
board of directors pursuant to a written consent with respect to the
approval of the corporation's investment advisory agreement, the approval
of the selection of the corporation's auditors, or any action required by
the Investment Company Act of 1940 or other applicable law to be taken at
a meeting of the board of directors to be held in person.
ARTICLE III
OFFICERS AND EMPLOYEES
Section 1. Election and Qualification. At the first meeting of each
newly elected board of directors there shall be elected a president, one
or more vice presidents, a secretary and a treasurer. The board may also
elect one or more assistant secretaries and assistant treasurers. No
officer need be a director. Any two or more offices, except the offices
of president and vice president, may be held by the same person but no
officer shall execute, acknowledge or verify any instrument in more than
one capacity, if such instrument is required by law, charter or these
bylaws to be executed, acknowledged or verified by two or more officers.
Each officer must be eligible to serve as an officer of a registered
investment company under the Investment Company Act of 1940. Nothing
herein shall preclude the employment of other employees or agents by the
corporation from time to time without action by the board.
Section 2. Term, Removal and Vacancies. The officers shall be elected
to serve until the next first meeting of a newly elected board of
directors and until their successors are elected and qualify. Any officer
may be removed by the board, with or without cause, whenever in its
judgment the best interests of the corporation will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any,
of the person so removed. A vacancy in any office shall be filled by the
board for the unexpired term.
Section 3. Bonding. Each officer and employee of the corporation who
singly or jointly with others has access to securities or funds of the
corporation, either directly or through authority to draw upon such funds,
or to direct generally the disposition of such securities shall be bonded
against larceny and embezzlement by a reputable fidelity insurance
company. Each such bond, which may be in the form of an individual bond,
a schedule or blanket bond covering the corporation's officers and
employees and the officers and employees of the investment adviser to the
corporation and other corporations to which said investment adviser also
acts as investment adviser, shall be in such form and for such amount
(determined at least annually) as the board of directors shall determine
in compliance with the requirements of Section 17(g) of the Investment
Company Act of 1940, as amended from time to time, and the rules,
regulations or orders of the Securities and Exchange Commission
thereunder.
Section 4. President. The president shall be the principal executive
officer of the corporation. He shall preside at all meetings of the
stockholders and directors, have general and active management of the
business of the corporation, see that all orders and resolutions of the
board of directors are carried into effect, and execute in the name of the
corporation all authorized instruments of the corporation, except where
the signing shall be expressly delegated by the board to some other
officer or agent of the corporation.
Section 5. Vice Presidents. The vice president, or if there be more
than one, the vice presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform
the duties and exercise the powers of the president, and shall have such
other duties and powers as the board may from time to time prescribe or
the president delegate.
Section 6. Secretary and Assistant Secretaries. The secretary shall
give notice of, attend and record the minutes of meetings of stockholders
and directors, keep the corporate seal and, when authorized by the board,
affix the same to any instrument requiring it, attesting to the same by
his signature, and shall have such further duties and powers as are
incident to his office or as the board may from time to time prescribe.
The assistant secretary, if any, or, if there be more than one, the
assistant secretaries in the order determined by the board, shall in the
absence or disability of the secretary, perform the duties and exercise
the powers of the secretary, and shall have such other duties and powers
as the board may from time to time prescribe or the secretary delegate.
Section 7. Treasurer and Assistant Treasurers. The treasurer shall be
the principal financial and accounting officer of the corporation. He
shall be responsible for the custody and supervision of the corporation's
books of account and subsidiary accounting records, and shall have such
further duties and powers as are incident to his office or as the board of
directors may from time to time prescribe. The assistant treasurer, if
any, or, if there be more than one, the assistant treasurers in the order
determined by the board, shall in the absence or disability of the
treasurer, perform all duties and exercise the powers of the treasurer,
and shall have such other duties and powers as the board may from time to
time prescribe or the treasurer delegate.
ARTICLE IV
RESTRICTIONS ON COMPENSATION
TRANSACTIONS AND INVESTMENTS
Section 1. Salary and Expenses. Directors and executive officers as
such shall not receive any salary for their services or reimbursement for
expenses from the corporation; provided that the corporation may pay fees
in such amounts and at such times as the board of directors shall
determine to directors who are not interested persons of the corporation
for attendance at meetings of the board of directors. Clerical employees
shall receive compensation for their services from the corporation in such
amounts as are determined by the board of directors.
Section 2. Compensation and Profit from Purchase and Sales. No
affiliated person of the corporation, as defined in the Investment Company
Act of 1940, or affiliated person of such person, shall, except as
permitted by Section 17(e) of the Act, or the rules, regulations or orders
of the Securities and Exchange Commission thereunder, (i) acting as agent,
accept from any source any compensation for the purchase or sale of any
property or securities to or for the corporation or any controlled company
of the corporation, as defined in such Act, or (ii) acting as a broker, in
connection with the sale of securities to or by the corporation or any
controlled company of the corporation, receive from any source a
commission, fee or other remuneration for effecting such transaction.
Section 3. Transactions with Affiliated Person. No affiliated person
of the corporation, as defined in the Investment Company Act of 1940, or
affiliated person of such person shall knowingly (i) sell any security or
other property to the corporation or to any company controlled by the
corporation, as defined in the Act, except shares of stock of the
corporation or securities of which such person is the issuer and which are
part of a general offering to the holders of a class of its securities,
(ii) purchase from the corporation or any such controlled company any
security or property except shares of stock of the corporation or
securities of which such person is the issuer, (iii) borrow money or other
property from the corporation or any such controlled company, or (iv)
acting as a principal effect any transaction in which the corporation or
controlled company is a joint or joint and several participant with such
person; provided, however, that this section shall not apply to any
transaction permitted by Sections 17(a), (b), (c), (d) or 21(b) of the
Investment Company Act of 1940 or the rules, regulations or orders of the
Securities and Exchange Commission thereunder, and shall not prohibit the
joint participation by the corporation and an affiliate in a fidelity bond
arrangement.
Section 4. Investment Adviser. The corporation shall employ one or
more investment advisers, the employment of which shall be pursuant to
written agreements in accordance with Section 15 of the Investment Company
Act of 1940, as amended from time to time.
ARTICLE V
STOCK CERTIFICATES AND TRANSFER BOOKS
Section 1. Certificates. Each holder of shares of any class of stock
of the corporation shall be entitled to a certificate or certificates, in
such form as the board of directors shall from time to time approve,
representing and certifying the number of shares of such class of stock
owned by him in the corporation. Each certificate shall be signed,
manually or by facsimile signature, by the president or a vice president,
countersigned, manually or by facsimile signature, by the secretary, an
assistant secretary, the treasurer or an assistant treasurer and sealed
with the corporate seal or facsimile thereof. In case any officer who has
signed any certificate, or whose facsimile signature appears thereon,
ceases to be an officer of the corporation before the certificate is
issued, the certificate may nevertheless be issued with the same effect as
if the officer had not ceased to be such officer as of the date of its
issue. Each certificate shall contain on its face or back a full
statement or summary of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms of each class of stock of the
corporation or shall state that the corporation will furnish such
information to the stockholder on request and without charge. Any
certificate representing stock which is restricted or limited as to
transferability also shall have a full statement of such restriction or
limitation plainly stated thereon or shall state that the corporation will
furnish such information to the stockholder on request and without charge.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been
lost, stolen, destroyed or mutilated (or may delegate such authority to
one or more officers of the corporation) upon the making of an affidavit
of that fact by the person claiming the certificate to be lost, stolen,
destroyed or mutilated. The board or such officer may, in its or his
discretion, require the owner of such certificate or his legal
representative to give bond with sufficient surety to the corporation to
indemnify it against any loss or claim which may arise or expense which
may be incurred by reason of the issuance of a new certificate.
Section 3. Stock Ledger. The corporation shall maintain at its office
in Novato, California, or at the office of its principal transfer agent,
if any, an original or duplicate stock ledger containing the names and
addresses of all stockholders and the number of shares of each class of
stock held by each stockholder.
Section 4. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as
such, as the owner of shares for all purposes, and shall not be bound to
recognize any equitable or other claim to or interest in such shares on
the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of
Maryland.
Section 5. Transfer Agent and Registrar. The corporation may maintain
one or more transfer offices or agencies, each in charge of a transfer
agent designated by the board of directors, where the shares of each class
of stock of the corporation shall be transferable. The corporation may
also maintain one or more registry offices, each in charge of a registrar
designated by the board, where the shares of such classes of stock shall
be registered.
Section 6. Transfers of Stock. Upon surrender to the corporation or a
transfer agent of a certificate for shares of any class duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 7. Fixing of Record Dates and Closing of Transfer Books. The
board of directors may fix, in advance, a date as the record date for the
purpose of determining stockholders entitled to notice of, or to vote at,
any meeting of stockholders, or stockholders entitled to receive payment
of any dividend or the allotment of any rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in
any case, shall be not more than ninety (90) days, and in case of a
meeting of stockholders not less than ten (10) days, prior to the date on
which the particular action requiring such determination of stockholders
is to be taken. In lieu of fixing a record date, the board may provide
that the stock transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the stock transfer books are
closed or a record date is fixed for the purpose of determining
stockholders entitled to vote at a meeting of stockholders, such books
shall be closed for at least ten (10) days immediately preceding such
action.
ARTICLE VI
ACCOUNTS, REPORTS, CUSTODIAN AND INVESTMENT ADVISER
Section 1. Inspection of Books. The board of directors shall
determine from time to time whether, and, if allowed, when and under what
conditions and regulations the accounts and books of the corporation
(except such as may by statute be specifically open to inspection) or any
of them, shall be open to the inspection of the stockholders, and the
stockholders' rights in this respect are and shall be limited accordingly.
Section 2. Reliance on Records. Each director and officer shall, in
the performance of his duties, be fully protected in relying in good faith
on the books of account or reports made to the corporation by any of its
officials or by an independent public accountant.
Section 3. Preparation and Maintenance of Accounts, Records and
Statements. The president, a vice president or the treasurer shall
prepare or cause to be prepared annually, a full and correct statement of
the affairs of the corporation, including a balance sheet or statement of
financial condition and a financial statement of operations for the
preceding fiscal year, which shall be submitted at the annual meeting of
the stockholders and filed within twenty (20) days thereafter at the
principal office of the corporation in the State of California. If the
corporation is not required to hold an annual meeting of stockholders, the
statement of affairs shall be placed on file at the corporation's
principal office within one hundred twenty (120) days after the end of the
fiscal year. The proper officers of the corporation shall also prepare,
maintain and preserve or cause to be prepared, maintained and preserved
the accounts, books and other documents required by Section 2-111 of the
Maryland General Corporation Law and Section 31 of the Investment Company
Act of 1940 and shall prepare and file or cause to be prepared and filed
the reports required by Section 30 of such Act. No financial statement
shall be filed with the Securities and Exchange Commission unless the
officers or employees who prepared or participated in the preparation of
such financial statement have been specifically designated for such
purpose by the board of directors.
Section 4. Auditors. No independent public accountant shall be
retained or employed by the corporation to examine, certify or report on
its financial statements for any fiscal year unless such selection: (i)
shall have been approved by a majority of the entire board of directors
within thirty (30) days before or after the beginning of such fiscal year
or before the annual ratification by the stockholders; (ii) shall have
been ratified by the stockholders, provided that any vacancy occurring
between such annual ratification due to the death or resignation of such
accountant may be filled by the board of directors; and (iii) shall
otherwise meet the requirements of Section 32 of the Investment Company
Act of 1940.
