U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Neil J. Hennessy
Hennessy Advisors, Inc.
Peter D. Fetzer
Approximate Date of Proposed Public Offering: As soon as practicable after this Registration Statement becomes effective.
It is proposed that this Registration Statement become effective on July 8, 2016, pursuant to Rule 488.
Title of Securities Being Registered: Shares of beneficial interest, no par value.
No filing fee is due because an indefinite number of shares have been registered in reliance on Section 24(f) under the Investment Company Act of 1940, as amended.
The information in this Proxy Statement/Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Proxy Statement/Prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
PRELIMINARY PRESIDENT’S LETTER, SUBJECT TO CHANGE, DATED JUNE 7, 2016.
THE WESTPORT FUNDS
253 Riverside Avenue
Westport, Connecticut 06880
(888) 593-7878
www.westportfunds.com
July [•], 2016
Dear Fellow Shareholder:
We are writing to let you know about an important shareholder vote coming up for each of The Westport Funds. We have called a special meeting of shareholders of the Westport Fund and the Westport Select Cap Fund (each a “Fund” and, together, the “Funds”) to be held on September 19, 2016, in the offices of The Westport Funds at 253 Riverside Avenue, Westport, Connecticut 06880. The purpose of the meeting is to seek shareholder approval of an Agreement and Plan of Reorganization under which the Westport Fund and the Westport Select Cap Fund would be reorganized into the Hennessy Cornerstone Mid Cap 30 Fund. Hennessy Advisors, Inc. (“Hennessy Advisors”) is the investment advisor to the Hennessy Cornerstone Mid Cap 30 Fund. The enclosed package contains important information about the proposed reorganization. For the reorganization to occur, shareholders like you must vote to approve it.
If the Funds’ shareholders approve the reorganization, the assets of the Westport Fund and the Westport Select Cap Fund would be merged into the Hennessy Cornerstone Mid Cap 30 Fund, which has a substantially similar investment objective to the Funds. While all of the investments of the Funds are eligible investments for Hennessy Cornerstone Mid Cap 30 Fund, the Funds and the Hennessy Cornerstone Mid Cap 30 Fund do differ in investment strategies, as the Hennessy Cornerstone Mid Cap 30 Fund employs a focused, formula based-approach to its investments. As of the closing of the proposed reorganization, shareholders of each class of each of the Funds would receive Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund.
We believe that the Hennessy Cornerstone Mid Cap 30 Fund and the reorganization more generally have a number of desirable features for shareholders. As noted above, the Hennessy Cornerstone Mid Cap 30 Fund is advised by Hennessy Advisors. Founded in 1989, Hennessy Advisors, with assets under management of nearly $6.47 billion as of April 30, 2016, is focused on providing high quality investment management and shareholder services for the Hennessy Funds. As more fully described in the attached proxy statement/prospectus, the Hennessy Cornerstone Mid Cap 30 Fund has had strong past performance. In addition, shareholders of each class of each Fund would benefit from a lower expense ratio as a result of the transaction.
In addition, we understand that the proposed reorganization is not expected to have any adverse federal or state tax consequences to the Funds or their shareholders.
The Board of Trustees of The Westport Funds evaluated the proposed reorganization at a Board meeting held on May 25, 2016, and following careful analysis and consideration, unanimously approved the Agreement and Plan of Reorganization providing for the proposed reorganization transaction and recommends that you vote “FOR” the Agreement and Plan of Reorganization as well. Please read the enclosed proxy statement/prospectus and related materials carefully, and if you have any questions on the terms of the reorganization, please call The Westport Funds at 877-227-3611.
If you are a shareholder of record as of the close of business on June 28, 2016, you are entitled to vote at the special meeting and at any postponements or adjournments thereof. While we welcome you to join us at the special meeting, we expect that most shareholders will cast their votes by proxy. Whether or not you are planning to attend the special meeting, we ask that you vote your shares for the reorganization as soon as possible. Voting is easy and can be done in the following ways:
| · | Simply mark, sign and date the enclosed proxy card and return in the postage prepaid envelope; |
| · | Calling the toll-free telephone number listed on the proxy card; |
| · | Via the Internet at website shown on the proxy card; or |
| · | In person at the Special Meeting of Shareholders. |
Thank you for your investment and confidence in The Westport Funds.
Sincerely,
____________________________________________________
Edmund H. Nicklin, Jr., President
The Westport Funds
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the reorganization described in the Proxy Statement/Prospectus or the securities to be issued pursuant to the reorganization under the Proxy Statement/Prospectus or determined if the Proxy Statement/Prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.
________________________________
The enclosed Proxy Statement/Prospectus is dated July [•], 2016, and is
first being mailed to shareholders on or about July [•], 2016.
PRELIMINARY NOTICE, SUBJECT TO CHANGE, DATED JUNE 7, 2016.
