SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
O'Shaughnessy Funds, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
May 9, 2000
Dear Shareholder:
A special meeting of shareholders of the O'Shaughnessy Cornerstone Growth Fund
and the O'Shaughnessy Cornerstone Value Fund will take place on June 30, 2000.
While you do not have to attend the meeting, WE ASK THAT YOU READ THE ENCLOSED
PROXY STATEMENT AND VOTE YOUR SHARES BY SIGNING, DATING AND SENDING BACK THE
PROXY CARD IN THE POSTAGE-PAID ENVELOPE OR BY CALLING 1-800-690-6903 OR BY
VOTING THROUGH THE INTERNET AT WWW.PROXYVOTE.COM USING THE 12 DIGIT CONTROL
NUMBER THAT APPEARS ON THE ENCLOSED PROXY CARD. All shareholders as of May 8,
2000 are entitled to vote, and your vote is extremely important.
After careful consideration, O'Shaughnessy Capital Management has decided to
leave the mutual fund business. Recent trends in the investment marketplace have
shown us that investors are increasingly interested in investments that are more
tax-friendly, customizable, and personalized than mutual funds.
Therefore we have entered into a definitive agreement to license certain of our
proprietary processes and service marks to Edward J. Hennessy, Incorporated, a
firm that focuses exclusively on growing its mutual fund business. I believe
that Hennessy is an excellent replacement manager. Hennessy fully believes in
the power of Strategy Indexing, and is committed to continuing the disciplined
investment criteria used by the Funds. If you approve the New Management
Agreement with Hennessy, we will license our patented investment strategies for
the Funds to Hennessy, giving them the ability to select stocks exactly the way
the Funds have done so in the past.
After careful consideration, the Board of Directors has approved the New
Management Agreement with Hennessy and believes it is in the shareholders' best
interest. The Funds' Board of Directors recommends that you vote "FOR" the
proposals.
Regardless of the number of shares you own, it is important that they be
represented and voted. Your prompt response will help save the expenses related
to additional solicitation.
If you have any questions regarding the enclosed proxy material or need
assistance in voting your shares, please contact us at 1-800-782-5855, Edward J.
Hennessy at 1-800-966-4354 or our proxy solicitor, D.F. King & Co., at
1-800-829-6551. We appreciate the time and consideration that you will give to
this matter.
Sincerely,
James P. O'Shaughnessy
Chairman & CEO
<PAGE>
O'SHAUGHNESSY FUNDS, INC.
O'SHAUGHNESSY CORNERSTONE GROWTH FUND
O'SHAUGHNESSY CORNERSTONE VALUE FUND
35 MASON STREET
GREENWICH, CONNECTICUT 06830
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Notice of Joint Special Meeting of Shareholders
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To Be Held On June 30, 2000
To Our Shareholders.:
NOTICE IS HEREBY GIVEN that a joint special meeting (the "Meeting") of
shareholders of the O'Shaughnessy Cornerstone Growth Fund (the "Cornerstone
Growth Fund") and the O'Shaughnessy Cornerstone Value Fund (the "Cornerstone
Value Fund" and together with the Cornerstone Growth Fund, the "Funds"), each a
series of O'Shaughnessy Funds, Inc. (the "Corporation"), will be held at the
Stamford Marriott, 2 Stamford Forum, Stamford, Connecticut, on June 30, 2000, at
4:00 p.m., Eastern Time, for the following purposes:
1. to approve or disapprove the new investment management agreement (the "New
Management Agreement") between the Corporation, on behalf of the Funds, and
Edward J. Hennessy, Incorporated (the "New Manager" or "Hennessy");
2. to elect a slate of four members to the Corporation's Board of Directors to
hold office until their successors are duly elected and qualified;
3. to ratify or reject the selection of PricewaterhouseCoopers LLP as the
Corporation's independent accountants for the fiscal year ending September
30, 2000; and
4. to transact such other matters as may properly come before the Meeting or
any adjournment thereof.
The Board of Directors of the Corporation has fixed the close of business
on May 8, 2000 as the record date for the determination of shareholders entitled
to notice of, and to vote at, the Meeting or any adjournment thereof.
<PAGE>
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE MEETING IN PERSON ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED FOR
THAT PURPOSE. WE ASK YOUR COOPERATION IN MAILING YOUR PROXY PROMPTLY.
SHAREHOLDERS CAN ALSO VOTE THROUGH THE INTERNET OR BY TELEPHONE USING THE
12-DIGIT "CONTROL" NUMBER THAT APPEARS ON THE ENCLOSED PROXY. EACH OF THE
ENCLOSED PROXIES IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION.
By Order of the Board of Directors,
Steven J. Paggioli
Secretary, O'Shaughnessy Funds, Inc.
Greenwich, Connecticut
Dated: May 9, 2000
<PAGE>
O'SHAUGHNESSY FUNDS, INC.
35 Mason Street
Greenwich, Connecticut 06830
1-877-OSFUNDS
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PROXY STATEMENT
Joint Special Meeting of Shareholders of
O'Shaughnessy Cornerstone Growth Fund and
O'Shaughnessy Cornerstone Value Fund
June 30, 2000 at 4:00 p.m.
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The Board of Directors of the O'Shaughnessy Funds, Inc. (the "Corporation")
solicits your proxy for use at a joint special meeting (the "Meeting") of
shareholders of O'Shaughnessy Cornerstone Growth Fund ("Cornerstone Growth
Fund") and O'Shaughnessy Cornerstone Value Fund ("Cornerstone Value Fund," and
together with Cornerstone Growth Fund, the "Funds"), each a separate series of
the Corporation. The Meeting is scheduled to be held at the Stamford Marriott, 2
Stamford Forum, Stamford, Connecticut, on June 30, 2000, at 4:00 p.m., Eastern
Time. As described in more detail below, the Meeting is being called for the
following purposes:
Funds(s) to Which
Summary of Proposal Proposal Applies
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1. to approve or disapprove the new Each Fund, voting separately
investment management agreement
(the "New Management Agreement")
between the Corporation, on behalf
of the Funds, and Edward J. Hennessy,
Incorporated (the "New Manager" or
"Hennessy");
2. to elect a slate of four members to the Both Funds, voting together
Corporation's Board of Directors to hold as a single class
office until their successors are duly
elected and qualified;
3. to ratify or reject the selection of Both Funds, voting together
PricewaterhouseCoopers LLP as the as a single class
Corporation's independent accountants
for the fiscal year ending September
30, 2000; and
4. to transact such other matters as may Both Funds
properly come before the Meeting or
any adjournment thereof.
