Securities Act Registration No. 333-00227
Investment Company Act Reg. No. 811-7493
__________________________________________________________________________
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. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 4 [X]
(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.
It is proposed that this filing become effective (check appropriate box):
[_] immediately upon filing pursuant to paragraph (b)
[_] on October 31, 1997 pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[_] on (date) pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[X] on June 30, 1998 pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities being Registered - Common Stock
<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 INVESTMENT STRATEGY;
Registrant HYPOTHETICAL PAST
PERFORMANCE; INVESTMENT
RESTRICTIONS
5. Management of the Fund 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 THE FUND'S
Offered SHARE PRICE; PURCHASING
SHARES; DIVIDEND
REINVESTMENT; RETIREMENT
PLANS
8. Redemption or Repurchase EXCHANGING SHARES;
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 Ownership of Management and
Principal Holders of Principal Shareholders
Securities
16. Investment Advisory and Investment Adviser,
Other Services Administrator, Custodian,
Transfer Agent and Account
Services Agent; Independent
Auditors
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 THE
Offered FUND'S SHARE PRICE";
"PURCHASING SHARES";
"EXCHANGING 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 Statements
_______________________
* Answer negative or inapplicable
EXPLANATORY NOTE
This Post-Effective Amendment No. 3 (the "Amendment") to the
Registrant's Registration Statement on Form N-1A is being filed to add the
Hennessy Aggressive Growth Fund (the "Fund"), a new series of the Hennessy
Funds, Inc. The Amendment incorporates by reference in its entirety Part
A of Post-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form N-1A with respect to the Hennessy Balanced Fund, filed
with the Securities and Exchange Commission (the "SEC") on October 31,
1997, as if set forth here in full.
The Amendment incorporates by reference in its entirety Part B
of Post-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form N-1A with respect to the Hennessy Balanced Fund, filed
with the SEC on October 31, 1997, as if set forth here in full.
HENNESSY AGGRESSIVE GROWTH FUND
THE HENNESSY FUNDS, INC.
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, California 94945
Telephone: (800) 966-4354 (FUND INFORMATION)
(800) 261-6950 (ACCOUNT INFORMATION)
Email: [email protected]
THE HENNESSY FUNDS, INC.
(the "Company") is an open end, non-diversified management investment
company consisting of two separate portfolios. The Hennessy Aggressive
Growth Fund, which is described in this Prospectus, seeks capital
appreciation. The Hennessy Aggressive Growth Fund intends to leverage its
investment. The investment portfolio is individually referred to as the
"Fund" or "We."
PROSPECTUS
June 30, 1998
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that
prospective investors should know before investing. Please read this
Prospectus and retain it for future reference. Additional information
about the Fund has been filed with the Securities and Exchange Commission
in the form of a Statement of Additional Information, dated June 30, 1998,
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. The
Securities and Exchange Commission maintains a web site
(http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information
regarding registrants that file electronically with the Securities and
Exchange Commission.
<PAGE>
Table of Contents
Page No.
1. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. INVESTMENT STRATEGY AND ASSOCIATED RISK FACTORS . . . . . . . . 2
3. HYPOTHETICAL PAST PERFORMANCE . . . . . . . . . . . . . . . . . 4
4. INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . 5
5. REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. HOW WE DETERMINE THE FUND'S SHARE PRICE . . . . . . . . . . . . 7
8. PURCHASING SHARES . . . . . . . . . . . . . . . . . . . . . . . 7
9. EXCHANGING SHARES . . . . . . . . . . . . . . . . . . . . . . . 9
10. REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11. DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES . . . . . . . . 12
12. DIVIDEND REINVESTMENT . . . . . . . . . . . . . . . . . . . . . 13
13. RETIREMENT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 13
14. BROKERAGE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . 14
15. GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . 14
16. PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . 15
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the
Statement of Additional Information dated June 30, 1998, and, if given or
made, such information or representation may not be relied upon as having
been authorized by The Hennessy Funds, Inc. This Prospectus does not
constitute an offer to sell securities in any state or jurisdiction in
which such offering may not lawfully be made.
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 the
annualized operating expenses the Fund expects to pay during the fiscal
year ending June 30, 1999. 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 reinvested dividends . . None
Deferred sales load . . . . . . . . . . . . . . . . . . None
Redemption fee . . . . . . . . . . . . . . . . . . . . None (1)
Exchange fee . . . . . . . . . . . . . . . . . . . . . None (1)
Annual Operating Expenses
(as a percentage of average net assets)
Management fees (after fee waivers) . . . . . . . . . 0.00%(2)
12b-1 fees (after fee waivers) . . . . . . . . . . . 0.00%(2)
Other expenses (after reimbursement) . . . . . . . . 0.00%(2)
Total fund operating expenses (after reimbursement) . 0.00%(2)
(1) A fee of $12.00 is charged for each wire redemption and a fee of
$5.00 for each telephone exchange.
(2) The Adviser has voluntarily agreed to waive its investment advisory
fees, waive 12b-1 fees and reimburse the Fund for all operating
expenses for the fiscal year ending June 30, 1999. Absent fee
waivers and reimbursements, Management fees, 12b-1 fees, other
expenses and total fund operating expenses for the Fund for the
fiscal year ending June 30, 1999, are estimated to be 0.60%, 0.25%,
0.35% and 1.20%, respectively, of the Fund's average net assets.
After June 30, 1999, the voluntary waivers and reimbursements may be
revoked at any time without notice to shareholders.
Example
1 Year 3 Years
You would pay the following expenses on a
$1,000 investment, assuming (1) a 5% $0 $38
annual return and (2) redemption at the
end of each time period: . . . . . . . .
2. INVESTMENT STRATEGY AND ASSOCIATED RISK FACTORS
The Fund's investment objective is capital appreciation. The Fund
pursues its investment objective by continuously investing approximately
one-half of the portfolio in U.S. Treasury securities having a remaining
maturity of 1 year or less and the other half of the portfolio in the ten
highest yielding common stocks in the Dow Jones Industrial Average
("DJIA").* The Fund intends to borrow money for investment purposes (i.e.
leverage its investments). The proceeds of any such borrowings will be
invested approximately one-half in U.S. Treasury securities having a
remaining maturity of one year or less and the other half in the ten
highest yielding common stocks in the DJIA. Borrowing for investment is a
speculative technique which increases investment risk but also increases
investment opportunity. See "Borrowing." By utilizing this investment
strategy, the Fund seeks to achieve total returns that in the long run
will exceed that of the DJIA. Since the Fund may leverage its assets, the
Fund may underperform the DJIA during periods of general market weakness.
There can be no assurances that the Fund will not underperform the DJIA or
that its net asset value will not decline.
----------
* 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. II, 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.
DJIA Stocks and U.S. Treasury Securities
Twice monthly, the Adviser will determine the ten highest yielding
common stocks in the DJIA. The Adviser will make this determination by
annualizing the last quarterly or semi-annual ordinary dividend declared
on each common stock included in the DJIA and dividing the result by the
market value of the common stock on the last business day preceding the
date of determination. All purchases of common stocks following such
determination until the next determination will be of the ten highest
yielding common stocks so determined. Unless we need to sell common
stocks to fund redemption requests as hereinafter discussed, we will hold
for approximately one year any common stocks purchased including common
stocks that are no longer one of the ten highest yielding common stocks in
the DJIA, common stocks that are no longer in the DJIA and common stocks
received in reorganizations of companies in the DJIA.
When we purchase common stock, we will also purchase an approximately
equal amount of U.S. Treasury securities having a remaining maturity of
one year or less. (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.
Because approximately half of our portfolio will consist of short-term
debt securities, it may not perform as well in the long term as a
portfolio of common stocks.
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 approximately 50% U.S. Treasury securities and
approximately 50% of the ten highest yielding common stocks in the DJIA in
approximately equal dollar amounts. We anticipate rebalancing twice
monthly with respect to the portfolio securities purchased one year
earlier. Rebalancing our common stock investments more frequently would
increase transaction costs. Our annual portfolio turnover rate will
generally not exceed 100%.
Other Investments
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 funds). 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.
The Fund's investment allocations may be affected by the fact that we
must meet the diversification requirements of the Internal Revenue Code
and may not concentrate our investments. See "Investment Restrictions."
Additionally, we will not invest more than 5% of our total assets in the
common stock of any issuer that derives more than 15% of its revenue from
securities-related activities, which limitation may affect our investment
allocations.
Borrowing
The Fund may borrow for investment purposes. Borrowing for
investment is known as leveraging. Leveraging investments, by purchasing
securities with borrowed money, is a speculative technique which increases
investment risk, but also increases investment opportunity. Since
substantially all of the Fund's assets will fluctuate in value, whereas
the interest obligations on borrowings may be fixed, the net asset value
per share of the Fund when it leverages its investments will increase more
when the Fund's portfolio assets increase in value and decrease more when
the Fund's portfolio assets decrease in value than would otherwise be the
case. Moreover, interest costs on borrowings may fluctuate with changing
market rates of interest and may partially offset or exceed the returns on
the borrowed funds. Under adverse conditions, the Fund might have to sell
portfolio securities to meet interest or principal payments at a time
investment considerations would not favor such sales. The Fund intends to
use leverage whenever it is able to borrow on terms considered by the
Adviser to be reasonable.
As required by the Investment Company of 1940 Act, the Fund must
maintain continuous asset coverage (total assets, including assets
acquired with borrowed funds, less liabilities exclusive of borrowings) of
300% of all amounts borrowed. If, at any time, the value of the Fund's
assets should fail to meet this 300% coverage test, the Fund, within three
days (not including Sundays and holidays), will reduce the amount of the
Fund's borrowings to the extent necessary to meet this 300% coverage.
Maintenance of this percentage limitation may result in the sale of
portfolio securities at a time when investment considerations otherwise
indicate that it would be disadvantageous to do so.
The Fund is authorized to borrow from a bank as a temporary measure
for extraordinary or emergency purposes in amounts not in excess of 10% of
the value of the Fund's total assets. This borrowing is not subject to
the foregoing 300% asset coverage requirement. The Fund is authorized to
pledge portfolio securities as the Adviser deems appropriate in connection
with any borrowings.
The Fund may purchase reverse repurchase agreements, which are
considered to be borrowings under the Investment Company Act of 1940.