Section 5. Custodianship. All securities owned by the corporation and
all cash, including, without limiting the generality of the foregoing, the
proceeds from sales of securities owned by the corporation and from the
issuance of shares of the capital stock of the corporation, payments of
principal upon securities owned by the corporation, and distributions in
respect of securities owned by the corporation which at the time of
payment are represented by the distributing corporation to be capital
distributions, shall be held by a custodian or custodians which shall be a
bank, as that term is defined in the Investment Company Act of 1940,
having capital, surplus and undivided profits aggregating not less than
$2,000,000. The terms of custody of such securities and cash shall
include provisions to the effect that the custodian shall deliver
securities owned by the corporation only (a) upon sales of such securities
for the account of the corporation and receipt by the custodian of payment
therefor, (b) when such securities are called, redeemed or retired or
otherwise become payable, (c) for examination by any broker selling any
such securities in accordance with "street delivery" custom, (d) in
exchange for or upon conversion into other securities alone or other
securities and cash whether pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment, or otherwise, (e) upon
conversion of such securities pursuant to their terms into other
securities, (f) upon exercise of subscription, purchase or other similar
rights represented by such securities, (g) for the purpose of exchanging
interim receipts or temporary securities for definitive securities, (h)
for the purpose of redeeming in kind shares of the capital stock of the
corporation, or (i) for other proper corporate purposes. Such terms of
custody shall also include provisions to the effect that the custodian
shall hold the securities and funds of the corporation in a separate
account or accounts and shall have sole power to release and deliver any
such securities and draw upon any such account, any of the securities or
funds of the corporation only on receipt by such custodian of written
instruction from one or more persons authorized by the board of directors
to give such instructions on behalf of the corporation, and that the
custodian shall deliver cash of the corporation required by this Section 5
to be deposited with the custodian only upon the purchase of securities
for the portfolio of the corporation and the delivery of such securities
to the custodian, for the purchase or redemption of shares of the capital
stock of the corporation, for the payment of interest, dividends, taxes,
management or supervisory fees or operating expenses, for payments in
connection with the conversion, exchange or surrender of securities owned
by the corporation, or for other proper corporate purposes. Upon the
resignation or inability to serve of any such custodian the corporation
shall (a) use its best efforts to obtain a successor custodian, (b)
require the cash and securities of the corporation held by the custodian
to be delivered directly to the successor custodian, and (c) in the event
that no successor custodian can be found, submit to the stockholders of
the corporation, before permitting delivery of such cash and securities to
anyone other than a successor custodian, the question whether the
corporation shall be dissolved or shall function without a custodian;
provided, however, that nothing herein contained shall prevent the
termination of any agreement between the corporation and any such
custodian by the affirmative vote of the holders of a majority of all the
shares of the capital stock of the corporation at the time outstanding and
entitled to vote. Upon its resignation or inability to serve, the
custodian may deliver any assets of the corporation held by it to a
qualified bank or trust company selected by it, such assets to be held
subject to the terms of custody which governed such retiring custodian,
pending action by the corporation as set forth in this Section 5.
Section 6. Termination of Custodian Agreement. Any employment
agreement with a custodian shall be terminable on not more than sixty (60)
days' notice in writing by the board of directors or the custodian and
upon any such termination the custodian shall turn over only to the
succeeding custodian designated by the board of directors all funds,
securities and property and documents of the corporation in its
possession.
Section 7. Checks and Requisitions. Except as otherwise authorized by
the board of directors, all checks and drafts for the payment of money
shall be signed in the name of the corporation by a custodian, and all
requisitions or orders for the payment of money by a custodian or for the
issue of checks and drafts therefore, all promissory notes, all
assignments of stock or securities standing in the name of the
corporation, and all requisitions or orders for the assignment of stock or
securities standing in the name of a custodian or its nominee, or for the
execution of powers to transfer the same, shall be signed in the name of
the corporation by not less than two persons (who shall be among those
persons, not in excess of five, designated for this purpose by the board
of directors) at least one of which shall be an officer. Promissory
notes, checks or drafts payable to the corporation may be endorsed only to
the order of a custodian or its nominee by the treasurer or president or
by such other person or persons as shall be thereto authorized by the
board of directors.
Section 8. Investment Advisory Contract. Any investment advisory
contract in effect after the first annual meeting of stockholders of the
corporation, to which the corporation is or shall become a party, whereby,
subject to the control of the board of directors of the corporation, the
investment portfolio with respect to any class of Common Stock of the
corporation shall be managed or supervised by the other party to such
contract, shall be effective and binding only upon the affirmative vote of
a majority of the outstanding voting securities of such class of Common
Stock of the corporation (as defined in the Investment Company Act of
1940), and the investment advisory contract currently in effect with
respect to any class of Common Stock shall be submitted to the holders of
shares of such class of Common Stock for ratification by the affirmative
vote of such majority. Any investment advisory contract to which the
corporation shall be a party whereby, subject to the control of the board
of directors of the corporation, the investment portfolio with respect to
any class of Common Stock of the corporation shall be managed or
supervised by the other party to such contract, shall provide, among other
things, that such contract cannot be assigned. Such investment advisory
contract shall prohibit the other party thereto from making short sales of
shares of capital stock of the corporation; and such investment advisory
contract shall prohibit such other party from purchasing shares otherwise
than for investment, and shall require such other party to advise the
corporation of any sales of shares of the capital stock of the corporation
made by such person or organization less than two months after the date of
any purchase by him or it of shares of the capital stock of the
corporation. Unless any such contract shall expressly otherwise provide,
any provisions therein for the termination thereof by action of the board
of directors of the corporation shall be construed to require that such
termination can be accomplished only upon the vote of a majority of the
entire board.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Offices. The registered office of the corporation in the
State of Maryland shall be in the City of Baltimore. The corporation
shall also have an office in Novato, California. The corporation may also
have offices at such other places within and without the State of Maryland
as the board of directors may from time to time determine. Except as
otherwise required by statute, the books and records of the corporation
may be kept outside the State of Maryland.
Section 2. Seal. The corporate seal shall have inscribed thereon the
name of the corporation, and the words "Corporate Seal" and "Maryland".
The seal may be used by causing it or a facsimile thereof to be impressed,
affixed, reproduced or otherwise.
Section 3. Fiscal Year. The fiscal year of the corporation shall be
fixed by the board of directors.
Section 4. Notice of Waiver of Notice. Whenever any notice of the
time, place or purpose of any meeting of stockholders or directors is
required to be given under the statute, the charter or these bylaws, a
waiver thereof in writing, signed by the person or persons entitled to
such notice and filed with the records of the meeting, either before or
after the holding thereof, or actual attendance at the meeting of
stockholders in person or by proxy or at the meeting of directors in
person, shall be deemed equivalent to the giving of such notice to such
person. No notice need be given to any person with whom communication is
made unlawful by any law of the United States or any rule, regulation,
proclamation or executive order issued by any such law.
Section 5. Voting of Stock. Unless otherwise ordered by the board of
directors, the president shall have full power and authority, in the name
and on behalf of the corporation, (i) to attend, act and vote at any
meeting of stockholders of any company in which the corporation may own
shares of stock of record, beneficially (as the proxy or attorney-in-fact
of the record holder) or of record and beneficially, and (ii) to give
voting directions to the record stockholder of any such stock beneficially
owned. At any such meeting, he shall possess and may exercise any and all
rights and powers incident to the ownership of such shares which, as the
holder or beneficial owner and proxy of the holder thereof, the
corporation might possess and exercise if personally present, and may
delegate such power and authority to any officer, agent or employee of the
corporation.
Section 6. Dividends. Dividends upon any class of stock of the
corporation, subject to the provisions of the charter, if any, may be
declared by the board of directors in any lawful manner. The source of
each dividend payment shall be disclosed to the stockholders receiving
such dividend, to the extent required by the laws of the State of Maryland
and by Section 19 of the Investment Company Act of 1940 and the rules and
regulations of the Securities and Exchange Commission thereunder.
Section 7. Indemnification.
A. The corporation shall indemnify all of its corporate
representatives against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
them in connection with the defense of any action, suit or proceeding, or
threat or claim of such action, suit or proceeding, whether civil,
criminal, administrative, or legislative, no matter by whom brought, or in
any appeal in which they or any of them are made parties or a party by
reason of being or having been a corporate representative, if the
corporate representative acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the corporation
and with respect to any criminal proceeding, if he had no reasonable cause
to believe his conduct was unlawful provided that the corporation shall
not indemnify corporate representatives in relation to matters as to which
any such corporate representative shall be adjudged in such action, suit
or proceeding to be liable for gross negligence, willful misfeasance, bad
faith, reckless disregard of the duties and obligations involved in the
conduct of his office, or when indemnification is otherwise not permitted
by the Maryland General Corporation Law.
B. In the absence of an adjudication which expressly absolves the
corporate representative, or in the event of a settlement, each corporate
representative shall be indemnified hereunder only if there has been a
reasonable determination based on a review of the facts that
indemnification of the corporate representative is proper because he has
met the applicable standard of conduct set forth in paragraph A. Such
determination shall be made: (i) by the board of directors, by a majority
vote of a quorum which consists of directors who were not parties to the
action, suit or proceeding, or if such a quorum cannot be obtained, then
by a majority vote of a committee of the board consisting solely of two or
more directors, not, at the time, parties to the action, suit or
proceeding and who were duly designated to act in the matter by the full
board in which the designated directors who are parties to the action,
suit or proceeding may participate; or (ii) by special legal counsel
selected by the board of directors or a committee of the board by vote as
set forth in (i) of this paragraph, or, if the requisite quorum of the
full board cannot be obtained therefor and the committee cannot be
established, by a majority vote of the full board in which directors who
are parties to the action, suit or proceeding may participate.
C. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall create a rebuttable presumption that the person was
guilty of willful misfeasance, bad faith, gross negligence or reckless
disregard to the duties and obligations involved in the conduct of his or
her office, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
D. Expenses, including attorneys' fees, incurred in the preparation
of and/or presentation of the defense of a civil or criminal action, suit
or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding as authorized in the manner
provided in Section 2-418(F) of the Maryland General Corporation Law upon
receipt of: (i) an undertaking by or on behalf of the corporate
representative to repay such amount unless it shall ultimately be
determined that he or she is entitled to be indemnified by the corporation
as authorized in this bylaw; and (ii) a written affirmation by the
corporate representative of the corporate representative's good faith
belief that the standard of conduct necessary for indemnification by the
corporation has been met.
E. The indemnification provided by this bylaw shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under these bylaws, any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person subject to the limitations imposed from
time to time by the Investment Company Act of 1940, as amended.
F. This corporation shall have power to purchase and maintain
insurance on behalf of any corporate representative against any liability
asserted against him or her and incurred by him or her in such capacity or
arising out of his or her status as such, whether or not the corporation
would have the power to indemnify him or her against such liability under
this bylaw provided that no insurance may be purchased or maintained to
protect any corporate representative against liability for gross
negligence, willful misfeasance, bad faith or reckless disregard of the
duties and obligations involved in the conduct of his or her office.
G. "Corporate Representative" means an individual who is or was a
director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust or other
enterprise in one of these capacities at the request of the corporation
and who, by reason of his or her position, is, was, or is threatened to be
made, a party to a proceeding described herein.
Section 8. Amendments.
A. These bylaws may be altered, amended or repealed and new
bylaws may be adopted by the stockholders by affirmative vote of not less
than a majority of the shares of all classes of stock present or
represented at any annual or special meeting of the stockholders at which
a quorum is in attendance.
B. These bylaws may also be altered, amended or repealed and
new bylaws may be adopted by the Board of Directors by affirmative vote of
a majority of the number of directors present at any meeting at which a
quorum is in attendance; but no bylaw adopted by the stockholders shall be
amended or repealed by the Board of Directors if the bylaws so adopted so
provides.
C. Any action taken or authorized by the stockholders or by
the Board of Directors, which would be inconsistent with the bylaws then
in effect but is taken or authorized by affirmative vote of not less than
the number of shares or the number of directors required to amend the
bylaws so that the bylaws would be consistent with such action, shall be
given the same effect as though the bylaws had been temporarily amended or
suspended so far, but only so far, as was necessary to permit the specific
action so taken or authorized.
Section 9. Reports to Stockholders. The books of account of the
corporation shall be examined by an independent firm of public accountants
at the close of each annual fiscal period of the corporation and at such
other times, if any, as may be directed by the Board of Directors of the
corporation. A report to the stockholders based upon each such
examination shall be mailed to each stockholder of the corporation of
record on such date with respect to each report as may be determined by
the Board of Directors at his address as the same appears on the books of
the corporation. Each such report shall include the financial information
required to be transmitted to stockholders by rules or regulations of the
Securities and Exchange Commission under the Investment Company Act of
1940 and shall be in such form as the Board of Directors shall determine
pursuant to rules and regulations of the Securities and Exchange
Commission.
Section 10. Information to Accompany Dividends. At the time of the
payment by the corporation of any dividend to the holders of any class of
stock of the corporation, each stockholder to whom such dividend is paid
shall be notified of the account or accounts from which it is paid and the
amount thereof paid from each such account.
ARTICLE VIII
SALES, REDEMPTION AND
NET ASSET VALUE OF SHARES
Section 1. Sales of Shares. Shares of any class of Common Stock of
the corporation shall be sold by it for the net asset value per share of
such class of Common Stock outstanding at the time as of which the
computation of said net asset value shall be made as hereinafter provided
in these bylaws.