This Proxy Statement is being furnished on or about May 17, 2000 on behalf
of the Board of Directors of the Corporation (the "Board of Directors," the
"Board" or the "Directors") to the shareholders of the Funds for their use in
voting on the proposals to be considered at the Meeting. The Board of Directors
has fixed the close of business on May 8, 2000 as the record date (the "Record
Date") for determining the number of shares outstanding and the shareholders
entitled to vote at the Meeting or any adjournment thereof. At the Record Date,
the total number of outstanding shares of the Funds were as follows:
<PAGE>
Total Number of Shares
Fund Outstanding
- ---- ----------------------
Cornerstone Growth Fund 10,273,309.682
Cornerstone Value Fund 2,230,017.322
Total Corporation 12,503,327.004
To the knowledge of each Fund, as of the Record Date, the following
shareholders, if any, owned more than 5% of the outstanding voting securities of
such Fund:
<TABLE>
<CAPTION>
Amount of Percentage
Name and Address Shares and Type of
Fund of Shareholder Owned Ownership
- ---- -------------- ----- ---------
<S> <C> <C> <C>
Cornerstone Growth Fund Charles Schwab & Co., Inc. 3,225,637.362 31.40% record
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
Emjayco Omnibus Account 1,309,376.248 12.75% record
P.O. Box 17909
Milwaukee, Wisconsin 53217
Cornerstone Value Fund Charles Schwab & Co., Inc. 704,455.756 31.59% record
Attn: Mutual Funds
101 Montgomery Street
San Francisco, California 94104
National Investor Services Corp. 151,484.779 6.79% record
for the Exclusive Benefit of
Customers
55 Water Street, Fl. 32
New York, New York 10041
</TABLE>
As of the Record Date, the directors and officers of the Corporation as a
group owned an aggregate of less than 1% of the outstanding voting securities of
the Corporation and of each Fund.
The cost of the solicitation, including the cost of printing and mailing
proxy materials, will be borne by the New Manager. In addition to solicitations
by mail, Proxies may also be solicited by officers of the Corporation, or
officers or employees of O'Shaughnessy Capital Management (the "Current
Manager") or the New Manager without compensation. The solicitation of proxies
will be largely by mail but may include telephonic, telegraphic, Internet or
oral communications by regular employees of the New Manager or the Current
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<PAGE>
Manager. The New Manager has retained, at its expense, D.F. King & Co., Inc. to
assist in the solicitation of proxies. The cost of solicitation is currently
estimated to be approximately $10,000 in the aggregate.
Shareholders can vote in any one of four ways: (A) by mail, with the
enclosed proxy card, (B) in person at the Meeting, (C) by telephone, with a
toll-free call to 1-800-690-6903, and (D) through the Internet at
www.proxyvote.com. Shareholders are encouraged to vote by Internet or telephone,
using the 12-digit "control" number that appears on the enclosed proxy card.
Subsequent to inputting this number, shareholders will be prompted to provide
their voting instructions on each proposal. Shareholders will have an
opportunity to review their voting instructions and make any necessary changes
before submitting their voting instructions and terminating their telephone call
or Internet link. Shareholders who vote on the Internet, in addition to
confirming their voting instructions prior to submission, will have the option
to receive an e-mail confirming their voting instructions. These procedures, and
certain other procedures that may be used, are designed to authenticate
shareholders' identities, to allow shareholders to authorize the voting of their
shares in accordance with instructions and to confirm that their instructions
have been properly recorded.
A shareholder executing and returning a proxy has the power to revoke it at
any time prior to its exercise by submitting a notice of revocation to the
Secretary of the Corporation. Although mere attendance at the Meeting will not
revoke a proxy, a shareholder present at the Meeting may withdraw his or her
proxy and vote in person. In addition, a shareholder can revoke a prior proxy by
simply voting again using the original proxy card, by toll-free telephone call
to 1-800-690-6903, or at the Corporation's Website: www.proxyvote.com. All
shares represented by properly executed proxies received at or prior to the
Meeting, unless such proxies previously have been revoked, will be voted at the
Meeting in accordance with the directions on the proxies; if no direction is
indicated on a properly executed proxy, such shares will be voted "FOR" approval
of all proposals and in favor of all of the nominees for Director. If any other
matters come before the Meeting, proxies will be voted in accordance with the
judgment of the persons designated on such proxies.
Properly executed proxies that are returned but that are marked "abstain"
or with respect to which a broker-dealer has declined to vote on any proposal
("broker non-votes") are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Because they are not votes
in favor of the proposal, they have the effect of a negative vote.
A quorum for each Fund for purposes of the Meeting consists of one-third of
the shares of such Fund entitled to vote at the Meeting, present in person or by
proxy. If, by the time scheduled for the Meeting, a quorum of the applicable
Fund's shareholders is not present or if a quorum is present but sufficient
votes in favor of the Proposals are not received from the shareholders of the
respective Fund, the persons named as proxies may propose one or more
adjournments of such Meeting to permit further solicitation of proxies from
shareholders. Any such adjournment will require the affirmative vote of a
majority of the shares of the applicable Fund present in person or by proxy and
entitled to vote at the session of the Meeting to be adjourned. The persons
named as proxies will vote in favor of any such adjournment if they determine
that adjournment and additional solicitation are reasonable and in the interests
of the shareholders of such Fund.
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<PAGE>
The shareholders of each Fund vote separately with respect to Proposal No.
1 and together as a single class with respect to Proposal Nos. 2 and 3.
All information in this proxy statement about the New Manager has been
provided by the New Manager and all information about the Current Manager has
been provided by the Current Manager.
PROPOSAL NO. 1: APPROVAL OF THE NEW MANAGEMENT AGREEMENT
BACKGROUND
The Funds' current investment manager is O'Shaughnessy Capital Management
(defined above as the "Current Manager"), pursuant to an Investment Management
Agreement entered into between the Corporation, on behalf of the Funds, and the
Current Manager (the "Current Management Agreement"). The Current Manager has
announced its decision to shift its focus from managing mutual funds to
individually managed portfolios under the new corporate name Netfolio, Inc. In
connection with this business realignment, the Current Manager has entered into
a definitive agreement to license certain of its proprietary processes and
service marks to Edward J. Hennessy, Incorporated (defined above as "Hennessy"
or the "New Manager") (the "Proposed Transaction"). In connection with the
Proposed Transaction, it is anticipated that the Current Management Agreement
will be assigned to the New Manager, as of the close of the Proposed Transaction
(the "Closing Date"). As a result, under the Investment Company Act of 1940 (the
"1940 Act"), the Current Management Agreement will terminate automatically as of
the Closing Date. In order for the New Manager to provide investment management
services to the Funds from and after the Closing Date, the New Management
Agreement is being submitted for approval by shareholders of each Fund. It is
proposed that the Corporation, on behalf of the Funds, enter into the New
Management Agreement with the New Manager to become effective upon Closing Date.