THE WESTPORT FUNDS
253 Riverside Avenue
Westport, Connecticut 06880
(888) 593-7878
www.westportfunds.com
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 19, 2016
A special meeting of shareholders of the Westport Fund and the Westport Select Cap Fund, each a series of The Westport Funds, a Delaware statutory trust (each a “Fund” and, together, the “Funds”), will be held on Monday, September 19, 2016, at [•] local time, in the offices of The Westport Funds at 253 Riverside Avenue, Westport, Connecticut 06880. At the special meeting, you and the other shareholders of each Fund will be asked to consider and vote upon:
| 1. | A proposal to approve an Agreement and Plan of Reorganization (the “Plan”) pursuant to which: |
| a. | all of the assets of the Westport Fund will be transferred to the Hennessy Cornerstone Mid Cap 30 Fund, in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund, which will be distributed pro rata by the Westport Fund to its Class R and Class I shareholders, with the Hennessy Cornerstone Mid Cap 30 Fund assuming the liabilities (other than the excluded liabilities) of the Westport Fund; and |
| b. | all of the assets of the Westport Select Cap Fund will be transferred to the Hennessy Cornerstone Mid Cap 30 Fund, in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund, which will be distributed pro rata by the Westport Select Cap Fund to its Class R and Class I shareholders, with the Hennessy Cornerstone Mid Cap 30 Fund assuming the liabilities (other than the excluded liabilities) of the Westport Select Cap Fund. |
| 2. | If necessary, a proposal to adjourn the special meeting to permit further solicitation of proxies in the event a quorum does not exist or a quorum exists but there are not sufficient votes at the time of the special meeting to approve the Plan; and |
| 3. | To transact such other business that may properly come before the special meeting or any postponements or adjournments thereof. |
Each of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund have substantially similar investment objectives. While all of the investments of the Funds are eligible investments for the Hennessy Cornerstone Mid Cap 30 Fund, the Funds and the Hennessy Cornerstone Mid Cap 30 Fund do differ in investment strategies, as the Hennessy Cornerstone Mid Cap 30 Fund employs a focused, formula-based approach to its investments.
Only shareholders of record at the close of business on June 28, 2016, the record date for the special meeting, shall be entitled to notice of, and to vote at, the special meeting or any postponements or adjournments thereof. This proxy is being solicited on behalf of The Westport Funds.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR PROXY
CARD PROMPTLY OR VOTE BY USING THE TOLL-FREE
TELEPHONE OR INTERNET ADDRESS FOUND ON YOUR PROXY CARD.
Whether or not you plan to attend the meeting, we urge you to authorize proxies to cast your votes. You can do this in one of the following three ways: (1) by completing, signing, dating and promptly returning the enclosed proxy card in the enclosed postage prepaid envelope; (2) by calling the toll-free telephone number listed on your proxy card, or (3) via the Internet at the website shown on your proxy card. Your prompt voting by proxy will help ensure a quorum at the special meeting. Voting by proxy will not prevent you from voting your shares in person at the special meeting. You may revoke your proxy before it is exercised at the special meeting, either by writing to the Secretary of The Westport Funds at the address noted in the Proxy Statement/Prospectus or in person at the time of the special meeting. A prior proxy can also be revoked by proxy voting again through the website or toll-free telephone number listed above. |
THE WESTPORT FUNDS
_________________________________________
Edmund H. Nicklin, Jr., President
The Westport Funds
July [•], 2016
Important Notice Regarding the Availability of Proxy Materials for this Special Meeting of Shareholders to Be Held on September 19, 2016: The Notice, Proxy Statement, Annual Report and Form of Proxy are available at www.proxyvote.com
PRELIMINARY Q&A, SUBJECT TO CHANGE, DATED JUNE 7, 2016.
THE WESTPORT FUNDS
253 Riverside Avenue
Westport, Connecticut 06880
(888) 593-7878
www.westportfunds.com
QUESTIONS AND ANSWERS
YOUR VOTE IS VERY IMPORTANT!
Dated: July [•], 2016
Question 1: What is this document and why did we send it to you?
Answer: This document includes a notice of special meeting of shareholders, a combined Proxy Statement/Prospectus, and a form of proxy. The Board of Trustees of The Westport Funds, a Delaware statutory trust (the “Westport Trust”), on behalf of the Westport Fund and the Westport Select Cap Fund, each a series of the Westport Trust (each a “Fund” and, together, the “Funds”), has approved an Agreement and Plan of Reorganization (the “Plan”) between Hennessy Funds Trust and the Westport Trust (the “Reorganization”) pursuant to which (i) all of the assets of the Westport Fund will be transferred to the Hennessy Cornerstone Mid Cap 30 Fund, in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund, with the Hennessy Cornerstone Mid Cap 30 Fund assuming the liabilities (other than the excluded liabilities) of the Westport Fund and (ii) all of the assets of the Westport Select Cap Fund will be transferred to the Hennessy Cornerstone Mid Cap 30 Fund, in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund, with the Hennessy Cornerstone Mid Cap 30 Fund assuming the liabilities (other than the excluded liabilities) of the Westport Select Cap Fund. The Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund will be distributed pro rata to the Class R and Class I shareholders of each of the Funds.
Each of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund have substantially similar investment objectives. While all of the investments of the Funds are eligible investments for the Hennessy Cornerstone Mid Cap 30 Fund, the Funds and the Hennessy Cornerstone Mid Cap 30 Fund do differ in investment strategies, as the Hennessy Cornerstone Mid Cap 30 Fund employs a focused, formula-based approach to its investments.
Shareholder approval of each of the Funds is needed to proceed with the Reorganization and a special meeting of shareholders of each of the Funds will be held on September 19, 2016, to consider whether to approve the Plan and implement the Reorganization. The Westport Trust’s Board of Trustees is sending this document to you for your use in deciding whether to approve the Plan at the special meeting.
Question 2: What is the reason for the Reorganization?
Answer: Westport Advisers, LLC (“Westport Advisers”), the investment advisor to the Westport Trust, recently completed a strategic review of the management and operations of the Funds and determined that it would be advisable to pursue the reorganization of the Funds
with another fund group. Following this strategic review process, Westport Advisers identified Hennessy Advisors, Inc. (“Hennessy Advisors”) as an asset management firm that they believe can successfully manage the investments of the current shareholders of the Funds following the completion of the proposed reorganization of the Funds into the Hennessy Cornerstone Mid Cap 30 Fund. Westport Advisers believes Hennessy Advisors is focused on providing high-quality investment management services and customer service to the Hennessy Cornerstone Mid Cap 30 Fund and its shareholders and the Hennessy Cornerstone Mid Cap 30 Fund is well suited to acquire the assets of the Funds.