Section 2. Periodic Investment and Dividend Reinvestment Plans. The
corporation acting by and through the Board of Directors shall have the
right to adopt and to offer to the holders of each class of stock and to
the public a periodic investment plan and an automatic reinvestment of
dividend plan subject to the limitations and restrictions imposed thereon
and as set forth in the Investment Company Act of 1940 and any rule or
regulation adopted or issued thereunder.
Section 3. Shares Issued for Securities. In the case of shares of any
class of stock of the corporation issued in whole or in part in exchange
for securities, there may, at the discretion of the board of directors of
the corporation, be included in the value of said securities, for the
purpose of determining the number of shares of such class stock of the
corporation issuable in exchange therefor, the amount, if any, of
brokerage commissions (not exceeding an amount equal to the rates payable
in connection with the purchase of comparable securities on the New York
Stock Exchange) or other similar costs of acquisition of such securities
paid by the holder of said securities in acquiring the same.
Section 4. Redemption of Shares. Each share of each class of Common
Stock of the corporation now or hereafter issued shall be subject to
redemption, as provided in the Articles of Incorporation of the
corporation.
Section 5. Suspension of Right of Redemption. The Board of Directors
of the corporation may suspend the right of the holders of any class of
Common Stock of the corporation to require the corporation to redeem
shares of such class:
(1) for any period (a) during which the New York Stock
Exchange is closed other than customary weekend and holiday
closings, or (b) during which trading on the New York Stock
Exchange is restricted;
(2) for any period during which an emergency, as defined
by rules of the Securities and Exchange Commission or any
successor thereto, exists as a result of which (a) disposal by
the corporation of securities owned by it is not reasonably
practicable, or (b) it is not reasonably practicable for the
corporation fairly to determine the value of its net assets; or
(3) for such other periods as the Securities and Exchange
Commission or any successor thereto may by order permit for the
protection of security holders of the corporation.
Section 6. Computation of Net Asset Value. For purposes of these
bylaws, the following rules shall apply:
A. The net asset value of each share of each class of
Common Stock of the corporation shall be determined at such time
or times as may be disclosed in the then currently effective
Prospectus relating to such class of Common Stock of this
corporation. The Board of Directors may also, from time to time
by resolution, designate a time or times intermediate of the
opening and closing of trading on the New York Stock Exchange on
each day that said Exchange is open for trading as of which the
net asset value of each share of each class of Common Stock of
the corporation shall be determined or estimated.
Any determination or estimation of net asset value as
provided in this subparagraph A shall be effective at the time
as of which such determination or estimation is made.
The net asset value of each share of each class of Common
Stock of the corporation for purposes of the issue of such class
of Common Stock shall be the net asset value which becomes
effective as provided in this Subparagraph A, next succeeding
receipt of the subscription to such share of such class Common
Stock. The net asset value of each share of each class of
Common Stock of the corporation tendered for redemption shall be
the net asset value which becomes effective as provided in this
Subparagraph A, next succeeding the tender of such share of such
class of Common Stock for redemption.
B. The net asset value of each share of each class of
Common Stock of the corporation, as of the close of business on
any day, shall be the quotient obtained by dividing the value at
such close of the net assets belonging to such class (meaning
the assets belonging to such class and any other assets
allocated to such class less the liabilities belonging to such
class and any other liabilities allocated to such class
excluding capital and surplus) of the corporation by the total
number of shares of such class outstanding at such close.
(i) The assets belonging to any class of Common
Stock shall be that portion of the total assets of the
corporation as determined in accordance with the
provisions of Article IV of the Articles of
Incorporation of the corporation. The assets of the
corporation shall be deemed to include (a) all cash on
hand, on deposit, or on call, (b) all bills and notes
and accounts receivable, (c) all shares of stock and
subscription rights and other securities owned or
contracted for by the corporation, other than its own
common stock, (d) all stock and cash dividends and
cash distributions, to be received by the corporation,
and not yet received by it but declared to
stockholders of record on a date on or before the date
as of which the net asset value is being determined,
(e) all interest accrued on any interest-bearing
securities owned by the corporation, and (f) all other
property of every kind and nature including prepaid
expenses; the value of such assets to be determined in
accordance with the corporation's registration
statement filed with the Securities and Exchange
Commission.
(ii) The liabilities belonging to any class of
Common Stock shall be that portion of the total
liabilities of the corporation as determined in
accordance with the provisions of Article IV of the
Articles of Incorporation of the corporation. The
liabilities of the corporation shall be deemed to
include (a) all bills and notes and accounts payable,
(b) all administration expenses payable and/or accrued
(including investment advisory fees), (c) all
contractual obligations for the payment of money or
property including the amount of any unpaid dividend
declared upon the corporation's stock and payable to
stockholders of record on or before the day as of
which the value of the corporation's stock is being
determined, (d) all reserves, if any, authorized or
approved by the Board of Directors for taxes,
including reserves for taxes at current rates based on
any unrealized appreciation in the value of the assets
of the corporation, and (e) all other liabilities of
the corporation of whatever kind and nature except
liabilities represented by outstanding capital stock
and surplus of the corporation.
(iii) For the purposes hereof: (a) shares of
each class of Common Stock subscribed for shall be
deemed to be outstanding as of the time of acceptance
of any subscription and the entry thereof on the books
of the corporation and the net price thereof shall be
deemed to be an asset belonging to such class; and (b)
shares of each class of Common Stock surrendered for
redemption by the corporation shall be deemed to be
outstanding until the time as of which the net asset
value for purposes of such redemption is determined or
estimated.
C. The net asset value of each share of each class of
Common Stock of the corporation, as of any time other than the
close of business on any day, may be determined by applying to
the net asset value as of the close of business on the preceding
business day, computed as provided in Paragraph B of this
Section of these bylaws, such adjustments as are authorized by
or pursuant to the direction of the Board of Directors and
designed reasonably to reflect any material changes in the
market value of securities and other assets held and any other
material changes in the assets or liabilities of the corporation
and in the number of its outstanding shares which shall have
taken place since the close of business on such preceding
business day.
D. In addition to the foregoing, the Board of Directors
is empowered, in its absolute discretion, to establish other
bases or times, or both, for determining the net asset value of
each share of each class of the Common Stock of the corporation.
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
Agreement made this ____ day of ________, 1996 between The
Hennessy Funds, Inc., a Maryland corporation (the "Company"), and The
Hennessy Management Co., L.P., a California limited partnership (the
"Adviser").
W I T N E S S E T H:
WHEREAS, the Company is in the process of registering with the
Securities and Exchange Commission under the Investment Company Act of
1940 (the "Act") as an open-end management investment company consisting
initially of one series, the Hennessy Balanced Fund (the "Fund"); and
WHEREAS, the Company desires to retain the Adviser, which is an
investment adviser registered under the Investment Advisers Act of 1940,
as the investment adviser for the Fund.
NOW, THEREFORE, the Company and the Adviser do mutually promise
and agree as follows:
1. Employment. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund for the
period and on the terms set forth in this Agreement. The Adviser hereby
accepts such employment for the compensation herein provided and agrees
during such period to render the services and to assume the obligations
herein set forth.
2. Authority of the Adviser. The Adviser shall supervise and
manage the investment portfolio of the Fund, and, subject to such policies
as the board of directors of the Company may determine, direct the
purchase and sale of investment securities in the day to day management of
the Fund. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Company or the
Fund in any way or otherwise be deemed an agent of the Company or the
Fund. However, one or more limited partners of the Adviser or one or more
shareholders, officers, directors or employees of the general partner of
the Adviser may serve as directors and/or officers of the Company, but
without compensation or reimbursement of expenses for such services from
the Company. Nothing herein contained shall be deemed to require the
Company to take any action contrary to its Limited Partnership Agreement
or Certificate of Limited Partnership, as either document may be amended,
restated or supplemented from time to time, or any applicable statute or
regulation, or to relieve or deprive the board of directors of the Company
of its responsibility for and control of the affairs of the Fund.
3. Expenses. The Adviser, at its own expense and without
reimbursement from the Company or the Fund, shall furnish office space,
and all necessary office facilities, equipment and executive personnel for
managing the investments of the Fund. The Adviser shall not be required
to pay any expenses of the Fund except as provided herein if the total
expenses borne by the Fund, including the Adviser's fee and the fees paid
to the Fund's Administrator but excluding all federal, state and local
taxes, interest, brokerage commissions and extraordinary items, in any
year exceed that percentage of the average net assets of the Fund for such
year, as determined by valuations made as of the close of each business
day, which is the most restrictive percentage provided by the state laws
of the various states in which the Fund's shares are qualified for sale
or, if the states in which the Fund's shares are qualified for sale impose
no such restrictions, 3%. The expenses of the Fund's operations borne by
the Fund include by way of illustration and not limitation, directors fees
paid to those directors who are not officers of the Company or interested
persons of the Adviser, the costs of preparing and printing registration
statements required under the Securities Act of 1933 and the Act (and
amendments thereto), the expense of registering its 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 stock certificates (if any), director and officer liability
insurance, reports to shareholders, reports to government authorities and
proxy statements, interest charges, taxes, legal expenses, salaries of
administrative and clerical personnel, association membership dues,
auditing and accounting services, insurance premiums, brokerage and other
expenses connected with the execution of portfolio securities
transactions, fees and expenses of the custodian of the Fund's assets,
expenses of calculating the net asset value and repurchasing and redeeming
shares, printing and mailing expenses, charges and expenses of dividend
disbursing agents, registrars and stock transfer agents and the cost of
keeping all necessary shareholder records and accounts.
The Company shall monitor the expense ratio of the Fund on a
monthly basis. If the accrued amount of the expenses of the Fund exceeds
the expense limitation established herein, the Company shall create an
account receivable from the Adviser in the amount of such excess. In such
a situation the monthly payment of the Adviser's fee will be reduced by
the amount of such excess, subject to adjustment month by month during the
balance of the Company's fiscal year if accrued expenses thereafter fall
below the expense limitation.
4. Compensation of the Adviser. For the services to be
rendered by the Adviser hereunder, the Company, through and on behalf of
the Fund, shall pay to the Adviser an advisory fee, paid monthly, based on
the average net assets of the Fund, as determined by valuations made as of
the close of each business day of the month. The monthly advisory fee
shall be 1/12 of 0.85% (0.85% per annum) on the average daily net assets
of the Fund. For any month in which this Agreement is not in effect for
the entire month, such fee shall be reduced proportionately on the basis
of the number of calendar days during which it is in effect and the fee
computed upon the average daily net assets of the business days during
which it is so in effect.
5. Ownership of Shares of the Fund. The Adviser shall not
take an ownership position in the Fund, and shall not permit any of its
partners or any of the shareholders, officers, directors or employees of
its general partner to take a long or short position in the shares of the
Fund, except for the purchase of shares of the Fund for investment
purposes at the same price as that available to the public at the time of
purchase or in connection with the initial capitalization of the Fund.
6. Exclusivity. The services of the Adviser to the Fund
hereunder are not to be deemed exclusive and the Adviser shall be free to
furnish similar services to others as long as the services hereunder are
not impaired thereby. Although the Adviser has agreed to permit the Fund
and the Company to use the name "Hennessy", if they so desire, it is
understood and agreed that the Adviser reserves the right to use and to
permit other persons, firms or corporations, including investment
companies, to use such name, and that the Fund and the Company will not
use such name if the Adviser ceases to be the Fund's sole investment
adviser. During the period that this Agreement is in effect, the Adviser
shall be the Fund's sole investment adviser.
7. Liability. In the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of the Adviser, the Adviser shall not be subject to
liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services
hereunder, or for any losses that may be sustained in the purchase,
holding or sale of any security.
8. Brokerage Commissions. The Adviser, subject to the control
and direction of the Company's Board of Directors, shall have authority
and discretion to select brokers and dealers to execute portfolio
transactions for the Fund and for the selection of the markets on or in
which the transactions will be executed. The Adviser may cause the Fund
to pay a broker-dealer which provides brokerage and research services, as
such services are defined in Section 28(e) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to the Adviser a commission for effecting a
securities transaction in excess of the amount another broker-dealer would
have charged for effecting such transaction, if the Adviser determines in
good faith that such amount of commission is reasonable in relation to the
value of brokerage and research services provided by the executing
broker-dealer viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he
exercises investment discretion (as defined in Section 3(a)(35) of the
Exchange Act). The Adviser shall provide such reports as the Company's
Board of Directors may reasonable request with respect to the Fund's total
brokerage and the manner in which that brokerage was allocated.
