RULE 497(e)
Registration No. 333-00227
HENNESSY LEVERAGED DOGS FUND
PROSPECTUS
June 30, 1998
(Hennessy Leveraged Dogs Fund Logo)
The Courtyard Square
750 Grant Ave., Suite 100
Novato, California 94945
(415) 899-1555
1 (800) 966-4354
Email: [email protected]
Symbol: HDOGX
HENNESSY LEVERAGED DOGS 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 Leveraged Dogs Fund, which is described in
this Prospectus, seeks to achieve total return that in the long run will exceed
that of the Dow Jones Industrial Average.*<F1> The Hennessy Leveraged Dogs 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.
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*<F1>The Dow Jones Industrial Average is the property of Dow Jones & Company,
Inc. Dow Jones & Company, Inc. is not affiliated with the Fund, the Fund's
investment adviser or the general partner of the Fund's 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 relating thereto.
TABLE OF CONTENTS
PAGE NO.
1. EXPENSES 1
2. INVESTMENT STRATEGY AND ASSOCIATED RISK FACTORS 2
3. INVESTMENT RESTRICTIONS 4
4. REPORTS 5
5. MANAGEMENT 5
6. HOW WE DETERMINE THE FUND'S SHARE PRICE 7
7. PURCHASING SHARES 7
8. EXCHANGING SHARES 9
9. REDEMPTIONS 10
10. DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES 12
11. DIVIDEND REINVESTMENT 12
12. RETIREMENT PLANS 13
13. BROKERAGE TRANSACTIONS 13
14. GENERAL INFORMATION 13
15. PERFORMANCE INFORMATION 14
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)<F2>
Exchange fee None (1)<F2>
ANNUAL OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management fees (after fee waivers) 0.00% (2)<F3>
12b-1 fees (after fee waivers) 0.00% (2)<F3>
Other expenses (after reimbursement) 0.00%
Total fund operating expenses (after reimbursement) 0.00% (2)<F3>
(1)<F2>A fee of $12.00 is charged for each wire redemption and a fee of $5.00
for each telephone exchange.
(2)<F3>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 and other expenses for the Fund for the fiscal year
ending June 30, 1999, are estimated to be 0.60%, 0.25% and 0.35%, 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
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You would pay the following expenses on a
$1,000 investment, assuming (1) a 5% annual return
and (2) redemption at the end of each time period: $0 $26
2. INVESTMENT STRATEGY AND ASSOCIATED RISK FACTORS
The Fund's investment objective is to achieve total return that in the long
run will exceed that of the Dow Jones Industrial Average ("DJIA").*<F3>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 DJIA in approximately equal dollar amounts. 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 in approximately equal dollar amounts. The Fund intends to borrow
the maximum amount permitted by the Investment Company Act of 1940 (e.g.
approximately one-half of its net assets). Borrowing for investment is a
speculative technique which increases investment risk but also increases
investment opportunity. See "Borrowing." Since the Fund intends to 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 Fund's name and investment strategy is derived from the so called "Dogs
of the Dow" investment strategy. The "Dogs of the Dow" investment strategy
involves annually investing in the ten highest yielding stocks in the DJIA (i.e.
the "Dow Dogs") in equal dollar amounts, liquidating the portfolio at the end of
the year, then reinvesting the proceeds in the then 10 highest yielding stocks
in the DJIA, liquidating that portfolio at the end of a year and so on.
Historically mutual funds have not used this investment strategy because if they
did they would not satisfy the tax diversification requirements applicable to
"regulated investment companies" under the Internal Revenue Code. By investing
approximately one-half of its total assets in U.S. Treasury securities, the Fund
is able to satisfy these tax diversification requirements and by utilizing
leverage it believes its performance will be more similar to that resulting from
the "Dogs of the Dow" investment strategy than if it did not.
For example if the Fund has $10 million in net assets, it is permitted under
the Investment Company Act of 1940 to borrow $5 million. The Fund intends
initially to borrow by entering into reverse repurchase agreements secured by
its portfolio of U.S. Treasury securities. See "Borrowing." After giving effect
to the borrowing and investment of the borrowed proceeds, the Fund would have a
portfolio consisting approximately of $7.5 million in the 10 highest yielding
stocks of the DJIA in approximately equal dollar amounts and approximately $7.5
million in U.S. Treasury securities. Approximately $5 million of the Fund's
U.S. Treasury securities would serve as collateral for its reverse repurchase
agreement obligations. If the interest earned on the Fund's U.S. Treasury
securities were equal to the interest paid on its reverse repurchase agreements,
the Fund's investment return, before expenses, would be derived approximately
75% from its investments in the 10 highest yielding stocks in the DJIA and
approximately 25% from its investments in U.S. Treasury securities. The Fund,
of course, recognizes that the interest it earns on its U.S. Treasury securities
will be less than the interest it pays when it borrows by entering into reverse
repurchase agreements. We refer to the difference between the interest rate on
the U.S. Treasury securities and the interest rate on the reverse repurchase
agreements to be our "cost of funds." The Fund's investment strategy will be
successful only if the Fund's investments in the stocks of the 10 highest
yielding stocks of the DJIA purchased with borrowed funds appreciate more than
its cost of funds. We cannot assure investors that this will happen. In fact,
the Fund's investments in the 10 highest yielding stocks in the DJIA may decline
in value.