Westport Advisers therefore made a recommendation to the Westport Trust’s Board of Trustees to approve the reorganization of the Funds with and into the Hennessy Cornerstone Mid Cap 30 Fund, and, following careful analysis and consideration, the Westport Trust’s Board of Trustees approved the Plan providing for the proposed reorganization transaction after concluding that the implementation of the reorganization is advisable and in the best interests of the Funds’ shareholders. The Westport Trust’s Board of Trustees recommends that you vote “FOR” the Plan.
Question 3: How will the Funds and their shareholders be affected by the Reorganization?
Answer: As a result of the Reorganization, the Funds will become part of the Hennessy Cornerstone Mid Cap 30 Fund with Hennessy Advisors as the investment advisor. Following is information regarding the fees and expenses of the Hennessy Cornerstone Mid Cap 30 Fund as compared to the Funds:
| · | The annual advisory fee for the Hennessy Cornerstone Mid Cap 30 Fund is 0.74%, which is less than the annual advisory fee of 0.90% of the Westport Fund and of 1.00% of the Westport Select Cap Fund. |
| · | The annual expense ratio of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund immediately after the closing of the transaction is estimated to be approximately 0.26% lower than the total annual expense ratio of the Class R shares of the Westport Fund for the fiscal year ended December 31, 2015. |
| · | The annual expense ratio of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund immediately after the closing of the transaction is estimated to be approximately 0.10% lower than the total annual expense ratio of the Class I shares of the Westport Fund for the fiscal year ended December 31, 2015. |
| · | The annual expense ratio of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund immediately after the closing of the transaction is estimated to be approximately 0.46% lower than the total annual expense ratio of the Class R shares of the Westport Select Cap Fund for the fiscal year ended December 31, 2015. |
| · | The annual expense ratio of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund immediately after the closing of the transaction is estimated to be approximately 0.20% lower than the total annual expense ratio of the Class I shares of the Westport Select Cap Fund for the fiscal year ended December 31, 2015. |
The Funds will be supervised by Hennessy Funds Trust’s Board of Trustees and will be serviced by the Hennessy Cornerstone Mid Cap 30 Fund service providers. The proposed Reorganization is not expected to have any adverse federal or state tax consequences to the Funds or their shareholders.
Question 4: How will the Reorganization work?
Answer: Pursuant to the Plan, the Funds will transfer all of their assets to the Hennessy Cornerstone Mid Cap 30 Fund in return for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund. Each of the Funds will distribute Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund pro rata to their Class R and Class I shareholders. This will result in the following:
| · | Class R shareholders of the Westport Fund will become Institutional Class shareholders of the Hennessy Cornerstone Mid Cap 30 Fund; |
| · | Class R shareholders of the Westport Select Cap Fund will become Institutional Class shareholders of the Hennessy Cornerstone Mid Cap 30 Fund; |
| · | Class I shareholders of the Westport Fund will become Institutional Class shareholders of the Hennessy Cornerstone Mid Cap 30 Fund; and |
| · | Class I shareholders of the Westport Select Cap Fund will become Institutional Class shareholders of the Hennessy Cornerstone Mid Cap 30 Fund. |
In each case, the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund received by a former Class R or Class I shareholder of the Funds will have the same aggregate net asset value as the shares of the Funds they held prior to the Reorganization.
If the Plan and Reorganization are carried out as proposed, we do not expect that the transaction will have any adverse federal or state tax consequences to the Funds or their shareholders. Please refer to the enclosed Proxy Statement/Prospectus for a detailed explanation of the Reorganization.
Question 5: What will happen if the Plan is not approved?
Answer: If the Plan is not approved by the Funds’ shareholders, then the Funds will continue to operate and the Westport Trust’s Board of Trustees may take any further action it deems to be in the best interest of the Funds and their shareholders, including terminating the Funds.
Question 6: Why do I need to vote?
Answer: Your vote is needed to ensure that the Reorganization proposal can be acted upon. Even if you are a small investor, your vote makes a difference. If numerous shareholders just like you fail to vote, the Funds may not receive enough votes to go forward with the special meeting. Your immediate response will help prevent the need for any further solicitations for a shareholder vote. You may authorize proxies to cast your vote (1) by completing, signing, dating and promptly returning the enclosed proxy card in the enclosed postage prepaid envelope; (2) by calling the toll-free telephone number listed on your proxy card; or (3) via the Internet at the website shown on your proxy card. We encourage all shareholders to participate.
Question 7: How does the Board of Trustees recommend that I vote?
Answer: After careful consideration, the Westport Trust’s Board of Trustees recommends that you vote “FOR” the Plan. If necessary, we may ask the shareholders of the Funds to vote on the proposal to adjourn the special meeting to solicit additional proxies if a quorum does not exist or a quorum exists but there are insufficient votes at the time of the adjournment to approve the Reorganization for one or both of the Funds. The Westport Trust’s Board of Trustees recommends that you vote “FOR” adjournment.
Question 8: Who is paying for expenses related to the Reorganization?
Answer: Westport Advisers and Hennessy Advisors will pay all of the expenses related to the Reorganization other than expenses related to any portfolio realignment, although no portfolio realignment is anticipated solely as a result of the Reorganization. The expenses of the Reorganization include, but are not limited to, expenses associated with the preparation and filing of the Registration Statement and printing and distribution of the Proxy Statement/Prospectus, legal fees, accounting fees, securities registration fees, proxy solicitation expenses and other expenses of holding the special meeting. The total expenses of the Reorganization are estimated to be approximately $[•].
Question 9: How do I vote?