9. Code of Ethics. The Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1 under the Act and has
provided the Company with a copy of the code of ethics and evidence of its
adoption. Upon the written request of the Company, the Adviser shall
permit the Company to examine any reports required to be made by the
Adviser pursuant to Rule 17j-1(c)(1) under the Act.
10. Amendments. This Agreement may be amended by the mutual
consent of the parties; provided, however, that in no event may it be
amended without the approval of the board of directors of the Company in
the manner required by the Act, and by the vote of the majority of the
outstanding voting securities of the Fund, as defined in the Act.
11. Termination. This Agreement may be terminated at any time,
without the payment of any penalty, by the board of directors of the
Company or by a vote of the majority of the outstanding voting securities
of the Fund, as defined in the Act, upon giving sixty (60) days' written
notice to the Adviser. This Agreement may be terminated by the Adviser at
any time upon the giving of sixty (60) days' written notice to the
Company. This Agreement shall terminate automatically in the event of its
assignment (as defined in Section 2(a)(4) of the Act). Subject to prior
termination as hereinbefore provided, this Agreement shall continue in
effect for an initial period beginning as of the date hereof and ending
___________, 1998 and indefinitely thereafter, but only so long as the
continuance after such initial period is specifically approved annually by
(i) the board of directors of the Company or by the vote of the majority
of the outstanding voting securities of the Fund, as defined in the Act,
and (ii) the board of directors of the Company in the manner required by
the Act, provided that any such approval may be made effective not more
than sixty (60) days thereafter.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
THE HENNESSY MANAGEMENT CO., L.P.
By: Edward J. Hennessy, Incorporated,
General Partner
By:
President
THE HENNESSY FUNDS, INC.
By:
President
CUSTODIAN AGREEMENT
THIS AGREEMENT made on ____________, 1995, between Hennessy
Funds, Inc., a Maryland Corporation currently sponsoring The Hennessy
Balanced Fund (hereinafter called the ("Fund"), and FIRSTAR TRUST COMPANY,
a corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian").
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. Definitions
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights
to receive, purchase or subscribe for the same, or evidencing or
representing any other rights or interests therein, or in any property or
assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by
any two of the President, a Vice President, the Secretary and the
Treasurer of the Fund, or any other persons duly authorized to sign by the
Board of Directors.
The word "Board" shall mean Board of Directors of Hennessy
Funds, Inc.
2. Names, Titles, and Signatures of the Fund's Officers
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board
of Directors, together with any changes which may occur from time to time.
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by
Custodian acting pursuant to the terms of this Agreement. Custodian shall
hold in such account or accounts, subject to the provisions hereof, all
cash received by it from or for the account of the Fund. Custodian shall
make payments of cash to, or for the account of, the Fund from such cash
only:
(a) for the purchase of securities for the portfolio of the
Fund upon the delivery of such securities to Custodian, registered in the
name of the Fund or of the nominee of Custodian referred to in Section 7
or in proper form for transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or upon proper
instructions from the Hennessy Funds, Inc.;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without limitation
thereto, fees for legal, accounting, auditing and custodian services and
expenses for printing and postage);
(d) for payments in connection with the conversion, exchange or
surrender of securities owned or subscribed to by the Fund held by or to
be delivered to Custodian; or
(e) for other proper corporate purposes certified by resolution
of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating
that it is for a purpose permitted under the terms of items (a), (b), (c),
or (d) of this Subsection A, and also, in respect of item (e), upon
receipt of an officers' certificate specifying the amount of such payment,
setting forth the purpose for which such payment is to be made, declaring
such purpose to be a proper corporate purpose, and naming the person or
persons to whom such payment is to be made, provided, however, that an
officers' certificate need not precede the disbursement of cash for the
purpose of purchasing a money market instrument, or any other security
with same or next-day settlement, if the President, a Vice President, the
Secretary or the Treasurer of the Fund issues appropriate oral or
facsimile instructions to Custodian and an appropriate officers'
certificate is received by Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by
Custodian for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from
time to time by the Fund and the custodian in the amount of checks
received in payment for shares of the Fund which are deposited into the
Fund's account.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or
securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian
agrees to transfer, exchange or deliver securities held by it hereunder
only:
(a) for sales of such securities for the account of the Fund
upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities
in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities
alone or other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or
otherwise;
(e) upon conversion of such securities pursuant to their terms
into other securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common stock
of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange
therefore shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose
permitted under the terms of items (a), (b), (c), (d), (e), (f), (g), or
(h) of this Section 5 and also, in respect of item (i), upon receipt of an
officers' certificate specifying the securities to be delivered, setting
forth the purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the person or persons
to whom delivery of such securities shall be made, provided, however, that
an officers' certificate need not precede any such transfer, exchange or
delivery of a money market instrument, or any other security with same or
next-day settlement, if the President, a Vice President, the Secretary or
the Treasurer of the Fund issues appropriate oral or facsimile
instructions to Custodian and an appropriate officers' certificate is
received by Custodian within two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by it upon such
payment for the account of the Fund; (b) collect interest and cash
dividends received, with notice to the Fund, for the account of the Fund;
(c) hold for the account of the Fund hereunder all stock dividends, rights
and similar securities issued with respect to any securities held by it
hereunder; and (d) execute, as agent on behalf of the Fund, all necessary
ownership certificates required by the Internal Revenue Code or the Income
Tax Regulations of the United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer
form, in the name of a registered nominee of Custodian as defined in the
Internal Revenue Code and any Regulations of the Treasury Department
issued hereunder or in any provision of any subsequent federal tax law
exempting such transaction from liability for stock transfer taxes, and
shall execute and deliver all such certificates in connection therewith as
may be required by such laws or regulations or under the laws of any
state. Custodian shall use its best efforts to the end that the specific
securities held by it hereunder shall be at all times identifiable in its
records.
The Fund shall from time to time furnish to Custodian
appropriate instruments to enable Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee,
any securities which it may hold for the account of the Fund and which may
from time to time be registered in the name of the Fund.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with
relation to such securities, such proxies to be executed by the registered
holder of such securities (if registered otherwise than in the name of the
Fund), but without indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder,
and for all other necessary and proper disbursements and expenses made or
incurred by Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement
as may be required under the provisions of the Internal Revenue Code and
any Regulations of the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exemptable transfers and/or
deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its services
pursuant to this Agreement such compensation as may from time to time be
agreed upon in writing between the two parties. Until modified in writing,
such compensation shall be as set forth in Exhibit A attached hereto.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution
of the Board, and may rely on the genuineness of any such document which
it may in good faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) incurred or assessed against it or by
its nominee in connection with the performance of this Agreement, except
such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct.
The Custodian agrees to indemnify and hold harmless the Fund
from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it in connection
with the performance of this Agreement, except such as may arise from its
own negligent action, negligent failure to act or willful misconduct.
Custodian is authorized to charge any account of the Fund for
such items. In the event of any advance of cash for any purpose made by
Custodian resulting from orders or instructions of the Fund, or in the
event that Custodian or its nominee shall incur or be assessed any taxes,
charges, expenses, assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may arise from its or
its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the Fund
shall be security therefore.
11. Subcustodians
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so
long as any such bank or trust company is a bank or trust company
organized under the laws of any state of the United States, having an
aggregate capital, surplus and undivided profit, as shown by its last
published report, of not less than Two Million Dollars ($2,000,000) and
provided further that, if the Custodian utilizes the services of a
Subcustodian, the Custodian shall remain fully liable and responsible for
any losses caused to the Fund by the Subcustodian as fully as if the
Custodian was directly responsible for any such losses under the terms of
the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to
the Fund's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Fund periodically as agreed upon
with a statement summarizing all transactions and entries for the account
of Fund. Custodian shall furnish to the Fund, at the end of every month,
a list of the portfolio securities showing the aggregate cost of each
issue. The books and records of Custodian pertaining to its actions under
this Agreement shall be open to inspection and audit at reasonable times
by officers of, and of auditors employed by, the Fund.
13. Termination or Assignment
This Agreement may be terminated by the Fund, or by Custodian,
on ninety (90) days notice, given in writing and sent by registered mail
to Custodian at P.O. Box 2054, Milwaukee, Wisconsin 53201, or to the Fund
at _________________, as the case may be. Upon any termination of this
Agreement, pending appointment of a successor to Custodian or a vote of
the shareholders of the Fund to dissolve or to function without a
custodian of its cash, securities and other property, Custodian shall not
deliver cash, securities or other property of the Fund to the Fund, but
may deliver them to a bank or trust company of its own selection, having
an aggregate capital, surplus and undivided profits, as shown by its last
published report of not less than Two Million Dollars ($2,000,000) as a
Custodian for the Fund to be held under terms similar to those of this
Agreement, provided, however, that Custodian shall not be required to make
any such delivery or payment until full payment shall have been made by
the Fund of all liabilities constituting a charge on or against the
properties then held by Custodian or on or against Custodian, and until
full payment shall have been made to Custodian of all its fees,
compensation, costs and expenses, subject to the provisions of Section 10
of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board
of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to prevent the
use by Custodian of a central securities clearing agency or securities
depository, provided, however, that Custodian and the central securities
clearing agency or securities depository meet all applicable federal and
state laws and regulations, and the Board of Directors of the Fund
approves by resolution the use of such central securities clearing agency
or securities depository.
15. Records
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as
amended, or the rules and regulations promulgated thereunder, Custodian
agrees to make any such records available to the Fund upon request and to
preserve such records for the periods prescribed in Rule 31a-2 under the
Investment Company Act of 1940, as amended.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and their respective corporate seals to be
affixed hereto as of the date first above-written by their respective
officers thereunto duly authorized.
Executed in several counterparts, each of which is an original.
HENNESSY FUNDS, INC. FIRSTAR TRUST COMPANY
By: By:
Vice President
Attest: Attest:
Assistant Secretary
Fund Administration Servicing Agreement
This Agreement is made and entered into on this _______ day of
____________, 1995, by and between Hennessy Funds, Inc., currently
sponsoring the Hennessy Balanced Fund (hereinafter referred to as the
"Fund") and Firstar Trust Company, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as "FTC").
WHEREAS, The Fund is an open-ended management investment company
which is registered under the Investment Company Act of 1940;
WHEREAS, FTC is a trust company and, among other things, is in
the business of providing fund administration services for the benefit of
its customers;
NOW, THEREFORE, the Fund and FTC do mutually promise and agree
as follows:
I. Appointment of Administrator
The Fund hereby appoints FTC as Administrator of the Fund on the
terms and conditions set forth in this Agreement, and FTC hereby accepts
such appointment and agrees to perform the services and duties set forth
in this Agreement in consideration of the compensation provided for
herein.
II. Duties and Responsibilities of FTC
A. General Fund Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director and
officers liability coverage, and making the necessary SEC filings relating
thereto
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit
process
c. Provide office facilities
4. Assist in overall operations of the Fund
B. Compliance
1. Regulatory Compliance
a. Periodically monitor compliance with Investment
Company Act of 1940 requirements
(1) Asset diversification tests
(2) Total return and SEC yield calculations
(3) Maintenance of books and records under Rule 31a-3
(4) Code of ethics
b. Periodically monitor Fund's compliance with the
policies' investment limitations of the Fund as set forth in its
prospectus and statement of additional information
2. Blue Sky Compliance
a. Prepare and file with the appropriate state securities
authorities any and all required compliance filings relating to the
registration of the securities of the Fund so as to enable the Fund to
make a continuous offering of its shares
b. Monitor status and maintain registrations in each
state
3. SEC Registration and Reporting
a. Assisting Fund's counsel in updating prospectus and
statement of additional information; and in preparing proxy statements,
and Rule 248-2 notice,
b. Annual and semiannual reports
4. IRS Compliance
a. Periodically monitor Fund's status as a regulated
investment company under Subchapter M through review of the following:
(1) Asset diversification requirements
(2) Qualifying income requirements
(3) Distribution requirements
b. Monitor short short testing
c. Calculate required distributions (including excise tax
distributions)
C. Financial Reporting
1. Provide financial data required by fund prospectus and
statement of additional information
2. Prepare financial reports for shareholders, the board, the
SEC, and independent auditors
3. Supervise the Fund's Custodian and Fund Accountants in the
maintenance of the Fund's general ledger and in the preparation of the
Fund's financial statements including oversight of expense accruals and
payments of the determination of net asset of the Fund's net assets and of
the Fund's shares, and of the declaration and payment of dividends and
other distributions to shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal and
state tax returns including forms 1120/8610 with any necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate
shareholders
III. Compensation
The Fund agrees to pay FTC for performance of the duties listed
in this Agreement and the fees and out-of-pocket expenses as set forth in
the attached Schedule A.