Under a reverse repurchase agreement, the Fund sells portfolio securities
and agrees to repurchase them at an agreed-upon future date and price. At
the time the Fund enters into a reverse repurchase agreement, it will
place in a segregated custodial account U.S. government securities or
other liquid high-grade debt securities having a value equal to or greater
than the repurchase price (including accrued interest), and will
subsequently monitor the account to insure that such value is maintained.
Reverse repurchase agreements involve the risk that the market value of
the securities sold by the Fund may decline below the price of the
securities it is obligated to repurchase.
3. HYPOTHETICAL PAST PERFORMANCE
The chart below illustrates the total return for each of the last
twenty-five years of the DJIA and for a hypothetical leveraged portfolio
consisting of 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 (the
"Model Portfolio"). The Model Portfolio assumes that an amount equal to
one half of the Model Portfolio is borrowed on January 1 of each year with
the proceeds invested one-half in one year Treasury bills and one-half in
the ten highest yielding common stocks in the DJIA. The total return of
the Model Portfolio assumes that the interest rate charged the Model
Portfolio is equal to the yield on one year U.S. Treasury bills plus
0.25%. The Model Portfolio was developed in a manner very similar to our
investment strategy, but does not reflect the effects of cash flows in and
out of the portfolio, the deduction of commissions and expenses (other
than interest) and the reinvestment of dividends. The performance of the
Model Portfolio would have been lower if the fees and expenses borne by
the Fund had been deducted.
Comparison of Total Return (1)
Model Model
DJIA Total Portfolio DJIA Total Portfolio
Year Return Total Return Year Return Total Return
1973 -13.10% 4.01% 1986 26.91% 25.17%
1974 -23.10% 0.46% 1987 6.02% 5.80%
1975 44.40% 43.34% 1988 15.95% 18.69%
1976 22.70% 27.27% 1989 31.71% 21.87%
1977 -12.71% 1.57% 1990 -0.57% -4.00%
1978 2.69% 1.30% 1991 23.93% 30.92%
1979 10.52% 11.46% 1992 7.34% 6.69%
1980 21.41% 23.10% 1993 16.72% 21.11%
1981 -3.40% 6.94% 1994 4.95% 3.72%
1982 25.79% 21.26% 1995 36.40% 28.32%
1983 25.68% 30.93% 1996 28.57% 21.96%
1984 1.06% 7.95% 1997 24.90% 17.54%
1985 32.78% 24.17% Average 14.30% 16.08%
____________________
(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); (c) the yield on one-
year U.S. Treasury bills as of the close of the first trading
day in that year; and (d) an interest charge equal to the yield
on one-year U.S. Treasury bills as of the close of the first day
of trading in that year plus 0.25%. Total Return does not take
into consideration any commissions, expenses (other than
interest) 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-five
years. There is no assurance that the investment returns of the Fund will
exceed that of the DJIA. See "Investment Strategy and Associated Risk
Factors."
The performance information shown above was compiled by the Adviser
from statistical services, reports, or other sources believed by the
Adviser to be reliable. Such information has not been verified by any
third party and is unaudited.
While the foregoing information is relevant to an investor's decision
to invest in the Fund, investors should be aware that the Fund's
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 in addition to interest; (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. INVESTMENT RESTRICTIONS
The Fund has 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) The Fund will not purchase the securities of any issuer if the
purchase would cause more than 5% of the value of our total
assets to be invested in securities of such issuer (except
securities of the U.S. government or any agency or
instrumentality thereof), or purchase more than 10% of the
outstanding voting securities of any one issuer, except that up
to 50% of our total assets may be invested without regard to
these limitations. As such we are classified as a non-
diversified investment company under the Investment Company Act
of 1940. A non-diversified portfolio may be more volatile than
a diversified portfolio.
(2) The Fund 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 the Company's 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.
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) 261-6950. If you have general questions about the Fund
or want more information, you may call us at (800) 966-4354 or write to us
at THE HENNESSY FUNDS, INC., The Courtyard Square, 750 Grant Avenue, Suite
100, Novato, California 94945, Attention: Corporate Secretary.
6. MANAGEMENT
As a Maryland corporation, the Company's business and affairs are
managed under the direction and supervision of its Board of Directors.
The Fund has entered into an investment advisory agreement (the
"Agreement") with The Hennessy Management Co. II, 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 in February, 1998 for the purpose of becoming our
investment adviser. The general partner of the Adviser is Edward J.
Hennessy, Incorporated ("Hennessy"), The Courtyard Square, 750 Grant
Avenue, Suite 100, Novato, California 94945. 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, controlling
shareholder and the President of Hennessy. Mr. Hennessy is also a limited
partner of the Adviser.
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 the
Company's President and a member of its Board of Directors since its
organization. Mr. Hennessy has been President of Hennessy since 1989.
The Adviser supervises and manages the investment portfolio of the
Fund and, subject to such policies as the Company's 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 the Fund (other
than pursuant to our 12b-1 plan), furnishes office space and all necessary
office facilities, equipment and executive personnel for managing the Fund
and maintaining the Company's organization; bears all of the Fund's 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 the Company's officers and directors (except the fees paid
to the Company's 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 0.60% of the daily net assets of the
Fund.
The Fund has adopted a Rule 12b-1 Plan (the "Plan") which authorizes
payments by the Fund in connection with the distribution of its shares at
an annual rate, as determined from time to time by the Company's Board of
Directors, of up to 0.25% of the Fund's average daily net assets.
Payments made pursuant to the Plan may only be used to pay distribution
expenses actually incurred. Amounts paid under the Plan by the Fund may
be spent on any activities or expenses primarily intended to result in the
sale of the Fund's 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 the Fund 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 its 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 entered into an agreement with
Hennessy pursuant to which it will reimburse Hennessy for expenses
actually incurred by Hennessy in distributing shares of the Fund. Such
payments to Hennessy are a permitted expenditure under the Plan.
The Fund will pay all of its expenses not assumed by the Adviser,
including, but not limited to, the costs of preparing and printing its
registration statements required under the Securities Act of 1933 and the
Investment Company Act of 1940 and any amendments thereto, the expenses 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 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 the Company's 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.
The Fund also has 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 the Fund's financial and accounting
records and generally assists in all aspects of its operations. The
Administrator, at its own expense and without reimbursement from the Fund,
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 the Fund 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 THE FUND'S SHARE PRICE
The net asset value (or "price") per share of the Fund is determined
by dividing the total value of its investments and other assets less any
liabilities, by the number of 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.
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 Company. 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
accompanying this Prospectus and send it, together with your check or
money order ($1,000 minimum), made payable to Hennessy Aggressive Growth
Fund, TO: THE HENNESSY FUNDS, INC., c/o Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. Note: A different procedure is used
for establishing Individual Retirement Accounts. Please call Firstar
Trust Company at (800) 261-6950 for details. All purchases must be made
in U.S. dollars and checks must be drawn on U.S. banks. No cash will be
accepted. Firstar Trust Company will charge a $20 fee against a
shareholder's account for any check returned to it for insufficient funds.
The shareholder will also be responsible for any losses suffered by us as
a result.
BY OVERNIGHT OR EXPRESS MAIL. Please use the following address to
insure proper delivery: Firstar Trust Company, Mutual Fund Services, 3rd
Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202.
BY WIRE. To establish a new account by wire please first call
Firstar Trust Company, (800) 261-6950, to advise it of the investment and
the dollar amount. This will ensure prompt and accurate handling of your
investment. A completed New Account Application form must also be sent to
us at the address above immediately after your investment is made so the
necessary remaining information can be recorded to your account. Your
purchase request should be wired through the Federal Reserve Bank as
follows:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA Number 075000022
For credit to Firstar Trust M.F.S.
Account Number 112-952-137
For further credit to Hennessy Aggressive Growth Fund
(Your account name and account number)
ADDITIONAL INVESTMENTS. You may add to your account at any time by
purchasing shares by mail (minimum $100) or by wire (minimum $100)
according to the aforementioned wiring instructions. You must notify
Firstar Trust Company at (800) 261-6950 prior to sending your wire. A
remittance form which is attached to your individual account statement
should accompany any investments made through the mail, when possible.
All purchase requests must include your account registration number in
order to assure that your funds are credited properly.
BY TELEPHONE. By using our telephone purchase option you may move
money from your bank account to your Fund account at your request. Only
bank accounts held at domestic financial institutions that are Automated
Clearing House (ACH) members may be used for telephone transactions. To
have our shares purchased at the net asset value determined as of the
close of regular trading on a given date, Firstar Trust Company must
receive both your purchase order and payment by Electronic Funds Transfer
through the ACH System before the close of regular trading on such date.
Most transfers are completed within three business days. You may not use
telephone transactions for initial purchases of our shares. The minimum
amount that can be transferred by telephone is $100.
AUTOMATIC INVESTMENT. If you choose the Automatic Investment option,
you may move money from your bank account to your Fund account on the
schedule (e.g., monthly, bimonthly (every other month), quarterly or
yearly) you select and may be in any amount subject to a $100 minimum.
You may establish this option and the telephone purchase option by
completing the appropriate section of the New Account Application. Please
call Firstar Trust Company at (800) 261-6950 if you have questions.
Please wait three weeks before using the service.
You pay no sales commissions when you purchase our shares, so all of
your investment is used to purchase shares. All shares purchased will be
credited to your account and confirmed by a statement mailed to your
address. We do not issue stock certificates for shares purchased. Since
certificates are not issued, you are relieved of the responsibility for
safekeeping of certificates and the need to deliver them upon redemption.
You may also invest in the Fund by purchasing shares through a registered
broker-dealer, who may charge you a fee, either at the time of purchase or
redemption. The fee, if charged, is retained by the broker-dealer and not
remitted to us or the Adviser. You will not be charged a fee when you
purchase our shares through Hennessy. We may accept telephone orders from
broker-dealers who we have previously approved. It is the responsibility
of the registered broker-dealer to promptly remit purchase and redemption
orders to Firstar Trust Company.
ALL APPLICATIONS ARE SUBJECT TO ACCEPTANCE BY US, AND ARE NOT BINDING
UNTIL SO ACCEPTED. WE RESERVE THE RIGHT TO REJECT APPLICATIONS IN WHOLE
OR IN PART. The minimum purchase amounts set forth above are subject to
change at any time and may be waived for purchases by retirement plans, or
the Adviser's or Hennessy's employees and their family members. You will
be advised at least 30 days in advance of any increases in such minimum
amounts and our prospectus will be appropriately supplemented.
Applications without Social Security or Tax Identification numbers will
not be accepted.