Answer: Whether or not you plan to attend the meeting, we urge you to authorize proxies to cast your votes. You can do this in one of the following three ways: (1) by completing, signing, dating and promptly returning the enclosed proxy card in the enclosed postage prepaid envelope; (2) by calling the toll-free telephone number listed on your proxy card; or (3) via the Internet at the website shown on your proxy card. You may also vote in person at the special meeting. Your prompt voting by proxy will help ensure a quorum at the special meeting. Voting by proxy will not prevent you from voting your shares in person at the special meeting. You may revoke your proxy before it is exercised at the special meeting, either by writing to the Secretary of the Westport Trust at the address noted in the Proxy Statement/Prospectus or in person at the time of the special meeting. A prior proxy can also be revoked by proxy voting again through the website or toll-free telephone number listed on your proxy card. If you have any questions regarding the proposed Reorganization, please do not hesitate to call 1-888-991-1289.
Question 10: Who do I call if I have questions?
Answer: We will be happy to answer your questions about the proxy solicitation. Please call 1-888-991-1289 during normal business hours between 8:00 a.m. and 5:00 p.m. Eastern time.
PRELIMINARY PROXY STATEMENT, SUBJECT TO CHANGE, DATED JUNE 7, 2016.
THE WESTPORT FUNDS
253 Riverside Avenue
Westport, Connecticut 06880
(888) 593-7878
www.westportfunds.com
HENNESSY FUNDS TRUST
7250 Redwood Boulevard, Suite 200
Novato, California 94945
(800) 966-4354
www.hennessyfunds.com
______________________________________________________________________________
PROXY STATEMENT AND PROSPECTUS DATED JULY [•], 2016
______________________________________________________________________________
This Proxy Statement/Prospectus is being sent to you in connection with the solicitation of proxies by The Westport Funds, a Delaware statutory trust (the “Westport Trust”), on behalf of the Westport Fund and the Westport Select Cap Fund, each a series of the Westport Trust (each a “Fund” and, together, the “Funds”), for use at a special meeting of shareholders of the Funds to be held in the offices of The Westport Funds at 253 Riverside Avenue, Westport, Connecticut 06880, on Monday, September 19, 2016, at [•] local time. At the special meeting, shareholders of the Funds will meet for the following purposes:
| · | To vote on a proposal to approve the reorganization of the Funds into the Hennessy Cornerstone Mid Cap 30 Fund (the “Reorganization”), pursuant to the Agreement and Plan of Reorganization (the “Plan”). A copy of the Plan is attached hereto as Exhibit A. Pursuant to the Plan: |
| · | all of the assets of the Westport Fund will be transferred to the Hennessy Cornerstone Mid Cap 30 Fund, in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund, which will be distributed pro rata by the Westport Fund to its Class R and Class I shareholders, with the Hennessy Cornerstone Mid Cap 30 Fund assuming the liabilities (other than the excluded liabilities) of the Westport Fund; and |
| · | all of the assets of the Westport Select Cap Fund will be transferred to the Hennessy Cornerstone Mid Cap 30 Fund, in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund, which will be distributed pro rata by the Westport Select Cap Fund to its Class R and Class I shareholders, with the Hennessy Cornerstone Mid Cap 30 Fund assuming the liabilities (other than the excluded liabilities) of the Westport Select Cap Fund. |
| · | If necessary, to approve adjourning the special meeting to permit further solicitation of proxies in the event a quorum does not exist or a quorum exists but there are not sufficient votes at the time of the special meeting to approve the Plan; and |
| · | To transact such other business that may properly come before the special meeting or any postponements or adjournments thereof. |
Shareholders who execute proxies may revoke them at any time before they are voted, either by writing to the Westport Trust at 253 Riverside Avenue, Westport, Connecticut 06880, Attention: Secretary, or in person at the time of the special meeting. A prior proxy can also be revoked by proxy voting again through the website or toll-free telephone number listed in the enclosed voting instructions.
Each Fund is a series of the Westport Trust, an open-end management investment company registered with the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). The Hennessy Cornerstone Mid Cap 30 Fund is a series of Hennessy Funds Trust, an open-end management investment company registered with the SEC under the Investment Company Act.
The following documents have been filed with the SEC and are incorporated by reference into this Proxy Statement/Prospectus, which means that they are legally considered to be a part of this Proxy Statement/Prospectus:
| · | Prospectus of the Funds, dated May 1, 2016, as supplemented to date. |
| · | Annual Report to Shareholders for the Funds for the fiscal year ended December 31, 2015, containing audited financial statements. |
| · | Prospectus of the Hennessy Cornerstone Mid Cap 30 Fund, dated February 29, 2016, as supplemented to date. |
| · | Annual Report to Shareholders for the Hennessy Cornerstone Mid Cap 30 Fund for the fiscal year ended October 31, 2015, containing audited financial statements. |
| · | Semi-Annual Report to Shareholders for the Hennessy Cornerstone Mid Cap 30 Fund for the six months ended April 30, 2016. |
Copies of the Funds’ documents are available upon request and without charge by writing to the Westport Trust at 253 Riverside Avenue, Westport, Connecticut 06880, by calling 1-888-593-7878, or over the Internet at www.westportfunds.com. Copies of the documents for the Hennessy Cornerstone Mid Cap 30 Fund are available upon request and without charge by writing to Hennessy Funds Trust, 7250 Redwood Blvd., Suite 200, Novato CA 94945, by calling 1-800-966-4354 or 1-415-899-1555, or over the Internet at hennesyfunds.com.
The Annual Report to Shareholders for the Funds for the fiscal year ended December 31, 2015, containing audited financial statements, have been previously mailed to shareholders of the Funds. Copies are available by writing or calling the Westport Trust at the address or telephone number listed above or over the Internet at www.westportfunds.com.
Copies of the Annual Report to Shareholders for the Hennessy Cornerstone Mid Cap 30 Fund for the fiscal year ended October 31, 2015, containing audited financial statements, and the Semi-Annual Report to Shareholders for the Hennessy Cornerstone Mid Cap 30 Fund for the six months ended April 30, 2016, are available by writing or calling Hennessy Funds Trust at the address or telephone number listed above or over the Internet at hennessyfunds.com.
