File Nos. and 33-46479 and 811-08659
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. __
Post-Effective Amendment No. 2
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 3
(Check appropriate box or boxes)
THE HENSSLER EQUITY FUND
1281 Kennestone Circle, Suite 100, Marietta, Georgia 30066
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (800) 936-3863
Gene W. Henssler, 1281 Kennestone Circle, Suite 100, Marietta, Georgia 30066
(Name and Address of Agent for Service)
With copy to:
Reinaldo Pascual, Esq., Kilpatrick Stockton LLP,
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309
Release Date: August 31, 1999
It is proposed that this filing will become effective:
<TABLE>
<CAPTION>
<S> <C> <S> <C>
__X__ immediately upon filing pursuant to paragraph ______ on (date) pursuant to paragraph (b) of Rule
(b) 485
_____ 60 days after filing pursuant to paragraph (a) ______ on (date) pursuant to paragraph (a) of Rule
485
______ 75 days after filing pursuant to paragraph ______ on (date) pursuant to paragraph (a)(2) of
(a)(2) Rule 485
</TABLE>
TITLE OF SECURITIES BEING REGISTERED: Common Stock, par value $.0001 per share
The Registrant hereby registers an indefinite
number of securities under Rule 24f-2 of
the Investment Company Act of 1940.
<PAGE>
The Henssler Equity Fund
1281 Kennestone Circle, Suite 100
Marietta, Georgia 30066
1-800-936-3863
www.henssler.com
PROSPECTUS
August 31, 1999
<TABLE>
TABLE OF CONTENTS
--------------------------------------------
<CAPTION>
<S> <C>
About the Fund..................................................................... 2
Investment Objective............................................................. 2
Principal Investment Strategy.................................................... 2
Principal Risks of Investing in the Fund......................................... 3
Past Performance................................................................. 3
Fund Expenses...................................................................... 4
The Fund in Detail................................................................. 5
Investment Objective, Investment Strategy and Related Risks...................... 5
Temporary Defensive Positions.................................................... 5
Related Risks of Investment in the Fund........................................ 6
Fund Management.................................................................... 7
Management's Discussion of Fund Performance........................................ 8
Financial Highlights............................................................... 9
Account Information................................................................ 10
How to Purchase Shares............................................................. 10
How to Sell Shares................................................................. 12
Dividends, Distributions and Taxes................................................. 15
How to Obtain More Information..................................................... 16
</TABLE>
--------------------------------------------
The Fund is a portfolio of The Henssler Funds, Inc. This Prospectus includes
important information about the Fund that you should know before investing. You
should read the Prospectus and keep it for future reference.
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
<PAGE>
ABOUT THE FUND
--------------
INVESTMENT OBJECTIVE:
The Fund's investment objective is to seek growth of capital.
PRINCIPAL INVESTMENT STRATEGY:
To meet its investment objective, the Fund will employ an investment
strategy that emphasizes long-term capital appreciation and safety of principal.
Under normal circumstances, the Fund invests over 90% of its portfolio in common
stocks of the best companies the Fund's investment adviser, Henssler Asset
Management, LLC (the "Adviser"), can identify. The Fund may invest in companies
of any size, and the Fund typically holds its common stock investments until the
fundamentals of the business change or other opportunities present themselves.
When selecting common stocks for the Fund, the Adviser seeks companies
that exhibit the following characteristics:
o undervalued assets;
o strong balance sheet characteristics and financial foundations;
o high earnings expectations; and
o quality management and potential for future growth.
Factors deemed important by the Adviser in selecting securities of such
companies include, but are not limited to:
o price;
o price history; and
o price-to-earnings ratio.
The Fund believes that its focus on the fundamentals of the businesses it
invests in results in the purchase of above-average, high-quality securities
with strong growth potential.
2
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE FUND:
All investments carry risks, and an investment in the Fund is no
exception. You could lose money on your investment in the Fund. Accordingly, you
should understand the principal risks of investing in the Fund, each of which is
described below.
MARKET RISK: Stock prices fluctuate in response to many factors, including
changes in interest rates, the activities of individual companies and general
market and economic conditions. Regardless of any one company's particular
prospects, a declining stock market may produce a decline in stock prices for
all companies. Stock market declines may continue for an indefinite period of
time, and investors should understand that from time to time during these
temporary or extended bear markets, the value of the Fund may decline.
BUSINESS AND ECONOMIC RISK: Often, a particular industry, or certain companies
within that industry, may be affected by circumstances that have little to no
impact on other industries, or other companies within that industry. For
example, many industries and companies rely heavily on one type of technology.
If this technology becomes outdated, or ceases to be cost-effective, industries
and companies that rely on the technology may become unprofitable while
companies outside the industry may not be affected at all.
POLITICAL RISK: The regulation or deregulation of particular industries may
materially impact the value of companies within the affected industry. For
example, during the past few years, electric and gas utility sectors of the
economy have been moving towards deregulation and open price competition. In
this new environment, some companies will make a successful transition into, and
prosper under deregulation, and other companies will mismanage the process and
do poorly.
PAST PERFORMANCE
----------------
The Fund began operations on June 10, 1998. When the Fund has completed
one full calendar year of operation, the Fund will be permitted to include a bar
chart and table that provides some indication of the risks of investing in the
Fund by showing changes in the Fund's performance from year to year and by
showing how the Fund's average annual returns compare with those of a broad
measure of market performance.
Investors interested in the Fund's performance for the fiscal year
ended April 30, 1999 should refer to the Fund's most recent Annual and
Semi-Annual Reports, available without charge by calling us at 1-800-936-3863,
and reviewing the information under "Management's Discussion of Fund
Performance" on page 8.
3
<PAGE>
FUND EXPENSES
-------------
As an investor, you pay certain fees and expenses in connection with
your investment in the Fund, which are described in the tables below.
Shareholder fees are paid from your account, while annual Fund operating
expenses are paid out of Fund assets, so their effect is included in the share
price. As a no load fund, the Fund does not have a sales charge (load).
FEE TABLE
---------
Shareholder Fees (fees paid directly from your investment):
None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets):
<TABLE>
<CAPTION>
The Henssler Equity Fund
% of average daily net assets
------------------------------------
<S> <C>
Management Fees................................................... 0.50%
Other Expenses.................................................... 0.70% <F1>
-----
Total Fund Operating Expenses..................................... 1.20%
<FN>
<F1>
The Fund has entered into an Operating Services Agreement with the Adviser
pursuant to which the Fund pays the Adviser a fee equal to 0.70% of the Fund's
assets on an annualized basis for providing all of the Fund's day-to-day
administrative services, excluding costs of brokerage, interest, taxes,
litigation and other extraordinary expenses.
</FN>
</TABLE>
Example:
This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The example below
assumes that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example below
also assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. The figures shown in the example represent a
best estimate. They are not necessarily indicative of past or future performance
or expenses. Actual performance and/or expenses may be greater or less than the
example.
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$120 $380 $660 $1,460
4
<PAGE>
THE FUND IN DETAIL
INVESTMENT OBJECTIVE,
INVESTMENT STRATEGY AND RELATED RISKS
-------------------------------------
An investment in the Fund cannot be considered a complete investment
program. An investor's needs will depend largely on his or her financial
resources and individual investment goals and objectives. Investors who engage
in short-term trading and/or other speculative strategies and styles may not
find the Fund to be an appropriate investment vehicle.
THE FUND'S INVESTMENT OBJECTIVE AND INVESTMENT STRATEGY:
The Fund's investment objective is to seek growth of capital. The Fund
seeks to achieve its objective by investing substantially all of its assets in
securities listed on a national securities exchange or quoted in the National
Association of Securities Dealers Automated Quotation ("NASDAQ") National Market
System.
The Fund uses the principal investment strategy detailed on page 2 to
achieve its investment objective. As explained above, the Fund does not attempt
to "time" the market, but rather purchases securities in the best companies the
Adviser can identify, and holds these securities until the fundamentals of the
business change or other opportunities present themselves. The Fund believes
that its focus on the fundamentals of the businesses it invests in results in
the purchase of above-average, high-quality securities with strong growth
potential. The Fund may invest in companies of all sizes.
Under normal circumstances, the Fund anticipates that over 90% of its
assets will be invested in a portfolio of common stocks. The Fund will not
invest more than 25% of its assets in a particular industry sector. Any assets
not invested in equity securities will be invested in cash and cash equivalents,
U.S. Government securities, money market instruments, and certain other fixed
income securities to meet the Fund's liquidity needs and may be so invested, in
extraordinary circumstances, to attempt to protect against significant down
cycles in the stock market.
TEMPORARY DEFENSIVE POSITIONS:
The Fund may, from time to time, take temporary defensive positions
that are inconsistent with the Fund's principal investment strategies in an
attempt to respond to adverse market, economic, political or other conditions.
When the Fund takes a temporary defensive position, the Fund may not be able to
achieve its investment objective.
5
<PAGE>
RELATED RISKS OF INVESTING IN THE FUND:
The principal risks of investing in the Fund are described on page 3 above.
Several additional risks of investing in the Fund are described below:
INVESTMENTS IN SMALL COMPANIES: Although the Fund invests in companies of all
sizes, there may be times when the Fund is substantially invested in small
companies. Stocks of smaller companies may have more risks than larger
companies. In general, they have less experienced management teams, serve
smaller markets, and find it more difficult to obtain financing for growth or
potential development than larger companies. Due to these and other factors,
small companies may be more susceptible to market downturns, and their stock
prices may be more volatile.
YEAR 2000 (Y2K): Like all mutual funds, the Fund could be negatively affected if
its computers or the computers used by its service providers experience
difficulty processing information with dates on or after January 1, 2000. In an
effort to avoid such potential problems, the Fund has worked hard to identify
and correct potential Y2K-related processing problems in its systems, and has
obtained or is getting assurances from its service providers that they are
taking similar precautions. In addition, Y2K problems may negatively affect the
companies whose securities the Fund purchases, which may have an impact on the
value of Funds shares. Accordingly, the Fund is reviewing Y2K disclosures made
by current and potential portfolio companies in their reports filed with the
Securities and Exchange Commission. Company-specific Y2K concerns raised by
these reviews, as well as any company-specific Y2K issues raised by industry
analysts, are one of the factors the Fund considers during the investment
decision-making process. Of course, the Fund cannot insulate itself from
Y2K-related problems completed, since it is impossible to protect against
misleading or incomplete Y2K-related disclosures, unanticipated Y2K problems at
any of the Fund's portfolio companies, or a general market downturn due to
widespread Y2K panic. The Fund hopes, however, that the steps it is taking will
protect its investment portfolio, as much as possible, from Y2K-related losses,
but there are no guarantees.
PORTFOLIO TURNOVER: Portfolio turnover measures the rate at which the securities
in a Fund's portfolio change during any given year. Portfolio turnover involves
expense to a fund in the form of brokerage commissions and other transaction
costs, which may adversely impact the fund's performance. Additionally, an
increase in portfolio turnover may result in an increase or decrease in taxable
gain or loss attributable to shareholders of a fund. The Adviser manages the
Fund for long-term profits, and expects that under normal conditions, portfolio
turnover should be less than 100%. However, the rate of portfolio turnover may
be higher for the Fund if implementation of the Fund's investment strategy or a
temporary defensive position results in frequent trading.
6
<PAGE>
FUND MANAGEMENT
---------------
Henssler Asset Management, LLC, located at 1281 Kennestone Circle,
Suite 100, Marietta, Georgia 30066, serves as the investment adviser for the
Fund. The Adviser was organized in February, 1998 by its only owners, Gene W.
Henssler, Ph.D., and Patricia T. Henssler. The Adviser is also an affiliate of
G.W Henssler & Associates, Ltd. ("Henssler & Associates"), an investment manager
which has provided investment advisory services to corporations, individual
investors, and institutional investors since its inception in 1987.
The Adviser provides investment advisory services and day-to-day
administrative services to the Fund under separate agreements. For these
services, the Fund pays the Adviser the fees described below. All fees are
expressed as an annualized percentage of average net assets of the Fund.
The Henssler Equity Fund
---------------------------------
Advisory Fee........................... 0.50%
Operating Services Fee................. 0.70%
Total Fees............................. 1.20%
Because the Adviser provides the Fund's management and operating services for
the fees in the chart, the Fund's total fees are 1.20% on an annualized basis,
excepting the costs of brokerage, interest, taxes, litigation, and other
extraordinary expenses.
Portfolio Management:
- ---------------------
The Fund is managed by a team of portfolio managers including Dr.
Henssler and Ted L. Parrish (the "Management Team"). The Fund's Management Team
is supported by a group of research analysts and other members of the Fund's
investment staff.
Dr. Henssler has worked in investment management and financial analysis
for over 25 years. Before organizing Henssler & Associates, Dr. Henssler was a
Professor of Finance at Kennesaw State University for 10 years. Dr. Henssler
earned his MBA and Ph.D. in Finance from the University of Michigan in 1965 and
1971, respectively.
Mr. Parrish has worked in investment management and financial analysis
for 4 years. He earned his BBA from Kennesaw State University in 1995, and holds
a Series 7 license. Mr. Parrish is a Level I Chartered Financial Analyst
candidate.
7
<PAGE>
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
-----------------------------------------
One of the primary themes of our investment strategy for the past year
has been based on our belief that strong long-term growth will come from three
industries: technology, finance, and health care. We've been seeking out
reasonably valued stocks from each of these industries, which we believe are
poised for long-term growth.
During the period June 10, 1998 (when the Fund began operations) to
April 30, 1999 (the end of the Fund's fiscal year), the Fund's total return,
including reinvestment of dividends and capital gain distributions, was 17.57%.
For comparison purposes, during the same period the S&P 500 index (a broad
market-weighted average dominated by blue-chip stocks) returned 21.14%, and the
Value-Line Composite index (an unmanaged, unweighted average of more than 1000
stocks) returned 3.07%. As with all mutual funds, how the Fund has performed in
the past is not necessarily an indictation of how it will perform in the future.
Additional information about the Fund's performance during the Fund's
most recent fiscal year, together with financial statements for the period, is
included in the Fund's latest Annual Report. We will send you a copy of this
report without charge upon request at 1-800-936-3863. Of course any specific
information regarding our investment activity or views is subject to change at
any time.
8
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The financial highlights table is intended to help you understand the
Fund's financial performance for the time periods indicated. The total returns
in the table represent the rate that an investor would have earned (or lost) on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by McCurdy & Associates CPAs,
Inc., whose report, along with the Fund's financial statements, is included in
the Fund's Annual Reports to Shareholders, incorporated by reference into this
Prospectus, and available upon request.
The following are selected per share data and ratios for the Fund for
the period beginning June 10, 1998 and ending April 30, 1999.