PURCHASES THROUGH PROCESSING INTERMEDIARIES. You may purchase our
shares through programs of services offered or administered by broker-
dealers, financial institutions or other service providers ("Processing
Intermediaries") that have entered into agreements with the Fund. Such
Processing Intermediaries may become shareholders of record and may use
procedures and impose restrictions in addition to or different from those
applicable to shareholders who invest directly in the Fund. Certain
services of the Fund may not be available or may be modified under the
programs provided by Processing Intermediaries. The Fund may accept
requests to purchase additional shares into an account in which the
Processing Intermediary is the shareholder of record only from the
Processing Intermediary.
The Fund may authorize one or more Processing Intermediaries (and
other Processing Intermediaries properly designated thereby) to accept
purchase orders on the Fund's behalf. In such event, the Fund will be
deemed to have received a purchase order when the Processing Intermediary
accepts the customer order, and the order will be priced at the Fund's net
asset value next computed after it is accepted by the Processing
Intermediary.
Processing Intermediaries may charge fees or assess other charges for
their services. Any such fee or charge paid directly by shareholders is
retained by the Processing Intermediary and not remitted to us or the
Adviser. Additionally, the Adviser and/or the Fund may pay fees to
Processing Intermediaries to compensate them for the services they
provide. Before investing in this manner, read the program materials
provided by the Processing Intermediary together with the Prospectus.
Shares of the Fund may be purchased through Processing Intermediaries
without regard to the Fund's minimum purchase requirement.
Certain Processing Intermediaries that have entered into agreements
with us may enter purchase orders by telephone, with payment to follow the
next business day as specified in the agreement. We may effect such
purchase orders at the net asset value next determined after receipt of
the telephone purchase order. It is the responsibility of the Processing
Intermediary to place the order with the Fund on a timely basis. If we do
not receive payment within the time period specified in the agreement, the
Processing Intermediary could be held liable for any resulting fees or
losses.
9. EXCHANGING SHARES
Shares of any Hennessy Fund may be exchanged at any time for shares
of another Hennessy Fund that is available for investment in your state.
Each exchange is subject to the minimum initial investment required for
each Fund. You may make additional exchanges for $1,000 or more. You may
open a new account or purchase additional shares by making an exchange
from an existing Hennessy Fund account. New accounts will have the same
registration as the existing accounts as well as the same privileges,
unless otherwise specified. To exchange by telephone, you must follow the
instructions under "Purchasing Shares - By Telephone". You must obtain
the prospectus for the appropriate Hennessy Fund, and you are advised to
read it carefully, before authorizing any investment in shares of a
Hennessy Fund.
In addition to the ability to exchange among Hennessy Funds, you may
exchange all or a portion of your shares for shares of the Firstar Money
Market Fund (formerly known as Portico Money Market Fund). This fund is a
no-load money market fund managed by Firstar Funds, Inc., an affiliate of
Firstar Trust Company. The Firstar Funds are unrelated to The Hennessy
Funds, Inc.
You may exchange your shares in the Fund for shares of the Firstar
Money Market Fund. This exchange privilege is a convenient way to buy
shares in a money market fund in order to respond to changes in your goals
or in market conditions. Before exchanging into the Firstar Money Market
Fund, read the applicable prospectus. To obtain a prospectus for the
Firstar Money Market Fund, call toll-free 1-800-261-6950. There is no
charge for exchange transactions which are requested by mail. Firstar
Trust Company will charge a fee for each exchange transaction involving
the Firstar Money Market Fund that is executed over the phone. This fee
is currently $5.00. See "Other Information About Exchanging Shares" below
for information on the limits imposed on exchanges.
BY MAIL. To exchange your shares of the Fund into the Hennessy
Balanced Fund or the Firstar Money Market Fund, complete and sign an
application and mail it to:
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201
You may also send the application via overnight courier to Firstar
Trust Company at 615 E. Michigan Street, Milwaukee, WI 53202.
BY TELEPHONE. If you have authorized telephone transaction
privileges in your application, you may also make exchanges by calling
toll-free 1-800-261-6950. See "Redemptions" for instructions on how to
authorize telephone transaction privileges. Exchanges made over the phone
may only be made by the shareholder of record. Certain other limitations
and conditions apply to all telephone transactions.
OTHER INFORMATION ABOUT EXCHANGING SHARES. All accounts opened as a
result of using the exchange privilege must be registered in the same name
and taxpayer identification number as your existing account with the Fund.
Because of the time needed to transfer money between the Fund and the
Hennessy Balanced Fund or Firstar Money Market Fund, you may not exchange
into and out of the same fund on the same or successive days; there must
be at least one day between exchange transactions. You may exchange your
shares of the Fund only for shares that have been registered for sale in
your state. Remember that each exchange represents the sale of shares of
one fund and the purchase of shares of another. Therefore, you could
realize a taxable gain or loss on the transaction. If your account is
subject to backup withholding, you may not open another account using the
exchange privilege. Because excessive trading can hurt the Fund's
performance and shareholders, the Fund reserves the right to temporarily
or permanently terminate the exchange privilege of any investor who makes
excessive use of the exchange privilege (more than five exchanges per
calendar year). Your exchanges may be restricted or refused by the Fund
if it receives or anticipates receiving simultaneous orders affecting
significant portions of the Fund's assets. In particular, a pattern of
exchanges with a "market timing" strategy may be disruptive to the Fund.
The Fund reserves the right to terminate or modify the exchange privilege
upon at least 60 days' written notice to shareholders. A signature
guarantee is not required except in cases where shares are also redeemed
for cash at the same time. The restriction or termination of the exchange
privilege does not affect the rights of shareholders to redeem shares as
discussed below.
10. 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, your account
number, 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 by
Sole Proprietorship, Custodial all person(s) required to sign
(Uniform Gift To Minors Act), for the account, exactly as it
General Partners is registered.
Corporations, Associations Redemption request and a
corporate resolution, signed by
person(s) required to sign for
the account, accompanied by
signature guarantee(s).
Trusts Redemption request signed by
the trustee(s), with a
signature guarantee. (If the
Trustee's name is not
registered on the account, a
copy of the trust document
certified within the last 60
days is also required).
- Signature guarantees if proceeds of redemption are to be sent by
wire transfer, to a person other than the registered holder, to
an address other than the address of record, and if a redemption
request includes a change of address. Transfers of shares also
require signature guarantees. Signature guarantees may be
obtained from any commercial bank or trust company in the United
States or a member of the New York Stock Exchange and some
savings and loan associations.
If you have an IRA, you must indicate on your redemption request whether
or not to withhold federal income tax. Redemption requests not indicating
an election to have federal tax withheld will be subject to withholding.
If you are uncertain of the redemption requirements, please contact, in
advance, Firstar Trust Company.
The redemption price is the next determined net asset value after
Firstar Trust Company receives a redemption request in "Good Order". The
amount paid will depend on the market value of the investments in our
portfolio at the time of determination of net asset value, and may be more
or less than the cost of the shares redeemed. Payment for shares redeemed
will be mailed to you typically within one or two days, but no later than
the seventh day after receipt by Firstar Trust Company of the redemption
request in "Good Order" unless we are requested to redeem shares for which
we have not yet received good payment (e.g. cash, bank money order or
certified check on a U.S. bank.) In such event we may delay the mailing
of a redemption check until such time as we have assured ourself that good
payment for the purchase price of the shares has been collected which may
take up to 12 days or more. Wire transfers may be arranged through
Firstar Trust Company, which will assess a $12.00 wiring charge against
your account.
You may redeem shares of the Fund by telephone. New Account
Applications provide that shareholders automatically authorize these
telephone privileges unless they check the box on the New Account
Application to waive these privileges. Once this feature has been
established, you may redeem shares by phoning Firstar Trust Company at
(800) 261-6950 and giving the account name, account number and either the
number of shares or the dollar amount to be redeemed. For your
protection, you may be asked to give the social security number or tax
identification number listed on the account as further verification.
Proceeds redeemed by telephone will be mailed or wired only to your
address or bank of record as shown on the records of Firstar Trust
Company. Telephone redemptions must be in amounts of $1,000 or more. If
the proceeds are sent by wire, a $12.00 wire fee will apply.
In order to arrange for telephone redemptions after a Fund account
has been opened or to change the bank, account or address designated to
receive redemption proceeds, you must send a written request to Firstar
Trust Company. The request must be signed by each registered holder of
the account with the signatures guaranteed by a commercial bank or trust
company in the United States, a member firm of the New York Stock Exchange
or other eligible guarantor institution. Further documentation may be
requested from corporations, executors, administrators, trustees and
guardians.
We reserve the right to refuse a telephone redemption if we believe
it is advisable to do so. Procedures for redeeming our shares by
telephone may be modified or terminated by us at any time. Neither the
Fund nor Firstar Trust Company will be liable for following instructions
for telephone redemption transactions which they reasonably believe to be
genuine, provided reasonable procedures are used to confirm the
genuineness of the telephone instructions, but may be liable for
unauthorized transactions if they fail to follow such procedures. These
procedures include requiring you to provide some form of personal
identification prior to acting upon your telephone instructions and
recording all telephone calls.
You should be aware that during periods of substantial economic or
market change, telephone or wire redemptions may be difficult to
implement. If you are unable to contact Firstar Trust Company by
telephone, you may redeem shares by delivering the redemption request to
Firstar Trust Company by mail as described above.
If you select our systematic withdrawal option, you may move money
automatically from your Fund account to your bank account according to the
schedule you select. The systematic withdrawal option may be in any
amount subject to a $100 minimum. To select the systematic withdrawal
option you must check the appropriate box on the New Account Application.
We reserve the right to redeem the shares held in any account if at
the time of any transfer or redemption of Fund shares in the account, the
value of the remaining shares in the account falls below $1,000. You will
be notified in writing that the value of your account is less than the
minimum and allowed at least 60 days to make an additional investment.
The receipt of proceeds from the redemption of shares held in an
Individual Retirement Account ("IRA") may constitute a taxable
distribution of benefits from the IRA unless a qualifying rollover
contribution is made. Involuntary redemptions will not be made because
the value of shares in an account falls below $1,000 solely because of a
decline in our net asset value.