THE NEW MANAGEMENT AGREEMENT IS IDENTICAL IN ALL MATERIAL RESPECTS TO THE
CURRENT MANAGEMENT AGREEMENT, WITH THE EXCEPTION OF THE IDENTITY OF THE
INVESTMENT MANAGER AND THE EFFECTIVE DATE. A copy of the New Management
Agreement is annexed to this Proxy Statement as Appendix A. The New Management
Agreement is being submitted for approval by shareholders of each Fund.
The New Management Agreement was approved by the Board of Directors of the
Corporation, including the Directors who are not "interested persons" (as
defined in the 1940 Act) of the Corporation, the Current Manager or the New
Manager ("Independent Directors") on April 10, 2000.
4
<PAGE>
If Proposal No. 1 is approved, the name of the Corporation will be changed
to Hennessy Mutual Funds, Inc.; and the names of the O'Shaughnessy Cornerstone
Growth Fund and the O'Shaughnessy Cornerstone Value Fund will be changed to the
Hennessy Cornerstone Growth Fund and the Hennessy Cornerstone Value Fund,
respectively. The Corporation's Articles of Incorporation will be amended to
reflect such changes.
THE PROPOSED TRANSACTION
Pursuant to the Proposed Transaction, the Current Manager has agreed to
license certain of its proprietary processes and service marks to the New
Manager, including the patented investment strategies the Current Manager
employs in managing the investments of the Funds, and deliver to the New Manger
copies of certain books and records relating to the Funds.
The Current Manager will provide technical assistance, without charge, to
the New Manager with respect to the implementation of patented strategies for a
period of three months following the end of the calendar quarter in which the
Closing Date occurs.
As part of the Proposed Transaction, the New Manager will pay the Current
Manager a license fee determined pursuant to a formula which will result in an
amount approximately equal to 2.375% of the aggregate net asset value of the
Funds at the close of business on the business day immediately preceding the
Closing Date, less 2.25% of the aggregate amount of net redemptions, if any, of
the shares of the Funds outstanding at the Closing Date through a specified date
post-closing. The license fee will be paid in installments over a period ending
on the sixth anniversary of the Closing Date. The New Manager will pay interest
in varying amounts on the unpaid installments.
James P. O'Shaughnessy, a current Director of the Corporation is also the
President and controlling shareholder of the Current Manager.
INFORMATION ABOUT THE NEW MANAGER
The New Manager is a California corporation registered as an investment
adviser under the Investment Advisers Act of 1940, as amended. The New Manager
is the general partner of Hennessy Management Company, L.P., the investment
adviser to the Hennessy Balanced Fund series of The Hennessy Funds, Inc., and
Hennessy Management Co. 2 L.P., the investment adviser to the Hennessy Leverage
Dogs Fund series of The Hennessy Funds, Inc. The New Manager also provides
investment advice to individuals, trusts and corporations. The New Manager,
directly and through limited partnerships for which is serves as general
partner, managed approximately $55 million in assets at March 31, 2000,
including mutual fund assets and individual, trust, and corporate account
assets.
The New Manager is controlled by Neil J. Hennessy, its president, who owns
74% of the outstanding voting securities of the New Manager. He is a nominee for
Director of the Corporation.
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<PAGE>
The address of Neil J. Hennessy is at the principal executive office of the New
Manager as indicated below.
The principal executive office of the New Manager is located at 750 Grant
Avenue, Suite 100, Novato, California 94945. To the knowledge of the
Corporation, no person owns of record or beneficially, 10% or more of the
outstanding voting securities of the New Manager except Neil J. Hennessy.
The current directors and principal executive officers of the New Manager
are:
Name Principal Occupation and Position with New Manager
- ---- --------------------------------------------------
Neil J. Hennessy President, Chief Executive Officer and Director
Brian A. Hennessy Director
Daniel B. Steadman Executive Vice President and Director
Teresa M. Nilsen Chief Financial Officer, Executive Vice President,
Secretary and Director
The address of each officer and director is at the principal executive office of
the New Manager.
The New Manager is the general partner to limited partnerships that act as
investment adviser to the following funds which have similar investment
objectives as the Funds:
Advisory Fees (as a After Waiver or
Net Assets at percentage of average Reduction, If
Fund December 31, 1999 daily net assets) Applicable
---- ----------------- ----------------- ----------
Hennessy $22,652,811 0.60% Not Applicable
Balanced Fund
Hennessy $ 5,367,233 0.60% 0.0%
Leveraged Dogs
Fund
THE CURRENT AND NEW MANAGEMENT AGREEMENTS
The Current Management Agreement, dated October 11, 1996 was last approved
by the initial shareholder prior to the commencement of operations of the
Corporation. The following is a summary of the material terms of the New
Management Agreement, which are identical in all material respects to the terms
of the Current Management Agreement. The form of the New Advisory Agreement is
annexed to this Proxy Statement as Appendix A.
6
<PAGE>
SERVICES. Pursuant to the New Management Agreement between the Corporation
and the New Manager, the New Manager will act as manager and investment adviser
of the Funds. Pursuant to the New Management Agreement, the New Manager will be
required to provide investment research, advice and supervision, determine which
securities or other investments will be purchased, sold or exchanged, and what
portion of the assets of the Funds will be held in the various securities in
which the Funds are permitted to invest. In addition, the New Manager will
determine how voting and other rights with respect to securities and other
investments will be exercised, and generally monitor each Fund's compliance with
its investment policies and restrictions. All of the New Manager's duties under
the New Management Agreement are performed subject to general oversight by the
Board of Directors and in accordance with each Fund's investment objectives,
policies and restrictions as provided in the Corporation's current registration
statement on Form N-1A, the Corporation's Articles of Incorporation and By-Laws,
the requirements of the 1940 Act, and other applicable law.
COMPENSATION FOR SERVICES. Under the New Management Agreement, the fees
payable to the New Manager are the same as the fees payable to the Current
Manager under the Current Management Agreement. The management fee payable by
each Fund is 0.74% of the respective Fund's average daily net assets. These fees
are computed daily and payable monthly.
The aggregate fees paid to the Current Manager by the Funds under the
Current Management Agreement for the fiscal year ended September 30, 1999 were
$783,280 for the Cornerstone Growth Fund and $204,286 for the Cornerstone Value
Fund.