This Proxy Statement/Prospectus sets forth concisely the information about the Hennessy Cornerstone Mid Cap 30 Fund that you should know before considering the Plan and resulting Reorganization and it should be retained for future reference. Additional information contained in a statement of additional information relating to this Proxy Statement/Prospectus (the “SAI”), as required by the SEC, is on file with the SEC. The SAI is available without charge, upon request by calling the toll free number set forth above for the Westport Trust, by writing or calling the Westport Trust at the address or telephone number listed above or over the Internet at www.westportfunds.com. The SAI, dated July [•], 2016, is incorporated by reference into this Proxy Statement/Prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the reorganization described in this Proxy Statement/Prospectus or the securities to be issued pursuant to the reorganization under this Proxy Statement/Prospectus or determined if this Proxy Statement/Prospectus is accurate or adequate. Any representation to the contrary is a criminal offense. |
PROXY STATEMENT / PROSPECTUS TABLE OF CONTENTS
Page
| I. | SYNOPSIS | 1 |
| | A. | Overview | 1 |
| | B. | Reasons for the Reorganization and Board Deliberations | 1 |
| | C. | The Proposed Plan and Resulting Reorganization | 3 |
| | D. | Comparison of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund | 4 |
| | | 1. Investment Objectives and Principal Investment Policies | 4 |
| | | 2. Investment Advisory Services | 6 |
| | | 3. Distribution Services | 6 |
| | | 4. Purchase and Redemption Procedures | 6 |
| | | 5. Exchange Procedures | 7 |
| | E. | Other Significant Considerations and Consequences of the Proposed Reorganization | 8 |
| | F. | Federal Tax Consequences of the Proposed Reorganization | 8 |
| | | |
| II. | PRINCIPAL RISK FACTORS | 9 |
| | | |
| III. | COMPARISON FEE TABLES AND EXAMPLES | 10 |
| | A. | Fee Tables | 10 |
| | B. | Example | 12 |
| | | |
| IV. | THE PROPOSED PLAN AND RESULTING REORGANIZATION | 13 |
| | A. | Summary of the Proposed Reorganization | 14 |
| | B. | Terms of the Plan | 15 |
| | C. | Description of the Hennessy Cornerstone Mid Cap 30 Fund Shares | 17 |
| | D. | Reasons for the Reorganization Considered by the Board | 17 |
| | E. | Federal Income Tax Consequences | 17 |
| | F. | Comparison of Shareholder Rights | 19 |
| | G. | Capitalization | 21 |
| | | |
| V. | INFORMATION ABOUT THE FUNDS AND THE HENNESSY CORNERSTONE MID CAP 30 FUND | 21 |
| | A. | Investment Objective and Investment Strategies | 21 |
| | B. | Fees and Expenses | 22 |
| | C. | Performance and Portfolio Turnover | 22 |
| | D. | Investment Advisor and Portfolio Managers | 25 |
| | E. | Payments to Broker-Dealers and Other Financial Intermediaries | 26 |
| | F. | Net Asset Value | 26 |
| | G. | Shares | 27 |
| | H. | Taxes, Dividends and Distributions | 37 |
| | I. | Financial Highlights | 39 |
| | J. | Distribution Arrangements | 39 |
| | | |
| VI. | VOTING INFORMATION | 40 |
| | A. | Method and Cost of Solicitation | 41 |
i
| | B. | Right of Revocation | 41 |
| | C. | Voting Securities and Principal Holders | 42 |
| | | |
| VII. | ADDITIONAL INFORMATION | 44 |
| | | |
| VIII. | MISCELLANEOUS INFORMATION | 44 |
| | A. | Other Business | 44 |
| | B. | Next Meeting of Shareholders | 44 |
| | C. | Legal Matters | 45 |
| | D. | Experts | 45 |
| | | |
| Exhibit A | | A-1 |
| | | |
| Exhibit B | | B-1 |
The following synopsis is a summary of certain information contained elsewhere in this Proxy Statement/Prospectus, including documents incorporated by reference, as well as in the Plan. This Proxy Statement/Prospectus is qualified by reference to the more complete information contained herein as well as in the Prospectus of the Funds, dated May 1, 2016, as supplemented to date, which includes information about the Funds, and in the Plan attached hereto as Exhibit A. Shareholders should read the entire Proxy Statement/Prospectus carefully.
| B. | Reasons for the Reorganization and Board Deliberations |
The proposed Reorganization was presented to the Westport Trust’s Board of Trustees (the “Board”) for consideration at a meeting held on May 25, 2016. At this meeting, representatives of Westport Advisers, LLC (“Westport Advisers”), Hennessy Advisors, Inc. (“Hennessy Advisors”) and the Hennessy Cornerstone Mid Cap 30 Fund provided, and the Board reviewed, detailed information about the proposed Reorganization in response to the Board’s request for information regarding Hennessy Advisors, the Hennessy Cornerstone Mid Cap 30 Fund and the Reorganization. For the reasons discussed below, the Board, including all of the trustees who are not “interested persons” (as defined in the Investment Company Act) (the “Independent Trustees”) of the Westport Trust, determined that the Reorganization is in the best interests of the Funds and their shareholders and unanimously voted to approve the Reorganization and to present it to shareholders for approval.
At the meeting held on May 25, 2016, Westport Advisers informed the Board that it had recently completed a strategic review of the management and operations of the Funds and had determined that it would be advisable to discontinue its management of the publicly listed funds and pursue the reorganization of the Funds with another fund group. Following this strategic review process, which included a review of other possible reorganization and acquisition candidates, Westport Advisers identified Hennessy Advisors and recommended the reorganization of the Funds into the Hennessy Cornerstone Mid Cap 30 Fund.