If you purchased shares through programs of Processing Intermediaries
that have entered into agreements with the Fund, you may be required to
redeem your shares through such programs. Processing Intermediaries may
become shareholders of record and use procedures and impose restrictions
in addition to or different from those applicable to shares redeemed
directly through the Fund. We may accept redemption requests for an
account in which the Processing Intermediary is the shareholder of record
only from the Processing Intermediary. We may authorize one or more
Processing Intermediaries to accept redemption requests on the Fund's
behalf. In such event, the Fund will be deemed to have received a
redemption request when the Processing Intermediary accepts the
shareholder's request, and the redemption price will be the Fund's net
asset value next computed after the shareholder's redemption request is
accepted by the Processing Intermediary.
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.
11. DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
We intend to distribute quarterly in March, June, September and
December any net investment income and annually in December any net
realized capital gains to shareholders. Dividend and capital gains
distributions may be automatically reinvested or received in cash.
We intend to continue to qualify for taxation as a "regulated
investment company" under the Internal Revenue Code so that we will not be
subject to federal income tax to the extent our income is distributed to
shareholders. Dividends paid by us from net investment income and net
short-term capital gains, whether received in cash or reinvested in
additional shares, will be taxable to shareholders as ordinary income.
Distributions paid by us from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital
gains, regardless of the length of time you have owned our shares. The
Taxpayer Relief Act of 1997 provides for a three-tiered tax rate structure
for long-term capital gains dependent upon the holding period of the
underlying financial instrument or capital asset. 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.
12. 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.
13. 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").
- ROTH IRA.
- SIMPLIFIED EMPLOYEE PENSION PLAN (SEP/IRA).
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.
14. 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 the Fund to pay a broker
which provides brokerage and research services to the Adviser a commission
for effecting securities transactions in excess of the amount another
broker would have charged for executing the transaction, provided the
Adviser believes this to be in our best interests. Although we do not
initially intend to market our shares through intermediary broker-dealers,
we may place portfolio orders with broker-dealers who recommend the
purchase of our shares to clients if the Adviser believes the commissions
and transaction quality are comparable to that available from other
brokers and allocate portfolio brokerage on that basis. We may place
portfolio orders with Hennessy if the quality of the transaction and the
commissions are comparable to what they would be with other qualified
brokerage firms.
15. GENERAL INFORMATION
The Company is organized as a Maryland corporation and was
incorporated on January 11, 1996. 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,
the Company is offering two series of shares, each of which is a separate
fund.
As a shareholder, you will be entitled: (1) to one vote per full
share of Common Stock; (2) to such distributions as may be legally
declared by the Company's Board of Directors; and (3) upon liquidation, to
share in the assets available for distribution. There are no conversion or
sinking fund provisions applicable to the shares of either Fund, and
shareholders have no preemptive rights and may not cumulate their votes in
the election of directors. Consequently the holders of more than 50% of
the Company's shares voting for the election of directors can elect the
entire Board of Directors, and in such event, the holders of the remaining
shares voting for the election of directors will not be able to elect any
person or persons to the Board of Directors. As a general matter, shares
are voted in the aggregate and not by series, except where voting by
series would be required by Maryland law or the Investment Company Act of
1940 (e.g. approval of an investment advisory agreement).
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 Company if requested in writing by the holders of not less than 10% of
the outstanding shares of the Fund.
The shares of each Fund are redeemable and are transferable. All
shares issued and sold by the Company will be fully paid and
nonassessable. Fractional shares of each Fund entitle the holder to the
same rights as whole shares of such Fund.
The shares of each Fund have the same preferences, limitations and
rights, except that all consideration received from the sale of shares of
each Fund, together with all income, earnings, profits and proceeds
thereof, belong to that Fund and are charged with the liabilities in
respect of that Fund and of that Fund's share of the general liabilities
of the Company in the proportion that the total net assets of the Fund
bears to the total net assets of all the Funds. The net asset value per
share of each Fund is based on the assets belonging to that Fund less the
liabilities charged to that Fund, and dividends are paid on shares of each
Fund only out of lawfully available assets belonging to that Fund. In the
event of liquidation or dissolution of the Company, the shareholders of
each Fund will be entitled, out of the assets of the Company available for
distribution, to the assets belonging to such Fund.
All of our securities and cash are held by Firstar Trust Company,
which also serves as our transfer and dividend disbursing agent. KPMG
Peat Marwick LLP serves as our independent accountants and will audit our
financial statements annually. We are not involved in any litigation.
16. 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 distributions 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.
Investment Adviser HENNESSY AGGRESSIVE GROWTH FUND
The Hennessy Management Co. II, L.P.
The Courtyard Square The Hennessy Funds, Inc.
750 Grant Avenue, Suite 100
Novato, CA 94945
Administrator, Transfer Agent, Dividend
Paying Agent, Shareholder
Servicing Agent & Custodian
Firstar Trust Company
P.O. Box 701
Milwaukee, WI 53201-0701
(800) 261-6950
Directors
Neil J. Hennessy
Brian A. Hennessy
Robert T. Doyle
Rodger D. Offenbach
J. Dennis DeSousa
Counsel
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367 PROSPECTUS
June 30, 1998
Independent Auditors
KPMG Peat Marwick LLP
777 East Wisconsin Avenue
Milwaukee, WI 53202
The Courtyard Square
750 Grant Ave., Suite 100
Novato, CA 94945
(415) 899-1555
1 (800) 966-4354
Email: [email protected]
Symbol: HBFBX
June 30, 1998
THE HENNESSY FUNDS, INC.
The Courtyard Square
750 Grant Avenue
Suite 100
Novato, California 94945
STATEMENT OF ADDITIONAL INFORMATION
FOR THE
HENNESSY AGGRESSIVE GROWTH FUND
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus for the Hennessy
Aggressive Growth Fund dated June 30, 1998. Requests for copies of the
Prospectus for the Fund 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 1-800-
966-4354.
The Hennessy Funds, Inc.
Hennessy Aggressive Growth Fund
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 AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . 13
INVESTMENT RESTRICTIONS
As set forth in the Prospectus dated June 30, 1998 of the
Hennessy Aggressive Growth Fund (the "Fund") under the caption "INVESTMENT
STRATEGY", the investment objective of the Fund is capital appreciation.
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 50% 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 borrow money or issue senior securities
to the extent permitted by the Investment Company Act of 1940.
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 Board of
Directors of The Hennessy Funds, Inc. (the "Corporation") 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 Corporation 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:
AlliedSignal Inc. Hewlett-Packard Co.
Aluminum Co. of America International Business Machines
(ALCOA) Corp. (IBM)
American Express Co. International Paper Co.
AT&T Corp. Johnson & Johnson
The Boeing Co. McDonald's Corp.
Caterpillar Inc. Merck & Co., Inc.
Chevron Corp. Minnesota Mining & Manufacturing Co.(3M)
The Coca-Cola Company J.P. Morgan & Co., Inc.
The Walt Disney Company Philip Morris Cos.
E.I du Pont De Nemours & Co., Procter & Gamble Co. Inc.
Eastman Kodak Co. Sears, Roebuck & Co.
Exxon Corp. The Travelers Corp.
General Electric Co. Union Carbide Corp.
General Motors Corp. United Technologies Corp.
The Goodyear Tire & Rubber Co. Wal-Mart Stores, Inc.
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. II, 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 meet the diversification
requirements of the Internal Revenue Code 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. Distributions to shareholders of such
investment gains, to the extent they consist of net short-term capital
gains, will be considered ordinary income for federal income tax purposes.
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, 42, 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, 45, has been a
self-employed dentist for more than ten years. His address is 912 Grand
Avenue, San Rafael, CA 94901.
Robert T. Doyle -- Director. Mr. Doyle, 50, 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, 47, has been
the owner of Rays Catering since 1974. His address is 919 Eastman Lane,
Petaluma, CA 94952.
J. Dennis DeSousa -- Director. Mr. DeSousa, 62, 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,
32, 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
directors who are interested persons of the Corporation (as defined in the
Act). Messrs. Neil Hennessy and Brian Hennessy are brothers. Ms. Nilsen,
as an officer of the Corporation, is an interested person of the
Corporation.
The Corporation's standard method of compensating directors is
for the Fund 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 and, effective May 28, 1998, for the Hennessy Balanced Fund to
pay each director who is not an interested person of the Corporation a fee
of $350 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 table below sets forth the compensation paid by the
Corporation to each of the current directors of the Corporation during the
fiscal year ended June 30, 1997:
<TABLE>
COMPENSATION TABLE
<CAPTION>
Total
Pension or Estimated Compensation
Aggregate Retirement Benefits Annual from Corporation
Compensation Accrued As Part of Benefits Upon Paid to
Name of Person from Corporation* Fund Expenses Retirement Directors*
<S> <C> <C> <C> <C>
Neil J. Hennessy $0 $0 $0 $0
Brian A. Hennessy 0 0 0 0
Robert T. Doyle 1,000 0 0 1,000
Rodger D. Offenbach 0 0 0 0
J. Dennis DeSousa 1,000 0 0 1,000
________________________
* During the fiscal year ended June 30, 1997, the Hennessy Balanced Fund
was the only series of the Corporation.
</TABLE>
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
At June 30, 1998, the Adviser owned all of the outstanding
shares of the Fund. Shareholders with a controlling interest could affect
the outcome of proxy voting or the direction of management of the
Corporation.
INVESTMENT ADVISER, ADMINISTRATOR, CUSTODIAN,
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
As set forth in the Fund's Prospectus under the caption
"MANAGEMENT OF THE FUND," the investment adviser to the Fund is The
Hennessy Management Co. II, 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 and Mr. Hennessy are limited partners 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, no such percentage limitation was applicable to
the Fund. 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 Fund's 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 of 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. 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.
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 from the
Fund 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 WE
DETERMINE THE FUND'S SHARE PRICE?", 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, Martin Luther King, Jr. Day, President's Day, 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. 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 reimburse Hennessy for expenses actually incurred by Hennessy in
distributing the Fund's shares. This agreement further provides that the
Adviser will pay Hennessy an amount equal to $225 per hour, or such other
rate as the Adviser and Hennessy may agree from time to time, for services
provided by Neil J. Hennessy in his capacity as President of Hennessy
related to the distribution of the Fund's shares. Neil J. Hennessy, the
President and a director of the Corporation, is a limited partner of the
Adviser as well as President and controlling shareholder of Hennessy, the
general partner to the Adviser.
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.
The Adviser may allocate brokerage to Hennessy but only if the
Adviser reasonably believes the commission and transaction quality are
comparable to that available from other qualified brokers. Under the Act,
Hennessy is prohibited from dealing with the Fund as a principal in the
purchase and sale of securities. Hennessy, when acting as a broker for
the Fund in any of its portfolio transactions executed on a securities
exchange of which Hennessy is a member, will act in accordance with the
requirements of Section 11(a) of the Securities Exchange Act of 1934 and
the rules of such exchanges.