<TABLE>
<CAPTION>
For the period ending April 30, 1999
- --------------------------------------------------------------- ---------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income From Investment Operations:
Net Investment Income (Loss) .02
Net Gains (Losses) on Securities (both realized and
unrealized) 1.74
----
Total From Investment Operations 1.76
----
Less Distributions:
Dividends from Net Investment Income (0.02)
Distributions from Capital Gains -
Returns of Capital -
Total Distributions (0.02)
-----
Net Asset Value, End of Period $11.74
======
Total Return 17.57%
Ratios/Supplemental Data:
For the period ending April 30, 1999
- --------------------------------------------------------------- ---------------------------------------------
Net Assets, end of period (in 000s) $15,680
Ratio of Expenses to Average Net Assets: 1.20%*
Ratio of Net Income (Loss) to Average Net Assets: 0.17%*
Portfolio Turnover Rate 14%
- ---------------
* Annualized
</TABLE>
9
<PAGE>
ACCOUNT INFORMATION
-------------------
VALUATION OF SHARES--DETERMINATION OF NET ASSET VALUE:
The Fund's share price is determined based upon net asset value (NAV).
The Fund calculates NAV at approximately 4:00 p.m., EST, each day that the New
York Stock Exchange (NYSE) is open for trading. The NYSE is closed on national
holidays, so NAV will not be calculated on those days. A list of these national
holidays appears in the Fund's Statement of Additional Information. The Fund's
NAV per share is determined by dividing the total value of the Fund's
investments and other assets less any liabilities by its number of outstanding
shares.
Equity securities listed on a national securities exchange or quoted on
the NASDAQ National Market System are valued at the last sale price on the day
the valuation is made or, if no sale is reported, at the latest bid price.
Valuations of variable and fixed income securities are supplied by independent
pricing services approved by the Fund's Board of Directors. Other assets and
securities for which no quotations are readily available are valued at fair
value as determined in good faith by or under the direction of the Board.
Securities with maturities of sixty (60) days or less are valued at amortized
cost.
HOW TO PURCHASE SHARES
----------------------
The Fund does not impose any sales charges on purchases of this Fund.
In general, the Fund requires a minimum investment of $2,000 and a minimum
subsequent investment of $200. The Fund will waive minimum investment
requirements for any automatic investment plan of $100 or more per month.
Orders for the purchase of shares of the Fund placed directly to the
Fund's transfer agent, Declaration Service Company (the "Transfer Agent") by an
investor are executed at the next determined NAV per share after receipt by the
Transfer Agent. Orders for the purchase of shares of the Fund placed through
broker-dealers are executed at their next determined NAV per share after receipt
in good order by the broker-dealer. Shares are eligible to receive dividends the
day they are purchased. The Fund reserves the right to reject any order for the
purchase of its shares in whole or in part.
10
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MINIMUM INITIAL AND ADDITIONAL INVESTMENTS REQUIRED BY THE FUND:
Minimum Investment
Initial Additional
----------------- ---------------
Regular Accounts $2,000 $200
Traditional IRA's $1,000 $100
Roth IRA's $1,000 $100
Education IRA's $500 $100
Automatic Investment Plan $100 $100
OPENING OR ADDING AN ACCOUNT:
To make an initial investment in the Fund, all purchasers must complete
and send the required application, along with a check payable to "The Henssler
Equity Fund," to the address listed below. To make a subsequent investment, all
purchasers must complete and send an investment slip, along with a check payable
to "The Henssler Equity Fund," to the address listed below. All investments must
be in U.S. dollars. Third-party checks cannot be accepted. You may be charged a
fee for any check that does not clear.
Regular Mail Overnight Delivery
------------------------------- ---------------------------
The Henssler Equity Fund The Henssler Equity Fund
c/o Declaration Service Company c/o Declaration Service Company
Post Office Box 844 555 North Lane, Suite 6160
Conshohocken, PA 19428-0844 Conshohocken, PA 19428-0844
You may also make automatic investments from your bank account in a
regular amount on a monthly basis (minimum $100 per month) pursuant to our
"Automatic Investment Plan." Please call us at 1-800-936-3863 for more
information about the Automatic Investment Plan.
SPECIAL INSTRUCTIONS FOR INDIVIDUAL RETIREMENT ACCOUNTS:
If you are interested in investing your Individual Retirement Account
("IRA") or Roth IRA in the Fund, you may establish an IRA, IRA Rollover Account,
Roth IRA, or Roth IRA Rollover Account in the Fund. Please call the Fund at
1-800-936-3863 to request an IRA investment package. You may also call a
broker-dealer for more information regarding the establishment of an IRA account
in the Fund. For more complete IRA information, consult your tax professional.
Terms to Understand:
Traditional IRA.................... an individual retirement account. Your
contributions may or may not be
deductible depending on your
circumstances. Assets grow tax-deferred;
withdrawals and distributions are
taxable in the year made.
Roth IRA........................... an IRA funded with non-deductible
contributions; and tax-free growth of
assets and distributions, if the assets
are held for five years or longer and
certain conditions are met.
Education IRA...................... an IRA with nondeductible contributions,
and tax-free growth of assets and
distributions, if used to pay qualified
educational expenses.
HOW TO SELL SHARES
You may sell shares at any time. This can be done via the telephone by
calling 1-800-936-FUND (3863) or in writing.
There are no fees charged by the Fund for redemptions. However,
shareholders who redeem their shares through a broker-dealer may be charged a
fee for the broker-dealer's services.
WRITTEN SELL ORDERS:
A written a letter of instruction must include:
o your name(s) and signature(s)
o your account number
o the fund name
o the dollar amount you want to sell
o how and where to send the proceeds
o if your account is an IRA account,
whether the distribution is qualified or premature
Mail your request to:
Regular Mail Overnight Delivery
------------ ------------------
The Henssler Equity Fund The Henssler Equity Fund
c/o Declaration Service Company c/o Declaration Service Company
Post Office Box 844 555 North Lane, Suite 6160
Conshohocken, PA 19428-0844 Conshohocken, PA 19428-0844
Redemption proceeds will be mailed or wired to the redeeming
shareholder within seven days, except where those shares have recently been
purchased by personal check. In those cases, redemption proceeds may be withheld
12
<PAGE>
until the check has been collected, which may take up to fifteen days. To avoid
such withholding, investors should purchase shares by certified or bank check.
Some circumstances require that written sell orders be signature
guaranteed. If the shareholder is a corporation, partnership, agent, fiduciary
or surviving joint owner, additional documentation may be required.
A signature guarantee helps protect against fraud. You can obtain one
from most banks or securities dealers, but not from a notary public. For joint
accounts, each signature must be guaranteed. Please call us to ensure that your
signature guarantee will be processed correctly.
Your shares will be sold at the next NAV per share calculated after
your completed order is received by the Fund's transfer agent.
GENERAL POLICIES:
If your account falls below $1,000, the Fund may ask you to increase
your balance. If the balance remains below $1,000 after ninety (90) days, the
Fund may close your account, and send you the proceeds from your account.
The Fund reserves the right to:
o Refuse any purchase request for any reason.
o Change any of its purchase or redemption policies or
procedures at any time.
o Delay in sending out redemption proceeds for up to seven days.
This generally only happens in cases of large redemptions or
during unusual market conditions.
o To suspend the right to redeem and delay redemption proceeds
during times when trading on the NYSE is restricted or halted,
or otherwise as permitted by the SEC.
INVESTMENTS THROUGH THIRD PARTIES:
If you invest through a third party (rather than directly through
Henssler), the policies and fees may be different than those described here.
Banks, brokers, 401(k) plans, financial advisers and financial supermarkets may
charge transaction fees and may set different minimum investments or limitations
on buying or selling shares. The Advisor may also pay such parties a fee for
shareholder services out of its own resources.
TELEPHONE PURCHASES BY SECURITIES FIRMS. Member firms of the NASD may telephone
Declaration Service Company at 1-800-936-3863 and place purchase orders on
behalf of investors who carry their Fund investments through the member's
account with the Fund. By electing telephone purchase privileges, NASD member
firms, on behalf of themselves and their clients, agree that neither the Fund,
the Distributor nor the Transfer Agent shall be liable for following
instructions communicated by telephone and reasonably believed to be genuine.
The Fund and its agents provide written confirmations of transactions initiated
by telephone as a procedure designed to confirm that telephone instructions are
genuine. In addition, all telephone transactions with the Transfer Agent are
13
<PAGE>
recorded. As a result of these and other policies, the NASD member firms may
bear the risk of any loss in the event of such a transaction. However, if the
Transfer Agent or the Fund fails to employ this and other established
procedures, the Transfer Agent or the Fund may be liable. The Fund reserves the
right to modify or terminate these telephone privileges at any time.
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------------
The Fund pays its shareholders all of its net investment income and net
realized long- and short-term capital gains to its shareholders on an annual
basis. Your distributions will be reinvested in the Fund unless you instruct the
Fund otherwise. There are no fees or sales charges on reinvestments.
Fund dividends and distributions are taxable to most investors (unless
your investment is in an IRA or other tax-advantaged account). The tax status of
any distribution is the same regardless of how long you have been in the Fund
and whether you reinvest your distributions or take them in cash. In general,
distributions are taxable as follows:
TAXABILITY OF DISTRIBUTIONS:
<TABLE>
<CAPTION>
TAX RATE FOR 15% TAX RATE FOR 28% BRACKET
TYPE OF DISTRIBUTION BRACKET OR ABOVE
- ----------------------------------- -------------------------------- ---------------------------------
<S> <S> <C> <S> <C>
Income Dividends Ordinary Income Rate Ordinary Income Rate
Short-Term Capital Gains Ordinary Income Rate Ordinary Income Rate
Long-Term Capital Gains 10% 20%
</TABLE>
Because everyone's tax situation is unique, always consult your tax
professional about federal, state and local tax consequences.
TAXES ON TRANSACTIONS:
Any sale of Fund shares may generate a tax liability. Tax-deferred
accounts do not generate a tax liability unless you are taking a distribution or
making a withdrawal.
The table above can provide a guide for your potential tax liability
when selling or exchanging fund shares. "Short-term capital gains" applies to
Fund shares sold up to 12 months after buying them. "Long-term capital gains"
applies to Fund shares held for more than 12 months.
14
<PAGE>
HOW TO OBTAIN MORE INFORMATION
The Statement of Additional Information ("SAI") contains additional information
about the Fund including a more detailed discussion of its investment policies
and the risks associated with various investments. The SAI is incorporated by
reference into this prospectus. This means that the SAI is legally a part of
this prospectus.
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
You can obtain more information about the Fund and a copy of the Fund's SAI,
annual or semi-annual reports to shareholders by request and without charge by
contacting the Fund at 1-800-936-FUND (3863) or in writing to The Henssler
Equity Fund, c/o Declaration Service Company, Post Office Box 844, Conshohocken,
PA 19428-0844.
You can also obtain these documents, and other information about the Fund from
the SEC's website at http://www.sec.gov. You may review and copy documents at
the SEC Public Reference Room in Washington, D.C. (1-800-SEC-0330). You may
request documents by mail from the SEC by writing to Securities and Exchange
Commission, Public Reference Section, Washington, D.C. 20549-6009. The SEC will
charge a duplicating fee for any requested materials.
Adviser
-------
Henssler Asset Management, LLC
1281 Kennestone Circle, Suite 100
Marietta, Georgia 30066
Distributor
-----------
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
Custodian
---------
The Fifth Third Bank, N.A.
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Transfer, Redemption, and Dividend Disbursing Agent
---------------------------------------------------
Declaration Service Company
555 North Lane, Suite 6160
Conshohocken, PA 19428
Independent Accountants
-----------------------
McCurdy & Associates CPA's, Inc.
27955 Clemens Road
Westlake, Ohio 44145
Legal Counsel
-------------
Kilpatrick Stockton LLP
1100 Peachtree Street
Suite 2800
Atlanta, Georgia 30309
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STATEMENT OF ADDITIONAL INFORMATION
August 31, 1999
THE HENSSLER EQUITY FUND
of
THE HENSSLER FUNDS, INC.
1281 Kennestone Circle, Suite 100
Marietta, Georgia 30066
Telephone No. (770) 429-9166
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The Henssler Equity Fund is a portfolio of The Henssler Funds, Inc.
("Henssler"), a no-load, open-end diversified management investment company. The
investment objective is to seek growth of capital. The Fund seeks to achieve its
objective by investing in securities listed on a national or foreign securities
exchange or quoted in the National Association of Securities Dealers Automated
Quotation ("NASDAQ") National Market System.
This Statement of Additional Information of Henssler is not a
prospectus and should be read in conjunction with Henssler's Prospectus, dated
August 31, 1999 (the "Prospectus"), which has been filed with the Securities and
Exchange Commission. This Statement of Additional Information incorporates by
reference the Fund's Prospectus and the Annual Report to shareholders for the
fiscal year ended April 30, 1999. Copies of the Prospectus and the Annual Report
are available free of charge by writing to The Henssler Funds, Inc. c/o
Declaration Service Company, P.O. Box 844, Conshohocken, PA 19428-0844, or by
telephoning 1-800-936-3863.
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Table of Contents
Page No.
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THE FUND..........................................................................................................4
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS...........................................................4
Investments in Common Stock..............................................................................5
Investments in Small Companies...........................................................................5
Investments in Sectors...................................................................................6
Investments in Foreign Securities........................................................................6
Low Portfolio Turnover...................................................................................7
Investment in Fixed Income Securities....................................................................8
Repurchase Agreements....................................................................................8
INVESTMENT RESTRICTIONS...........................................................................................9
MANAGEMENT OF THE FUND...........................................................................................10
ADVISORY AND ADMINISTRATION ARRANGEMENTS.........................................................................13
Advisory and Operational ServiceAgreements..............................................................13
Duration and Termination................................................................................14
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION..................................................................14
General.................................................................................................14
Research Services.......................................................................................14
Over-the-Counter Transactions...........................................................................15
Political Conflicts.....................................................................................15
DETERMINATION OF NET ASSET VALUE.................................................................................15
PURCHASE OF SHARES...............................................................................................16
Purchase by Exchange of Securities......................................................................17
THE DISTRIBUTOR..................................................................................................18
REDEMPTION OF SHARES.............................................................................................19
SHAREHOLDER SERVICES.............................................................................................21
Investment Account......................................................................................21
Reinvestment of Dividends and Capital Gains Distribution................................................21
DIVIDENDS, DISTRIBUTIONS AND TAXES...............................................................................21
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Dividends and Distributions.............................................................................21
Taxes ...............................................................................................21
PERFORMANCE INFORMATION..........................................................................................24
GENERAL INFORMATION..............................................................................................25
Description of Shares...................................................................................26
Principal Shareholders..................................................................................26
Independent Accountants.................................................................................27
Custodian...............................................................................................27
Transfer, Redemption, And Dividend Disbursing Agent.....................................................27
Legal Counsel...........................................................................................27
Reports To Shareholders.................................................................................27
Additional Information..................................................................................27
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THE FUND
The Henssler Equity Fund (the "Fund") is the only portfolio of The
Henssler Funds, Inc. ("Henssler"), a no-load, open-end diversified management
investment company incorporated under the laws of the State of Maryland on
February 12, 1998.