These fees may be changed from time to time, subject to mutual
written Agreement between the Fund and FTC.
The Fund agrees to pay all fees and reimbursable expenses within
ten (10) business days following the mailing of the billing notice.
IV. Performance of Service; Limitation of Liability
A. FTC shall exercise reasonable care in the performance of
its duties under this Agreement. FTC shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of communication or
power supplies beyond FTC's control, except a loss resulting from FTC's
refusal or failure to comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in the performance of
its duties under this Agreement. Notwithstanding any other provision of
this Agreement, the Fund shall indemnify and hold harmless FTC from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which FTC may sustain or incur or
which may be asserted against FTC by any person arising out of any action
taken or omitted to be taken by it in performing the services hereunder
(i) in accordance with the foregoing standards, or (ii) in reliance upon
any written or oral instruction provided to FTC by any duly authorized
officer of the Fund, such duly authorized officer to be included in a list
of authorized officers furnished to FTC and as amended from time to time
in writing by resolution of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FTC shall take all
reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FTC's control. FTC will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of FTC. FTC agrees
that it shall, at all times, have reasonable contingency plans with
appropriate parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate equipment
is available. Representatives of the Fund shall be entitled to inspect
FTC's premises and operating capabilities at any time during regular
business hours of FTC, upon reasonable notice to FTC.
Regardless of the above, FTC reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in
this section shall apply, it is understood that if in any case the Fund
may be asked to indemnify or hold FTC harmless, the Fund shall be fully
and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that FTC will use all reasonable
care to notify the Fund promptly concerning any situation which presents
or appears likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option to
defend FTC against any claim which may be the subject of this
indemnification. In the event that the Fund so elects, it will so notify
FTC and thereupon the Fund shall take over complete defense of the claim,
and FTC shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this section. FTC
shall in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify FTC except with the Fund's prior
written consent.
C. FTC shall indemnify and hold the Fund harmless from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which may be asserted against the
Fund by any person arising out of any action taken or omitted to be taken
by FTC as a result of FTC's refusal or failure to comply with the terms of
this Agreement, its bad faith, negligence, or willful misconduct.
V. Confidentiality
FTC shall handle, in confidence, all information relating to the
Fund's business which is received by FTC during the course of rendering
any service hereunder.
VI. Data Necessary to Perform Service
The Fund or its agent, which may be FTC, shall furnish to FTC
the data necessary to perform the services described herein at times and
in such form as mutually agreed upon.
VII. Terms of Agreement
This Agreement shall become effective as of the date hereof and,
unless sooner terminated as provided herein, shall continue automatically
in effect for successive annual periods. The Agreement may be terminated
by either party upon giving ninety (90) days prior written notice to the
other party or such shorter period as is mutually agreed upon by the
parties.
VIII. Duties in the Event of Termination
In the event that, in connection with termination, a successor
to any of FTC's duties or responsibilities hereunder is designated by the
Fund by written notice to FTC, FTC will promptly, upon such termination
and at the expense of the Fund, transfer to such successor all relevant
books, records, correspondence, and other data established or maintained
by FTC under this Agreement in a form reasonably acceptable to the Fund
(if such form differs from the form in which FTC has maintained, the Fund
shall pay any expenses associated with transferring the data to such
form), and will cooperate in the transfer of such duties and
responsibilities, including provision for assistance from FTC's personnel
in the establishment of books, records, and other data by such successor.
IX. Choice of Law
This Agreement shall be construed in accordance with the laws of
the State of Wisconsin.
X. Notices
Notices of any kind to be given by either party to the other
party shall be in writing and shall be duly given if mailed or delivered
as follows: "Notice to FTC shall be sent to ___________________, and
notice to Fund shall be sent to ____________.
XI. Records
FTC shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Fund but not inconsistent with the rules
and regulations of appropriate government authorities, in particular,
Section 31 of the Investment Company Act of 1940 as amended (the
"Investment Company Act"), and the rules thereunder. FTC agrees that all
such records prepared or maintained by FTC relating to the services to be
performed by FTC hereunder are the property of the Fund and will be
preserved, maintained, and made available with such section and rules of
the Investment Company Act and will be promptly surrendered to the Fund on
and in accordance with its request.
HENNESSY FUNDS, INC. FIRSTAR TRUST COMPANY
By: By:
Attest: Attest:
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this _______ day of
____________, 1995, by and between Hennessy Funds, Inc., currently
sponsoring the Hennessy Balanced Fund (hereinafter referred to as the
"Fund") and Firstar Trust Company, a corporation organized under the laws
of the State of Wisconsin (hereinafter referred to as the "Agent").
WHEREAS, the Fund is an open-ended management investment company
which is registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things,
is in the business of administering transfer and dividend disbursing agent
functions for the benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and
agree as follows:
1. Terms of Appointment; Duties of the Agent
Subject to the terms and conditions set forth in this Agreement,
the Fund hereby employs and appoints the Agent to act as transfer agent
and dividend disbursing agent.
The Agent shall perform all of the customary services of a
transfer agent and dividend disbursing agent, and as relevant, agent in
connection with accumulation, open account or similar plans (including
without limitation any periodic investment plan or periodic withdrawal
program), including but not limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
C. Process redemption requests received in good order;
D. Pay monies in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the
shareowner's instructions;
F. Process exchanges between funds within the same family of
funds;
G. Issue and/or cancel certificates as instructed; replace
lost, stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and
distributions declared by the Fund;
I. Make changes to shareholder records, including, but not
limited to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain,
pursuant to Section Rule 17ad-10(e), a record of the total number of
shares of the Fund which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and
other appropriate information returns required with respect to dividends
and distributions for all shareholders;
N. Provide shareholder account information upon request and
prepare and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable transactions as
agreed upon with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to
monitor the total number of shares sold in each state. In addition, the
Fund shall identify to the Agent in writing those transactions and assets
to be treated as exempt from the Blue Sky reporting to the Fund for each
state. The responsibility of the Agent for the Fund's Blue Sky state
registration status is solely limited to the initial compliance by the
Fund and the reporting of such transactions to the Fund.
2. Compensation
The Fund agrees to pay the Agent for performance of the duties
listed in this Agreement; the fees and out-of-pocket expenses include, but
are not limited to the following: printing, postage, forms, stationery,
record retention, mailing, insertion, programming, labels, shareholder
lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to
time subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within
ten (10) business days following the mailing of the billing notice.
3. Representations of Agent
The Agent represents and warrants to the Fund that:
A. It is a trust company duly organized, existing and in good
standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Securities
Exchange Act of 1934 as amended.
C. It is duly qualified to carry on its business in the state
of Wisconsin;
D. It is empowered under applicable laws and by its charter
and bylaws to enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to
authorize it to enter and perform this Agreement; and
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations
under this Agreement.
G. It will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the Investment
Company Act of 1940, as amended, and any laws, rules, and regulations of
governmental authorities having jurisdiction.
4. Representations of the Fund
The Fund represents and warrants to the Agent that:
A. The Fund is an open-ended diversified investment company
under the Investment Company Act of 1940;
B. The Fund is a corporation organized, existing, and in good
standing under the laws of Maryland;
C. The Fund is empowered under applicable laws and by its
Corporate Charter and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Corporate Charter
have been taken to authorize it to enter into and perform this Agreement;
E. The Fund will comply with all applicable requirements of
the Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of 1940, as amended, and any laws, rules and
regulations of governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act of 1933
is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all shares of the Fund being offered for sale.
5. Covenants of Fund and Agent
The Fund shall furnish the Agent a certified copy of the
resolution of the Board of Directors of the Fund authorizing the
appointment of the Agent and the execution of this Agreement. The Fund
shall provide to the Agent a copy of the Corporate Charter, bylaws of the
Corporation, and all amendments.
The Agent shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To
the extent required by Section 31 of the Investment Company Act of 1940,
as amended, and the rules thereunder, the Agent agrees that all such
records prepared or maintained by the Agent relating to the services to be
performed by the Agent hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such section
and rules and will be surrendered to the Fund on and in accordance with
its request.
6. Indemnification; Remedies Upon Breach
The Agent shall exercise reasonable care in the performance of
its duties under this Agreement. The Agent shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund
in connection with matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the failure of
communication or power supplies beyond the Agent's control, except a loss
resulting from the Agent's refusal or failure to comply with the terms of
this Agreement or from bad faith, negligence, or willful misconduct on its
part in the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, the Fund shall
indemnify and hold harmless the Agent from and against any and all claims,
demands, losses, expenses, and liabilities (whether with or without basis
in fact or law) of any and every nature (including reasonable attorneys'
fees) which the Agent may sustain or incur or which may be asserted
against the Agent by any person arising out of any action taken or omitted
to be taken by it in performing the services hereunder (i) in accordance
with the foregoing standards, or (ii) in reliance upon any written or oral
instruction provided to the Agent by any duly authorized officer of the
Fund, such duly authorized officer to be included in a list of authorized
officers furnished to the Agent and as amended from time to time in
writing by resolution of the Board of Directors of the Fund.
Further, the Fund will indemnify and hold the Agent harmless
against any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) resulting from any claim,
demand, action, or suit as a result of the negligence of the Fund or the
principal underwriter (unless contributed to by the Agent's breach of this
Agreement or other Agreements between the Fund and the Agent, or the
Agent's own negligence or bad faith); or as a result of the Agent acting
upon telephone instructions relating to the exchange or redemption of
shares received by the Agent and reasonably believed by the Agent under a
standard of care customarily used in the industry to have originated from
the record owner of the subject shares; or as a result of acting in
reliance upon any genuine instrument or stock certificate signed,
countersigned, or executed by any person or persons authorized to sign,
countersign, or execute the same.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, the Agent shall take
all reasonable steps to minimize service interruptions for any period that
such interruption continues beyond the Agent's control. The Agent will
make every reasonable effort to restore any lost or damaged data and
correct any errors resulting from such a breakdown at the expense of the
Agent. The Agent agrees that it shall, at all times, have reasonable
contingency plans with appropriate parties, making reasonable provision
for emergency use of electrical data processing equipment to the extent
appropriate equipment is available. Representatives of the Fund shall be
entitled to inspect the Agent's premises and operating capabilities at any
time during regular business hours of the Agent, upon reasonable notice to
the Agent.
Regardless of the above, the Agent reserves the right to
reprocess and correct administrative errors at its own expense.
In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the Fund may be
asked to indemnify or hold the Agent harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Agent will use all
reasonable care to notify the Fund promptly concerning any situation which
presents or appears likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option to
defend the Agent against any claim which may be the subject of this
indemnification. In the event that the Fund so elects, it will so notify
the Agent and thereupon the Fund shall take over complete defense of the
claim, and the Agent shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this section.
The Agent shall in no case confess any claim or make any compromise in any
case in which the Fund will be asked to indemnify the Agent except with
the Fund's prior written consent.
The Agent shall indemnify and hold the Fund harmless from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which may be asserted against the
Fund by any person arising out of any action taken or omitted to be taken
by the Agent as a result of the Agent's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence, or willful
misconduct.
7. Confidentiality
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and
its shareholders and shall not be disclosed to any other party, except
after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where
the Agent may be exposed to civil or criminal contempt proceedings for
failure to comply after being requested to divulge such information by
duly constituted authorities.
8. Records
The Agent shall keep records relating to the services to be
performed hereunder, in the form and manner, and for such period as it may
deem advisable and is agreeable to the Fund but not inconsistent with the
rules and regulations of appropriate government authorities, in
particular, Section 31 of The Investment Company Act of 1940 as amended
(the "Investment Company Act"), and the rules thereunder. The Agent
agrees that all such records prepared or maintained by The Agent relating
to the services to be performed by The Agent hereunder are the property of
the Fund and will be preserved, maintained, and made available with such
section and rules of the Investment Company Act and will be promptly
surrendered to the Fund on and in accordance with its request.
9. Wisconsin Law to Apply
This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the state of
Wisconsin.
10. Amendment, Assignment, Termination and Notice
A. This Agreement may be amended by the mutual written consent
of the parties.
B. This Agreement may be terminated upon ninety (90) day's
written notice given by one party to the other.
C. This Agreement and any right or obligation hereunder may
not be assigned by either party without the signed, written consent of the
other party.
D. Any notice required to be given by the parties to each
other under the terms of this Agreement shall be in writing, addressed and
delivered, or mailed to the principal place of business of the other
party. If to the agent, such notice should to be sent to _______________.