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.
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 net investment income, 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 to dividends from the Fund's net investment income, subject to
proportionate reductions if the aggregate dividends received by the Fund
from domestic corporations in any year are less than 100% of the
distributions of net investment company taxable income made by the Fund.
Redemption of shares will generally result in a capital gain or
loss for income tax purposes. The tax treatment of any such capital gain
or loss generally will be dependent upon the investor's holding period for
the shares. However, if a loss is realized on shares held for six months
or less, and the investor received a distribution of long-term capital
gains 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.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, 777 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202 will serve as the independent accountants for the Fund.
As such KPMG Peat Marwick LLP will perform an audit of the Fund's
financial statements including consideration of the Fund's internal
control structure.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a.) Financial Statements (all incorporated by reference to the
Annual Report dated June 30, 1997 (File No. 811-7493) of the
Hennessy Balanced Fund (as filed with the Securities and
Exchange Commission on September 8, 1997))
Independent Auditors' Report
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Schedule of Investments
Notes to the Financial Statements
(b.) Exhibits
(1.1) Registrant's Articles of Incorporation (Exhibit 1 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933)
(1.2) Articles Supplementary to Articles of Incorporation
(2) Registrant's Bylaws (Exhibit 2 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933)
(3) None
(4) None
(5.1) Investment Advisory Agreement with The Hennessy
Management Co., L.P. relating to the Hennessy Balanced
Fund (Exhibit 5 to Registrant's Registration Statement
on Form N-1A is incorporated by reference pursuant to
Rule 411 under the Securities Act of 1933)
(5.2) Investment Advisory Agreement with The Hennessy
Management Co. II, L.P., relating to the Hennessy
Aggressive Growth Fund.
(6) None
(7) None
(8) Custodian Agreement with Firstar Trust Company (Exhibit
8 to Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933)
(9.1) Fund Administration Servicing Agreement with Firstar
Trust Company relating to the Hennessy Balanced Fund
(Exhibit 9.1 to Registrant's Registration Statement on
Form N-1A is incorporated by reference pursuant to Rule
411 under the Securities Act of 1933)
(9.2) Transfer Agent Agreement with Firstar Trust Company
relating to Hennessy Balanced Fund (Exhibit 9.2 to
Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933)
(9.3) Fund Accounting Servicing Agreement with Firstar Trust
Company (Exhibit 9.3 to Registrant's Registration
Statement on Form N-1A is incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933)
(10) Opinion of Foley & Lardner, counsel for Registrant
(Exhibit 10 to Amendment No. 1 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933)
(11) Consent of KPMG Peat Marwick LLP
(12) None
(13) Subscription Agreement (Exhibit 13 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933)
(14) Individual Retirement Custodial Account
(15) Service and Distribution Plan (Exhibit 15 to Amendment
No. 1 to Registrant's Registration Statement on Form
N-1A is incorporated by reference pursuant to Rule 411
under the Securities Act of 1933)
(15.1) Agreement pursuant to Distribution Plan (Exhibit 15.1 to
Amendment No. 1 to Registrant's Registration Statement
on Form N-1A is incorporated by reference pursuant to
Rule 411 under the Securities Act of 1933)
(15.2) Distribution Agreement (Exhibit 15.2 to Amendment No. 2
to Registrant's Registration Statement on Form N-1A is
incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933)
(15.3) Agreement pursuant to Distribution Plan relating to
Hennessy Aggressive Growth Fund
(15.4) Distribution Agreement relating to Hennessy Aggressive
Growth Fund
(16) Schedule for Computation of Performance Quotations
(Exhibit 16 to Amendment No. 2 to Registrant's
Registration Statement on Form N-1A is incorporated by
reference pursuant to Rule 411 under the Securities Act
of 1933)
(17) None
(18) None.
Item 25. Persons Controlled by or under Common Control with Registrant
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 March 31, 1998
Class A Common Stock, $0.0001 par value 690
(Hennessy Balanced Fund)
Class B Common Stock, $0.0001 par value 0
(Hennessy Aggressive Growth 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, if requested to do so by holders of at
least 10% of Registrant's outstanding shares, to call a meeting of
shareholders for the purpose of voting upon the question of removal of a
director or directors and to assist in communication with other
shareholders as required by Section 16(c) of the Investment Company Act of
1940.
Registrant undertakes to provide its Annual Report to
Shareholders upon request without charge to each person to whom a
prospectus is delivered.
<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 29th day of March, 1998.
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 March 29, 1998
Neil J. Hennessy (Principal Executive,
Financial and Accounting
Officer) and a Director
/s/ Brian A. Hennessy Director March 31, 1998
Brian A. Hennessy
/s/ Robert T. Doyle Director March 31, 1998
Robert T. Doyle
/s/ Rodger D. Offenbach Director March 31, 1998
Rodger D. Offenbach
/s/ John D. DeSousa Director March 30, 1998
John D. DeSousa
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Page No.
(1.1) Registrant's Articles of
Incorporation*
(1.2) Articles Supplementary
(2) Registrant's Bylaws*
(3) None
(4) None
(5.1) Investment Advisory Agreement with The
Hennessy Management Co., L.P. relating
to Hennessy Balanced Fund*
(5.2) Investment Advisory Agreement with the
Hennessy Management Co. II, L.P.
relating to the Hennessy Aggressive
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 KPMG Peat Marwick LLP
(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*
(15.3) Agreement pursuant to Distribution
Plan relating to Hennessy Aggressive
Growth Fund
(15.4) Distribution Agreement relating to
Hennessy Aggressive Growth Fund
(16) Schedule for Computation of
Performance Quotations*
(17) None
(18) None
__________________________________
* Incorporated by Reference.
Exhibit 1.2
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
THE HENNESSY FUNDS, INC.
Pursuant to Section 2-208 of the Maryland General Corporation
Law (the "MGCL"), The Hennessy Funds, Inc., having its registered office
in Baltimore, Maryland (the "Company"), does hereby certify to the State
Department of Assessments and Taxation of Maryland (the "Department")
that:
FIRST: The Company is registered as an open-end investment
company under the Investment Company Act of 1940.
SECOND: Pursuant to Section 2-105(a)(9) of the MGCL and Article
IV of the Company's Articles of Incorporation, the Board of Directors of
the Company duly adopted on May __, 1998, resolutions: (a) designating
100,000,000 shares of the Company's previously undesignated Common Stock,
$.0001 par value, as set forth below; and (b) authorizing and directing
the filing of these Articles Supplementary for record with the Department.
Class Fund Shares
B Hennessy Aggressive Growth Fund 100,000,000
THIRD: The respective preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications
and term and conditions of redemption of each class of the Company's
Common Stock, $.0001 par value, are as set forth in Section B of Article
IV of the Company's Articles of Incorporation.
FOURTH: These Articles Supplementary shall become effective as
of the time they are accepted by the Department for record.
IN WITNESS WHEREOF, the Company has caused these presents to be
signed in its name and on behalf by its President and attested by its
Secretary as of this ____ day of June, 1998.
THE HENNESSY FUNDS, INC.
By:
Neil J. Hennessy, President
Attest:
Teresa M. Nilsen, Secretary
EXHIBIT 5.2
INVESTMENT ADVISORY AGREEMENT
Agreement made this 30th day of June, 1998 between The Hennessy
Funds, Inc., a Maryland corporation (the "Company"), and The Hennessy
Management Co. II, L.P., a California limited partnership (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Company is registered with the Securities and
Exchange Commission under the Investment Company Act of 1940 (the "Act")
as an open-end management investment company consisting of two series, the
Hennessy Balanced Fund and the Hennessy Aggressive Growth 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 Articles of Incorporation or
Bylaws, 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 0.60% (0.60% 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
June 30, 2000 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. II, L.P.
By: Edward J. Hennessy, Incorporated,
General Partner
By:
President
THE HENNESSY FUNDS, INC.
By:
President
Exhibit 11
CONSENT OF INDEPENDENT AUDITORS
The Shareholders and Board of Directors
The Hennessy Funds, Inc.
We consent to the use of our report incorporated herein by reference and
to the reference to our Firm under the headings "General Information" in
the Prospectus and "Independent Auditors" in the Statement of Additional
Information.
/s/ KPMG PEAT MARWICK LLP
Milwaukee, Wisconsin
April 15, 1998
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
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 the shares of any regulated
investment company ("Investment Company") for which The Hennessy
Management Co., L.P. or The Hennessy Management Co. II, L.P. serves as
investment advisor, or any other regulated investment company designated
by the investment advisor. 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 Custodian 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 The Hennessy Funds, Inc., c/o Firstar
Trust Company, Mutual Fund Services, 615 East Michigan Street, 3rd Floor,
P.O. Box 701, Milwaukee, WI 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.
<PAGE>
THE HENNESSY FUNDS, INC.
ROTH INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The following constitutes an agreement establishing a Roth IRA
(under Section 408A of the Internal Revenue Code) between the depositor
and the custodian.
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA,
then, except in the case of a rollover contribution described in section
408A(e), the custodian will accept only cash contributions and only up to
a maximum amount of $2,000 for any tax year of the depositor.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same
tax year will be accepted.
ARTICLE II
The $2,000 limit described in Article I is gradually reduced
to $0 between certain levels of adjusted gross income (AGI). For a single
depositor, the $2,000 annual contribution is phased out between AGI of
$95,000 and $110,000; for a married depositor who files jointly, between
AGI of $150,000 and $160,000; and for a married depositor who files
separately, between $0 and $10,000. In the case of a conversion, the
custodian will not accept IRA Conversion Contributions in a tax year if
the depositor's AGI for that tax year exceeds $100,000 or if the depositor
is married and files a separate return. Adjusted gross income is defined
in section 408A(c)(3) and does not include IRA Conversion Contributions.
ARTICLE III
The depositor's interest in the balance in the custodial account
if nonforfeitable.
ARTICLE IV
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, silver,
and platinum coins, coins issued under the laws of any state, and certain
bullion.
ARTICLE V
1. If the depositor dies before his or her entire interest is
distributed to him or her and the grantor's surviving spouse is not the
sole beneficiary, 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.
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the depositor's death, or
(b) Be distributed over the life expectancy of the designated
beneficiary starting no later than December 31 of the year following the
year of the depositor's death.
If distributions do not begin by the date described in (b),
distribution method (a) will apply.