Henssler's address is 1281 Kennestone Circle, Suite 100, Marietta,
Georgia 30066, and its telephone number is (770) 429-9166.
INVESTMENT OBJECTIVES, POLICIES AND RISK CONSIDERATIONS
Reference is made to "About the Fund" and "The Fund in Detail" in the
Prospectus for a discussion of the investment strategy, objectives, policies and
risks of the Fund. Set forth below is certain further information relating to
the Fund generally.
The Fund's investment strategy is to emphasize long term capital
appreciation and safety of principal. The Fund does not attempt to "time" the
market, but rather purchases securities in the best companies the Fund's
investment adviser, Henssler Asset Management, LLC (the "Adviser"), can
identify, and holds these securities until the fundamentals of the business
change or other opportunities present themselves. The Fund believes that its
focus on the fundamentals of the businesses it invests in results in the
purchase of above-average, high-quality securities with strong growth potential.
The Fund seeks to invest in companies with undervalued assets, strong
balance sheet characteristics and financial foundations, high earnings
expectations, quality management and potential for future growth. Factors deemed
important by the Adviser in selecting securities of such companies include, but
are not limited to, price, price history, and price-to-earnings ratio. The
Fund's investments may include small, medium, or large capitalization companies,
and a typical initial purchase of an issuer's securities may involve one to five
percent (1-5%) of the Fund's total assets.
Under normal circumstances, the Fund anticipates that over 90% of its
assets will be invested in a portfolio of common stocks. Any assets not invested
in equity securities will be invested in cash and cash equivalents, U.S.
Government securities, money market instruments, and certain other fixed income
securities to meet the Fund's liquidity needs and may be so invested, in
extraordinary circumstances, to attempt to protect against significant down
cycles in the stock market. The Fund may invest in securities of other
investment companies, subject to the limits and restrictions contained in, and
the rules and regulations promulgated under, the Investment Company Act of 1940.
In the event that the Fund invests in other investment companies, such
investments would be for cash management purposes.
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The Fund is diversified, which means that the Fund may not, as to 75%
of its assets, purchase securities of any one issuer, other than securities
issued or guaranteed by the United States government, if immediately after such
purchase more than 5% of the Fund's total assets would be invested in securities
of such issuer or the Fund would own 10% or more of the outstanding voting
securities of such issuer. The Fund will not invest more than 25% of its assets
in a particular industry sector. The Fund will not purchase securities on
margin, but it may obtain such short-term credit from banks as may be necessary
for the clearance of purchases and sales of securities.
INVESTMENTS IN COMMON STOCK. Because the Fund invests primarily in common
stocks, shares of the Fund will be subject to market risk, i.e., the possibility
that stock prices could decline over short or even extended periods. The stock
market tends to be cyclical, with periods when the prices of stocks generally
rise and periods when they generally decline. Historically, the market has been
characterized by volatility in the short run and growth in the long run. The
Fund is intended to be a long-term investment vehicle and should not be used to
meet short-term needs.
INVESTMENTS IN SMALL COMPANIES. Although the Fund invests in companies of all
sizes, i.e. large (annual revenues generally over $5 billion), medium (annual
revenues generally between $1 billion and $5 billion), and small (annual
revenues generally under $1 billion), there may be times when the Fund is
significantly invested in small companies. Smaller growth companies may offer
greater potential for capital appreciation than larger companies, particularly
because they often have new products, methods or technologies, or may respond to
changes in industry conditions due to regulatory or other developments more
rapidly than their larger competitors. In addition, because they may be followed
by fewer stock analysts and less information may be available on which to base
stock price evaluations, the market may overlook favorable trends in particular
smaller growth companies, and then adjust its valuation more quickly once
investor interest increases. Smaller growth companies may also be more subject
to a valuation catalyst (such as acquisition or disposition efforts or changes
in management) than larger companies.
On the other hand, the smaller companies in which the Fund may invest
may have relatively small revenues or market share for their products or
services, their businesses may be limited to regional markets, or they may
provide goods or services for a limited market. For example, they may be
developing or marketing new products or services for which markets are not yet
established and may never become established or may have or develop only a
regional market for product or services and thus be affected by local or
regional market conditions. In addition, small companies may lack depth of
management or they may be unable to generate funds necessary for growth or
potential development, either internally or through external financing on
favorable terms. Such companies may also be insignificant in their industries
and become subject to intense competition from larger companies.
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Due to these and other factors, small companies may suffer significant
losses or realize substantial growth; therefore, investments in such companies
tend to be volatile and are more speculative.
INVESTMENTS IN SECTORS. Although the Fund anticipates that, under normal
circumstances, its investments will be diversified across all equity market
sectors, the Fund is permitted to invest up to 25% of its assets in a particular
industry sector. Sector markets, like the national economy as a whole, tend to
be cyclical. Significant product development or regulatory change in a
particular sector may rapidly result in a substantial upswing in that sector's
sales and profits and corresponding increases in the stock prices of the
sector's companies. By investing a substantial percentage of the Fund's assets
in a particular sector, the Adviser will attempt to capitalize on the strength
of that sector and the growth of that industry in relation to other sectors of
the overall economy.
On the other hand, investments in a particular sector are also volatile
in response to unanticipated negative changes in the sector's economy. For
example, unexpected declines in demand, regulatory changes, or shortages of
materials, skilled employees or growth capital may negatively affect an industry
sector without affecting the overall economy. If the Fund is substantially
invested in a particular sector which experiences an unanticipated decline, the
Fund's performance may suffer accordingly.
INVESTMENTS IN FOREIGN SECURITIES. The Adviser may invest up to 20% of the
Fund's assets in equity securities that are issued by foreign issuers and are
traded in the United States and in American Depository Receipts of foreign
companies. By doing so, the Adviser attempts to take advantage of differences
between economic trends and the performance of securities markets in various
countries. The Adviser believes that it may be possible to obtain significant
appreciation from a portfolio consisting, in part, of foreign investments and
also achieve increased diversification. Increased diversification is gained by
combining securities from various countries that offer different investment
opportunities and are affected by different economic trends.
Generally, investments in securities of foreign companies, except
Canadian companies, involve greater risks than are present in domestic
investments. Canadian securities are not considered by the Adviser to have the
same risks as other nations' securities because Canadian and U.S. companies are
generally subject to similar auditing and accounting procedures and similar
governmental supervision and regulation. Also, Canadian securities are normally
more liquid than other non-U.S. securities. Compared to U.S. and Canadian
companies, there is generally less publicly available information about foreign
companies and there may be less governmental regulation and supervision of
foreign stock exchanges, brokers and listed companies.
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In addition, investing in foreign securities also involves the
following considerations comprising both risks and opportunities not typically
associated with investing in U.S. securities: fluctuations in exchange rates of
foreign currencies; possible imposition of exchange control regulation or
currency restrictions that would prevent cash from being brought back to the
U.S.; lack of uniform accounting, auditing, and financial reporting standards;
lack of uniform settlement periods and trading practices; less liquidity and
frequently greater price volatility in foreign markets than in the U.S.;
possible expropriation or nationalization of assets; and possible imposition of
foreign taxes. Furthermore, the U.S. government has from time to time in the
past imposed restrictions, through taxation and otherwise, on foreign
investments by U.S. investors such as the Fund.
To the extent portfolio securities are denominated in foreign
currencies, the value of the assets of the Fund as measured in U.S. dollars may
be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations. Although the Fund values its assets
daily in terms of U.S. dollars, it does not intend to convert its holdings of
foreign securities into U.S. dollars on a daily basis.
As one way of managing foreign currency exchange rate risk, the Fund
may enter into forward foreign currency exchange contracts (i.e., purchasing or
selling foreign currencies at a future date). These contracts are usually
entered into in order to fix the U.S. dollar value of a security which the Fund
has agreed to buy or sell, but which will not settle until some time in the
future. These contracts may also be used to hedge the U.S. dollar value of a
security already owned by the Fund (position hedging), particularly if a
decrease in the value of the currency in which the foreign security is
denominated is expected. This method of protecting the value of the Fund's
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities, but it does establish a
rate of exchange which the Fund may rely upon at a predetermined future point in
time.
The Adviser seeks to benefit the Fund when using forward contracts,
although the Adviser may not be able to project precisely the future exchange
rates between foreign currencies and the U.S. dollar. The Fund may therefore,
incur a gain or a loss on a forward contract. A forward contract may help reduce
the Fund's losses on a security when a foreign currency's value decreases but it
may likewise reduce the potential gain on a security if the foreign currency's
value increases.
PORTFOLIO TURNOVER. Due to the Fund's long-term investment style, the Fund
anticipates that portfolio turnover will not exceed 100% per year. Portfolio
turnover results from a change of the securities held by the Fund and involves
expenses to the Fund in the form of brokerage commissions and other transaction
costs. Portfolio turnover may also have an impact on the amount of taxable
distributions to shareholders. Although the rate of portfolio turnover will not
be a limiting factor when the Adviser deems change appropriate and in the best
interest of the Fund's shareholders, the relatively low turnover rate
anticipated in the Fund may benefit the Fund and its shareholders in the form of
lower capital expenses and lower taxable distributions.
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INVESTMENT IN FIXED INCOME SECURITIES. Under normal circumstances, the Fund
anticipates that substantially all of its assets (ordinarily 90% or more) will
be invested in equity securities. Any assets not invested in equity securities
will be invested in cash and certain cash equivalents, money market instruments,
U.S. Government securities and certain other fixed income securities for
liquidity needs or may be so invested, in extraordinary circumstances, as a
defensive position due to uncertainties in the stock market. The Fund will limit
its investments in corporate bonds and notes to those which are considered
investment grade (generally, bonds and notes that have received a rating from
Standard & Poor's Corporation of "BBB" or better or from Moody's Investors
Service, Inc. of "Baa" or better) at the time of their purchase. For further
information regarding Standard & Poor's and Moody's ratings for corporate bonds
and notes, see Appendix A to this Statement of Additional Information.
The Fund's investments in fixed income securities will generally be
subject to both credit risk and market risk. Credit risk relates to the ability
of the issuer to meet interest or principal payments as they become due. Market
risk relates to the fact that market values of fixed income securities generally
will be affected by changes in the level of interest rates. Generally, as
interest rates rise, the market value of fixed income securities will fall.
Conversely, as interest rates fall, the market value of fixed income securities
will rise. In addition, yields and market values of lower-rated securities tend
to fluctuate more than highly-rated securities. The risks of greater
fluctuations in yield and value occur because investors generally perceive
issuers of lower rated securities to be less creditworthy. Fluctuations in
market value do not affect the interest income from the securities, but are
reflected in the Fund's net asset value.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
"primary dealers" in U.S. government securities and member banks of the Federal
Reserve System which furnish collateral equal in value or market price to at
least 102% of the amount of their repurchase obligation. In a repurchase
agreement, the Fund purchases a security from a seller which undertakes to
repurchase the security at a specified resale price on an agreed future date
(ordinarily a week or less). The resale price generally exceeds the purchase
price by an amount which reflects an agreed-upon market interest rate for the
term of the repurchase agreement. The principal risk is that, if the seller
defaults, the Fund might suffer a loss to the extent that the proceeds from the
sale of the underlying securities and other collateral held by the Fund in
connection with the related repurchase agreement are less than the repurchase
price. Repurchase agreements maturing in more than seven days are considered by
the Fund to be illiquid.
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INVESTMENT RESTRICTIONS
The Fund has adopted the following restrictions and policies relating
to the investment of its assets and its activities, which are fundamental
policies and may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities (which for this purpose and
under the Investment Company Act of 1940 means the lesser of (i) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented or (ii) more than 50% of the outstanding shares).
Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
of securities or assets of, or borrowings by, the Fund.
The Fund may not:
1. As to 75% of its total assets, purchase securities of any one
issuer, other than those issued or guaranteed by the United States government,
if immediately after such purchase more than 5% of the Fund's total assets would
be invested in securities of such issuer or the Fund would own 10% or more of
the outstanding voting securities of such issuer.
2. Invest 25% or more of its total assets in the securities of
issuers in any particular Standard & Poor's 500 industry sector.
3. The Fund may not issue senior securities, except as permitted
under the Investment Company Act of 1940.
4. Make investments for the purpose of exercising control or
management.
5. Purchase or sell real estate or interests in real estate,
including real estate limited partnerships; PROVIDED, HOWEVER, that the Fund may
invest in securities secured by real estate or interests therein or issued by
companies, including real estate investment trusts, which invest in real estate
or interests therein.
6. Purchase or sell commodities or commodity contracts, including
future contracts, provided however that the Fund may enter into foreign currency
exchange contracts as described above under "Investments in Foreign Securities."
7. Purchase any securities on margin, except that the Fund may
obtain such short-term credit as may be necessary for the clearance of purchases
and sales of portfolio securities.
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8. Make loans to other persons; provided, however, that, for
purposes of this restriction, the term "loan" does not include the purchase of
an issue of publicly distributed bonds or debentures, government obligations,
certificates of deposit, bankers' acceptances or repurchase agreements.
9. Borrow amounts in excess of 10% of its total assets, taken at
market value, and then only from banks as a temporary measure for extraordinary
or emergency purposes such as the redemption of Fund shares.
10. Mortgage, pledge, hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the Fund except as
may be necessary in connection with borrowings mentioned in (9) above, and then
such mortgaging, pledging or hypothecating may not exceed 10% of the Fund's
total assets, taken at market value.
11. Invest more than 10% of the Fund's total assets in securities
for which there are legal or contractual restrictions on resale, securities
which are not readily marketable, securities of foreign issuers which are not
listed on a recognized domestic or foreign securities exchange, or other
illiquid securities.
12. Underwrite securities of other issuers except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in selling
portfolio securities.
13. Write, purchase or sell puts, calls or combinations thereof.
14. Purchase or sell interests in oil, gas or other mineral
exploration or development programs or leases; PROVIDED, HOWEVEr, that the Fund
may purchase or sell securities of entities which invest in such programs.
MANAGEMENT OF THE FUND
Reference is made to "Management of the Fund" in the Prospectus. Set
forth below is further information about the Fund's management.