The Board also met with representatives of Hennessy Advisors and reviewed information regarding Hennessy Advisors and the Hennessy Cornerstone Mid Cap 30 Fund that had been requested by the Board and considered additional information regarding the proposed reorganization. The Independent Trustees also discussed the proposed Reorganization without the participation of representatives of Westport Advisers or Hennessy Advisors. After reviewing and considering a number of factors relating to Hennessy Advisors and the Hennessy Cornerstone Mid Cap 30 Fund, the Board determined that the Reorganization is in the best interests of the shareholders of each of the Funds.
The action of the Board to recommend the proposed Reorganization included consideration of a number of factors in connection with this decision. Among the factors considered by the Board were: (1) the nature, extent and quality of the services proposed to be provided by Hennessy Advisors, including the long-term performance of the Hennessy Cornerstone Mid Cap 30 Fund; (2) the terms of the proposed Reorganization, including the anticipated tax-free nature of the transaction for the Funds and their shareholders; (3) various alternatives to the Reorganization including the potential for restructuring with different funds and Westport Advisers’ assessment of possible alternatives; (4) Hennessy Advisors’ significant
prior experience with mutual fund acquisitions; (5) operating expense ratios of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund, including the fact that Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund have a lower total expense ratio than the total expense ratios of each class of shares of each Fund; (6) that Westport Advisers and Hennessy Advisors are bearing all of the expenses of the Reorganization (other than fees and expenses related to any portfolio realignment), including proxy solicitation expenses, and that the Funds will not incur any of the expenses of carrying out and completing the Reorganization; (7) that the interests of shareholders of the Funds will not be diluted as a result of the Reorganization; and (8) the nature, extent and quality of the non-advisory services to be provided by various service providers to the Hennessy Cornerstone Mid Cap 30 Fund following the closing of the Reorganization.
The Board was also advised that Westport Advisers intends to rely on Section 15(f) of the Investment Company Act, which provides a non-exclusive safe harbor for an investment advisor to an investment company, and any of the investment advisor’s “affiliated persons” (as such term is defined in the Investment Company Act), to receive any amount or benefit in connection with a change in control of the investment advisor so long as two conditions are met. First, for a period of three years after the closing of the Reorganization, at least 75% of the trustees of the acquiring funds must be persons who are not “interested persons” of the predecessor or successor advisor. Westport Advisers and Hennessy Advisors have indicated that they intend to take the necessary actions to comply with this 75% requirement with respect to the trustees of Hennessy Funds Trust for the three-year period following the closing of the Reorganization. The second condition of Section 15(f) is that, for a period of two years following an acquisition of an investment advisor to mutual funds, there must not be imposed on the subject funds any “unfair burden” as a result of the acquisition or any express or implied terms, conditions or understandings related to it. An “unfair burden” would include any arrangement whereby an investment advisor, or any interested person of the investment advisor, would receive or be entitled to receive any compensation, directly or indirectly, from each fund or its shareholders (other than fees for bona fide investment advisory or other services) or from any person in connection with the purchase or sale of securities or other property to, from or on behalf of each subject fund (other than bona fide ordinary compensation as principal underwriter for the subject funds). In this regard, the Board was informed that Westport Advisers and Hennessy Advisors have indicated that they intend to take the necessary actions to comply with this requirement of Section 15(f) and that, as a result, no special compensation arrangements are contemplated in connection with the Reorganization. Specifically, Hennessy Advisors and Hennessy Funds Trust have agreed that, for the minimum time periods specified in Section 15(f) of the Investment Company Act, they will ensure that (1) at least 75% of the trustees of Hennessy Funds Trust are not “interested persons” (as that term is defined in the Investment Company Act) of Hennessy Advisors or Westport Advisers; and (2) no “unfair burden” (as that term is defined in Section 15(f)(2)(B) of the Investment Company Act) will be imposed on the Hennessy Cornerstone Mid Cap 30 Fund.
The Board has approved the Plan and resulting Reorganization, and recommends that you vote “FOR” the Plan and Reorganization.
If all of the requisite approvals are obtained and certain conditions are either met or waived, it is anticipated that the closing of the Reorganization will occur on or about [•], 2016, or such other date as is agreed to by the parties, provided that Hennessy Cornerstone Mid Cap 30 Fund has obtained prior to that time an opinion of Foley & Lardner LLP, legal counsel to Hennessy Funds Trust, concerning the tax consequences of the Reorganization as set forth in the
Plan. The Plan may be terminated, and the Reorganization abandoned, whether before or after the requisite approval by the shareholders of the Funds, at any time prior to the closing, (i) by the Westport Trust if any conditions precedent to the obligations of the Funds have not been fulfilled or waived; (ii) by Hennessy Funds Trust if any conditions precedent to the obligations of Hennessy Cornerstone Mid Cap 30 Fund have not been fulfilled or waived; or (iii) by mutual consent of the parties.
Westport Advisers and Hennessy Advisors will pay all of the expenses related to the Reorganization other than expenses related to any portfolio realignment, although no portfolio realignment is anticipated solely as a result of the Reorganization. The expenses of the Reorganization include, but are not limited to, expenses associated with the preparation and filing of the Registration Statement and printing and distribution of the Proxy Statement/Prospectus, legal fees, accounting fees, securities registration fees, proxy solicitation expenses and other expenses of holding the special meeting. In addition to solicitations by mail, the officers and agents of the Funds also may solicit proxies, without special compensation, by telephone or via the Internet. If a Fund’s shareholders do not approve the Plan and resulting Reorganization, that Fund will continue to operate and the Board may take any further action as it deems to be in the best interests of that Fund and its shareholders.