2. In the case of distribution method 1.(b) above, to determine the
minimum annual payment for each year, divide the grantor's entire interest
in the trust as of the close of business on December 31 of the preceding
year by the life expectancy of the designated beneficiary using the
attained age of the designated beneficiary as of the beneficiary's
birthday in the year distributions are required to commence and subtract 1
for each subsequent year.
3. If the depositor's spouse is the sole beneficiary on the
depositor's date of death, such spouse will then be treated as the
depositor.
ARTICLE VI
1. The depositor agrees to provide the custodian with information
necessary for the custodian to prepare any reports required under section
408(i) and 408A(d)(3)(E), regulations sections 1.408-5 and 1.408-6, and
under guidance published by the Internal Revenue Service.
2. The custodian agrees to submit reports to the Internal Revenue
Service and the depositor prescribed by the Internal Revenue Service.
ARTICLE VII
Notwithstanding any other articles which may be added or
incorporated, the provisions of Articles I through IV and this sentence
will be controlling. Any additional articles that are not consistent with
section 408A, the related regulations, and other published guidance will
be invalid.
ARTICLE VIII
This Agreement will be amended from time to time to comply with
the provisions of the Code, related regulations, and other published
guidance. Other amendments may be made with the consent of the persons
whose signatures appear below.
ARTICLE IX
1. Investment of Account Assets. (a) All contributions to the
custodial account shall be invested in the shares of any regulated
investment company ("Investment Company") for which The Hennessy
Management Co. L.P. or The Hennessy Management Co. II, L.P. serves as
investment advisor, or any other regulated investment company designated
by the investment advisor. 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 custodian 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 The Hennessy Funds, Inc., c/o Firstar Trust
Company, Mutual Fund Services, 615 East Michigan Street, 3rd Floor, P.O.
Box 701, Milwaukee, WI 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. 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.
7. Rollover Contributions and Transfers. Subject to the
restrictions in Article I, 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.
8. Conflict in Provisions. To the extent that any provisions of
this Article VIII shall conflict with the provisions of Articles V, VI
and/or VIII, the provisions of this Article IX shall govern.
9. Applicable State Law. This custodial account shall be
construed, administered and enforced according to the laws of the State of
Wisconsin.
<PAGE>
THE HENNESSY FUNDS, INC.
SIMPLE INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT
The participant whose name appears above is establishing a
savings incentive match plan for employees of small employers individual
retirement account (SIMPLE IRA) under sections 408(a) and 408(p) to
provide for his or her retirement and for the support of his or her
beneficiaries after death.
The custodian named above has given the participant the
disclosure statement required under Regulations section 1.408-6.
The participant and the custodian make the following agreement:
ARTICLE I.
The custodian will accept cash contributions made on behalf of
the participant by the participant's employer under the terms of a SIMPLE
plan described in section 408(p). In addition, the custodian will accept
transfers or rollovers from other SIMPLE IRAs of the participant. No
other contributions will be accepted by the custodian.
ARTICLE II.
The participant'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, silver,
and platinum coins, coins issued under the laws of any state, and certain
bullion.
ARTICLE IV.
1. Notwithstanding any provision of this agreement to the contrary,
the distribution of the participant'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
incorporated by reference.
2. Unless otherwise elected by the time distributions are required
to begin to the participant 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 participant and the surviving spouse and shall apply
to all subsequent years. The life expectancy of a nonspouse beneficiary
may not be recalculated.
3. The participant's entire interest in the custodial account must
be, or begin to be, distributed by the participant's requested beginning
date (April 1 following the calendar year end in which the participant
reaches age 70-1/2). By that date, the participant 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 participant.
(c) An annuity contract that provides equal or
substantially equal monthly, quarterly, or annual payments over the joint
and last survivor lives of the participant and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a
specified period that may not be longer than the participant'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 participant and his or her designated
beneficiary.
4. If the participant 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 participant 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 participant dies before distribution of his or
her interest has begun, the entire remaining interest will, at the
election of the participant or, if the participant 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 participant'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
participant's death. If, however, the beneficiary is
the participant's surviving spouse, then this
distribution is not required to begin before December
31 of the year in which the participant would have
reached age 70-1/2.
(c) Except where distribution in the form of an annuity
meeting the requirements of section 408(b0(3) and its related regulations
has irrevocably commenced, distributions are treated as having begun on
the participant's required beginning date, even though payments may
actually have been made before that date.
(d) If the participant 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 participant'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 participant (or the joint
life and last survivor expectancy of the participant and the participant'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 participant and
designated beneficiary as of their birthdays in the year the participant
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 participant agrees to provide the custodian with information
necessary for the custodian to prepare any report required under sections
408(i) and 408(l)(2) and Regulations sections 1.408-5 and 1.408-6.
2. The custodian agrees to submit reports to the Internal Revenue
Service and the participant as prescribed by the Internal Revenue Service.
3. The custodian also agrees to provide the participant's employer
the summary description described in section 408(l)(2) unless this SIMPLE
IRA is a transfer SIMPLE IRA.
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
sections 408(a) and 408(p) and the 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 the shares of any regulated
investment company ("Investment Company") for which The Hennessy
Management Co., L.P. or The Hennessy Management Co. II, L.P. serves as
investment advisor, or any other regulated investment company designated
by the investment advisor. 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 Custodian 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 The Hennessy Funds, Inc., c/o
Firstar Trust Company, Mutual Fund Services, 615 East Michigan Street, 3rd
Floor, P.O. Box 701, Milwaukee, WI 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.
<PAGE>
THE HENNESSY FUNDS, INC. SIMPLE PLAN
Article I Employee Requirements (Complete appropriate box(es) and
blanks-see instructions)
1 General Eligibility Requirements. The Employer agrees to permit
salary reduction contributions to be made in each calendar year to the
SIMPLE IRA established by each employee who meets the following
requirements (select either 1a or 1b):
a [_] Full Eligibility. All employees are eligible.
b [_] Limited Eligibility. Eligibility is limited to employees who
are described in both (i) and (ii) below:
(i) Current compensation. Employees who are reasonably
expected to receive at least $_____________ in compensation (not to exceed
$5,000) for the calendar year.
(ii) Prior compensation. Employees who have received at
least $___________ in compensation (not to exceed $5,000) during any
_______ calendar year(s) (insert 0, 1, or 2) preceding the calendar year.
2 Excludable Employees (OPTIONAL)
[_] The Employer elects to exclude employees covered under a
collective bargaining agreement for which retirement benefits were the
subject of good faith bargaining.
Article II-Salary Reduction Agreements (Complete the box and blank, if
appropriate-see instructions.)
1 Salary Reduction Election. An eligible employee may make a salary
reduction election to have his or her compensation for each pay period
reduced by a percentage. The total amount of the reduction in the
employee's compensation cannot exceed $6,000* for any calendar year.
----------------
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
2 Timing of Salary Reduction Elections
a For a calendar year, an eligible employee may make or modify a salary
reduction election during the 60-day period immediately preceding January
1 of that year. However, of for the year in which the employee becomes
eligible to make salary reduction contributions, the period during which
the employee may make or modify the election is a 60-day period that
includes either the date the employee becomes eligible or the day before.
b In addition to the election in 2a, eligible employees may make salary
reduction elections or modify prior elections _______________ (If the
Employer chooses this option, insert a period or periods (e.g. semi-
annually, quarterly, monthly, or daily) that will apply uniformly to all
eligible employees.)
c No salary reduction election may apply to compensation that an
employee received, or had a right to immediately receive, before execution
of the salary reduction election.
d An employee may terminate a salary reduction election at any time
during the calendar year. [_] If this box is checked, an employee who
terminates a salary reduction election not in accordance with 2b may not
resume salary reduction contributions during the calendar year.
Article III-Contributions (Complete the blank, if appropriate-see
instructions.)
1 Salary Reduction Contributions. The amount by which an employee
agrees to reduce his or her compensation will be contributed by the
Employer to the employee's SIMPLE IRA.
2 Other Contributions
a Matching Contributions
(i) For each calendar year, the Employer will contribute a matching
contribution to each eligible employee's SIMPLE IRA equal to the
employee's salary education contributions up to a limit of 3% of the
employee's compensation for the calendar year.
(ii) The Employer may reduce the 3% limit for the calendar year in
(i) only if:
(1) The limit is not reduced below 1%; (2) The limit is not
reduced for more than 2 calendar years during the 5-year period ending
with the calendar year the reduction is effective; and (3) Each employee
is notified of the reduced limit within a reasonable period of time before
the employees' 60-day election period for the calendar year (described in
Article II, item 2a).
b Nonelective Contributions
(i) For any calendar year, instead of making matching contributions
the Employer may make nonelective contributions equal to 2% of
compensation for the calendar year to the SIMPLE IRA of each eligible
employee who has at least $______________ (not more than $5,000) in
compensation for the calendar year. No more than $160,000* in
compensation can be taken into account in determining the nonelective
contribution for each eligible employee.
----------------
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
(ii) For any calendar year, the Employer may make 2% nonelective
contributions instead of matching contributions only if:
(1) Each eligible employee is notified that a 2% nonelective
contribution will be made instead of a matching contribution; and
(2) This notification is provided within a reasonable period of time
before the employees' 60-day election period for the calendar year
(described in Article II, item 2a).
Time and Manner of Contributions
a The Employer will make the salary reduction contributions
(described in 1 above) for each eligible employee to the SIMPLE IRA
established at the financial institution selected by that employee no
later than 30 days after the end of the month in which the money is
withheld from the employee's pay. See instructions.
b The Employer will make the matching or nonelective contributions
(described in 2a and 2b above) for each eligible employee to the SIMPLE
IRA established at the financial institution selected by that employee no
later than the due date for filing the Employer's tax return, including
extensions, for the taxable year that includes the last day of the
calendar year for which the contributions are made.
Article IV-Other Requirements and Provisions
1 Contributions in General. The Employer will make no contributions to
the SIMPLE IRAs other than salary reduction contributions (described in
Article III, item 1) and matching or nonelective contributions (described
in Article III, items 2a and 2b).
2 Vesting Requirements. All contributions made under this SIMPLE plan
are fully vested and nonforfeitable.
3 No Withdrawal Restrictions. The Employer may not require the
employee to retain any portion of the contributions in his or her SIMPLE
IRA or otherwise impose any withdrawal restrictions.