BOARD OF DIRECTORS. The Fund is governed by a Board of Directors which
is responsible for protecting the interests of the Fund's shareholders. The
members of the Board of Directors are experienced executives who meet throughout
the year to oversee the Fund's activities, review the Fund's contractual
relationships with service providers, and review the performance of the Fund. A
majority of the Fund's directors are not affiliated with the Adviser.
MANAGEMENT AGREEMENTS. Henssler Asset Management, LLC (the "Adviser")
has entered into an Investment Advisory Agreement (the "Advisory Agreement")
with the Fund to provide investment management services to the Fund. In
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addition, the Adviser has entered into an Operating Services Agreement (the
"Services Agreement") with the Fund to provide virtually all day-to-day
operational services to the Fund. As is further explained below, the combined
effect of the Advisory Agreement and the Services Agreement is to place a cap or
ceiling on the Fund's ordinary operating expenses at 1.20% of daily net asset
value of the Fund, excepting brokerage, interest, taxes, litigation, and other
extraordinary expenses.
The Adviser was organized in February 1998 by its only owners, Gene W.
Henssler, Ph.D., and Patricia T. Henssler. The Adviser is an affiliate of G.W.
Henssler & Associates, Ltd. ("Henssler & Associates"), an investment manager
which has provided investment advisory services to corporations, individual
investors, and institutional investors since its inception in 1987. Dr. Henssler
owns over 90% of the outstanding interests in Henssler & Associates. Henssler &
Associates has approximately $400 million under private account management, with
an additional $200 million under advisement. The Adviser's offices are located
at 1281 Kennestone Circle, Suite 100, Marietta, Georgia 30066.
The Board of Directors is responsible for the overall management of the
Fund, including general supervision of its investment activities. The officers,
who administer the Fund's daily operations, are appointed by the Board of
Directors. The current Directors and principal officers of the Fund, their
addresses, and their principal occupations for the past five years are set forth
below. "Interested" directors, as defined by the 1940 Act, are designated by an
asterisk.
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Positions Principal Occupations
Name and Address (Age) with Registrant During the Past 5 Years
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*Gene W. Henssler (59) Director, President President, G.W. Henssler & Associates, Ltd.
1281 Kennestone Circle
Suite 100
Marietta, Georgia 30066
*Patricia T. Henssler (44) Director, Executive Vice Treasurer, G.W. Henssler & Associates, Ltd.;
1281 Kennestone Circle President, Treasurer, Patricia T. Henssler, CPA, Henssler, Still &
Suite 100 Secretary Associates, LLC
Marietta, GA 30066
Kenneth M. Davies (59) Director Principal, Kenneth M. Davies, P.C.
1675 Penobscot Building
Detroit, MI 48226
Ladd M. Kochmann, DBA (54) Director Professor of Finance - Kennesaw State
Kennesaw State University University
1000 Chastain Road
Kennesaw, GA 30144-5591
Mr. James L. Brookover (48) Director Portfolio Manager, Reams Asset Management
4725 Stonebridge Court
Columbus, IN 47201
Mr. Ted L. Parrish (26) Vice President Principal, G.W.
1281 Kennestone Circle Henssler & Associates, Ltd.
Suite 100
Marietta, GA 30066
Mr. William G. Lako, Jr. (28) Vice President Principal, G.W.
1281 Kennestone Circle Henssler & Associates, Ltd.
Suite 100
Marietta, GA 30066
Mr. Scott L. Keller (33) Vice President Principal, G.W. Henssler & Associates, Ltd.;
1281 Kennestone Circle Vice President, The Fuji Bank, Ltd.
Suite 100
Marietta, GA 30066
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The Fund pays each Director an annual fee of $2,500 per year plus $100
per meeting attended, together with such directors' actual out-of-pocket
expenses relating to attendance at meetings. The $2,500 annual fee is payable in
four equal quarterly installments and is paid as of the date of each quarterly
Board meeting. During the fiscal year ended April 30, 1999, each Director was
paid $2,900 by the Fund.
ADVISORY AND ADMINISTRATION ARRANGEMENTS
Reference is made to "Management of the Fund--Management Arrangements"
in the Prospectus for certain information concerning the management and Advisory
arrangements of the Fund.
ADVISORY AND OPERATING SERVICE AGREEMENTS. Henssler Asset Management, LLC (the
"Adviser") has entered into an Investment Advisory Agreement (the "Advisory
Agreement") with the Fund to provide investment management services to the Fund.
In addition to the Advisory Agreement, the Adviser has entered into an Operating
Services Agreement (the "Services Agreement") with the Fund to provide, or make
arrangements for the provision of, virtually all day-to-day operational services
to the Fund.
The Adviser is an affiliate of G.W. Henssler & Associates, an
investment manager described above. Henssler & Associates and the Adviser are
under the common control of Gene W. Henssler, Ph.D. Some of the Adviser's
officers also serve as officers of Henssler & Associates.
As explained in the Prospectus, the terms of the Advisory Agreement and
the Services Agreement empower the Adviser, subject to the Board of Directors of
the Fund, to manage the Fund's assets and provide or arrange for the provision
of operational and other administrative services for the day-to-day operation of
the Fund. The combined effect of the Advisory Agreement and the Services
Agreement is to place a cap or ceiling on the total expenses of the Fund,
excepting brokerage interest, taxes, litigation, and other extraordinary
expenses, at an annual rate of 1.20% of the daily net asset value of the Fund.
The Adviser has entered into several agreements with third party
providers to provide, among other services, accounting, administrative, dividend
disbursing, transfer agent, registrar, custodial, distribution, shareholder
reporting, sub-accounting and recordkeeping services to the Fund.
During the fiscal year ended April 30, 1999, the Fund paid the Adviser
$36,969 for its services under the Advisory Agreement and $51,756 for its
services under the Services Agreement.
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DURATION AND TERMINATION. Unless earlier terminated as described above, the
Advisory Agreement will remain in effect until May 1, 2000, and thereafter from
year to year if approved annually (a) by the Board of Directors of the Fund or
by a majority of the outstanding shares of the Fund; and (b) by a majority of
the Directors who are not parties to such contract or interested persons (as
defined in the Investment Company Act of 1940) of any such party. Such contract
terminates automatically upon assignment and may be terminated without penalty
on 60 days written notice at the option of either party thereto or by the vote
of the shareholders of the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Subject to the policies established by the Board of Directors of the
Fund, the Adviser is responsible for the Fund's portfolio decisions, the placing
of the Fund's portfolio transactions and the negotiation of the commissions to
be paid on such transactions. In executing such transactions, the Adviser will
use its best efforts to obtain the execution of portfolio transactions at prices
which are advantageous to the Fund and involving commission rates which are
reasonable in relation to the value of the transaction.
GENERAL. The Fund has no obligation to deal with any broker or dealer in the
execution of transactions for its portfolio securities. The Adviser will select
brokers or dealers taking into account such factors as price (including the
commission or spread), size of order, difficulty of execution and operational
facilities of the firm involved and the firm's risk in positioning a block of
securities. The Adviser will also consider the research services which the
broker or dealer has provided to the Adviser relating to the security involved
in the transaction and/or to other securities. Consistent with the Code of
Conduct of the NASD and such other policies as the Board of Directors may
determine, the Fund may consider sales of shares of the Fund as a factor in the
selection of brokers or dealers to execute portfolio transactions for the Fund.
During the fiscal year ended April 30, 1999, the Fund paid $13,412 in brokerage
fees.
RESEARCH SERVICES. Under Section 28(e) of the Securities Exchange Act of 1934
and its Advisory Agreement with the Fund, the Adviser is authorized to pay a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction, in recognition of the value of brokerage
and/or research services provided by the broker. These research and investment
information services make available to the Adviser for its analysis and
consideration the views and information of individuals and research staffs of
other securities firms. These services may be useful to the Adviser in
connection with Advisory clients other than the Fund and not all such services
may be useful to the Adviser in connection with the Fund. Although such
information may be a useful supplement to the Adviser's own investment
information in rendering services to the Fund, the value of such research and
services is not expected to reduce materially the expenses of the Adviser in the
performance of its services under the Advisory Agreement and will not reduce the
management fees payable to the Adviser by the Fund.
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OVER-THE-COUNTER TRANSACTIONS. The Fund may invest in securities traded in the
over-the-counter market. Transactions in the over-the-counter market are
generally principal transactions with dealers and the costs of such transactions
involve dealer spreads rather than brokerage commissions. The Fund, where
possible, deals directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are
available elsewhere. When a transaction involves exchange listed securities, the
Adviser considers the advisability of effecting the transaction with a broker
which is not a member of the securities exchange on which the security to be
purchased is listed (i.e., a third market transaction) or effecting the
transaction in the institutional or fourth market.
POTENTIAL CONFLICTS. The Fund may have investment objectives and strategies
similar to those of other clients of the Adviser. Accordingly, securities held
by the Fund may also be held by other clients of the Adviser and the Adviser may
find it desirable to purchase or sell the same security for the Fund and another
client of the Adviser at the same time. Similarly, due to differing investment
objectives or strategies, the Adviser may find it desirable to purchase a
security for the Fund at the same time that the Adviser wishes to sell the
security for another of the Adviser's clients, or vice versa. In either of the
foregoing circumstances, transactions in the securities will be made, insofar as
feasible, for the Fund and the Adviser's other clients in a manner deemed
equitable to all.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of the Fund is determined as of 4:00
P.M. on each day during which The New York Stock Exchange is open for trading.
The New York Stock Exchange is not open on New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The Fund will also determine its net
asset value once daily on each day (other than a day during which no shares were
tendered for redemption and no order to purchase or sell shares was received by
the Fund) in which there is sufficient trading in its portfolio securities that
the net asset value might be materially affected. The net asset value per share
is computed by dividing the sum of the value of the securities held by the Fund
plus any cash or other assets (including interest and dividends accrued but not
yet received) minus all liabilities (including accrued expenses) by the total
number of shares outstanding at such time, rounded to the nearest cent.
Expenses, including the management fee payable to the Adviser, are accrued
daily.
Equity securities listed or traded on a national securities exchange or
quoted on the over-the-counter market are valued at the last sale price on the
day the valuation is made or, if no sale is reported, at the last bid price.
Valuations of fixed income securities are supplied by independent pricing
services approved by Henssler's Board of Directors. Money market securities with
a remaining maturity of 60 days or less are valued on an amortized cost basis if
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<PAGE>
their original term to maturity from the date of purchase was 60 days or less,
or by amortizing their value on the 61st day prior to maturity, if their term to
maturity from the date of purchase exceeded 60 days, unless the Board of
Directors determines that such valuation does not represent fair value. Other
assets and securities for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the direction of
Henssler's Board of Directors.
PURCHASE OF SHARES
Reference is made to "How to Purchase Shares" in the Prospectus. Set
forth below is further information about the purchase of shares of the Fund.
Shares of the Fund are continuously offered at net asset value, and the
Fund does not impose any sales charges on purchases of Fund shares. The minimum
initial investment in the Fund is generally $2,000 and the minimum subsequent
investment is $200. The minimum initial investment for an Individual Retirement
Account ("IRA"), other tax-deferred retirement account, including accounts with
plans administered under Sections 401(k) and 403(b) of the Internal Revenue
Code, or an account under the Uniform Gift to Minors Act for is $1,000, with
minimum subsequent investments of $100. The Fund will waive minimum investment
requirements for any automatic investment plan of $100 or more per month.
Orders for the purchase of shares of the Fund placed directly to the
Fund's transfer agent, Declaration Service Company (the "Transfer Agent") by an
investor are executed at their next determined net asset value after receipt by
the Transfer Agent. Orders for the purchase of shares of the Fund placed through
brokers are executed at their next determined net asset value after receipt by
the broker. Shares are eligible to receive dividends the day they are purchased.
For further information regarding net asset value, see "Additional
Information-Determination of Net Asset Value." The Fund reserves the right to
reject any order for the purchase of its shares in whole or in part.
For initial and subsequent investments, shares of the Fund may be
purchased by sending a check payable to "The Henssler Equity Fund," together
with a completed Application to:
Regular Mail: For Overnight Delivery:
The Henssler Equity Fund The Henssler Equity Fund
c/o Declaration Service Company c/o Declaration Service Company
P.O. Box 844 555 North Lane, Suite 6160
Conshohocken, PA 19428-0844 Conshohocken, PA 19428-0844
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<PAGE>
Shareholders should be aware that purchases and redemptions mailed to the Fund
at its address in Georgia will not be effected until received by the Transfer
Agent at the address listed above. Investments in the Fund may also be made
through brokerage firms and institutions. However, investors who place their
orders through a broker-dealer may be charged a fee for the broker-dealer's
services. No such charge will be paid by an investor who purchases Fund shares
directly from the Fund as described above.
INDIVIDUAL RETIREMENT ACCOUNTs. If you are interested in investing your
Individual Retirement Account ("IRA") or Roth IRA in the Fund, you may establish
an IRA, IRA Rollover Account, Roth IRA, or Roth IRA Rollover Account in the
Fund. Please call the Fund at 1-800-936-3863 to request an IRA investment
package. You may also call a broker-dealer for more information regarding the
establishment of an IRA account in the Fund.
AUTOMATIC INVESTMENT PLANS. If you are interested in setting up an Automatic
Investment Plan to invest a specific amount of money in the Fund on a regular
basis, you may complete the appropriate section of the Account Application to
authorize the Transfer Agent to automatically debit your bank account
accordingly. Debits must be made in amounts of $100 or more and may be made once
per month on the 15th or last business day of the month. If the 15th falls on a
weekend or holiday, the account will be debited on the previous business day.
Requests to modify or discontinue an Automatic Investment Plan must be received
in writing fifteen (15) days prior to the next scheduled debit date. Please call
the Fund at 1-800-936-3863 to inquire about the Automatic Investment Plan.
TELEPHONE PURCHASES BY SECURITIES FIRMS. Member firms of the NASD may telephone
Declaration Service Company at 1-800-936-3863 and place purchase orders on
behalf of investors who carry their Fund investments through the member's
account with the Fund. By electing telephone purchase privileges, NASD member
firms, on behalf of themselves and their clients, agree that neither the Fund,
the Distributor nor the Transfer Agent shall be liable for following
instructions communicated by telephone and reasonably believed to be genuine.
The Fund and its agents provide written confirmations of transactions initiated
by telephone as a procedure designed to confirm that telephone instructions are
genuine. In addition, all telephone transactions with the Transfer Agent are
recorded. As a result of these and other policies, the NASD member firms may
bear the risk of any loss in the event of such a transaction. However, if the
Transfer Agent or the Fund fails to employ this and other established
procedures, the Transfer Agent or the Fund may be liable. The Fund reserves the
right to modify or terminate these telephone privileges at any time.