PAYMENT OF EXPENSES. The New Management Agreement provides that the New
Manager will pay all of its expenses arising from the performance of the
obligations set forth above, all compensation of officers and directors of the
Corporation who are affiliated persons of the New Manager, and all expenses of a
Fund in connection with the continuous offering of Fund shares. All other
expenses of a Fund, including fees payable to the New Manager under the New
Management Agreement, are paid by the Corporation on behalf of that Fund.
The New Manager has agreed to voluntarily waive its investment advisory
fees to the extent necessary to limit each Fund's expenses to 2.00% (on an
annual basis) of the respective Fund's average daily net assets for at least two
years from the Closing Date. There is not currently in place a similar agreement
by the Current Manager.
LIMITATION OF LIABILITY. The New Management Agreement provides that the New
Manager shall not be liable for any error of judgment or mistake of law or for
any loss suffered by a Fund in connection with any investment or for any act or
omission in the management of a Fund, except for willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard of its duties under the New Management Agreement.
7
<PAGE>
TERM. The New Management Agreement provides that it will continue in effect
for two years and thereafter from year to year, subject to approval at least
annually in accordance with the requirements of the 1940 Act.
TERMINATION; ASSIGNMENT. The New Management Agreement provides that it will
terminate automatically in the event of assignment (as defined in the 1940 Act),
and that it may be terminated without penalty with respect to any Fund by either
the New Manager or the Corporation, upon not more than 60 days' written notice.
SECTION 15(f) OF THE 1940 ACT
Section 15(f) of the 1940 Act provides that an investment adviser to a
mutual fund (or its affiliates) may receive any amount or benefit in connection
with a sale of any interest in such adviser which results in an assignment of an
investment advisory contract if two conditions are satisfied. One condition is
that, for a period of three years after such assignment, at least 75% of the
board of directors of the fund cannot be "interested persons" of the new
investment adviser or its predecessor. The second condition is that no "unfair
burden" be imposed on the investment company as a result of the assignment or
any express or implied terms, conditions or understandings applicable thereto.
In connection with the first condition of Section 15(f), the Current
Manager and the New Manager have agreed that, for a period of three years after
the Closing Date, they will use their best efforts so that at least 75% of the
Directors of the Funds (or successors thereto by reorganization or otherwise)
are not "interested persons" of the Current Manager or the New Manager.
With respect to the second condition of Section 15(f), an "unfair burden"
on a fund is defined in the 1940 Act to include any arrangement during the
two-year period after any such transaction occurs whereby the investment adviser
or its predecessor or successor, or any interested person of such adviser,
predecessor, or successor receives or is entitled to receive any compensation of
two types, either directly or indirectly. The first type is compensation from
any person in connection with the purchase or sale of securities or other
property to, from or on behalf of the fund, other than bona fide ordinary
compensation as principal underwriter for such fund. The second type is
compensation from the fund or its security holders for other than bona fide
investment advisory or other services. The Current Manager and the New Manager
have agreed not to impose or cause to be imposed any unfair burden on the Funds
within the meaning of Section 15(f).
BOARD CONSIDERATIONS
At a series of Board meetings and informal discussions between the Current
Manager and the Directors, the Current Manager apprised the Directors about its
proposed shift in business focus from managing mutual funds to individually
managed portfolios. The Current Manager advised the Directors that it had
entered into discussions with the New Manager, with respect to the possibility
of the New Manager assuming management responsibilities for the Funds. As part
of this proposed change in manager, the Current Manager advised the Directors
that it planned to license to the New Manager its proprietary processes for
managing the Funds and related service marks and deliver to the New Manager
copies of certain books and records relating to the Funds.
8
<PAGE>
At a special meeting of the Board of Directors of the Corporation held on
April 10, 2000, the Current Manager discussed the Proposed Transaction and its
possible effect on the Funds and their shareholders. At the meeting, the Current
Manager proposed that in connection with the Proposed Transaction, the Board
approve the New Management Agreement with the New Manager. Representatives of
the New Manager attended the meeting and made a detailed presentation to the
Board about the organization's resources, personnel, experience and commitment
to the Funds. The New Manager assured the Board that it has the financial
resources and personnel necessary to continue to render services to the Funds of
the same nature and quality as had been rendered in the past.
During the course of their deliberations, the Directors considered a
variety of factors, based both on information presented at the meeting and on
information regarding the New Manager that had been furnished previously to the
Board. The New Manager presented information to the Board about the two mutual
funds it currently manages -- both according to a disciplined buy and hold
strategy. The Current Manager stated that the investment philosophy of the New
Manager was compatible with that of the Current Manager. The Current Manager
also advised the Board that the New Manager would have a perpetual license to
use the proprietary processes pursuant to which the Funds are currently managed,
and that the Current Manager would provide technical assistance to the New
Manager on the use of these processes for a period of three months following the
end of the calendar quarter in which the Closing Date occurs. The New Manager
stated its commitment to continue to manage each of the Funds according to the
same philosophy and methodology as are currently in place for the Funds. Based
on the information presented to them, the Directors considered the nature,
quality and extent of the services expected to be furnished by the New Manager
to the Funds, the financial resources, business reputation and organizational
capability of the New Manager, and the possible advantages and disadvantages to
the Funds of having the New Manager serve as the investment manager to the
Funds. The Board also considered that the New Management Agreement is the same
as the Current Management Agreement in all material respects, including the rate
of the management fee. The Board considered that the New Manager had voluntarily
agreed to waive its investment advisory fee to the extent necessary to limit
each Fund's expenses to 2% per annum of average daily net assets for a period of
at least two years. The Board also considered the other options available to the
Funds in light of the Current Manager's decision to realign its business focus.
Among the options discussed by the Board were liquidating the Funds or seeking a
different firm to act as manager. The Board rejected liquidation as an option
because of the possible adverse tax consequences to shareholders. On the basis
of the information presented at the meeting, the Board determined that it was
satisfied that it was in the best interests of each Fund and its shareholders to
enter into the New Management Agreement, and that it would not be necessary to
look further for another candidate to manage the Funds. The Board of Directors,
including all of the Independent Directors, determined that the terms of the New
Management Agreement are fair and reasonable and that the approval of the New
Management Agreement on behalf of the Corporation and each Fund is in the best
interests of the Corporation and of each respective Fund and its shareholders.
9
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
At an in-person meeting held on April 10, 2000, the Board of Directors,
including all of the Independent Directors, voted unanimously to approve the New
Management Agreement and to recommend to shareholders that they vote "FOR"
Proposal No. 1.
VOTE REQUIRED FOR PROPOSAL NO. 1
Shareholders of each Fund vote separately on whether to approve Proposal
No. 1 with respect to that Fund. Approval of Proposal No. 1 with respect to a
Fund requires the affirmative vote of a majority of the outstanding voting
securities of that Fund. "Majority" for this purpose under the 1940 Act means
the lesser of (1) more than 50% of the outstanding shares of the Fund or (2) 67%
or more of the shares of the Fund represented at the meeting if more than 50% of
such shares are represented.