If to the Fund, such notice should be sent to ________________.
E. In the event that the Fund gives to the Agent its written
intention to terminate and appoint a successor transfer agent, the Agent
agrees to cooperate in the transfer of its duties and responsibilities to
the successor, including any and all relevant books, records and other
data established or maintained by the Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and
material will be paid by the Fund.
HENNESSY FUNDS, INC. FIRSTAR TRUST COMPANY
By: By:
Attest: Attest:
Assistant Secretary
FUND ACCOUNTING SERVICING AGREEMENT
This contract between Hennessy Funds, Inc., a Maryland
Corporation currently sponsoring the Hennessy Balanced Fund, hereinafter
called the "Fund," and Firstar Trust Company, a Wisconsin corporation,
hereinafter called "FTC," is entered into on this _________ day of
______________, 1995.
WHEREAS, Hennessy Funds, Inc., is an open-ended management
investment company registered under the Investment Company Act of 1940;
and
WHEREAS, Firstar Trust Company ("FTC") is in the business of
providing, among other things, mutual fund accounting services to
investment companies;
NOW, THEREFORE, the parties do mutually promise and agree as
follows:
1. Services. FTC agrees to provide the following mutual fund
accounting services to the Fund:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis
using security trade information communicated from the investment manager
on a timely basis.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Directors and apply those prices to the
portfolio positions. For those securities where market quotations are not
readily available, the Board of Directors shall approve, in good faith,
the method for determining the fair value for such securities.
(3) Identify interest and dividend accrual balances as of
each valuation date and calculate gross earnings on investments for the
accounting period.
(4) Determine gain/loss on security sales and identify
them as to short-short, short- or long-term status; account for periodic
distributions of gains or losses to shareholders and maintain
undistributed gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Fund as to methodology, rate or dollar amount.
(2) Record payments for Fund expenses upon receipt of
written authorization from the Fund.
(3) Account for fund expenditures and maintain expense
accrual balances at the level of accounting detail, as agreed upon by FTC
and the Fund.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share activity as
reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Fund.
(3) Determine net investment income (earnings) for the
Fund as of each valuation date. Account for periodic distributions of
earnings to shareholders and maintain undistributed net investment income
balances as of each valuation date.
(4) Maintain a general ledger for the Fund in the form as
agreed upon.
(5) For each day the Fund is open as defined in the
prospectus, determine the net asset value of the according to the
accounting policies and procedures set forth in the prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of fund operation at such
time as required by the nature and characteristics of the Fund.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as agreed upon from time to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment
portfolio of the Fund to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using
the tax lot relief method designated by the Fund.
(4) Provide the necessary financial information to support
the taxable components of income and capital gains distributions to the
transfer agent to support tax reporting to the shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the fund accounting records
available to Hennessy Funds, Inc., the Securities and Exchange Commission,
and the outside auditors.
(2) Maintain accounting records according to the
Investment Company Act of 1940 and regulations provided thereunder.
2. Pricing of Securities. For each valuation date, obtain prices
from a pricing source selected by FTC but approved by the Fund's Board and
apply those prices to the portfolio positions. For those securities where
market quotations are not readily available, the Fund's Board shall
approve, in good faith, the method for determining the fair value for such
securities.
If the Fund desires to provide a price which varies from the
pricing source, the Fund shall promptly notify and supply FTC with the
valuation of any such security on each valuation date. All pricing
changes made by the Fund will be in writing and must specifically identify
the securities to be changed by CUSIP, name of security, new price or rate
to be applied, and, if applicable, the time period for which the new price
is effective.
3. Changes in Accounting Procedures. Any resolution passed by the
Board of Directors that affects accounting practices and procedures under
this agreement shall be effective upon written receipt and acceptance by
the FTC.
4. Changes in Equipment, Systems, Service, Etc. FTC reserves the
right to make changes from time to time, as it deems advisable, relating
to its services, systems, programs, rules, operating schedules and
equipment, so long as such changes do not adversely affect the service
provided to the Fund under this Agreement.
5. Compensation. FTC shall be compensated for providing the
services set forth in this Agreement in accordance with the Fee Schedule
attached hereto as Exhibit A and as mutually agreed upon and amended from
time to time.
6. Performance of Service.
A. FTC shall exercise reasonable care in the performance of
its duties under this Agreement. FTC shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which this Agreement relates, including losses
resulting from mechanical breakdowns or the failure of communication or
power supplies beyond FTC's control, except a loss resulting from FTC's
refusal or failure to comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in the performance of
its duties under this Agreement. Notwithstanding any other provision of
this Agreement, the Fund shall indemnify and hold harmless FTC from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which FTC may sustain or incur or
which may be asserted against FTC by any person arising out of any action
taken or omitted to be taken by it in performing the services hereunder
(i) in accordance with the foregoing standards, or (ii) in reliance upon
any written or oral instruction provided to FTC by any duly authorized
officer of the Fund, such duly authorized officer to be included in a list
of authorized officers furnished to FTC and as amended from time to time
in writing by resolution of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FTC shall take all
reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FTC's control. FTC will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of FTC. FTC agrees
that it shall, at all times, have reasonable contingency plans with
appropriate parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate equipment
is available. Representatives of the Fund shall be entitled to inspect
FTC's premises and operating capabilities at any time during regular
business hours of FTC, upon reasonable notice to FTC.
Regardless of the above, FTC reserves the right to reprocess and
correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in
this section shall apply, it is understood that if in any case the Fund
may be asked to indemnify or hold FTC harmless, the Fund shall be fully
and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that FTC will use all reasonable
care to notify the Fund promptly concerning any situation which presents
or appears likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option to
defend FTC against any claim which may be the subject of this
indemnification. In the event that the Fund so elects, it will so notify
FTC and thereupon the Fund shall take over complete defense of the claim,
and FTC shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this section. FTC
shall in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify FTC except with the Fund's prior
written consent.
C. FTC shall indemnify and hold the Fund harmless from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which may be asserted against the
Fund by any person arising out of any action taken or omitted to be taken
by FTC as a result of FTC's refusal or failure to comply with the terms of
this Agreement, its bad faith, negligence, or willful misconduct.
7. No Agency Relationship. Nothing herein contained shall be
deemed to authorize or empower FTC to act as agent for any other party to
this Agreement, or to conduct business in the name of, or for the account
of, any other party to this Agreement.
8. Records. FTC shall keep records relating to the services to be
performed hereunder, in the form and manner, and for such period as it may
deem advisable and is agreeable to the Fund but not inconsistent with the
rules and regulations of appropriate government authorities, in
particular, Section 31 of The Investment Company Act of 1940 as amended
(the "Investment Company Act"), and the rules thereunder. FTC agrees that
all such records prepared or maintained by FTC relating to the services to
be performed by FTC hereunder are the property of the Fund and will be
preserved, maintained, and made available with such section and rules of
the Investment Company Act and will be promptly surrendered to the Fund on
and in accordance with its request.
9. Confidentiality. FTC shall handle in confidence all information
relating to the Fund's business, which is received by FTC during the
course of rendering any service hereunder.
10. Data Necessary to Perform Services. The Fund or its agent,
which may be FTC, shall furnish to FTC the data necessary to perform the
services described herein at times and in such form as mutually agreed
upon.
11. Notification of Error. The Fund will notify FTC of any
balancing or control error caused by FTC within three (3) business days
after receipt of any reports rendered by FTC to the Fund, or within three
(3) business days after discovery of any error or omission not covered in
the balancing or control procedure, or within three (3) business days of
receiving notice from any shareholder.
12. Term of Agreement. This Agreement may be terminated by either
party upon giving ninety (90) days prior written notice to the other party
or such shorter period as is mutually agreed upon by the parties.
However, this Agreement may be replaced or modified by a subsequent
agreement between the parties.
13. Duties in the Event of Termination. In the event that in
connection with termination a Successor to any of FTC's duties or
responsibilities hereunder is designated by Hennessy Funds, Inc. by
written notice to FTC, FTC will promptly, upon such termination and at the
expense of Hennessy Funds, Inc., transfer to such Successor all relevant
books, records, correspondence and other data established or maintained by
FTC under this Agreement in a form reasonably acceptable to Hennessy
Funds, Inc. (if such form differs from the form in which FTC has
maintained the same, Hennessy Funds, Inc. shall pay any expenses
associated with transferring the same to such form), and will cooperate in
the transfer of such duties and responsibilities, including provision for
assistance from FTC's personnel in the establishment of books, records and
other data by such successor.
14. Notices. Notices of any kind to be given by either party to the
other party shall be in writing and shall be duly given if mailed or
delivered as follows: "Notice to FTC shall be sent to
___________________, and notice to the Fund shall be sent to
___________________.
15. Choice of Law. This Agreement shall be construed in accordance
with the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
ATTEST: FIRSTAR TRUST COMPANY
By: By:
ATTEST: HENNESSY FUNDS, INC.
By: By:
EXHIBIT 10
FOLEY & LARDNER
A T T O R N E Y S A T L A W
FIRSTAR CENTER
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202-5367
A MEMBER OF GLOBALEX
WITH MEMBER OFFICES IN
MADISON BERLIN
CHICAGO TELEPHONE (414) 271-2400 BRUSSELS
WASHINGTON, D.C. DRESDEN
JACKSONVILLE TELEX 26-819 FRANKFURT
ORLANDO LONDON
TALLAHASSEE (FOLEY LARD MIL) PARIS
TAMPA SINGAPORE
WEST PALM BEACH FACSIMILE (414) 297-4900 STUTTGART
TAIPEI
WRITER'S DIRECT LINE
January __, 1996
The Hennessy Funds, Inc.
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, CA 94945
Gentlemen:
We have acted as counsel for you in connection with the
preparation of a Registration Statement on Form N-1A relating to the sale
by you of an indefinite amount of The Hennessy Funds, Inc. Common Stock,
$0.0001 par value (such Common Stock being hereinafter referred to as the
"Stock") in the manner set forth in the Registration Statement to which
reference is made. In this connection we have examined: (a) the
Registration Statement on Form N-1A; (b) your Articles of Incorporation
and Bylaws, as amended to date; (c) corporate proceedings relative to the
authorization for issuance of the Stock; and (d) such other proceedings,
documents and records as we have deemed necessary to enable us to render
this opinion.
Based upon the foregoing, we are of the opinion that the shares
of Stock when sold as contemplated in the Registration Statement will be
legally issued, fully paid and nonassessable.
We hereby consent to the use of this opinion as an exhibit to
the Form N-1A Registration Statement. In giving this consent, we do not
admit that we are experts within the meaning of Section 11 of the
Securities Act of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
FOLEY & LARDNER
EXHIBIT 13
SUBSCRIPTION AGREEMENT
The Hennessy Funds, Inc.
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, California 94945
Gentlemen:
The undersigned hereby subscribes to 10,000 shares of the Common
Stock, $0.0001 par value of The Hennessy Funds, Inc., and agrees to pay to
said corporation the sum of $100,000 in cash.
It is understood that upon acceptance hereof by said corporation
a certificate or certificates representing the shares subscribed for shall
be issued to the undersigned and that said shares shall be deemed to be
fully paid and nonassessable.
The undersigned agrees that the shares are being purchased for
investment with no present intention of reselling or redeeming said
shares.
Dated and effective as of this ____ day of February, 1996.
THE HENNESSY MANAGEMENT CO., L.P.
By: Edward J. Hennessy, Incorporated
By: ________________________________
Neil J. Hennessy, President
The foregoing subscription is hereby accepted. Dated and
effective as of this _____ day of February, 1996.
THE HENNESSY FUNDS, INC.
By: ______________________________________
Neil J. Hennessy, President
EXHIBIT 14
THE HENNESSY FUNDS, INC.
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing an
Individual Retirement Account (under Section 408(a) of the Internal
Revenue Code) between the Depositor and the Custodian.
ARTICLE I
The Custodian may accept additional cash contributions on behalf
of the Depositor for a tax year of the Depositor. The total cash
contributions are limited to $2,000 for the tax year unless the
contribution is a rollover contribution described in Section 402(c) (but
only after December 31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an
employer contribution to a simplified employee pension plan as described
in Section 408(k). Rollover contributions before January 1, 1993, include
rollovers described in Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4),
403(b)(8), 408(d)(3), or an employer contribution to a simplified employee
pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account
is nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life
insurance contracts, nor may the assets of the custodial account be
commingled with other property except in a common trust fund or common
investment fund (within the meaning of Section 408(a)(5)).