WRITTEN SHAREHOLDER INQUIRIES. Written shareholder inquiries may be directed to
the Fund's Transfer Agent at The Henssler Equity Fund, c/o Declaration Service
Company, P.O. Box 844, Conshohocken, PA 19428-0844, or by telephone by calling
1-800-936-3863.
PURCHASE BY EXCHANGE OF SECURITIES. The Board of Directors of Henssler has
determined that it is in the best interest of the Fund to offer its shares, in
lieu of cash payment, for securities approved by the Adviser to be purchased by
the Fund. This will enable an investor to purchase shares of the Fund by
exchanging securities owned by the investor for shares of the Fund. The
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<PAGE>
Directors believe that such a transaction can benefit the Fund by allowing it to
acquire securities for its portfolio without paying brokerage commissions. For
the same reason, the transaction may also be beneficial to investors. Securities
will be exchanged for shares of the Fund in the absolute discretion of the
Adviser. Cash equivalent securities may be contributed to the Fund in accordance
with the wishes of the investor and the consent of the Adviser. The exchange of
securities in an investor's portfolio for shares of the Fund is treated for
federal income tax purposes as a sale of such securities and the investor may,
therefore, realize a taxable gain or loss.
The Fund shall not enter into such transactions, however, unless the
securities to be exchanged for Fund shares are securities whose values are
readily ascertainable and are readily marketable, comply with the investment
policies of the Fund, are of the type and quality which would normally be
purchased for the Fund's portfolio, are securities which the Fund would
otherwise purchase, and are acquired for investment and not for immediate
resale. The value of the Fund's shares used to purchase portfolio securities as
stated herein will be determined at such time as the Fund next determines its
net asset value. Such securities will be valued in accordance with the same
procedure used in valuing the Fund's portfolio securities. See "Additional
Information - Determination of Net Asset Value." If you wish to acquire the
Fund's shares in exchange for securities you should contact Declaration Service
Company at the address or telephone number shown on the back page of the
Prospectus. The Board of Directors of Henssler reserves the right to terminate
this privilege at any time.
THE DISTRIBUTOR
The Adviser has entered into a Distribution Agreement on the Fund's
behalf with Declaration Distributors, Inc. (the "Distributor"). Under the
Agreement, the Distributor will provide distribution and distribution services
to the Fund in exchange for a fee to be paid by the Adviser and reimbursement by
the Adviser of the Distributor's out of pocket expenses incurred in connection
with the provision of the foregoing.
The Distribution Agreement has an initial term of one year and will
remain in effect from year to year thereafter, but only so long as such
continuance is approved at least annually by a vote of Henssler's Board of
Directors or by vote of a majority of the outstanding voting securities of the
Fund and of the Directors who, except for their positions as Directors, are not
"interested persons" of Henssler (as defined in the Investment Company Act). In
addition, in the Distribution Agreement, either party may terminate the
Distribution Agreement upon 60 days written notice to the other party. The
Distribution Agreement terminates automatically if "assigned" (as defined in the
Investment Company Act). The Distribution Agreement is subject to the same
renewal requirements and termination provisions as the Advisory Agreement
described under "Management of the Fund - Management Arrangements."
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<PAGE>
REDEMPTION OF SHARES
Reference is made to "How to Redeem Shares" in the Prospectus for
certain information as to the redemption of shares of the Fund.
REDEMPTION BY MAIL OR TELEPHONE. Shares may be redeemed in writing or by
telephone. If the shareholder is a corporation, partnership, agent, fiduciary or
surviving joint owner, additional documentation of a customary nature may be
required. Shares are redeemed at their next determined net asset value after a
redemption request in good order has been received by the Transfer Agent or, for
redemptions through a broker, after the request has been received by the broker.
A request is deemed to be in good order if it has been signed by the account
holder and is accompanied, where necessary, by a signature guarantee. Redemption
proceeds will be mailed or wired to the redeeming shareholder within seven days,
except where those shares have recently been purchased by personal check. In
those cases, redemption proceeds may be withheld until the check has been
collected, which may take up to fifteen days. To avoid such withholding,
investors should purchase shares by certified or bank check.
To redeem shares in writing, submit a written redemption request
directly to the Transfer Agent at the following address:
Regular Mail: For Overnight Delivery:
The Henssler Equity Fund The Henssler Equity Fund
c/o Declaration Service Company c/o Declaration Service Company
P.O. Box 844 555 North Lane, Suite 6160
Conshohocken, PA 19428-0844 Conshohocken, PA 19428-0844
Shares may also be redeemed by telephone by calling toll-free 1-800-936-3863.
The Fund, through the Transfer Agent, has established procedures designed to
confirm the authenticity of telephonic instructions, which procedures include
requiring callers to establish their personal identity and limiting the mailing
of telephone redemption proceeds to the address or bank account set forth on the
Account Application. Investors should understand that neither the Fund nor the
Transfer Agent will be liable for acting upon instructions communicated by
telephone that it reasonably believes to be genuine.
Redemption proceeds wired to a designated account at a shareholder's
request for amounts less than $10,000 will be reduced by a wire transfer fee
(currently $10.00). Certain institutional clients will not be charged this wire
redemption fee. Changes to the designated address or bank account must be made
in writing and may be required to be accompanied by a signature guarantee from
an eligible guarantor.
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<PAGE>
The Fund reserves the right to redeem, at net asset value, the shares
of any shareholder if, because of redemptions by the shareholder, the account of
such shareholder has a value of less than $1,000. Before the Fund exercises its
right to redeem such shares, the shareholder will be given written notice of the
proposed redemption and will be allowed 90 days to make an additional investment
in an amount which will increase the value of the account to at least $1,000.
The right to redeem shares or to receive payment with respect to any
such redemptions may be suspended for more than seven days only for periods
during which trading on the New York Stock Exchange is restricted as determined
by the Securities and Exchange Commission or such Exchange is closed (other than
customary weekend and holiday closings), or any period during which an emergency
exists, as defined by the Securities and Exchange Commission, as a result of
which disposal of portfolio securities or determination of the net asset value
of the Fund is not reasonably practicable, and for such other periods as the
Securities and Exchange Commission may by order permit for the protection of
shareholders of the Fund.
The Fund has made an election with the Securities and Exchange
Commission to pay in cash all redemptions requested by any shareholder of record
limited in amount during any 90-day period to the lesser of $250,000 or 1% of
the net assets of the Fund at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. Redemptions in excess of the above limits may be paid in whole or in
part, in investment securities or in cash, as the Board of Directors may deem
advisable; however, payment will be made wholly in cash unless the Board of
Directors believes that economic or market conditions exist which would make
such a practice detrimental to the best interests of the Fund. If redemptions
are paid in investment securities, such securities will be valued as set forth
in the Prospectus under "Additional Information - Determination of Net Asset
Value" and a redeeming shareholder would normally incur brokerage expenses if he
converted these securities to cash.
The Fund will generally first sell any cash equivalent securities it
holds to meet redemptions and, to the extent these proceeds are insufficient to
meet redemptions, the Fund will sell other portfolio securities at the
discretion of the Adviser. See "Redemption of Shares" in the Prospectus.
The value of shares at the time of redemption may be more or less than
the shareholder's cost, depending on the market value of the securities held by
the Fund at such time. Shareholders who redeem their shares through a
broker-dealer may be charged a fee for the broker-dealer's services.
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<PAGE>
SHAREHOLDER SERVICES
The Fund offers the following shareholder services designed to
facilitate investment in its shares.
INVESTMENT ACCOUNT. Each shareholder has an Investment Account and will receive
statements from the Fund's Transfer Agent after each transaction showing the
cumulative activity in the account since the beginning of the year. After the
end of each year, shareholders will receive federal income tax information
regarding dividends and capital gains distributions.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTION. Unless specific
instructions are given as to the method of payment of dividends and capital
gains distributions, dividends and distributions will automatically be
reinvested in additional shares of the Fund. Such reinvestment will be at the
net asset value of shares of the Fund, without sales charge, as of the close of
business on the ex-dividend date of the dividend or distribution. Shareholders
may elect in writing to receive either their income dividends or capital gains
distributions, or both, in cash, in which event payment will be mailed on the
payment date.
Shareholders may, at any time, notify the Transfer Agent in writing
that they no longer wish to have their dividends and/or distributions reinvested
in shares of the Funds or vice versa and, commencing ten days after the receipt
by the Transfer Agent of such notice, those instructions will be effected.
Shareholder inquiries should be made to the Fund at the address on the
front of the Fund's Prospectus.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to distribute all of its net
investment income and net realized long- or short-term capital gains, if any, to
its shareholders annually after the close of the Fund's fiscal year. See
"Shareholder Services - Reinvestment of Dividends and Capital Gains
Distributions" for information concerning the manner in which dividends and
distributions may be automatically reinvested in shares of the Fund.
Shareholders may elect in writing to receive any such dividends or
distributions, or both, in cash. Dividends and distributions are taxable to
shareholders as discussed below whether they are reinvested in shares of the
Fund or received in cash.
TAXES. The Fund intends to elect to qualify for the special tax treatment
afforded regulated investment companies under the Internal Revenue Code of 1986,
as amended (the "Code"). If it so qualifies, the Fund will not be subject to
federal income tax on the part of its net ordinary income and net realized
capital gains which it distributes to shareholders.
B-21
<PAGE>
Dividends paid by the Fund from its ordinary income, and distributions
of the Fund's net realized short-term capital gains, are taxable to
non-tax-exempt investors as ordinary income. Ordinary income dividends may be
eligible for the 70% dividends received deduction allowed to corporations under
the Code, if certain requirements are met.
Distributions made from the Fund's net realized long-term capital gains
are taxable to shareholders as long-term capital gains regardless of the length
of time the shareholder has owned Fund shares. Generally, long-term capital
gains are taxable at a maximum federal income rate of 20%.
Upon redemption of Fund shares held by a non-tax-exempt investor, such
investor, generally, will realize a capital gain or loss equal to the difference
between the redemption price received by the investor and the adjusted basis of
the shares redeemed. If the redemption by the Fund is in-kind, capital gain or
loss will be measured by the difference between the fair market value of
securities received and the adjusted basis of the shares redeemed. Such capital
gain or loss, generally, will constitute a short-term capital gain or loss if
the redeemed Fund shares were held for twelve months or less, and long-term
capital gain or loss if the redeemed Fund shares were held for more than twelve
months. If, however, Fund shares were redeemed within six months of their
purchase by an investor, and if a capital gain dividend was paid with respect to
the Fund's shares while they were held by the investor, then any loss realized
by the investor will be treated as long-term capital loss to the extent of the
capital gain dividend.
Under certain provisions of the Code, some shareholders may be subject
to 31% withholding on reportable dividends, capital gains distributions and
redemption payments ("back-up withholding"). Generally, shareholders subject to
back-up withholding will be those for whom a taxpayer identification number is
not on file with the Fund or who, to such Fund's knowledge, have furnished an
incorrect number. When establishing an account, an investor must certify under
penalty of perjury that such number is correct and that he is not otherwise
subject to back-up withholding.
Dividends paid by the Fund from its ordinary income and distributions
of the Fund's net realized short-term capital gains paid to shareholders who are
non-resident aliens will be subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Non-resident shareholders are urged to consult
their own tax advisers concerning the applicability of the United States
withholding tax.
B-22
<PAGE>
The Code requires each regulated investment company to pay a
nondeductible 4% excise tax to the extent the company does not distribute,
during each calendar year, 98% of its ordinary income, determined on a calendar
year basis, and 98% of its capital gains, determined, in general, on an October
31 year-end, plus any undistributed amount from prior years. The Fund
anticipates that it will make sufficient timely distributions to avoid
imposition of the excise tax. If the Fund pays a dividend in May which was
declared in the previous October, November or December to shareholders of record
on a date in those months, then such dividend or distribution will be treated
for tax purposes as being paid on December 31 and will be taxable to
shareholders as if received on December 31.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
the Treasury regulations promulgated thereunder. The Code and these Treasury
regulations are subject to change by legislative or administrative action.
Dividends and capital gains distributions may also be subject to state
and local taxes.
The federal income tax consequences set forth above do not address any
particular tax considerations a shareholder of the Fund might have. Shareholders
are urged to consult their tax Advisers as to the particular tax consequences of
the acquisition, ownership and disposition of shares of the Fund, including the
application of state, local and foreign tax laws and possible future changes in
federal tax laws. Foreign investors should consider applicable foreign taxes in
their evaluation of an investment in the Fund.
B-23
<PAGE>
PERFORMANCE INFORMATION
Reference is made to "Past Performance" in the Prospectus. Set forth
below is further information regarding performance of the Fund.
From time to time, the Fund may make available certain information
about its performance. This information may include calculations regarding the
total return on an investment in the Fund ("Total Return"). Total Return is
measured by comparing the value of an investment in the Fund at the beginning of
the relevant period to the redemption value of the investment at the end of the
period (assuming reinvestment of any dividends or capital gains distributions).
When the Fund makes available its Total Return, it will be calculated on an
annualized basis for specified periods of time, and may be calculated for the
period since the start of the Fund's operations. Any performance information
made available by the Fund, including Total Return, is based on the Fund's
historical record and is not intended to indicate future performance.
As stated above, from time to time the Fund may provide its total
return in advertisements, sales literature or reports, and other communications
to shareholders. The Fund's total return is calculated based on the Fund's
change in net asset value per share between the beginning and end of the period
shown and assumes reinvestment of the Fund's dividend and capital gains
distributions during the period.
Total return figures will be computed according to a formula prescribed
by the Securities and Exchange Commission. The formula can be expressed as
follows:
P(1+T)n = ERV
Where P = a hypothetical initial payment of $10,000
T = average annual total return
N = number of years
ERV = Ending Redeemable Value of a hypothetical $10,000
payment made at the beginning of the 1, 5, or 10
years (or other) periods at the end of the 1, 5, or
10 (or other) periods (or fractional portion
thereof).
Note: The ERV assumes complete redemption of the hypothetical investment at the
end of the measuring period. The Fund's net investment income changes in
response to fluctuations in interest rates, dividends declared and the expenses
of the Funds.
There may be a time when the Fund advertises its "yield." Yield figures
are based on historical earnings and, like the rate of return, are not intended
to indicate future performance. The yield of the Fund refers to the income
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<PAGE>
generated by an investment in the Fund over a thirty-day (or one month) period
(which period will be stated in the advertisement). The yield for any period is
computed by dividing the net investment income per share earned during such
period by the maximum public offering price per share on the last day of the
period, and then annualizing such 30-day (or one month) yield in accordance with
a formula prescribed by the Securities and Exchange Commission. The Fund may
also advertise in terms of sales literature an "actual distribution" which is
computed in the same manner as yield except that actual income dividends
declared per share during the period in question is substituted for net
investment income per share. The Fund's yield will only be advertised when
accompanied by the Fund's total return.