| C. | The Proposed Plan and Resulting Reorganization |
If a Fund’s shareholders approve the Plan and the Reorganization takes place, then:
| · | the Hennessy Cornerstone Mid Cap 30 Fund will acquire substantially all of the assets and assume the liabilities (other than the excluded liabilities) of the Westport Fund and the Westport Select Fund; |
| · | the Hennessy Cornerstone Mid Cap 30 Fund will issue Institutional Class shares to the Westport Fund and the Westport Select Cap Fund, which the Westport Fund and the Westport Select Cap Fund will distribute pro rata to their Class R and Class I shareholders; |
| · | the shareholders of the Westport Fund and the Westport Select Fund will become shareholders of the Hennessy Cornerstone Mid Cap 30 Fund; and |
| · | the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund received by a Fund’s shareholder will have the same aggregate net asset value as such shareholder’s interest in the Fund immediately prior to the Reorganization. |
No sales charges will be imposed on the shares of the Hennessy Cornerstone Mid Cap 30 Fund issued in connection with the Reorganization. The Reorganization has been structured with the intention that it qualify, for federal income tax purposes, as a tax-free reorganization under the Internal Revenue Code of 1986, as amended (the “Code”). Therefore, shareholders should not recognize any gain or loss on the Fund shares for federal income tax purposes as a result of the Reorganization.
| D. | Comparison of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund |
| 1. | Investment Objectives and Principal Investment Policies |
Each of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund have substantially similar investment objectives. While all of the investments of the Funds are eligible investments for the Hennessy Cornerstone Mid Cap 30 Fund, the Funds and the Hennessy Cornerstone Mid Cap 30 Fund do differ in investment strategies, as the Hennessy Cornerstone Mid Cap 30 Fund employs a focused, formula-based approach to its investments, as described below.
Westport Fund
The investment objective of the Westport Fund is primarily capital appreciation and secondarily current income. The Westport Fund seeks to achieve its investment goal by investing primarily in undervalued common stocks of mid-capitalization companies, which it defines as companies having a market capitalization between $2 billion and $10 billion. The Westport Fund will opportunistically invest in securities of companies with both larger and smaller market capitalizations, but expects the median market capitalization of the Westport Fund to be in the mid-capitalization range. The Westport Fund considers several factors as part of its analysis for determining value, primarily the potential for capital appreciation and secondarily the potential for current income. However, the companies in which the Westport Fund invests typically do not distribute a meaningful level of earnings as dividends. Consequently, a company’s potential for capital appreciation receives much greater emphasis than current income.
Westport Advisers employs a modified “value” approach to the Westport Fund’s investments known as second generation value investing. The investment process begins with the identification of change in a company’s products, operations, or management. Once change is identified, Westport Advisers evaluates the company from a number of perspectives – what the market is willing to pay for stock of comparable companies, what a strategic buyer would pay for the whole company, and how the company’s products are positioned in their various markets – to estimate a company’s fundamental value and the extent of undervaluation, if any. In its overall assessment, Westport Advisers seeks stocks for the Westport Fund that it believes have a greater upside potential than risk over an 18- to 24-month holding period.
Westport Select Cap Fund
The investment objective of the Westport Select Cap Fund is long-term capital appreciation. The Westport Select Cap Fund invests primarily in common stocks of small capitalization companies selected for their capital appreciation potential. Under normal circumstances, the Westport Select Cap Fund seeks to achieve its investment goal by investing at least 65% of its net assets in the equity securities of companies with market capitalizations at the time of initial purchase within the range of those in the Russell 2000® Index. The market capitalization range of the Russell 2000® Index changes constantly, and as a result, the capitalization of small cap companies in which the Westport Select Cap Fund will invest will also change. As of March 31, 2016, the market capitalization range of the Russell 2000® Index was approximately $14 million to $6.05 billion. If the market capitalization of a small cap company exceeds that of the largest capitalization company in the Russell 2000® Index, and Westport Advisers determines that the company continues to present a significant investment opportunity, the Westport Select Cap Fund may add to an existing position in that company’s
securities by purchasing additional shares as long as the company’s market capitalization does not exceed 2.5 times that of the largest capitalization company in the Russell 2000® Index. Any such additional securities purchases will be considered purchases of small cap securities with respect to the 65% limitation. The Westport Select Cap Fund may also invest to a limited degree in companies that have larger market capitalizations.
Westport Advisers employs a modified “value” approach to the Westport Select Cap Fund’s investments known as second generation value investing. The investment process begins with the identification of change in a company’s products, operations, or management. Once change is identified, Westport Advisers evaluates the company from a number of perspectives – what the market is willing to pay for stock of comparable companies, what a strategic buyer would pay for the whole company, and how the company’s products are positioned in their various markets – to estimate a company’s fundamental value and the extent of undervaluation, if any. In its overall assessment, Westport Advisers seeks stocks for the Westport Select Cap Fund that it believes have a greater upside potential than risk over an 18- to 24-month holding period.
Hennessy Cornerstone Mid Cap 30 Fund
The Hennessy Cornerstone Mid Cap 30 Fund seeks long-term growth of capital. The Fund invests in mid-cap, growth-oriented stocks by utilizing a highly disciplined, quantitative formula known as the Cornerstone Mid Cap 30 Formula® (the “Formula”). The Formula selects companies that have between $1 billion and $10 billion in market value, and excludes American Depositary Receipts, or “ADRs”. The Formula selects the 30 common stocks with the highest one-year price appreciation as of the date of purchase that also meet the following criteria:
| 1. | Price-to-sales ratio below 1.5. |
This value criterion helps to uncover relative bargains. The Formula uses sales as its guide because sales figures are more difficult for companies to manipulate than earnings and frequently provide a clearer picture of a company’s potential value.
| 2. | Annual earnings that are higher than the previous year. |
While sales may be the best indicator of a company’s value, the Formula considers improved earnings to be a key indicator of a company’s financial strength.
| 3. | Positive stock price appreciation, or relative strength, over the past three and six month periods. |
Historically, relative strength has been one of the most influential variables in predicting which stocks will outperform the market.