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 in
approximately equal dollar amounts. 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. After we have had one year of
operations we will rebalance our common stock investments as described below.
When we purchase common stocks, 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%.
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*<F3> 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. 2, 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.
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 intends to 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 intends to enter into 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. 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.
4. REPORTS
As a shareholder of the Fund you will be provided at least semi-annually with
a report showing the Fund's portfolio and other information. Annually, after
the close of our June 30 fiscal year, you will be provided with an annual report
containing audited financial statements.
An individual account statement will be sent to you by Firstar Trust Company
after each purchase, including reinvestment of dividends or redemption of our
shares. You will also receive an annual statement after the end of the calendar
year listing all your transactions in our shares during the year and a quarterly
statement following the end of each calendar quarter listing year-to-date
transactions.
If you have questions about your account you may call Firstar Trust Company
at (800) 261-6950. If you have general questions about the Fund or want more
information, you may call us at (800) 966-4354 or write to us at THE HENNESSY
FUNDS, INC., The Courtyard Square, 750 Grant Avenue, Suite 100, Novato,
California 94945, Attention: Corporate Secretary.
5. 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. 2, 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. The Adviser was organized for the purpose of becoming the investment
adviser to the Fund and has no other investment advisory clients.
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. Mr. Hennessy is the portfolio manager for the
Hennessy Balanced Fund, the other portfolio of the Company.
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 its 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 $18,000.
Firstar Trust Company also provides custodial, transfer agency and accounting
services for us. Information regarding the fees payable by us to Firstar Trust
Company for these services is provided in the Statement of Additional
Information.
6. HOW WE DETERMINE 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.
7. 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 Leveraged Dogs 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. For credit to Firstar Trust M.F.S.
777 East Wisconsin Avenue Account Number 112-952-137
Milwaukee, Wisconsin 53202 For further credit to Hennessy
ABA Number 075000022 Leveraged Dogs 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
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.
8. 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
the 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.
9. REDEMPTIONS
At any time during normal business hours you may request us to redeem your
shares in whole or in part. Written redemption requests must be directed to THE
HENNESSY FUNDS, INC., c/o Firstar Trust Company, P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. If a redemption request is inadvertently sent to us at
our corporate address, it will be forwarded to Firstar Trust Company, but the
effective date of redemption will be delayed until the request is received by
Firstar Trust Company. Requests for redemption which are subject to any special
conditions or which specify an effective date other than as provided herein
cannot be honored.
A redemption request must be received in "Good Order" by Firstar Trust
Company for the request to be processed. "Good Order" means the request for
redemption must include:
o 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, Sole Redemption request signed by all person(s)
Proprietorship, Custodial required to sign for the account, exactly
(Uniform Gift To Minors Act), as it is registered.
General Partners
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).
o 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.
10. 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.
11. DIVIDEND REINVESTMENT
You may elect to have all income dividends and capital gains distributions
reinvested in our shares or paid in cash, or to have capital gains distributions
reinvested and income dividends paid in cash. Please refer to the New Account
Application form accompanying this Prospectus for further information. If you
do not specify an election, all dividends and capital gains distributions will
automatically be reinvested in full and fractional shares of the Fund calculated
to the nearest 1,000th of a share. Shares are purchased at the net asset value
in effect on the business day after the dividend record date and are credited to
your account on the dividend payment date. Cash dividends are also paid on such
date. You will be advised of the number of shares purchased and the price
following each reinvestment. An election to reinvest or receive dividends and
distributions in cash will apply to all our shares registered in your name,
including those previously purchased. See "DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAXES" for a discussion of certain tax consequences.
You may change an election at any time by notifying us in writing. If such a
notice is received between a dividend declaration date and payment date, it will
become effective on the day following the payment date. We may modify or
terminate our dividend reinvestment program at any time on thirty days' notice
to participants.
12. RETIREMENT PLANS
We offer the following retirement plans that may fit your needs and allow you
to shelter some of your income from taxes:
o INDIVIDUAL RETIREMENT ACCOUNT ("IRA").
o ROTH IRA.
o 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.
13. BROKERAGE TRANSACTIONS
The Agreement authorizes the Adviser to select the brokers or dealers that
will execute the purchases and sales of our portfolio securities. In placing
purchase and sale orders for us, it is the policy of the Adviser to seek the
best execution of orders at the most favorable price in light of the overall
quality of brokerage and research services provided.
The Agreement permits the Adviser to cause 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.
14. 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.
15. PERFORMANCE INFORMATION
We may provide from time to time in advertisements, reports to shareholders
and other communications with shareholders our average annual total return. An
average total return refers to the rate of return which, if applied to an
initial investment at the beginning of a stated period and compounded over the
period, would result in the redeemable value of the investment at the end of the
stated period assuming reinvestment of all dividends and 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, the Merrill Lynch One
Year Treasury Bill Index, U.S. Treasury Securities 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
The Hennessy Management Co. 2, L.P.
The Courtyard Square
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
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
777 East Wisconsin Avenue
Milwaukee, WI 53202