2. No part of the custodial funds may be invested in
collectibles (within the meaning of Section 408(m)) except as otherwise
permitted by Section 408(m)(3) which provides an exception for certain
gold and silver coins and coins issued under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the
contrary, the distribution of the Depositor's interest in the custodial
account shall be made in accordance with the following requirements and
shall otherwise comply with Section 408(a)(6) and Proposed Regulations
Section 1.408-8, including the incidental death benefit provisions of
Proposed Regulations Section 1.401(a)(9)-2, the provisions of which are
herein incorporated by reference.
2. Unless otherwise elected by the time distributions are
required to begin to the Depositor under Paragraph 3, or to the surviving
spouse under Paragraph 4, other than in the case of a life annuity, life
expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Depositor and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The Depositor's entire interest in the custodial account
must be, or begin to be, distributed by the Depositor's required beginning
date, April 1 following the calendar year end in which the Depositor
reaches age 70 1/2. By that date, the Depositor may elect, in a manner
acceptable to the Custodian, to have the balance in the custodial account
distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially
equal monthly, quarterly, or annual payments over the joint and last
survivor lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the Depositor's life
expectancy.
(e) Equal or substantially equal annual payments over a
specified period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4. If the Depositor dies before his or her entire interest is
distributed to him or her, the entire remaining interest will be
distributed as follows:
(a) If the Depositor dies on or after distribution of his or
her interest has begun, distribution must continue to be made in
accordance with Paragraph 3.
(b) If the Depositor dies before distribution of his or her
interest has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year
containing the fifth anniversary of the Depositor's
death, or
(ii) Be distributed in equal or substantially equal
payments over the life or life expectancy of the
designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the
Depositor's death. If, however, the beneficiary is
the Depositor's surviving spouse, then this
distribution is not required to begin before December
31 of the year in which the Depositor would have
turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually
have been made before that date.
(d) If the Depositor dies before his or her entire interest has
been distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions may be
accepted in the account.
5. In the case of a distribution over life expectancy in equal
or substantially equal annual payments, to determine the minimum annual
payment for each year, divide the Depositor's entire interest in the
custodial account as of the close of business on December 31 of the
preceding year by the life expectancy of the Depositor (or the joint life
and last survivor expectancy of the Depositor and the Depositor's
designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under
Paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designed
beneficiary as of their birthdays in the year the Depositor reaches age 70
1/2. In the case of a distribution in accordance with Paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated
beneficiary as of the beneficiary's birthday in the year distributions are
required to commence.
6. The owner of two or more individual retirement accounts may
use the "alternative method" described in Notice 88-38, 1988-1 C.B. 524,
to satisfy the minimum distribution requirements described above. This
method permits an individual to satisfy these requirements by taking from
one individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with
information necessary for the Custodian to prepare any reports required
under Section 408(i) and Regulations Section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal
Revenue Service and the Depositor prescribed by the Internal Revenue
Service.
ARTICLE VI
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through III and this sentence
will be controlling. Any additional articles that are not consistent with
Section 408(a) and related regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with
the provisions of the Code and related regulations. Other amendments may
be made with the consent of the persons whose signatures appear below.
ARTICLE VIII
1. Investment of Account Assets. (a) All contributions to the
custodial account shall be invested in accordance with your election, in
the shares of the Hennessy Balanced Fund and/or any other regulated
investment company of the Maryland business corporation commonly known as
The Hennessy Funds, Inc., or any other investment company designated by
The Hennessy Management Co., L.P. Shares of stock of an Investment
Company shall be referred to as "Investment Company Shares."
(b) Each contribution to the custodial account shall identify
the Depositor's account number and be accompanied by a signed statement
directing the investment of that contribution. The Custodian may return
to the Depositor, without liability for interest thereon, any contribution
which is not accompanied by adequate account identification or an
appropriate signed statement directing investment of that contribution.
(c) Contributions shall be invested in whole and fractional
Investment Company Shares at the price and in the manner such shares are
offered to the public. All distributions received on Investment Company
Shares held in the custodial account shall be reinvested in like shares.
If any distribution of Investment Company Shares may be received in
additional like shares or in cash or other property, the Custodian shall
elect to receive such distribution in additional like Investment Company
Shares.
(d) All Investment Company Shares acquired by the Custodian
shall be registered in the name of the Custodian or its nominee. The
Depositor shall be the beneficial owner of all Investment Company Shares
held in the custodial account and the Custodian shall not vote any such
shares, except upon written direction of the Depositor. The Custodian
agrees to forward to the Depositor each prospectus, report, notice, proxy
and related proxy soliciting materials applicable to Investment Company
Shares held in the custodial account received by the Custodian.
(e) The Depositor may, at any time, by written notice to the
Custodian, redeem any number of shares held in the custodial account and
reinvest the proceeds in the shares of any other Investment Company. Such
redemptions and reinvestments shall be done at the price and in the manner
such shares are then being redeemed or offered by the respective
Investment Companies.
2. Amendment and Termination. (a) The Hennessy Management
Co., L.P., the investment adviser to The Hennessy Funds, Inc., may amend
the Custodial Account (including retroactive amendments) by delivering to
the Depositor written notice of such amendment setting forth the substance
and effective date of the amendment. The Depositor shall be deemed to
have consented to any such amendment not objected to in writing by the
Depositor within thirty (30) days of receipt of the notice, provided that
no amendment shall cause or permit any part of the assets of the custodial
account to be diverted to purposes other than for the exclusive benefit of
the Depositor or his or her beneficiaries.
(b) The Depositor may terminate the custodial account at any
time by delivering to the Custodian a written notice of such termination.
(c) The custodial account shall automatically terminate upon
distribution to the Depositor or his or her beneficiaries of its entire
balance.
3. Taxes and Custodial Fees. Any income taxes or other taxes
levied or assessed upon or in respect of the assets or income of the
custodial account and any transfer taxes incurred shall be paid from the
custodial account. All administrative expenses incurred by the Custodian
in the performance of its duties, including fees for legal services
rendered to the Custodian, and the Custodian's compensation shall be paid
from the custodial account, unless otherwise paid by the Depositor or his
or her beneficiaries.
The Custodian's fees are set forth in a schedule provided to the
Depositor. Extraordinary charges resulting from unusual administrative
responsibilities not contemplated by the schedule will be subject to such
additional charges as will reasonably compensate the Custodian. Fees for
refund of excess contributions, transferring to a successor trustee or
custodian, or redemption/reinvestment of Investment Company Shares will be
deducted from the refund or redemption proceeds and the remaining balance
will be remitted to the Depositor, or reinvested or transferred in
accordance with the Depositor's instructions.
4. Reports and Notices. (a) The Custodian shall keep
adequate records of transactions it is required to perform hereunder.
After the close of each calendar year, the Custodian shall provide to the
Depositor or his or her legal representative a written report or reports
reflecting the transactions effected by it during such year and the assets
and liabilities of the Custodial Account at the close of the year.
(b) All communications or notices shall be deemed to be given
upon receipt by the Custodian at Post Office Box 701, Milwaukee, Wisconsin
53201-0701 or the Depositor at his most recent address shown in the
Custodian's records. The Depositor agrees to advise the Custodian
promptly, in writing, of any change of address.
5. Designation of Beneficiary. The Depositor may designate a
beneficiary or beneficiaries to receive benefits from the custodial
account in the event of the Depositor's death. In the event the Depositor
has not designated a beneficiary, or if all beneficiaries shall predecease
the Depositor, the following persons shall take in the order named:
(a) The spouse of the Depositor;
(b) If the spouse shall predecease the Depositor or if the
Depositor does not have a spouse, then to the personal representative of
the Depositor's estate.
6. Multiple Individual Retirement Accounts. In the event the
Depositor maintains more than one individual retirement account (as
defined in Section 408(a)) and elects to satisfy his or her minimum
distribution requirements described in Article IV above by making a
distribution for another individual retirement account in accordance with
Paragraph 6 thereof, the Depositor shall be deemed to have elected to
calculate the amount of his or her minimum distribution under this
custodial account in the same manner as under the individual retirement
account from which the distribution is made.
7. Inalienability of Benefits. The benefits provided under
this custodial account shall not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind and any attempt to
cause such benefits to be so subjected shall not be recognized except to
the extent as may be required by law.
8. Rollover Contributions and Transfers. The Custodian shall
have the right to receive rollover contributions and to receive direct
transfers from other custodians or trustees. All contributions must be
made in cash or check.
9. Conflict in Provisions. To the extent that any provisions
of this Article VIII shall conflict with the provisions of Articles IV, V
and/or VII, the provisions of this Article VIII shall govern.
10. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
EXHIBIT 15
SERVICE AND DISTRIBUTION PLAN
OF
THE HENNESSY FUNDS, INC.
WHEREAS, The Hennessy Funds, Inc. (the "Fund") is registered
with the Securities and Exchange Commission as an open-end management
investment company under the Investment Company Act of 1940, as amended
(the "Act");
WHEREAS, the Fund intends to act as a distributor of shares of
its Common Stock, $.0001 par value ("Common Stock"), as defined in Rule
12b-1 under the Act, and desires to adopt a distribution plan pursuant to
such Rule, and the Board of Directors has determined that there is a
reasonable likelihood that adoption of this Service and Distribution Plan
will benefit the Fund and its shareholders; and
WHEREAS, the Fund may enter into agreements with dealers and
other financial service organizations to obtain various distribution-
related and/or shareholder services for the Fund, all as permitted and
contemplated by Rule 12b-1 under the Act; it being under that to the
extent any activity is one in which the Fund may finance without a Rule
12b-1 plan, the Fund may also make payments to finance such activity
outside such a plan and not subject to its limitations.
NOW, THEREFORE, the Fund hereby adopts this Service and
Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act
on the following terms and conditions:
1. Distribution and Service Fee. The Fund may charge a
distribution expense and service fee on an annualized basis of 0.75% of
the Fund's average daily net assets. Such fee shall be calculated and
accrued daily and paid at such intervals as the Board of Directors of the
Fund shall determine, subject to any applicable restriction imposed by
rules of the National Association of Securities Dealers, Inc.
2. Permitted Expenditures. The amount set forth in paragraph
1 of this Plan shall be paid for services or expenses primarily intended
to result in the sale of the Fund's shares. The Fund may pay all or a
portion of this fee to any securities dealer, financial institution or any
other person (the "Shareholder Organization(s)") who renders personal
service to shareholders, assists in the maintenance of shareholder
accounts or who renders assistance in distributing or promoting the sale
of the Fund's shares pursuant to a written agreement approved by the
Board of Directors (the "Related Agreement"). To the extent such fee is
not paid to such persons, the Fund may use the fee for their expenses of
distribution of its shares including, but not limited to, payment by the
Fund of the cost of preparing, printing and distributing Prospectuses and
Statements of Additional Information to prospective investors and of
implementing and operating the Plan as well as payment of capital or other
expenses of associated equipment, rent, salaries, bonuses, interest and
other overhead costs.
3. Effective Date of Plan. This Plan shall not take effect
until (a) it has been approved by a vote of at least a majority (as
defined in the Act) of the outstanding shares of Common Stock and (b)
(together with any related agreements) by votes of a majority of both (i)
the Board of Directors of the Fund and (ii) those Directors of the Fund
who are not "interested persons" of the Fund (as defined in the Act) and
have no direct or indirect financial interest in the operation of this
Plan or any agreements related to it (the "Rule 12b-1 Directors"), cast in
person at a meeting (or meetings) called for the purpose of voting on this
Plan and such related agreements.
4. Continuance. Unless otherwise terminated pursuant to
paragraph 6 below, this Plan shall continue in effect for as long as such
continuance is specifically approved at least annually in the manner
provided for approval of this Plan in paragraph 3(b).
5. Reports. Any person authorized to direct the disposition
of monies paid or payable by the Fund pursuant to this Plan or any related
agreement shall provide to the Fund's Board of Directors and the Board
shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
6. Termination. This Plan may be terminated at any time by
vote of a majority of the Rule 12b-1 Directors, or by a vote of a majority
of the outstanding shares of Common Stock.
7. Amendments. This Plan may not be amended to increase
materially the amount of payments provided for in paragraph 1 hereof
unless such amendment is approved in the manner provided for initial
approval in paragraph 3 hereof. No other amendment to the Plan may be
made unless approved in the manner provided for approval of this Plan in
paragraph 3(b).
8. Selection of Directors. While this Plan is in effect, the
selection and nomination of Directors who are not interested persons (as
defined in the Act) of the Fund shall be committed to the discretion of
the Directors who are not interested persons.