The Fund's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and its operating expenses.
Consequently, any given performance quotation should not be considered
representative of the Fund's performance for any specified period in the future.
In addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in the Fund with certain bank deposits or other
investments that pay a fixed yield for a stated period of time.
The Fund's average annualized rate of return (unaudited) for the period
June 10, 1998 to April 30, 1999 (since inception) is as follows:
One Year 20.01% (annualized and unaudited)
As an example, based on the average annual compound rate of return listed above,
you could have expected the following values (unaudited) on a $1,000 investment
assuming no redemption at the end of the time period:
One Year $1,164 (based on annualized and unaudited rate of return above)
GENERAL INFORMATION
The Fund is the only portfolio of The Henssler Funds, Inc.
("Henssler"), an open-end diversified management investment company incorporated
under the laws of the State of Maryland on February 12, 1998.
The Fund's address 1281 Kennestone Circle, Suite 100, Marietta, Georgia
30066, and its telephone number is (770) 429-9166.
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<PAGE>
DESCRIPTION OF SHARES. The Henssler Funds, Inc. ("Henssler") has an authorized
capital of 500,000,000 shares of Common Stock, par value $.0001 per share,
100,000,000 shares of which have been classified as shares of common stock of
The Henssler Equity Fund (the "Fund"). The Board of Directors has the power to
authorize and issue additional classes of stock, without stockholder approval,
by classifying or reclassifying unissued stock, subject to the requirements of
the Act. In the event of liquidation, each share of Common Stock is entitled to
a pro rata portion of the particular portfolio's assets after payment of debts
and expenses. Shareholders of the Fund are entitled to one vote for each share
held and fractional votes for fractional shares held and will vote on the
election of Directors and any other matter submitted to a shareholder vote. In
addition, shareholders have the right to remove Directors. Henssler does not
intend to hold meetings of shareholders in any year in which the Act does not
require shareholders to act upon any of the following matters: (i) election of
Directors; (ii) approval of an investment advisory agreement; (iii) approval of
a distribution agreement; and (iv) ratification of selection of independent
auditors. Voting rights for Directors are not cumulative. Shares issued are
fully paid and non-assessable and have no preemptive or conversion rights.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. Henssler has elected to indemnify its
directors and officers to the maximum extent permitted under the Maryland
General Corporation Law and the Investment Company Act of 1940. Accordingly, a
director or officer of Henssler will not be liable to the Fund or its
shareholders for monetary damages, except in the case of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. See the Articles of Incorporation and Bylaws on file with
the Securities and Exchange Commission for the full text of these provisions.
PRINCIPAL SHAREHOLDERS. As of July 31, 1999, the following entities were known
by the Fund to be record and beneficial owners of five percent or more of the
outstanding stock of the Fund:
Name and Address of
Beneficial Owner Number of Shares Percent of Class
- ---------------- ---------------- ----------------
Charles Schwab & Co., Inc.
Special Custody A/C FBO Customers 1,340,510.419 88.17%
101 Montgomery Street
San Francisco, California 94104
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<PAGE>
As of July 31, 1999, the Officers and Directors of The Henssler Funds, Inc. and
the Manager, as a group, own 1.07% of the outstanding shares of the Fund.
INDEPENDENT ACCOUNTANTS. McCurdy & Associates CPA's, Inc., 27955 Clemens Road,
Westlake, Ohio 44145 has been selected as the independent accountants of the
Fund. The independent accountants are responsible for auditing the financial
statements of the Fund.
CUSTODIAN. The Fifth Third Bank, 38 Fountain Square, Cincinnati, Ohio 45263 acts
as Custodian of the Fund's assets. The Custodian is responsible for safeguarding
and controlling the Fund's cash and securities, handling the delivery of
securities and collecting interest on the Fund's investments.
TRANSFER, REDEMPTION, AND DIVIDEND DISBURSING AGENT. Declaration Service
Company, 555 North Lane, Suite 6160, Conshohocken, PA 19428, acts as the Fund's
Transfer, Redemption, and Dividend Disbursing Agent. The Transfer, Redemption,
and Dividend Disbursing Agent is responsible for the issuance, transfer and
redemption of shares and the operating, maintenance and servicing of shareholder
accounts.
LEGAL COUNSEL. Kilpatrick Stockton LLP, 1100 Peachtree Street, Suite 2800,
Atlanta, Georgia 30309, has been selected as counsel for the Fund. Kilpatrick
Stockton LLP will pass on legal matters for the Fund in connection with the
offering of its shares. Kilpatrick Stockton LLP also represents the Adviser in
regard to Fund-related matters and will pass on legal matters for them in
connection with the offering of the Fund's shares.
REPORTS TO SHAREHOLDERS. The fiscal year of the Fund ends on April 30 of each
year. The Fund sends to its shareholders at least semi-annually reports showing
the Fund's portfolio and other information. An annual report, containing
financial statements audited by independent auditors, is sent to shareholders
each year.
ADDITIONAL INFORMATION. The Prospectus and this Statement of Additional
Information do not contain all the information set forth in the Registration
Statement and the exhibits relating thereto which Henssler has filed with the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933 and the Investment Company Act of 1940, to which reference is hereby
made.
FINANCIAL STATEMENTS
The Fund's most recent Statement of Assets and Liabilities, which has
been audited by McCurdy & Associates CPA's, Inc., is attached to this Statement
of Additional Information.
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<PAGE>
FINANCIAL STATEMENTS OF THE FUND INCORPORATED BY
REFERENCE IN PART B:
Annual Report to Shareholders for year ended
April 30, 1999:
Independent Accountants' Report
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statements of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
B-28
<PAGE>
APPENDIX A
Ratings of Corporate Debt Obligations
The characteristics of debt obligations rated by Moody's are generally as
follows:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities of fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
B-29
<PAGE>
The characteristics of debt obligations rated by Standard & Poor's are generally
as follows:
AAA - This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC - Debt rated BB, B, CCC or CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation among obligations rated lower than BBB and CC the
highest degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
C - This rating is reserved for income bonds on which no interest is being paid.
A bond rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
Ratings of Commercial Paper
The Funds' purchases of commercial paper are limited to those instruments rated
A-1 or A-2 by Standard & Poor's or Prime-1 or Prime-2 by Moody's.
Commercial paper rated A-1 or A-2 by Standard & Poor's has the following
characteristics: liquidity ratios are adequate to meet cash requirements; the
issuer's long-term debt is rated "A" or better; the issuer has access to at
least two additional channels of borrowing; and basic earnings and cash flow
have an up and down trend with allowances made for unusual circumstances.
Typically, the issuer's industry is well-established and the issuer has a strong
position within the industry. Relative strength or weakness of the above factors
B-30
<PAGE>
determines whether an insurer's commercial paper is rated A-1 or A-2, with the
relative degree of safety of commercial paper rated A-2 not being as high as for
commercial paper rated A-1.
Commercial paper rated Prime-1 or Prime-2 by Moody's is the highest commercial
paper rating assigned by Moody's. Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of management of the issuer;
(2) economic evaluation of the issuer's industry or industries and an appraisal
of speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and consumer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Relative strength or
weakness of the above factors determine how the issuer's commercial paper is
rated within various categories.
A commercial paper rating is not a recommendation to purchase, sell or hold a
particular instrument, inasmuch as it does not comment as to market price or
suitability for a particular investment.
B-31
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits:
Exhibit
Number:
- -------
a. Articles of Incorporation of Registrant, incorporated by
reference from Registrant's Registration Statement filed
February 18, 1998.
b. By-laws of Registrant incorporated by reference from
Registrant's Registration Statement filed February 18,
1998.
c. Inapplicable.
d. Form of Advisory Agreement by and between the Registrant
and the Adviser, incorporated by reference from the
Registrant's Registration Statement filed February 18,
1998.
e. Form of Distribution Agreement by and among the Adviser,
Registrant and Declaration Distributors, Inc.,
incorporated by reference from Registration Statement
filed February 18, 1998.
f. Inapplicable.
g. Form of Custody Agreement by and among the Adviser, Registrant
and The Fifth Third Bank dated August 30, 1999.
h.l. Form of Operating Services Agreement by and between the
Registrant and the Adviser incorporated by reference from
Registrant's Registration Statement filed February 18,
1998.
C-1
<PAGE>
h.2 Form of Investment Services Agreement by and among the
Adviser, Registrant and Declaration Service Company
incorporated by reference from Registrant's Registration
Statement filed February 18, 1998.
i. Opinion of Kilpatrick Stockton LLP as to legality of the
shares incorporated by reference from Registrant's
Registration Statement filed May 26, 1998.
j. Consent of Independent Auditors.*
k. Inapplicable.
l. Agreement concerning initial capital of the Fund,
incorporated by reference from Registrant's Registration
Statement filed May 26, 1998.
m. Inapplicable.
n. Inapplicable.
o. Inapplicable.
* Filed herewith
Item 24. Persons Controlled by or under Common Control with Registrant.
--------------------------------------------------------------
Henssler Asset Management, LLC, the Fund's Adviser, is a newly-formed
Georgia limited liability company 51% owned by Gene W. Henssler, Ph.D. and 49%
owned by Patricia T. Henssler. The Fund's Adviser is an affiliate of G.W.
Henssler & Associates, Ltd., an investment manager wholly owned by Dr. Henssler
with approximately $400 million under private account management, with an
additional $200 million under advisement.
Item 25. Indemnification.
----------------
Section 2-418 of the General Corporation Law of the State of Maryland,
Article VI of Registrant's Charter filed as Exhibit 1, Article VII of
Registrant's By-Laws filed as Exhibit 2, and the Distribution Agreement filed as
Exhibit 6 provide, or will provide, for indemnification.
Registrant's Articles of Incorporation (Article VI) provide that
Registrant shall indemnify its directors and officers to the fullest extent
permitted by law.
C-2
<PAGE>
Registrant's By-laws (Article VII, Section 1) provide that Registrant
shall indemnify any director and/or officer who was or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director or officer of Registrant, or is or was serving at
the request of Registrant as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding to the maximum extent permitted by law.
With respect to indemnification of officers and directors, Section
2-418 of the Maryland General Corporation Law provides that a corporation may
indemnify any director who is made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of Registrant) by reason
of service in that capacity, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement and
expenses actually and reasonably incurred by him in connection with such action,
suit or proceeding unless (1) it is established that the act or omission of the
director was material to the matter giving rise to the proceeding, and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty; or (2) the director actually received an improper personal benefit
of money, property, or services; or (3) in the case of any criminal action or
proceeding, had reasonable cause to believe that the act or omission was
unlawful. A court of appropriate jurisdiction may, however, except in
proceedings by or in the right of Registrant or in which liability has been
adjudged by reason of the person receiving an improper personal benefit, order
such indemnification as the court shall deem proper if it determines that the
director is fairly and reasonably entitled to indemnification in view of all the
relevant circumstances, whether or not the director has met the requisite
standard of conduct.
Under Section 2-418, Registrant may also indemnify officers, employees
and agents of Registrant who are not Directors to the same extent that it shall
indemnify directors and officers, and to such further extent, consistent with
law, as may be provided by general or specific action of the Board of Directors
or contract. Pursuant to Section 2-418 of the Maryland General Corporation Law,
the termination of any proceeding by judgment, order or settlement does not
create a presumption that the person did not meet the requisite standard of
conduct required by Section 2-418. The termination of any proceeding by
conviction, or a plea of nolo contendere or its equivalent, or an entry of an
order of probation prior to judgment, creates a rebuttable presumption that the
person did not meet the requisite standard of conduct.
Reference is also made to Section 12 of the Distribution Agreement
filed as Exhibit 6 to this Registration Statement. Section 12 of the
Distribution Agreement provides that Registrant, subject to certain conditions
and limitations, shall indemnify, defend and hold harmless the Underwriter, its
officers and directors and any person who controls the Underwriter within the
meaning of the Securities Act of 1933 from and against any and all claims,
C-3
<PAGE>
demands, liabilities and expenses which they may incur under the Federal
securities laws, the common law or otherwise, arising out of or based upon any
alleged untrue statement of a material fact contained in the Registration
Statement or any related Prospectus and/or Statement of Additional Information
or arising out of or based upon any alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
Reference is also made to Section 6 of the Advisory Agreement filed as
Exhibit 5 to this Registration Statement. Section 6 provides that the Adviser
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
the Registrant, except for willful misfeasance, bad faith or from negligence in
the performance of its duties, or by reason of reckless disregard of its
obligations and duties under the Advisory Agreement.
The Registrant may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the General
Laws of the State of Maryland, from liability arising from his activities as
officer or director of the Registrant. The Registrant, however, may not purchase
insurance on behalf of any officer or director of the Registrant that protects
or purports to protect such person from liability to the Registrant or to its
shareholders to which such officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, reckless disregard of the
duties involved in the conduct of his office, active or deliberate dishonesty,
receipt of an improper personal benefit, or in the case of a criminal proceeding
that such person had reasonable cause to believe the act or omission was
unlawful. The corporation may provide similar protection, including a trust
fund, letter of credit, or surety bond, not inconsistent with this section.
Insurance or similar protection may also be provided by a subsidiary or
affiliate of the corporation.
Item 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
None.
Item 27. Principal Underwriters.
-----------------------
The Fund's Distributor, Declaration Distributors, Inc., also serves as
the distributor for the Declaration Trust Fund, the Pauze Funds, the JWB
Aggressive Growth Fund, and the Noah Fund.
Set forth below is information concerning each director and officer of
the Distributor. The principal business address of the Distributor and each such
person is 555 North Lane, Suite 6160, Conshohocken, PA 19428.
C-4
<PAGE>
<TABLE>
(1) (2) (3)
Position and Offices Positions and Offices
Name with Underwriter With Registrant
---- ---------------- ---------------
<CAPTION>
<S> <S> <C>
Terence P. Smith Chief Executive Officer None
David F. Ganley Compliance Officer None
</TABLE>
Item 28. Location of Accounts and Records.
---------------------------------
Registrant maintains the records required to be maintained by it under
Rules 31a-1(a), 31a-1(b) and 31a-2(a) under the Investment Company Act of 1940
at its principal executive offices at 1281 Kennestone Circle, Suite 100,
Marietta, Georgia 30066. Certain records, including records relating to
Registrant's stockholders and the physical possession of its securities, may be
maintained pursuant to Rule 31a-3 at the offices of Registrant's Custodian,
Fifth Third Bank, N.A., 38 Fountain Square Plaza, Cincinnati, Ohio 45263, and
Transfer Agent, Declaration Distributors, Inc., 555 North Lane, Suite 6160,
Conshohocken, PA 19428.