4 Selection of IRA Trustee. The employer must permit each eligible
employee to select the financial institution that will serve as the
trustee, custodian, or issuer of the SIMPLE IRA to which the employer will
make all contributions on behalf of that employee.
5 Amendments To This SIMPLE Plan. This SIMPLE plan may not be amended
except to modify the entries inserted in the blanks or boxes provided in
Articles I, II, III, VI, and VII.
6 Effects of Withdrawals and Rollovers
a An amount withdrawn from the SIMPLE IRA is generally includible
in gross income. However, a SIMPLE IRA balance may be rolled over or
transferred on a tax-free basis to another IRA designed solely to hold
funds under a SIMPLE plan. In addition, an individual may roll over or
transfer his or her SIMPLE IRA balance to any IRA on a tax-free basis
after a 2-year period has expired since the individual first participate
in a SIMPLE plan. Any rollover or transfer must comply with the
requirements under section 408.
b If an individual withdraws an amount from a SIMPLE IRA during
the 2-year period beginning when the individual first participate in a
SIMPLE plan and the amount is subject to the additional tax on early
distributions under section 72(t), this additional tax is increased from
10% to 25%.
Article V-Definitions
1 Compensation
a General Definition of Compensation. Compensation means the sum
of wages, tips, and other compensation from the Employer subject to
federal income tax withholding (as described in section 6051(a)(3)) and
the employee's salary reduction contributions made under this plan, and if
applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a
section 403(b) annuity contract and compensation deferred under a section
45 plan required to be reported by the Employer on Form W-2 (as described
in section 6051(a)(8)).
b Compensation for Self-Employed Individuals. For self-employed
individuals, compensation means that net earnings from self-employment
determined under section 1402(a) prior to subtracting any contributions
made pursuant to this plan on behalf of the individual.
2 Employee. Employee means a common-law employee of the Employer. The
term employee also includes a self-employed individual and a leased
employee described in section 414(n) but does not include a nonresident
alien who received no earned income from the Employer that constitutes
income from sources within the United States.
Eligible Employee. An eligible employee means an employee who satisfies
the conditions in Article I, item 1 and is not excluded under Article I,
item 2.
4 SIMPLE IRA. A SIMPLE IRA is an individual retirement account
described in section 408(a), or an individual retirement annuity described
in section 408(b), to which the only contributions that can be made are
contributions under SIMPLE plan and rollovers or transfers from another
SIMPLE IRA.
Article VI-Procedures for Withdrawal. (The employer will provide each
employee with the procedures for withdrawals of contributions received by
the financial institution selected by that employee, and that financial
institution's name and address (by attaching that information or inserting
it in the space below) unless: (1) that financial institution's
procedures are unavailable, or (2) that financial institution provides the
procedures directly to the employee. See Employee Notification section in
the instructions.
Article VII-Effective Date
This SIMPLE plan is effective _________________________________ (See
instructions.)
* * * *
Name of Employer By: Signature Date
Address of Employer Name and title
Model Notification to Eligible Employees
I. Opportunity to Participate in the SIMPLE Plan
You are eligible to make salary reduction contributions to the
___________ SIMPLE plan. This notice and the attached summary description
provide you with information that you should consider before you decide
whether to start, continue, or change your salary reduction agreement.
II. Employer Contribution Election
For the ______ calendar year, the employer elects to contribute to
your SIMPLE IRA (employer must select either (1), (2) or (3)):
(1) A matching contribution equal to your salary reduction
contributions up to a limit of 3% of your compensation for the
year.
(2) A matching contribution equal to your salary reduction
contributions up to a limit of ______% (employer must insert a
number from 1 to 3 and is subject to certain restrictions) of
your compensation for the year; or
(3) A nonelective contribution equal to 2% of your compensation for
the year (limited to $160,000*) if you are an employee who makes
at least $__________ (employer must insert an amount that is
$5,000 or less) in compensation for the year.
---------------
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
III. Administrative Procedures
If you decide to start or change your salary reduction agreement, you
must complete the salary reduction agreement and return it to
___________________________________ (employer should designate a place or
individual) by _____________________ (employer should insert a date that
is not less than 60 days after notice is given).
IV. Employee Selection of Financial Institution
You must select the financial institution that will serve as the
trustee, custodian, issuer or your SIMPLE IRA and notify your employer of
your selection.
<PAGE>
Model Salary Reduction Agreement
I. Salary Reduction Election
Subject to the requirements of the SIMPLE plan of
___________________________ (name of employer) I authorize __________% or
$____________ (which equals ________% of my current rate of pay) to be
withheld from my pay for each pay period and contributed to my SIMPLE IRA
as a salary reduction contribution.
II. Maximum Salary Reduction
I understand that the total amount of my salary reduction
contributions in any calendar year cannot exceed $6,000*.
------------
* This amount will be adjusted to reflect any annual cost-of-living
increases announced by the IRS.
III. Date Salary Reduction Begins
I understand that my salary reduction contributions will start as
soon as permitted under the SIMPLE plan and as soon as administratively
feasible or, if later, ____________. (Fill in the date you want the
salary reduction contributions to begin. The date must be after you sign
this agreement).
IV. Employee Selection of Financial Institution
I select the following financial institution to serve as the trustee,
custodian, or issuer of my SIMPLE IRA.
____________________________________________
Name of financial institution
____________________________________________
Address of financial institution
____________________________________________
SIMPLE IRA account name and number
I understand that I must establish a SIMPLE IRA to receive any
contributions made on my behalf under this SIMPLE plan. If the
information regarding my SIMPLE IRA is incomplete when I first submit my
salary reduction agreement, I realize that it must be completed by the
date contributions must be made under the SIMPLE plan. If I fail to
update my agreement to provide this information by that date, I understand
that my employer may select a financial institution of my SIMPLE IRA.
V. Duration of Election
This salary reduction agreement replaces any earlier agreement and
will remain in effect as long as I remain an eligible employee under the
SIMPLE plan or until I provide my employer with a request to end my salary
reduction contributions or provide a new salary reduction agreement as
permitted under this SIMPLE plan.
Signature of employee ___________________________
Date ___________________________
<PAGE>
THE HENNESSY FUNDS, INC. SIMPLIFIED EMPLOYEE PENSION
Instructions
Section references are to the Internal Revenue Code unless otherwise
noted.
Purpose of Form
Form 5305-SEP (Model SEP) is used by an employer to make an agreement to
provide benefits to all eligible employees under a SEP described in
section 408(k). Do not file this form with the IRS. See Pub. 560,
Retirement Plans for the Self-Employed, and Pub. 590, Individual
Retirement Arrangements (IRAs).
Instructions to the Employer
Simplified Employee Pension.-A SEP is a written arrangement (a plan) that
provides you with a simplified way to make contributions toward your
employees' retirement income. Under a SEP, you can contribute to an
employee's individual retirement account or annuity (IRA). You make
contributions directly to an IRA set up by or for each employee with a
bank, insurance company, or other qualified financial institution. When
using Form 5305-SEP to establish a SEP, the IRA must be a Model IRA
established on an IRS form or a master or prototype IRA for which the IRS
has issued a favorable opinion letter. Making the agreement on Form 5305-
SEP does not establish an employer IRA described in section 408(c).
When Not To Use Form 5305-SEP.-Do not use this form if you:
1. Currently maintain any other qualified retirement plan. This
does not prevent you from maintaining another SEP.
2. Previously maintained a defined benefit plan that is now
terminated.
3. Have any eligible employees for whom IRAs have not been
established.
4. Use the services of leased employees (described in section
414(n)).
5. Are a member of an affiliated service group (described in
section 414(m)), a controlled group of corporations (described in section
414(b)), or trades or businesses under common control (described in
sections 414(c) and 414(o)), unless all eligible employees of all the
members of such groups,trades, or businesses, participate in the SEP.
6. Will not pay the cost of the SEP contributions. Do not use Form
5305-SEP for a SEP that provides for elective employee contributions even
if the contributions are made under a salary reduction agreement.
Use Form 5305A-SEP, or a nonmodel SEP if you permit elective
deferrals to a SEP.
Note: SEPs permitting elective deferrals cannot be established after
1996.
Eligible Employees.-All eligible employees must be allowed to participate
in the SEP. An eligible employee is any employee who: (1) is at least 21
years old, and (2) has performed "service" for you in at least 3 of the
immediately preceding 5 years.
Note: You can establish less restrictive eligibility requirements, but
not more restrictive ones.
Service is any work performed for you for any period of time, however
short. If you are a member of an affiliated service group, a controlled
group of corporations,or trades or businesses under common control,
service includes any work performed for any period of time for any other
member of such group,trades, or businesses.
Excludable Employees.-The following employees do not have to be covered by
the SEP: (1) employees covered by a collective bargaining agreement whose
retirement benefits were bargained for in good faith by you and their
union, (2) nonresident alien employees who did not earn U.S.source income
from you, and (3) employees who received less than $400* in compensation
during the year.
Contribution Limits.-The SEP rules permit you to make an annual
contribution of up to 15% of the employee's compensation or $300,000*,
whichever is less. Compensation, for this purpose, does not include
employer contributions to the SEP or the employee's compensation in excess
of $160,000*. If you also maintain a Model Elective SEP or any other SEP
that permits employees to make elective deferrals, contributions to the
two SEPs together may not exceed the smaller of $300,000* or 15% of
compensation for any employee.
---------------
* This amount reflects the cost-of-living increase effective January 1,
1997. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
Contributions cannot discriminate in favor of highly compensated
employees. You are not required to make contributions every year. But
you must contribute to the SEP-IRAs of all of the eligible employees who
actually performed services during the year of the contribution. This
includes eligible employees who die or quit working before the
contribution is made.
You may also not integrate your SEP contributions with, or offset
them by, contributions made under the Federal Insurance Contributions Act
(FICA).
If this SEP is intended to meet the top-heavy minimum contribution
rules of section 416, but it does not cover all your employees who
participate in your elective SEP, then you must make minimum contributions
to IRAs established on behalf of those employees.
Deducting Contributions.--You may deduct contributions to a SEP subject to
the limits of section 404(h). This SEP is maintained on a calendar year
basis and contributions to the SEP are deductible for your tax year with
or within which the calendar year ends. Contributions made for a
particular tax year must be made by the due date of your income tax return
(including extensions) for that tax year.
Completing the Agreement.--This agreement is considered adopted when:
- IRAs have been established for all your eligible employees;
- You have completed all blanks on the agreement form without
modification; and
- You have given all your eligible employees the following information:
1. A copy of Form 5305-SEP.
2. A statement that IRAs other than the IRAs into which employer
SEP contributions will be made may provide different rates of return and
different terms concerning, among other things, transfers and withdrawals
of funds from the IRAs.