9. Records. The Fund shall preserve copies of this Plan and
any related agreements and all reports made pursuant to paragraph 6
hereof, for a period of not less than six years from the date of this
Plan, or the agreements or such report, as the case may be, the first two
years in an easily accessible place.
EXHIBIT 15.1
AGREEMENT
_______________, 1996
The Hennessy Management Co., L.P.
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, CA 94945
Gentlemen:
This is to confirm that in consideration of the agreements
hereinafter contained, the undersigned, The Hennessy Funds, Inc., a
Maryland corporation (the "Fund"), has agreed that you shall be, for the
period of this Agreement, the sole recipient of payments under the Fund's
Service and Distribution Plan (the "Plan") under Rule 12b-1 under the
Investment Company Act of 1940. This Agreement is subject to the terms
and conditions of the Plan, which is incorporated herein by reference.
1. Services to the Fund
1.1 You are hereby authorized to retain a distributor (the
"Distributor") for the shares of common stock of the Fund (the "Shares")
in accordance with the instructions of the Fund's Board of Directors and
the Fund's registration statement and then current prospectus and
statement of additional information under the Securities Act of 1933, as
amended. You shall monitor the activities of the Distributor and report
quarterly to the Board of Directors as to the performance of the
Distributor. Additionally you shall provide the reports required by
Paragraph 5 of the Plan.
1.1(a) You, at your own expense, shall finance appropriate
activities which you deem reasonable which are primarily intended to
result in the sale of Shares, including, but not limited to, advertising,
compensation of the Distributor, the printing and mailing of prospectuses
to other than current shareholders and the printing and mailing of sales
literature.
1.1(b) All Shares offered for sale by the Distributor shall
be offered for sale to the public at a price per Share equal to their net
asset value (determined in the manner set forth in the Fund's Registration
Statement and then current prospectus and statement of additional
information).
1.1(c) You are authorized to pay the Distributor a fee equal
to 1% of the net asset value of all Shares sold other than Shares sold
pursuant to the reinvestment of dividends. The obligation to pay the
Distributor shall be your obligation and not an obligation of the Fund.
Your agreement with the Distributor shall provide that if any Shares are
redeemed within one month after the date of original purchase, the
Distributor shall repay to you the fee earned with respect to the original
sale of such Shares; provided, however, that such fees shall not be
required to be repaid in the event of death or disability of the
shareholder. Your agreement with the Distributor shall provide that in
determining whether the Distributor is required to repay fees with respect
to a redemption of less than all of a shareholder's Shares, Shares which
have been held for one month will be considered to have been redeemed
first and then other Shares in the order purchased.
1.1(d) In exchange for such services, the Fund agrees to pay
you quarterly fees in an amount equal to the amount of fees paid to the
Distributor pursuant to Section 1.1(c) less any amount repaid by
Distributor; provided, however, that the fees paid hereunder in any fiscal
year of the Fund shall not exceed 0.75% of the average daily net assets of
the Fund.
1.2 Your agreement with Distributor shall provide that it shall
act as distributor of the Shares in compliance with all state and federal
laws, rules and regulations and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc.
1.3 Whenever in their judgment such action is warranted by
market, economic or political conditions, or by circumstances of any kind,
the Fund's officers may decline to accept any orders for, or make any
sales of, any Shares until such time as they deem it advisable to accept
such orders and to make such sales and the Fund shall advise you promptly
of such determination.
1.4 The Fund agrees to pay all costs and expenses in connection
with the registration of the Shares under the Securities Act of 1933, as
amended, and to be responsible for all expenses in connection with
maintaining facilities for the issue and transfer of Shares and for
supplying information, prices and other data to be furnished by the Fund
hereunder.
1.5 The Fund agrees to execute any and all documents and to
furnish any and all information and otherwise to take all actions which
may be reasonably necessary in the discretion of the Fund's officers in
connection with the qualification of Shares for sale in such states as you
may designate to the Fund and the Fund may approve, and the Fund agrees to
pay all expenses which may be incurred in connection with such
qualification.
1.6 The Fund shall furnish you from time to time for use in
connection with the sale of Shares, such information with respect to the
Fund and the Shares as you may reasonably request. The Fund also shall
furnish you upon request with: (a) annual audited reports of the Fund's
books and accounts made by independent public accountants regularly
retained by the Fund, (b) semi-annual reports with respect to the Fund
prepared by the Fund, and (c) from time to time such additional
information regarding the Fund's financial condition as you may reasonably
request. The Fund authorizes you to use any prospectus, in the form
furnished to you by the Fund from time to time, in connection with the
sale of Shares.
1.7 No Shares shall be offered and no orders for the purchase
or sale of Shares shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the
provisions of the Securities Act of 1933, as amended, or if and so long as
current prospectuses as required by Section 10 of said Act, as amended,
are not on file with the Securities and Exchange Commission; provided,
however, that nothing contained in this paragraph 1.7 shall in any way
restrict or have an application to or bearing upon the Fund's obligation
to redeem Shares from any shareholder in accordance with the provisions of
the Fund's prospectus or Articles of Incorporation.
2. Term
2. This Agreement shall become effective as of the date hereof
and, unless sooner terminated, shall continue until _______________, 1997,
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by
(i) the Fund's Board of Directors or (ii) the vote of a majority (as
defined in the Investment Company Act of 1940) of the Fund's outstanding
Shares, provided that in either event its continuance also is approved by
a majority of the Fund's directors who are not "interested persons" (as
defined in said Act) of any party to this agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
This Agreement is terminable without penalty, on not less than 60 days'
notice, by the Fund's Board of Directors, by vote of the holders of a
majority (as defined in said Act) of the Fund's outstanding Shares, or by
you. This Agreement will also terminate automatically in the event of its
assignment (as defined in said Act).
Very truly yours,
THE HENNESSY FUNDS, INC.
By: _________________________
President
Accepted:
THE HENNESSY MANAGEMENT CO., L.P.
By: Edward J. Hennessy, Incorporated,
General Partner
By: ____________________________
President
EXHIBIT 15.2
DISTRIBUTION AGREEMENT
AGREEMENT made this____ day of ______________, 1996 between The
Hennessy Management Co., L.P., a California limited partnership
(hereinafter called the "Adviser"), and Edward J. Hennessy, Incorporated,
a California corporation (hereinafter called the "Distributor").
W I T N E S S E T H;
WHEREAS, the Adviser is registered as an investment adviser
under the Investment Advisers Act of 1940 and serves as investment adviser
to The Hennessy Funds, Inc. (the "Fund"), an open-end management
investment company under the Investment Company Act of 1940;
WHEREAS, the Adviser has been authorized by the Fund to retain a
distributor for the shares of the Fund's Common Stock (the "Shares")
pursuant to the Fund's Service and Distribution Plan (the "Plan") under
the Investment Company Act of 1940;
WHEREAS, the Distributor is a registered broker-dealer under
state and federal laws and regulations and is a member of the National
Association of Securities Dealers, Inc.; and
WHEREAS, the Adviser desires to retain the Distributor as the
distributor of the Shares.
NOW, THEREFORE, the Adviser and Distributor mutually agree and
promise as follows:
1. Appointment of Distributor.
The Adviser hereby appoints the Distributor as the distributor
of the Shares in jurisdictions wherein the Shares may legally be offered
for sale.
2. Acceptance; Services of Distributor.
The Distributor hereby accepts appointment as distributor for
the Shares and agrees that it will use its best efforts with reasonable
promptness to sell such part of the authorized Shares remaining unissued
as from time to time shall be effectively registered under the Securities
Act of 1933 at prices determined as hereinafter provided and on terms
hereinafter set forth.
3. Manner of Sale; Compliance with Securities Laws and
Regulations.
a. The Distributor shall sell Shares to prospective
purchasers in such manner, not inconsistent with the provisions hereof and
the then effective Registration Statement of the Fund under the Securities
Act of 1933 (and then current prospectus and statement of additional
information). The Distributor shall cause subscriptions for Shares to be
transmitted to the Fund's custodian in accordance with the Share Purchase
Application then in force for the purchase of Shares. All such Share
Purchase Applications are subject to acceptance or rejection by the Fund.
Shares are to be sold for cash, payable at the time the Share Purchase
Application and payment for such Shares are received by the Fund's
custodian.
b. The Adviser will furnish to the Distributor from time
to time such information with respect to the Fund and its Shares as the
Distributor may reasonably request for use in connection with the sale of
the Shares. The Distributor agrees that it will not use or distribute any
statements, other than those contained in the Fund's current prospectus
and statement of additional information, except such supplemental
literature or advertising as shall be lawful under federal and state
securities laws and regulations, and that shall have been approved by the
Fund.
c. In selling the Shares, the Distributor will in all
respects conform to the requirements of all state and federal laws, rules
and regulations and the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and will indemnify and hold harmless the Fund
and each person who has been, is or may hereafter be a director or officer
of the Fund from any damage or expense on account of any wrongful act by
the Distributor or any employee, representative or agent of the
Distributor. The term "expense" includes amounts paid in satisfaction of
judgments or in settlement.
4. Price of Shares.
All Shares offered for sale or sold by the Distributor shall be
sold at the net asset value per share as determined in the manner provided
in the Fund's Registration Statement and then current prospectus and
statement of additional information.
5. Registration of Shares and Distributor.
a. The Adviser agrees that the Fund will use its best
efforts to keep effectively registered under the Securities Act for sale
as herein contemplated the Shares.
b. The Adviser agrees that the Fund will execute any and
all documents and furnish any and all information which may be reasonably
necessary in connection with the qualification of the Shares for sale in
such states as the Distributor may reasonably request (it being understood
that the Fund shall not be required without its consent to comply with any
requirement which in the Fund's opinion is unduly burdensome).
c. Notwithstanding any other provision hereof, the
Distributor agrees that the Fund may terminate, suspend or withdraw the
offering of Shares whenever, in its sole discretion, it deems such action
to be desirable.
6. Expenses; Compensation of Distributor.
a. The Adviser agrees that the Fund will pay or cause to
be paid expenses (including the fees and disbursements of its own counsel)
of any registration of the Shares under the Securities Act of 1933,
expenses of qualifying or continuing the qualification of the Shares for
sale under the laws of such states as may be designated by the
Distributor under the conditions herein specified, and expenses incident
to the issuance of Shares, such as the cost of share certificates, issue
taxes and fees of the transfer agent. The Adviser will pay all other
expenses incident to the sale and distribution of the Shares issued or
sold hereunder, including, without limiting the generality of the
foregoing, all (a) expenses of printing and distributing or disseminating
any other literature, advertising and selling aids in connection with such
offering of the Shares for sale (except that such expenses shall not
include expenses incurred by the Fund in connection with the preparation,
printing and distribution of any report or other communication to holders
of Shares in their capacity as such) and (b) expenses of advertising in
connection with such offering.
b. The Adviser shall pay a fee equal to 1% of the net
asset value of all Shares sold other than Shares sold pursuant to the
reinvestment of dividends. The Distributor acknowledges that such
obligation is solely the obligation of the Adviser and not the obligation
of the Fund. If any Shares are redeemed within one month after the date
of original purchase, the Distributor shall repay to the Adviser the fee
earned with respect to the original sale of such Shares; provided,
however, that such fees shall not be required to be repaid in the event of
death or disability of the shareholder. In determining whether the
Distributor is required to repay fees with respect to a redemption of less
than all of a shareholder's Shares, Shares which have been held for one
month will be considered to have been redeemed first and then other Shares
in the order purchased.
7. Duration and Termination.
a. This Agreement shall become effective on
_________________, 1996 and shall continue in effect until _____________,
1997, and shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by
(i) the Fund's Board of Directors or (ii) the vote of a majority (as
defined in the Investment Company Act of 1940) of the Fund's outstanding
Shares, provided that in either event its continuance is also approved by
a majority of the Fund's directors who are not "interested persons" (as
defined in said Act) of any party to this Agreement, by vote cast in
person at a meeting called for the purpose of voting on such approval.
b. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of
any penalty, by the Fund's Board of Directors, or by vote of the holders
of a majority (as defined in the Investment Company Act of 1940) of the
Fund's outstanding Shares, or by the Distributor, in each case, upon sixty
(60) days' written notice to the other party and shall terminate
automatically in the event of its assignment (as defined in said Act).
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the day first above written.
THE HENNESSY MANAGEMENT CO., L.P.
By: Edward J. Hennessy, Incorporated
General Partner
By: _________________________________
President
THE HENNESSY FUNDS, INC.
By: __________________________________
President