Item 29. Management Services.
--------------------
None.
Item 30. Undertakings.
-------------
The Registrant undertakes to file a post-effective amendment, using
Financial Statements for the Fund which need not be certified, within four to
six months from the effective date of Registrant's registration statement under
the Securities Act of 1933.
The Directors will call a meeting of shareholders to vote on the
removal of a Director upon the written request of the record holders of 10% of
its outstanding shares. In addition, if the Directors receive a request from at
least 10 shareholders (who have been shareholders for at least six months)
holding shares of the Fund valued at $25,000 or more or holding at least 1% of
the Fund's outstanding shares, whichever is less, stating that they wish to
communicate with other shareholders to request a meeting to remove a Director,
the Directors will then either make the Fund's shareholder list available to the
applicants or mail their communications to all other shareholders at the
applicants' expense, or the Directors may take such other action as set forth
under Section 16(c) of the Investment Company Act.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant and the principal underwriter pursuant to the foregoing
C-5
<PAGE>
provisions or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant and the principal underwriter in
connection with the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person or the principal
underwriter in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Marietta, and State of Georgia, on the 30th day
of August, 1999.
THE HENSSLER FUNDS, INC.
(Registrant)
By: /s/ Gene W. Henssler
Gene W. Henssler
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
effective as of August 30, 1999:
/s/ Patricia T. Henssler /s/Kenneth M. Davies*
Patricia T. Henssler, Director and Kenneth M. Davies, Director
Treasurer (Principal Accounting
Officer)
/s/Ladd M. Kochman* /s/James L. Brookover*
Ladd M. Kochman, D.B.A., Director James L. Brookover, Director
/s/ Gene W. Henssler
Gene W. Henssler, Ph.D., Director
*By: /s/ Gene W. Henssler
Gene W. Henssler, Ph.D.,
as Attorney in Fact
<PAGE>
<TABLE>
Exhibit
Number Description
- ------ -----------
<CAPTION>
<C> <S>
a. Articles of Incorporation of Registrant, filed as an
Exhibit to the Registrant's Registration Statement filed
February 18, 1998.
b. By-laws of Registrant, filed as an Exhibit to the
Registrant's Registration Statement filed February 18,
1998.
c. Inapplicable.
d. Form of Advisory Agreement by and between the Registrant
and the Adviser, incorporated by reference from
Registrant's Registration Statement filed February 18,
1998.
e. Form of Distribution Agreement by and among the Adviser,
Registrant and Declaration Distributors, Inc.,
incorporated by reference from Registrant's Registration
Statement filed February 18, 1998.
f. Inapplicable.
g. Form of Custody Agreement by and among the Adviser, Registrant
and The Fifth Third Bank, N.A. dated August 30, 1999*
h.1. Form of Operating Services Agreement by and between the
Registrant and the Adviser incorporated by reference from
the Registrant's Registration Statement filed February
18, 1998.
h.2. Form of Investment Services Agreement by and among the
Adviser, Registrant and Declaration Service Company
incorporated by reference from Registrant's Registration
Statement filed February 18, 1998.
<PAGE>
i. Opinion of Kilpatrick Stockton LLP as to legality of the
shares, incorporated by reference from Registrant's
Registration Statement filed May 26, 1998.
j. Consent of Independent Auditors.*
k. Inapplicable.
l. Agreement concerning initial capital of the Fund,
incorporated by reference from Registrant's Registration
Statement filed May 26, 1998.
m. Inapplicable.
n. Inapplicable.
o. Inapplicable.
</TABLE>
* Filed herewith
FORM OF
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of ___________, 1999, by and among HENSSLER
ASSET MANAGEMENT, LLC, a Georgia limited liability company (the "Adviser"), THE
HENSSLER FUNDS, INC., a corporation organized under the laws of Maryland (the
"Corporation"), and FIFTH THIRD BANK, a banking company organized under the laws
of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Corporation desires that the Securities and cash of each
of the investment portfolios identified in Exhibit A hereto (such investment
portfolios and individually referred to herein as a "Fund" and collectively as
the "Funds"), be held and administered by the Custodian pursuant to this
Agreement; and
WHEREAS, the Corporation is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Corporation and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Oral Instructions and
Written Instructions on behalf of the Corporation and named in Exhibit B hereto
or in such resolutions of the Board of Trustees, certified by an Officer, as may
be received by the Custodian from time to time.
1.2 "BOARD OF DIRECTORS" shall mean the persons from time to time
serving as Directors of the Corporation.
1.3 "BOOK-ENTRY SYSTEM" shall mean a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of
31 CFR Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "BUSINESS DAY" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Fund computes
the net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers,
Inc.
1.6 "OFFICER" shall mean the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Corporation.
1.7 "ORAL INSTRUCTIONS" shall mean instructions orally transmitted to
and accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Corporation shall
cause all Oral Instructions to be confirmed by Written Instructions. If such
Written Instructions confirming Oral Instructions are not received by the
Custodian prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Corporation. If Oral
Instructions vary from the Written Instructions which purport to confirm them,
the Custodian shall notify the Corporation of such variance but such Oral
Instructions will govern unless the Custodian has not yet acted.
<PAGE>
1.8 "CUSTODY ACCOUNT" shall mean any account in the name of a Fund,
which is provided for in Section 3.2 below.
1.9 "PROPER INSTRUCTIONS" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "SECURITIES DEPOSITORY" shall mean The Participants Trust Company
or The Depository Trust Company and (provided that Custodian shall have received
a copy of a resolution of the Board of Directors, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Corporation) any other clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities and Exchange Act of 1934
(the "1934 Act"), which acts as a system for the central handling of Securities
where all Securities of any particular class or series of an issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "SECURITIES" shall include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures, notes, bank
certificates of deposit, bankers' acceptances, mortgage-backed securities, other
money market instruments or other obligations, and any certificates, receipts,
warrants or other instruments or documents representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that the
Custodian has the facilities to clear and to service.
1.12 "SHARES" shall mean the shares issued by the Corporation.
1.13 "WRITTEN INSTRUCTIONS" shall mean (i) written communications
actually received by the Custodian and signed by one or more persons as the
Board of Directors shall have from time to time authorized, or (ii)
communications by telex or any other such system from a person or persons
reasonably believed by the Custodian to be Authorized, or (iii) communications
transmitted electronically through the Institutional Delivery System (IDS), or
any other similar electronic instruction system acceptable to Custodian and
approved by resolutions of the Board of Directors, a copy of which, certified by
an Officer, shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
------------------------
2.1 APPOINTMENT. The Corporation hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Corporation at any time during the period of this Agreement, provided
that such Securities or cash at all times shall be and remain the property of
the Corporation.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth and
in accordance with the 1940 Act as amended. Except as specifically set forth
herein, the Custodian shall have no liability and assumes no responsibly for any
non-compliance by the Corporation or a Fund of any laws, rules or regulations.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
------------------------------
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of the Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 CUSTODY ACCOUNT. The Custodian shall open and maintain in its trust
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.
2
<PAGE>
3.3 APPOINTMENT OF AGENTS. In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company, which has
been approved by the Board of Directors and is qualified to act as a custodian
under the 1940 Act, as sub-custodian to hold Securities and cash of the Funds
and to carry out such other provisions of this Agreement as it may determine,
and may also open and maintain one or more banking accounts with such a bank or
trust company (any such accounts to be in the name of the Custodian and subject
only to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement.
3.4 DELIVERY OF ASSETS TO CUSTODIAN. Each Fund shall deliver, or cause
to be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of a Fund in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Directors, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible
and practical in connection with its performance hereunder,
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and
deliveries and returns of collateral consisting of Securities. So
long as such Securities Depository or Book-Entry System shall
continue to be employed for the deposit of Securities of the Funds,
the Corporation shall annually re-adopt such resolution and deliver
a copy thereof, certified by an Officer, to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of
the Custodian in such Book-Entry System or Securities Depository
which includes only assets held by the Custodian as a fiduciary,
custodian or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the
books of the Book-Entry System and Securities Depository as the
case may be, with respect to Securities of a Fund maintained in a
Book-Entry System or Securities Depository shall, by book-entry, or
otherwise identify such Securities as belonging to the Fund.
(d) If Securities purchases by a Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for
the account of a Fund. If Securities sold by a Fund are held in a
Book-Entry System or Securities Depository, the Custodian shall
transfer such Securities upon (i) receipt of advice from the
Book-Entry System or Securities depository that payment for such
Securities has been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund.
(e) Upon request, the Custodian shall provide a Fund with copies of any
report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund is kept) on
the internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
3
<PAGE>
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Corporation and Fund for any loss
or damage to the Corporation or such Fund resulting (i) from the
use of a Book-Entry System or Securities Depository by reason of
any negligence or willful misconduct on the part of Custodian or
any sub-custodian appointed pursuant to Section 3.3 above or any of
its or their employees, or (ii) from failure of Custodian or any
such sub-custodian to enforce effectively such rights as it may
have against a Book-Entry System or Securities Depository. At its
election, the Corporation shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person for any loss or damage to
the Funds arising from the use of such Book-Entry System or
Securities Depository, if and to the extent that the Corporation
has been made whole for any such loss or damage.
3.6 DISBURSEMENT OF MONEYS FROM CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only (i) in the
case of Securities (other than options on Securities, futures
contracts and options on futures contracts), against the delivery
to the Custodian (or any sub-custodian appointed pursuant to
Section 3.3 above) of such Securities registered as provided in
Section 3.9 below in proper form for transfer, or if the purchase
of such Securities is effected through a Book-Entry System or
Securities Depository, in accordance with the conditions set forth
in Section 3.5 above; (ii) in the case of options on Securities,
against delivery to the Custodian (or such sub-custodian) of such
receipts as are required by the customs prevailing among dealers in
such options; (iii) in the case of futures contracts and options on
futures contracts, against delivery to the Custodian (or such
sub-custodian) of evidence of title thereto in favor of the
Corporation or any nominee referred to in Section 3.9 below; and
(iv) in the case of repurchase or reverse repurchase agreements
entered into between the Corporation and a bank which is a member
of the Federal Reserve System or between the Corporation and a
primary dealer in U.S. Government securities, against delivery of
the purchased Securities either in certificate form or through an
entry crediting the Custodian's account at a Book-Entry System or
Securities Depository for the account of the Fund with such
Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account
of a Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating expenses of
a Fund; in all cases, whether or not such expenses are to be in
whole or in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Corporation, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD, relating to compliance
with rules of The Options Clearing Corporation and of any
registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Fund;
(g) For transfer in accordance with the provisions of any agreement
among the Corporation, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar organization
or organizations) regarding account deposits in connection with
transactions by the Fund;
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(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including
the Custodian), which deposit or account has a term of one year or
less; and
(i) For any other proper purposes, but only upon receipt, in addition
to Proper Instructions, of a copy of a resolution of the Board of
Directors, certified by an Officer, specifying the amount and
purpose of such payment, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such
payment is to be made.
3.7 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only
against receipt of payment therefor in cash, by certified or
cashiers check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an Offeror's depository agent in connection with tender or other
similar offers for Securities of a Fund; provided that, in any such
case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name
of the Corporation, the Custodian or any sub-custodian appointed
pursuant to Section 3.3 above, or of any nominee or nominees of any
of the foregoing, or (ii) for exchange for a different number of
certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance
with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the issuer of such Securities, or pursuant to provisions for
conversion contained in such Securities, or pursuant to any deposit
agreement, including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of depository
receipts; provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by a Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of a Fund,
but only against receipt of such collateral as the Trust shall have
specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Corporation on behalf of a Fund requiring a pledge of assets by
such Fund, but only against receipt by the Custodian of the amounts
borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Corporation or a
Fund;
(l) For delivery in accordance with the provisions of any agreement
among the Corporation, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD, relating to compliance
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with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other
arrangements in connection with transactions by the Corporation on
behalf of a Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Corporation on behalf of a Fund, the Custodian, and a
futures commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any contract market (or any similar
organization or organizations) regarding account deposits in
connection with transactions by the Corporation on behalf of a
Fund; or
(n) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Directors, certified by an Officer, specifying the
Securities to be delivered, setting forth the purpose for which
such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such Securities shall be made.
3.8 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise
instructed by the Corporation, the Custodian shall with respect to all
Securities held for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all income
and other payments to which the Trust is entitled either by law or
pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on a
timely basis the amount payable upon all Securities which may
mature or be called, redeemed, or retired, or otherwise become
payable;
(c) Endorse for collection, in the name of the Fund or the Corporation
on behalf of the Fund, checks, drafts and other negotiable
instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect, and prepare and submit reports to the Internal Revenue
Service ("IRS") and to the Corporation at such time, in such manner
and containing such information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to Securities
held therein, through a Book-Entry System or Securities Depository,
all rights and similar securities issued with respect to Securities
of the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in connection
with sale, exchange, substitution, purchase, transfer and other
dealings with Securities and assets of the Fund.
3.9 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Corporation on behalf of a Fund, if
eligible therefor. All other Securities held for a Fund may be registered in the
name of the Corporation on behalf of such Fund, the Custodian, or any
sub-custodian appointed pursuant to Section 3.3 above, or in the name of any
nominee of any of them, or in the name of a Book-Entry System, Securities
Depository or any nominee of either thereof; provided, however, that such
Securities are held specifically for the account of the Corporation on behalf of
a Fund. The Corporation shall furnish to the Custodian appropriate instruments
to enable the Custodian to hold or deliver in proper form for transfer, or to
register in the name of any of the nominees hereinabove referred to or in the
name of a Book-Entry System or Securities Depository, any Securities registered
in the name of a Fund.
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3.10 RECORDS. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Corporation, including (i) journals or other records of original entry
containing an itemized daily record in detail of all receipts and deliveries of
Securities and all receipts and disbursements of cash; (ii) ledgers (or other
records) reflecting (A) Securities in transfer, (B) Securities in physical
possession, (C) monies and Securities borrowed and monies and Securities loaned
(together with a record of the collateral therefor and substitutions of such
collateral), (D) dividends and interest received, and (E) dividends receivable
and interest accrued; and (iii) canceled checks and bank records related
thereto. The Custodian shall keep such other books and records of the
Corporation as the Corporation shall reasonably request, or as may be required
by the 1940 Act, including, but not limited to Section 3.1 and Rule 31a-1 and
Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Corporation and in compliance with rules
and regulations of the Securities and Exchange Commission, (ii) be the property
of the Corporation and at all times during the regular business hours of the
Custodian be made available upon request for inspection by duly authorized
officers, employees or agents of the Corporation and employees or agents of the
Securities and Exchange Commission, and (iii) if required to be maintained by
Rule 31a-1 under the 1940 Act, be preserved for the periods prescribed in Rule
31a-2 under the 1940 Act.