PROPOSAL NO. 1 MUST BE APPROVED BY SHAREHOLDERS OF BOTH FUNDS IN ORDER FOR
THE NEW MANAGEMENT AGREEMENT TO TAKE EFFECT. IF PROPOSAL NO. 1 IS NOT APPROVED
BY THE SHAREHOLDERS OF EITHER FUND, THE BOARD WILL CONSIDER WHAT ACTION, IF ANY,
SHOULD BE TAKEN.
PROPOSAL NO. 2: ELECTION OF DIRECTORS
At the Meeting, a slate of four nominees, including three who are not
interested persons of the Corporation, will be elected to serve as Directors of
the Corporation, to hold office until their successors are duly elected and
qualified. If elected, these individuals will take office only if Proposal No. 1
is approved by both Funds. At such time the incumbent Directors of the
Corporation, C. Flemming Heilman, Joseph John McAleer and Thomas Abbott, will
cease to be directors. It is the intention of the persons named in the
accompanying form of proxy to vote for the election of each of the nominees
named below, each of whom has consented to be a nominee. The nominees consist of
the following individuals: Neil J. Hennessy, Harry F. Thomas, J. Dennis DeSousa,
and Robert T. Doyle. None of the nominees is currently a Director of the
Corporation. None of the nominees owns any shares of either Fund.
If any of the nominees become unavailable for election as a Director before
the Meeting, proxies will be voted for the other persons that the Directors
recommend.
10
<PAGE>
INFORMATION REGARDING NOMINEES - PRINCIPAL OCCUPATION AND OTHER INFORMATION
Name, Age and Address Other Business Activities in Past Five Years
- --------------------- --------------------------------------------
J. Dennis DeSousa (63) Currently a real estate investor; Vice President
682 Wilson Street, of the California State Automobile Association
Novato, CA 94947 from 1958 to 1986; Owner/director, North Bay
Television, Inc., 1985 - 1999; Director of The
Hennessy Funds, Inc. since 1996.
Robert T. Doyle (52) Currently the Sheriff of Marin County, California
87 Washington Street, (since 1996) and has been employed in the Marin
Novato, CA 94947 County Sheriff's Office in various capacities
since 1969; Director of The Hennessy Funds, Inc.
since 1996.
Neil J. Hennessy (44)* President of Edward J. Hennessy, Incorporated
The Courtyard Square, since 1989; President and Investment Manager of
750 Grant Avenue, The Hennessy Funds, Inc. since 1996; has served as
Suite 100, Novato, CA an Expert Witness to the securities industry since
94945 1989; Mr. Hennessy has been in the securities
industry since September 1979 and was formerly
co-chairman and chairman of the National
Association of Securities Dealers Business Conduct
Committee District 1.
Harry F. Thomas (53) Managing Director of Emplifi, Inc. (responsible
685 Market Street, for consultants specializing in the trust,
Suite 620, San Francisco, investment, and brokerage industries) since 1999;
CA 94105 Vice President and Manager, Employee Benefit Trust
Operation of Wells Fargo Bank from 1997-1999; and
Trust Systems Manager and Vice President of Wells
Fargo Bank since 1992.
The Directors met four times during the fiscal year ended September 30,
1999. The incumbents who were Directors during the 1999 fiscal year attended
100% of the meetings of the Directors. Thomas Abbott became a Director on April
10, 2000. The Board currently has an audit committee consisting of Messrs.C.
Flemming Heilmann, Joseph John McAleer and Thomas Abbott. The Board's current
audit committee, which selects and oversees the Corporation's independent
accountants, met once during the fiscal year ended September 30, 1999 and all of
the members attended. The Board has no standing nominating or compensating
committees.
- ----------
* Mr. Hennessy is an interested person of the New Manager, and will be an
interested person of the Corporation, as defined in the 1940 Act, by virtue of
his position as President and controlling shareholder of the New Manager.
11
<PAGE>
EXECUTIVE OFFICERS OF THE CORPORATION
<TABLE>
<CAPTION>
Position With the
Name (Age) Corporation Years Experience During the Past Five
- ---------- ----------------- -------------------------------
<S> <C> <C>
James P. O'Shaughnessy (39) President and Treasurer Chairman and Chief Executive Officer
of the Current Manager since 1988;
author of INVEST LIKE THE BEST; WHAT
WORKS ON WALL STREET, and HOW TO
RETIRE RICH.
Steven J. Paggioli (50) Vice President and Executive Vice President and Director
Secretary of Wadsworth Group since 1986; Vice
President of First Fund Distributors,
Inc. since 1989; Executive Vice
President and Director of Investment
Company Administration, LLC since 1990
</TABLE>
All officers of the Corporation have been elected to serve until their
successors are elected and qualified. James P. O'Shaughnessy's address is 35
Mason Street, Greenwich, Connecticut, 06830. Steven J. Paggioli's address is c/o
Investment Company Administration, LLC, 915 Broadway, Suite 1605, New York, NY
10010. If the newly elected Directors take office, the current officers of the
Corporation will resign and new officers will be elected by the Board of
Directors.
REMUNERATION OF DIRECTORS AND OFFICERS
The Corporation pays Directors who are not interested persons of the
Corporation fees for serving as Directors. During the fiscal year ended
September 30, 1999 the Corporation paid the Directors who are not interested
persons of the Corporation a combined total of $29,596, including expenses,
which were allocated to the Funds.
The following table sets forth for the fiscal year ended September 30,
1999, compensation paid by the Corporation to the incumbent Independent
Directors. Directors who are interested persons, as defined in the 1940 Act,
receive no compensation from the Corporation.
12
<PAGE>
Pension or Total
Retirement Estimated Compensation
Aggregate Benefits Annual From
Compensation Accrued as Part Benefits Corporation
From of Corporation Upon Paid to
Name of Director Corporation Expenses Retirement Directors
- ---------------- ----------- -------- ---------- ---------
C. Flemming Heilman 9,750 None None 9,750
Robert E. Ix* 9,750 None None 9,750
Joseph John McAleer 9,750 None None 9,750
- ----------
* Robert E. Ix retired from the Board of Directors effective as of December
31, 1999.
BOARD RECOMMENDATION
At an in-person meeting held on April 10, 2000, the Board of Directors,
including all of the Independent Directors, voted unanimously to nominate the
four individuals named in this Proxy Statement to serve as Directors of the
Corporation if Proposal No.1 is approved by shareholders and to recommend to
shareholders that they vote "FOR" the nominees in Proposal No. 2.