3. A statement that, in addition to the information provided to an
employee at the time the employee becomes eligible to participate, the
administrator of the SEP must furnish each participant within 30 days of
the effective date of any amendment to the SEP, a copy of the amendment
and a written explanation of its effects.
4. A statement that the administrator will give written
notification to each participant of any employer contributions made under
the SEP to that participant's IRA by the later of January 31 of the year
following the year for which a contribution is made or 30 days after the
contribution is made.
Employers who have established a SEP using Form 5305-SEP and have
furnished each eligible employee with a copy of the completed Form 5305-
SEP and provided the other documents and disclosures described in
Instructions to the Employer and Information for the Employee, are not
required to file the annual information returns, Forms 5500, 5500-C/R, or
5500-EZ for the SEP. However, under Title I of ERISA, this relief from
the annual reporting requirements may not be available to an employer who
selects, recommends, or influences its employees to choose IRAs into which
contributions will be made under the SEP, if those IRAs are subject to
provisions that impose any limits on a participant's ability to withdraw
funds (other than restrictions imposed by the Code that apply to all
IRAs). For additional information on Title I requirements, see the
Department of Labor regulation at 29 CFR 2520.104-48.
Information for the Employee
The information below explains what a SEP is, how contributions are made,
and how to treat your employer's contributions for tax purposes. For more
information, see Pub. 590.
Simplified Employee Pension.--A SEP is a written arrangement (a plan) that
allows an employer to make contributions toward your retirement.
Contributions are made to an individual retirement account/annuity (IRA).
Contributions must be made to either a Model IRA executed on an IRS form
or a master or prototype IRA for which the IRS has issued a favorable
opinion letter.
An employer is not required to make SEP contributions. If a
contribution is made, it must be allocated to all the eligible employees
according to the SEP agreement. The Model SEP (Form 5305-SEP) specifies
that the contribution for each eligible employee will be the same
percentage of compensation (excluding compensation higher than $160,000*)
for all employees.
Your employer will provide you with a copy of the agreement
containing participation rules and a description of how employer
contributions may be made to your IRA. Your employer must also provide
you with a copy of the completed Form 5305-SEP and a yearly statement
showing any contributions to your IRA.
All amounts contributed to your IRA by your employer belong to you
even after you stop working for that employer.
Contribution Limits.--Your employer will determine the amount to be
contributed to your IRA each year. However, the amount for any year is
limited to the smaller of $30,000* or 15% of your compensation (currently
limited to $160,000) for that year. Compensation does not include any
amount that is contributed by your employer to your IRA under the SEP.
Your employer is not required to make contributions every year or to
maintain a particular level of contributions.
Tax Treatment of Contributions.--Employer contributions to your SEP-IRA
are excluded from your income unless there are contributions in excess of
the applicable limit. Employer contributions within these limits will not
be included on your Form W-2.
Employee Contributions.--You may contribute the smaller of $2,000 or 100%
of your compensation to an IRA. However, the amount you can deduct may be
reduced or eliminated because, as a participant in a SEP, you are covered
by an employer retirement plan.
SEP Participation.--If your employer does not require you to participate
in a SEP as a condition of employment, and you elect not to participate,
all other employees of your employer may be prohibited from participating.
If one or more eligible employees do not participate and the employer
tries to establish a SEP for the remaining employees, it could cause
adverse tax consequences for the participating employees.
An employer may not adopt this IRS Model SEP if the employer
maintains another qualified retirement plan or has ever maintained a
qualified defined benefit plan. This does not prevent your employer from
adopting this IRS Model SEP and also maintaining an IRS Model Elective SEP
or other SEP. However, if you work for several employers, you may be
covered by a SEP of one employer and a different SEP or pension or profit-
sharing plan of another employer.
SEP-IRA Amounts--Rollover or Transfer to Another IRA.--You can withdraw or
receive funds from your SEP-IRA if within 60 days of receipt, you place
those funds in another IRA or SEP-IRA. This is called a "rollover" and
can be done without penalty only once in any 1-year period. However,
there are no restrictions on the number of times you may make "transfers"
if you arrange to have these funds transferred between the trustees or the
custodians so that you never have possession of the funds.
Withdrawals.--You may withdraw your employer's contribution at any time,
but any amount withdrawn is includible in your income unless rolled over.
Also, if withdrawals occur before you reach age 59-1/2, you may be subject
to a tax on early withdrawal.
Excess SEP Contributions.--Contributions exceeding the yearly limitations
may be withdrawn without penalty by the due date (plus extensions) for
filing your tax return (normally April 15), but is includible in your
gross income. Excess contributions left in your SEP-IRA account after
that time may have adverse tax consequences. Withdrawals of those
contributions may be taxed as premature withdrawals.
Financial Institution Requirements.--The financial institution where your
IRA is maintained must provide you with a disclosure statement that
contains the following information in plain, nontechnical language:
1. The law that relates to your IRA.
2. The tax consequences of various options concerning your IRA.
3. Participation eligibility rules, and rules on the deductibility
of retirement savings.
4. Situations and procedures for revoking your IRA, including the
name, address, and telephone number of the person designated to receive
notice of revocation. (This information must be clearly displayed at the
beginning of the disclosure statement.)
5. A discussion of the penalties that may be assessed because of
prohibited activities concerning your IRA.
6. Financial disclosure that provides the following information:
a. Projects value growth rates of your IRA under various
contribution and retirement schedules, or describes the method of
determining annual earnings and charges that may be assessed.
b. Describes whether, and for when, the growth projections are
guaranteed, or a statement of the earnings rate and the terms on which the
projections are based.
c. States the sales commission for each year expressed as a
percentage of $1,000.
In addition, the financial institution must provide you with a
financial statement each year. You may want to keep these statements to
evaluate your IRA's investment performance.
<PAGE>
THE HENNESSY FUNDS, INC.
SIMPLIFIED EMPLOYEE PENSION-INDIVIDUAL
RETIREMENT ACCOUNTS CONTRIBUTION AGREEMENT
(Under Section 408(k) of the Internal Revenue Code)
makes the following agreement under
(Name of employer)
Section 408(k) of the Internal Revenue Code and the instructions to this
form.
Article I--Eligibility Requirements (Check appropriate boxes--see
Instructions.)
The employer agrees to provide for discretionary contributions in each
calendar year to the individual retirement account or individual
retirement annuity (IRA) of all employees who are at least ______ years
old (not to exceed 21 years old) and have performed services for the
employer in at least ______ years (not to exceed 3 years) of the
immediately preceding 5 years. This simplified employee pension (SEP) [_]
includes [_] does not include employees covered under a collective
bargaining agreement, [_] includes [_] does not include certain
nonresident aliens, and [_] includes [_] does not include employees whose
total compensation during the year is less than $400*.
Article II--SEP Requirements (See Instructions.)
The employer agrees that contributions made on behalf of each eligible
employee will be:
A. Based only on the first $160,000* of compensation.
B. Made in an amount that is the same percentage of compensation for
every employee.
C. Limited annually to the smaller of $30,000* or 15% of
compensation.
D. Paid to the employee's IRA trustee, custodian, or insurance company
(for an annuity contract).
Employer's Signature and date Name and title
---------------
* This amount reflects the cost-of-living increase effective January 1,
1998. The amount is adjusted annually. The IRS announces the increase,
if any, in a news release and in the Internal Revenue Bulletin.
EXHIBIT 15.3
AGREEMENT
June 30, 1998
The Hennessy Management Co. II, 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 "Company"), has agreed that you shall be, for
the period of this Agreement, a recipient of payments under the Company's
Service and Distribution Plan (the "Plan") under Rule 12b-1 under the
Investment Company Act of 1940 with respect to the Hennessy Aggressive
Growth Fund (the "Fund"). 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 one or more
distributors (the "Distributors") for the shares of common stock of the
Fund (the "Shares") in accordance with the instructions of the Company'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
Distributors and report quarterly to the Board of Directors as to the
performance of the Distributors. 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 Distributors, 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 Distributors 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 reimburse Edward J. Hennessy,
Incorporated ("Hennessy") for expenses actually incurred by Hennessy in
distributing or promoting the sale of Shares. You are also authorized to
pay Hennessy an amount equal to $225 per hour, or such other rate as you
and Hennessy may agree from time to time, for services provided by Neil J.
Hennessy in his capacity as President of Hennessy related to the
distribution of Shares. The obligation to pay Hennessy shall be your
obligation and not an obligation of the Fund. You are also authorized to
pay other Distributors such fees that you negotiate with them in
accordance with paragraph 1.1(a), all of such payments to be your
obligations and not the obligation of the Fund.
1.1(d) In exchange for such services, the Fund agrees to pay
you fees on an annualized basis of 0.25% of the Fund's average daily net
assets.
1.2 Your agreement with Distributors 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 the Company's Articles of Incorporation.
2. Term
2. This Agreement shall become effective as of the date hereof
and, unless sooner terminated, shall continue until June 30, 1999, and
thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by
(i) the Company'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 Company'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 Company'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. II, L.P.
By: Edward J. Hennessy, Incorporated,
General Partner
By: ____________________________
President
EXHIBIT 15.4
DISTRIBUTION AGREEMENT
AGREEMENT made this 30th day of June, 1998 between The Hennessy
Management Co. II, 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 Aggressive Growth Fund (the "Fund"), which is an
investment portfolio of The Hennessy Funds, Inc. (the "Company"), an open-
end management investment company under the Investment Company Act of
1940;
WHEREAS, the Adviser has been authorized by the Company to
retain a distributor for the shares of the Fund's Common Stock (the
"Shares") pursuant to the Company'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. The Adviser will reimburse the Distributor
for expenses actually incurred by the Distributor in distributing or
promoting the sale of Shares.
b. The Adviser shall pay to the Distributor an amount
equal to $225 per hour, or such other rate as the Adviser and the
Distributor may agree from time to time, for services provided by Neil J.
Hennessy in his capacity as President of the Distributor related to the
distribution of Shares.
7. Duration and Termination.
a. This Agreement shall become effective on June 30, 1998
and shall continue in effect until June 30, 1999, 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
Company'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 Company'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. II, L.P.
By: Edward J. Hennessy, Incorporated
General Partner
By: _________________________________
President
EDWARD J. HENNESSY, INCORPORATED
By: __________________________________
President