3.11 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the
Corporation with a daily activity statement by Fund and a summary of all
transfers to or from the Custody Account on the day following such transfers. At
least monthly and from time to time, the Custodian shall furnish the Corporation
with a detailed statement, by Fund, of the Securities and moneys held for the
Corporation under this Agreement.
3.12 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the
Corporation with such reports, as the Corporation may reasonably request from
time to time, on the internal accounting controls and procedures for
safeguarding Securities, which are employed by the Custodian or any
sub-custodian appointed pursuant to Section 3.3 above.
3.13 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies
if any, relating to Securities which are not registered in the name of a Fund,
to be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Corporation
such proxies, all proxy soliciting materials, which should include all other
proxy materials, if any, and all notices to such Securities.
3.14 INFORMATION ON CORPORATE ACTIONS. Custodian will promptly notify
the Corporation of corporate actions, limited to those Securities registered in
nominee name and to those Securities held at a Depository or sub-Custodian
acting as agent for Custodian. Custodian will be responsible only if the notice
of such corporate actions is published by the Financial Daily Card Service, J.J.
Kenny Called Bond Service, DTC, or received by first class mail from the agent.
For market announcements not yet received and distributed by Custodian's
services, Corporation will inform its custody representative with appropriate
instructions. Custodian will, upon receipt of Corporation's response within the
required deadline, affect such action for receipt or payment for the
Corporation. For those responses received after the deadline, Custodian will
affect such action for receipt or payment, subject to the limitations of the
agent(s) affecting such actions. Custodian will promptly notify Corporation for
put options only if the notice is received by first class mail from the agent.
The Corporation will provide or cause to be provided to Custodian with all
relevant information contained in the prospectus for any security which has
unique put/option provisions and provide Custodian with specific tender
instructions at least ten business days prior to the beginning date of the
tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
--------------------------------------------
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities
for the Corporation, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
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purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by a
Fund pay out of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the cost
of a purchase of Securities for a Fund, if in the relevant Custody Account there
is insufficient cash available to the Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES
PURCHASED. In any and every case where payment for the purchase of Securities
for a Fund is made by the Custodian in advance of receipt for the account of the
Fund of the Securities purchased but in the absence of specific Written or Oral
Instructions to so pay in advance, the Custodian shall be liable to the Fund for
such Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a
Fund, Written Instructions shall be delivered to the Custodian, specifying (a)
the name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Corporation as specified in such Written
Instructions, the Custodian shall deliver such Securities to the person
specified in such Written Instructions. Subject to the foregoing, the Custodian
may accept payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs prevailing
among dealers in Securities.
4.4 DELIVERY OF SECURITIES SOLD. Notwithstanding Section 4.3 above or
any other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Trust shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 PAYMENT FOR SECURITIES SOLD, ETC. In its sole discretion and from
time to time, the Custodian may credit the relevant Fund Custody Account, prior
to actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of the Fund. Any such credit
shall be conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit a Fund to use funds so
credited to its Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Custody Account.
4.6 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its
sole discretion and from time to time, advance funds to the Corporation to
facilitate the settlement of transactions on behalf of a Fund in the Fund's
Custody Account. Any such advance shall be repayable immediately upon demand
made by Custodian.
ARTICLE V
REDEMPTION OF TRUST SHARES
--------------------------
TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the relevant Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions. Upon effecting payment or distribution in accordance with proper
Instruction, the Custodian shall not be under any obligation or have any
responsibility thereafter with respect to any such paying bank.
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ARTICLE VI
SEGREGATED ACCOUNTS
-------------------
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Corporation, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Corporation,
(b) for purposes of segregating cash or Securities in connection
with securities options purchased or written by a Fund or in
connection with financial futures contracts (or options
thereon) purchased or sold by a Fund,
(c) which constitute collateral for loans of Securities made by a
Fund,
(d) for purposes of compliance by the Corporation or a Fund with
requirements under the 1940 Act for the maintenance of
segregated accounts by registered investment companies in
connection with reverse repurchase agreements and when-issued,
delayed delivery and firm commitment transactions, and
(e) for other proper corporate purposes, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors, certified by an Officer,
setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate
purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
------------------------
7.1 STANDARD OF CARE. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Corporation for any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability or claim unless such
loss, damages, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian's cumulative liability
within a calendar year shall be limited with respect to the Corporation or any
party claiming by, through or on behalf of the Corporation for the initial and
all subsequent renewal terms of this Agreement, to the lessor amount of (a) the
actual damages sustained by the Corporation, (actual damages for uninvested
funds shall be the overnight Feds fund rate), or (b) to an amount not to exceed
one-half of the net fees paid to the Custodian within the prior three calendar
months. The Custodian shall be entitled to rely on and may act upon advice of
counsel on all matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. The Custodian shall promptly notify
the Corporation of any action taken or omitted by the Custodian pursuant to
advice of counsel. The Custodian shall not be under any obligation at any time
to ascertain whether the Corporation is in compliance with the 1940 Act, the
regulations thereunder, the provisions of the Corporation's charter documents or
by-laws, or its investment objectives and policies as then in effect.
7.2 ACTUAL COLLECTION REQUIRED. The Custodian shall not be liable for,
or considered to be the custodian of, any cash belonging to the Corporation or
any money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
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7.4 LIMITATION ON DUTY TO COLLECT. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Corporation if such
Securities are in default or payment is not made after due demand or
presentation.
7.5 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 EXPRESS DUTIES ONLY. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 COOPERATION. As directed by the Corporation, the Custodian shall
cooperate with and supply necessary information to the entity or entities
appointed by the Corporation to keep the books of account of the Corporation
and/or compute the value of the assets of the Corporation. The Custodian shall
take all such reasonable actions as the Corporation may from time to time
request to enable the Corporation to obtain, from year to year, favorable
opinions from the Corporation's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Corporation's report on Form N-1A and Form N-SAR and any other reports required
by the Securities and Exchange Commission, and (b) the fulfillment by the
Corporation of any other requirements of the Securities and Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1 INDEMNIFICATION. The Corporation shall indemnify and hold harmless
the Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and
any nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 INDEMNITY TO BE PROVIDED. If the Corporation requests the Custodian
to take any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Corporation shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
-------------
Neither the Custodian nor the Corporation shall be liable for any
failure or delay in performance of its obligations under this Agreement arising
out of or caused, directly or indirectly, by circumstances beyond its reasonable
control, including, without limitation, acts of God; earthquakes; fires; floods;
wars; civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
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service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay. Notwithstanding the foregoing, the Custodian shall maintain
sufficient disaster recovery procedures to minimize interruptions.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
-----------------------------
10.1 EFFECTIVE PERIOD. This Agreement shall become effective as of the
date first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 TERMINATION. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by the
Board of Directors, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Book-Entry System or Securities Depository) and cash then owned by the
Corporation and held by the Custodian as custodian, and (b) transfer any
Securities held in a Book-Entry System or Securities Depository to an account of
or for the benefit of the Corporation at the successor custodian, provided that
the Corporation shall have paid to the Custodian all fees, expenses and other
amounts to the payment or reimbursement of which it shall then be entitled. Upon
such delivery and transfer, the Custodian shall be relieved of all obligations
under this Agreement. The Corporation may at any time immediately terminate this
Agreement in the event of the appointment of a conservator or receiver for the
Custodian by regulatory authorities in the State of Ohio or upon the happening
of a like event at the direction of an appropriate regulatory agency or court of
competent jurisdiction.
10.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian
is not designated by the Corporation on or before the date of termination
specified pursuant to Section 10.1 above, then the Custodian shall have the
right to deliver to a bank or Corporation company of its own selection, which is
(a) a "Bank" as defined in the 1940 Act, (b) has aggregate capital, surplus and
undivided profits as shown on its then most recent published report of not less
than $25 million, and (c) is doing business in New York, New York, all
Securities, cash and other property held by Custodian under this Agreement and
to transfer to an account of or for the Corporation at such bank or Corporation
company all Securities of the Corporation held in a Book-Entry System or
Securities Depository. Upon such delivery and transfer, such bank or Corporation
company shall be the successor custodian under this Agreement and the Custodian
shall be relieved of all obligations under this Agreement. If, after reasonable
inquiry, Custodian cannot find a successor custodian as contemplated in this
Section 10.3, then Custodian shall have the right to deliver to the Corporation
all Securities and cash then owned on behalf of a Fund and to transfer any
Securities held in a Book-Entry System or Securities Depository to an account of
or on behalf of a Fund. Thereafter, the Corporation shall be deemed to be its
own custodian with respect to the Corporation and the Custodian shall be
relieved of all obligations under this Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
-------------------------
The Custodian shall be entitled to compensation as agreed upon from
time to time by the Corporation and the Custodian. Adviser shall be responsible
for payment of any fees and other charges due to the Custodian hereunder. The
fees and other charges in effect on the date hereof and applicable to the Funds
are set forth in Exhibit B attached hereto.
ARTICLE XII
LIMITATION OF LIABILITY
-----------------------
The Corporation is a corporation organized under Maryland law and under
Articles of Incorporation, to which reference is hereby made a copy of which is
on file at the office of the Secretary of State of Maryland as required by law,
and to any and all amendments thereto so filed or hereafter filed. The
obligations of the Corporation entered into in the name of the Corporation or on
behalf thereof by any of the Directors, officers, employees or agents are made
not individually, but in such capacities, and are not binding upon any of the
Directors, officers, employees, agents or shareholders of the Corporation or the
Funds personally, but bind only the assets of the Corporation, and all persons
dealing with any of the Funds of the Corporation must look solely to the assets
of the Corporation belonging to such Fund for the enforcement of any claims
against the Corporation.
11
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ARTICLE XIII
NOTICES
-------
Unless otherwise specified herein, all demands, notices, instructions,
and other communications to be given hereunder shall be in writing and shall be
sent or delivered to The receipt at the address set forth after its name herein
below:
TO THE CORPORATION:
__________________________
--------------------------
--------------------------
Attn:
Telephone: ( )_____________________
Facsimile: ( )_____________________
TO THE CUSTODIAN:
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Trust Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
14.2 REFERENCES TO CUSTODIAN. The Corporation shall not circulate any
printed matter which contains any reference to Custodian without the prior
written approval of Custodian, excepting printed matter contained in the
prospectus or statement of additional information or its registration statement
for the Corporation and such other printed matter as merely identifies Custodian
as custodian for the Corporation. The Corporation shall submit printed matter
requiring approval to Custodian in draft form, allowing sufficient time for
review by Custodian and its counsel prior to any deadline for printing.
14.3 NO WAIVER. No failure by either party hereto to exercise and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 AMENDMENTS. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
14.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
12
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14.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: HENSSLER FUNDS, INC.
__________________________________ By: _______________________________
Its: ______________________________
FIFTH THIRD BANK
ATTEST:
__________________________________ By: _______________________________
Its: ______________________________
HENNSLER ASSET MANAGEMENT, LLC
ATTEST:
__________________________________ By: _______________________________
Its: ______________________________
13
<PAGE>
Dated: ________________ , 1999
EXHIBIT A
TO THE CUSTODY AGREEMENT AMONG
HENSSLER ASSET MANAGEMENT, LLC, THE HENSSLER
FUNDS, INC. AND FIFTH THIRD BANK
____________, 1999
NAME OF FUND DATE
The Henssler Equity Fund
HENSSLER ASSET MANAGEMENT, LLC
--------------------------------
By: Gene W. Henssler
Its: President
THE HENSSLER FUNDS, INC.
--------------------------------
By: Gene W. Henssler
Its: President
FIFTH THIRD BANK
--------------------------------
By: ___________________________
Its: __________________________
14
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Dated:_____________________, 1999
EXHIBIT B
TO THE CUSTODY AGREEMENT AMONG
HENSSLER ASSET MANAGEMENT, LLC, THE HENSSLER
FUNDS, INC. AND FIFTH THIRD BANK
________________, 1999
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to Administer each Custody Account.
NAME SIGNATURE
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
15
<PAGE>
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of THE HENSSLER FUNDS, INC. and any
of them, namely the Chairman, President, Vice President, Secretary and
Treasurer, are hereby authorized as signers for the conduct of business for and
on behalf of the Funds with FIFTH THIRD BANK:
______________________________ CHAIRMAN ________________________
______________________________ PRESIDENT _________________________
_______________________________ VICE PRESIDENT _________________________
_______________________________ VICE PRESIDENT _________________________
_______________________________ VICE PRESIDENT _________________________
_______________________________ VICE PRESIDENT _________________________
_______________________________ TREASURER _________________________
_______________________________ SECRETARY _________________________
In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Trust for the purpose of effecting securities transactions:
________________________ ASSISTANT TREASURER _______________________________
The undersigned officers of THE HENSSLER FUNDS, INC. hereby certify that the
foregoing is within the parameters of a Resolution adopted by Corporation of the
Trust in a meeting held June 11, 1999, directing and authorizing preparation of
documents and to do everything necessary to effect the Custody Agreement between
___________________ and FIFTH THIRD BANK.
By: ____________________________________
Its: ____________________________________
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EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
_____________________ AND FIFTH THIRD BANK
__________________ , 1999
MUTUAL FUND CUSTODY FEE SCHEDULE
BASIC ACCOUNT CHARGE
FUND SIZE:
Less than $25MM .01%
$25MM - $100MM .0075%
$100MM - $200MM .005%
Greater than $200MM .0025%
Minimum Annual Fee $2,400.00
TRANSACTION FEES
DTC/FED Eligible Trades $9.00
DTC/FED Ineligible Trades $25.00
Amortized Security Trades $25.00
Repurchase Agreements (purchase and maturity) $9.00
Third Party Repo's (purchase and maturity) $9.00
Physical Commercial Paper Trades $25.00
(purchase and maturity)
Book-Entry Commercial Paper Trades $9.00
(purchase and maturity)
Options, each transaction $25.00
Amortized Security Receipts $5.00
A transaction is a purchase, sale, maturity, redemption, tender, exchange,
dividend reinvestment, deposit or withdrawal of a security (with the exception
of Fifth Third Certificates of Deposit, Commercial Paper & Repo's).
MISCELLANEOUS FEES
Wire Transfers $7.00
Check Disbursements $6.00
dstaff:legal:Gwen:Henssler Custody Agreement
17
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to all references made to us in this Post-Effective Amendment No. 2
to the Henssler Equity Fund's Registration Statement on Form N-1A and the use of
our report dated June 10, 1999 on the financial statements and financial
highlights which are incorporated by reference into such registration
statement.
/s/ McCurdy & Associates CPA's, Inc.
McCurdy & Associates CPA's, Inc.
August 27, 1999