VOTE REQUIRED FOR PROPOSAL NO. 2
The nominees receiving the affirmative vote of a plurality of the votes
cast for the election of Directors at the Meeting will be elected, provided a
quorum is present. Shares of the Funds of the Corporation vote together as a
single class for the Directors of the Corporation.
PROPOSAL NO. 3: RATIFICATION OF THE SELECTION OF
INDEPENDENT ACCOUNTANTS
Under Proposal No. 3, shareholders of the Corporation are being asked to
ratify the Board's selection of independent accountants for the Corporation for
the fiscal year ending September 30, 2000. The firm of PricewaterhouseCoopers
LLP has extensive experience in investment company accounting and auditing and
has served as independent accountants to the Corporation since its merger with
the firm's former independent accountants, McGladrey & Pullen, LLP in 1999. The
financial statements included in the Corporation's Annual Report, dated
September 30, 1999, have been examined by PricewaterhouseCoopers LLP. It is not
expected that a representative of PricewaterhouseCoopers LLP will be present at
the Meeting.
13
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that shareholders vote "FOR" Proposal No.
3.
GENERAL INFORMATION
DISTRIBUTOR
First Fund Distributors, Inc. (the "Current Distributor") acts without
remuneration as the Corporation's Distributor pursuant to the Current
Distribution Agreement dated October 11, 1996. The Current Distributor's address
is 4455 E. Camelback Road, Suite 261 E, Phoenix, AZ 85018. The Current
Distribution Agreement will continue following completion of the Proposed
Transaction. It is anticipated that following the Closing Date, the Board of
Directors of the Corporation will consider whether to continue the Current
Distribution Agreement for additional one-year terms, or other alternatives,
including entering into an agreement with another distributor or authorizing the
Corporation to distribute its own shares.
TRANSFER AGENT, DIVIDEND AGENT, RECORDKEEPING AGENT AND CUSTODIAN
Firstar Mutual Fund Services, LLC, 615 E. Michigan Street, Milwaukee, WI
53202, acts as the Corporation's transfer agent, custodian and fund accountant.
OTHER MATTERS
The Board of Directors does not know of any other business to be brought
before the meeting. If any other matters properly come before the meeting,
proxies will vote on such matters in their discretion.
REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS
THE CORPORATION WILL FURNISH, WITHOUT CHARGE, A COPY OF THE MOST RECENT
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS OF THE FUNDS. COPIES OF THE
ANNUAL AND SEMI- ANNUAL REPORTS MAY BE OBTAINED FROM THE CORPORATION, WITHOUT
CHARGE, BY CONTACTING THE CORPORATION IN WRITING AT THE ADDRESS ON THE COVER OF
THIS PROXY STATEMENT, OR BY CALLING 1- 877-OSFUNDS.
SHAREHOLDER PROPOSALS
The Corporation is not required to hold annual meetings of shareholders and
currently does not intend to hold such meetings unless shareholder action is
required in accordance with the 1940 Act or the Corporation's Articles of
Incorporation. A shareholder proposal to be considered for inclusion in the
proxy statement at any meeting of shareholders hereafter called must be
submitted a reasonable time before the proxy statement relating thereto is
mailed.
14
<PAGE>
Whether a proposal submitted will be included in the proxy statement will be
determined in accordance with applicable federal and state laws.
Respectfully Submitted,
Steven J. Paggioli
Secretary
Dated: May 9, 2000
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO HAVE
THEIR SHARES VOTED ARE REQUESTED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. SHAREHOLDERS CAN ALSO VOTE THROUGH THE INTERNET OR BY TELEPHONE USING
THE 12-DIGIT "CONTROL" NUMBER THAT APPEARS ON THE ENCLOSED PROXY.
15
<PAGE>
Appendix A
MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of __________, 2000 by and between HENNESSY
MUTUAL FUNDS, INC., a Maryland corporation (hereinafter referred to as the
"Corporation"), on behalf of each of its investment series set forth on Schedule
A hereto as it may be amended from time to time (hereinafter referred to each as
a "Fund" and together, as the "Funds"), and EDWARD J. HENNESSY, INCORPORATED, a
California corporation (hereinafter referred to as the "Manager").
W I T N E S S E T H:
WHEREAS, the Corporation is engaged in business as a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (hereinafter referred to as the "Investment Company Act"); and
WHEREAS, the Manager is engaged principally in rendering management and
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940; and
WHEREAS, the Corporation on behalf of the Funds desires to retain the
Manager to provide management and investment advisory services to the Funds in
the manner and on the terms hereinafter set forth; and
WHEREAS, the Manager is willing to provide management and investment
advisory services to the Funds on the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Corporation, on behalf of the Funds, and the Manager
hereby agree as follows:
ARTICLE I
DUTIES OF THE MANAGER
The Corporation hereby employs the Manager to act as a manager and
investment adviser of the Funds and to furnish the management and investment
advisory services described below, subject to the policies of the Funds and the
review by and overall consent of the Board of Directors of the Corporation, for
the period and on the terms and conditions set forth in this Agreement. The
Manager hereby accepts such employment and agrees during such period, at its own
expense, to render, or arrange for the rendering of, such services and to assume
the obligations herein set forth for the compensation provided for herein. The
Manager shall for all purposes herein be deemed to be an independent contractor
A-1
<PAGE>
and shall, unless otherwise expressly provided or authorized, have no authority
to act for or represent the Corporation or the Funds in any way or otherwise be
deemed agents of the Corporation or the Funds. Additional investment series may
from time to time be added to those covered by this Agreement by the parties by
executing a new Schedule A which shall become effective upon its execution and
shall supersede any Schedule A having an earlier date.
(a) MANAGEMENT SERVICES. The Manager shall perform the management services
necessary for the operation of the Funds as hereinafter provided. The Manager
shall generally monitor each Fund's compliance with investment policies and
restrictions as set forth in its currently effective Prospectus and Statement of
Additional Information relating to the shares of the Fund under the Securities
Act of 1933, as amended (each a "Prospectus" and "Statement of Additional
Information", respectively). The Manager shall provide the Corporation with such
other services as the Manager, subject to review by the Directors, shall from
time to time determine to be necessary or useful to perform its obligations
under this Agreement. The Manager shall make reports to the Directors of its
performance of obligations hereunder and furnish advice and recommendations with
respect to such other aspects of the business and affairs of the Corporation as
it shall determine to be desirable.
(b) INVESTMENT ADVISORY SERVICES. With respect to each Fund:
(i) The Manager shall provide such investment research, advice and
supervision as the Fund may from time to time consider necessary for the proper
supervision of the assets of the Fund, shall furnish continuously an investment
program for the Fund and shall determine from time to time which securities
shall be purchased, sold or exchanged and what portion of the assets of the Fund
shall be held in the various securities in which the Fund invests, options,
futures, options on futures or cash, subject always to the restrictions of the
Articles of Incorporation and By-Laws of the Corporation, as amended from time
to time, the provisions of the Investment Company Act and the statements
relating to the Fund's investment objectives, investment policies and investment
restrictions as the same are set forth in the Fund's currently effective
Prospectus and Statement of Additional Information. Should the Directors at any
time, however, make any definite determination as to investment policy and
notify the Manager thereof in writing, the Manager shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked.
(ii) To the extent applicable, the Manager shall also make decisions
for the Fund as to foreign currency matters and make determinations as to
foreign exchange contracts.
(iii) The Manager shall make decisions for the Fund as to the manner
in which voting rights, rights to consent to corporate action and any other
rights pertaining to the Fund's portfolio securities shall be exercised.
A-2
<PAGE>
(iv) The Manager shall take, on behalf of the Fund, all actions which
it deems necessary to implement the Fund's investment policies, and in
particular to place all orders for the purchase or sale of portfolio securities
for the Fund's account with brokers or dealers selected by it, and to that end,
the Manager is authorized as the agent of the Fund to give instructions to the
custodian of the Fund as to deliveries of securities and payments of cash for
the account of the Fund.
(v) In connection with the selection of such brokers or dealers and
the placing of such orders with respect to assets of the Fund, the Manager is
directed at all times to seek to obtain execution and prices within the policy
guidelines determined by the Directors and set forth in the Fund's Prospectus
and Statement of Additional Information. Subject to this requirement and the
provisions of the Investment Company Act, the Securities Exchange Act of 1934,
as amended, and other applicable provisions of law, the Manager may select
brokers or dealers with which it or the Corporation is affiliated (if any).
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
(a) THE MANAGER. The Manager assumes and shall pay for maintaining the
staff and personnel necessary to perform its obligations under this Agreement,
shall pay all compensation relating to service to the Corporation of Officers
and Directors of the Corporation who are affiliated persons of the Manager, and
shall pay the expenses of the Funds incurred in connection with the continuous
offering of Fund shares.
(b) THE CORPORATION. Except as described in paragraph (a) hereof, the
Corporation, on behalf of each Fund, assumes and shall pay all other Fund
expenses, including, without limitation: taxes, expenses for legal and auditing
services, costs of printing proxies, stock certificates, shareholder reports,
Prospectuses and Statements of Additional Information, charges of the custodian,
any sub-custodian and transfer agent, expenses of portfolio transactions,
expenses of redemption of shares, Securities and Exchange Commission fees,
expenses of registering the shares under federal, state and foreign laws, fees
and actual out-of-pocket expenses of Directors who are not affiliated persons of
the Manager, accounting and pricing costs (including the daily calculation of
the net asset value), insurance, interest, brokerage costs, litigation and other
extraordinary or non- recurring expenses, and other expenses properly payable by
each Fund.
ARTICLE III
COMPENSATION OF THE MANAGER
(a) MANAGEMENT AND INVESTMENT ADVISORY FEE. For the services rendered, the
facilities furnished and expenses assumed by the Manager, each Fund shall pay to
the Manager at the end of each calendar month a fee, commencing on the day
following effectiveness hereof, based upon the average daily value of the net
assets of such Fund, as determined and computed in accordance with the
description of the determination of net asset value contained in the relevant
Prospectus and Statement of Additional Information. The fee payable by each Fund
is set forth on Schedule A hereto.
A-3
<PAGE>
If this Agreement becomes effective subsequent to the first day of a month
or shall terminate before the last day of a month, compensation for that part of
the month that this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fee as set forth above. Subject to the
provisions of subsection (b) hereof, payment of the Manager's compensation for
the preceding month shall be made as promptly as possible after completion of
the computations contemplated by subsection (b) hereof. During any period when
the determination of net asset value is suspended by the Directors, the net
asset value of a share as of the last business day prior to such suspension
shall for this purpose be deemed to be the net asset value at the close of each
succeeding business day until it is again determined.
(b) EXPENSE LIMITATIONS. In the event the operating expenses of a Fund,
including amounts payable to the Manager pursuant to subsection (a) hereof, for
any fiscal year ending on a date on which this Agreement is in effect exceed the
expense limitations applicable to the Fund imposed by applicable state
securities laws or regulations thereunder, as such limitations may be raised or
lowered from time to time, the Manager shall reduce its management fee with
respect to such Fund by the extent of such excess and, if required pursuant to
any such laws or regulations, will reimburse such Fund in the amount of such
excess; provided, however, to the extent permitted by law, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage fees
and commissions, distribution fees and extraordinary expenses (including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by such Fund. Whenever the
expenses of a Fund exceed a pro rata portion of the applicable annual expense
limitations, the estimated amount of reimbursement under such limitations shall
be applicable as an offset against the monthly payment of the fee due to the
Manager with respect to such Fund. Should two or more such expense limitations
be applicable at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Manager's fee shall be
applicable.
ARTICLE IV
LIMITATION OF LIABILITY OF THE MANAGER
The Manager shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or omission in the
management of a Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Article IV, the term
"Manager" shall include any directors, officers and employees of the Manager.
A-4
<PAGE>
ARTICLE V
ACTIVITIES OF THE MANAGER
The services of the Manager to the Funds are not to be deemed to be
exclusive, and the Manager is free to render services to other investment
advisory clients. It is understood that Directors, officers, employees and
shareholders of the Corporation are or may become interested in the Manager, as
directors, officers, employees and shareholders or otherwise, and that
directors, officers, employees and shareholders of the Manager are or may become
similarly interested in the Corporation.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective as of the date first above written
and shall remain in force with respect to each Fund until ________________, and
thereafter, but only so long as such continuance is specifically approved with
respect to each Fund at least annually by: (i) the Directors, or by the vote of
a majority of the outstanding voting securities of the Fund, and (ii) a majority
of those Directors who are not parties to this Agreement or interested persons
of any such party cast in person at a meeting called for the purpose of voting
on such approval.
This Agreement may be terminated at any time with respect to a Fund,
without the payment of any penalty, by the Directors or by the vote of a
majority of the outstanding voting securities of such Fund, or by the Manager,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
With respect to a Fund, this Agreement may be amended by the parties only
if such amendment is specifically approved by: (i) the vote of a majority of
outstanding voting securities of such Fund, and (ii) a majority of those
Directors who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval.
A-5
<PAGE>
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
The terms "vote of a majority of the outstanding voting securities,"
"assignment," "affiliated person" and "interested person," when used in this
Agreement, shall have the respective meanings specified in the Investment
Company Act and the rules thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with laws of the State of
New York and the applicable provisions of the Investment Company Act. To the
extent that the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act, the latter shall control.
A-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
HENNESSY MUTUAL FUNDS, INC.
By:
------------------------------------
Name:
Title:
EDWARD J. HENNESSY, INCORPORATED
By:
------------------------------------
Name:
Title:
A-7
<PAGE>
Schedule A
Compensation
Name of Fund (as a % of average daily net assets)
- ------------ ------------------------------------
Hennessy Cornerstone Value Fund 0.74%
Hennessy Cornerstone Growth Fund 0.74%
Date: ____________
A-8
<PAGE>
O'SHAUGHNESSY CORNERSTONE GROWTH FUND
OF O'SHAUGHNESSY FUNDS, INC.
35 MASON STREET
GREENWICH, CONNECTICUT 06830
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF O'SHAUGHNESSY
FUNDS, INC.
The undersigned hereby appoints James P. O'Shaughnessy and Christopher
Loveless as proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated on the reverse
hereof, all of the shares of the O'Shaughnessy Cornerstone Growth Fund (the
"Fund") held of record by the undersigned on May 8, 2000, at a Special Meeting
of Shareholders of the Fund to be held on June 30, 2000 or any adjournment
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER HEREIN
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXIES
WILL VOTE SHARES REPRESENTED BY THIS PROXY FOR ALL NOMINEES IN PROPOSAL NO. 2
AND FOR ALL OTHER PROPOSALS LISTED ON THE REVERSE SIDE.
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournment thereof.
TO VOTE BY MAIL
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE
INDICATED AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have this Proxy card at hand.
2) Call 1-800-690-6903 toll free.
3) Enter the 12 digit control number set forth on the right side of this
Proxy card and follow the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have this Proxy card at hand.
2) Go to Web site www.proxyvote.com.
3) Enter the 12 digit control number set forth on the right side of this
Proxy card and follow the simple instructions.
(Continued and to be signed on the reverse side)
<PAGE>
<TABLE>
<S> <C>
1. To approve the new investment management FOR [ ] AGAINST [ ] ABSTAIN [ ]
agreement between O'Shaughnessy Funds, Inc.
on behalf of the Fund, and Edward J.
Hennessy, Inc.
2. To elect the following nominees to the
Board of Directors of O'Shaughnessy Funds,
Inc. to hold office until their successors
are duly elected and qualified:
J. Dennis DeSousa FOR [ ] WITHHOLD [ ]
Robert T. Doyle FOR [ ] WITHHOLD [ ]
Neil J. Hennessy FOR [ ] WITHHOLD [ ]
Harry F. Thomas FOR [ ] WITHHOLD [ ]
3. To ratify the selection of FOR [ ] AGAINST [ ] ABSTAIN [ ]
PricewaterhouseCoopers LLP as the
independent accountants of O'Shaughnessy
Funds, Inc. for the fiscal year ending
September 30, 2000
4. In their discretion, the named proxies Please sign exactly as name appears
may vote to transact such other business hereon. When shares are held by joint
as properly may come before the meeting or tenants, both should sign. When signing
any adjournment thereof. as attorney or as executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized persons.
PLEASE MARK BOXES /X/ OR [X] IN BLUE OR BLACK
INK. SIGN, DATE AND RETURN THE PROXY CARD Dated:_________________________________
PROMPTLY USING THE ENCLOSED ENVELOPE.
X______________________________________
Signature
X______________________________________
Signature, if held jointly
</TABLE>
<PAGE>
O'SHAUGHNESSY CORNERSTONE VALUE FUND
OF O'SHAUGHNESSY FUNDS, INC.
35 MASON STREET
GREENWICH, CONNECTICUT 06830
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF O'SHAUGHNESSY
FUNDS, INC.
The undersigned hereby appoints James P. O'Shaughnessy and Christopher
Loveless as proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated on the reverse
hereof, all of the shares of the O'Shaughnessy Cornerstone Value Fund (the
"Fund") held of record by the undersigned on May 8, 2000, at a Special Meeting
of Shareholders of the Fund to be held on June 30, 2000 or any adjournment
thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER HEREIN
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXIES
WILL VOTE SHARES REPRESENTED BY THIS PROXY FOR ALL NOMINEES IN PROPOSAL NO. 2
AND FOR ALL OTHER PROPOSALS LISTED ON THE REVERSE SIDE.
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournment thereof.
TO VOTE BY MAIL
IF VOTING BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY CARD WHERE
INDICATED AND RETURN IT PROMPTLY USING THE ENCLOSED ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have this Proxy card at hand.
2) Call 1-800-690-6903 toll free.
3) Enter the 12 digit control number set forth on the right side of this
Proxy card and follow the simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have this Proxy card at hand.
2) Go to Web site www.proxyvote.com.
3) Enter the 12 digit control number set forth on the right side of this
Proxy card and follow the simple instructions.
(Continued and to be signed on the reverse side)
<PAGE>
<TABLE>
<S> <C>
1. To approve the new investment management FOR [ ] AGAINST [ ] ABSTAIN [ ]
agreement between O'Shaughnessy Funds, Inc.
on behalf of the Fund, and Edward J.
Hennessy, Inc.
2. To elect the following nominees to the
Board of Directors of O'Shaughnessy Funds,
Inc. to hold office until their successors
are duly elected and qualified:
J. Dennis DeSousa FOR [ ] WITHHOLD [ ]
Robert T. Doyle FOR [ ] WITHHOLD [ ]
Neil J. Hennessy FOR [ ] WITHHOLD [ ]
Harry F. Thomas FOR [ ] WITHHOLD [ ]
3. To ratify the selection of FOR [ ] AGAINST [ ] ABSTAIN [ ]
PricewaterhouseCoopers LLP as the
independent accountants of O'Shaughnessy
Funds, Inc. for the fiscal year ending
September 30, 2000
4. In their discretion, the named proxies Please sign exactly as name appears
may vote to transact such other business hereon. When shares are held by joint
as properly may come before the meeting or tenants, both should sign. When signing
any adjournment thereof. as attorney or as executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized persons.
Dated:_________________________________
PLEASE MARK BOXES /X/ OR [X] IN BLUE OR BLACK
INK. SIGN, DATE AND RETURN THE PROXY CARD X______________________________________
PROMPTLY USING THE ENCLOSED ENVELOPE. Signature
X______________________________________
Signature, if held jointly
</TABLE>