The Fund purchases 30 stocks as dictated by the Formula, weighted equally by dollar amount, with 3.33% of the portfolio’s assets invested in each. Using the Formula, the universe of stocks is re-screened and the portfolio is rebalanced annually, generally in the fall. Stocks meeting the Formula’s criteria not currently in the portfolio are purchased, and stocks that no longer meet the criteria are sold. Holdings of all stocks in the Fund that continue to meet the criteria are appropriately increased or decreased to result in an equal 3.33% weighting.
| 2. | Investment Advisory Services |
Westport Advisers is the investment advisor of the Funds. The address of Westport Advisers, LLC is 1253 Riverside Avenue, Westport, Connecticut 06880. Westport Advisers directs the investment of each Fund’s assets, subject at all times to the supervision of the Board. Westport Advisers continually conducts investment research and supervision for the Funds and is responsible for the purchase and sale of each Fund’s investments. Westport Advisers was organized as a Connecticut limited liability company in 1997 and is registered with the SEC as an investment advisor. As of April 30, 2016, Westport Advisers managed approximately $641 million of net assets on behalf of the Funds. For its services, the Westport Fund pays Westport Advisers an investment advisory fee at an annual rate of 0.90% of its average daily net assets, and the Westport Select Fund pays Westport Advisers an investment advisory fee at an annual rate of 1.00% of its average daily net assets.
Hennessy Advisors is the investment manager of the Hennessy Cornerstone Mid Cap 30 Fund. The address of Hennessy Advisors, Inc. is 7250 Redwood Blvd., Suite 200, Novato, California 94945. As of April 30, 2016, Hennessy Advisors managed approximately $6.47 billion of net assets on behalf of all of sixteen series in Hennessy Funds Trust. For its services, the Hennessy Cornerstone Mid Cap 30 Fund pays Hennessy Advisors an investment advisory fee at an annual rate of 0.74% of its average daily net assets.
UMB Distribution Services, LLC, located at 235 West Galena Street, Milwaukee, Wisconsin 53212, currently serves as the distributor for the Funds.
Quasar Distributors, LLC (“Quasar”), 615 East Michigan Street, Milwaukee, Wisconsin 53202 serves as the distributor for the Hennessy Cornerstone Mid Cap 30 Fund. As such, Quasar is responsible for all purchases, sales, redemptions and other transfers of shares. As distributor, Quasar also provides certain administrative services. Shares of the Hennessy Cornerstone Mid Cap 30 Fund are offered for sale on a continuous basis at net asset value per share. Quasar is a registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”).
| 4. | Purchase and Redemption Procedures |
The Funds and the Hennessy Cornerstone Mid Cap 30 Fund have similar purchase and redemption procedures. Purchases and sales (redemptions) of shares of both the Funds and the Hennessy Cornerstone Mid Cap 30 Fund are made at the net asset value per share next determined after receipt of the complete and accurate purchase or redemption order by the respective fund’s transfer agent. Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund have no load or redemption fee.
The Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund are not subject to any shareholder servicing fees. The Class R shares of the Funds are subject to shareholder servicing fees, but Class I shares of the Funds are not subject to shareholder servicing fees. Both the Funds’ transfer agent and the Hennessy Cornerstone Mid Cap Fund’s transfer agent assess a fee of $15.00 for each redemption made by wire.
The minimum amounts required to invest in or add to an account with the Funds and the Hennessy Cornerstone Mid Cap 30 Fund, are indicated below:
| | Investment Minimums |
| | | | | | | | |
| | Westport Fund
(Class R) | | Westport Select Cap Fund
(Class R) | | Funds
(Class I) | | Hennessy Cornerstone Mid Cap 30 Fund
(Institutional) |
| Regular (New Investor) | $2,500 | | $5,000 | | $250,000 | | $250,000 |
| | | | | | | | |
Additional Investment
(Current Fund Shareholders) | None | | None | | None | | None |
| | | | | | | | |
| Retirement (Roth and Regular) | $2,000 | | $2,000 | | $250,000 | | None |
| | | | | | | | |
| Automatic Investment Plans | $1,000 | | $1,000 | | $250,000 | | $100 |
Both the Funds and the Hennessy Cornerstone Mid Cap 30 Fund offer an automatic investment plan (“Automatic Investment Plan”), whereby an existing shareholder may authorize the Funds and the Hennessy Cornerstone Mid Cap 30 Fund to withdraw from his or her personal bank account each month an amount that such shareholder wishes to invest. Both the Funds and the Hennessy Cornerstone Mid Cap 30 Fund may waive the investment minimums from time to time.
Shareholders of the Funds may exchange shares of the Funds between Funds any day that the New York Stock Exchange (“NYSE”) is open for business.
Shareholders of the Hennessy Cornerstone Mid Cap 30 Fund may exchange shares of the Hennessy Cornerstone Mid Cap 30 Fund for shares of any of the other fifteen series of Hennessy Funds Trust on any day that the NYSE is open for business. Shareholders of the Hennessy Cornerstone Mid Cap 30 Fund may also exchange shares of the Hennessy Cornerstone Mid Cap 30 Fund for shares of the First American Prime Obligations Fund, a money market mutual fund that is not affiliated with the Hennessy Cornerstone Mid Cap 30 Fund, Hennessy Advisors or any sub-advisor to series of Hennessy Funds Trust. Exchanges are done at no cost.
Each fund of Hennessy Funds Trust reserves the right on notice to shareholders to limit the number of exchanges that can be made in any year to avoid excess expenses. Each fund of Hennessy Funds Trust reserves the right to reject any exchange order. Each fund of Hennessy Funds Trust may modify or terminate the exchange privilege upon written notice to shareholders. Each fund of Hennessy Funds Trust may suspend temporarily the exchange privilege in emergency situations or in cases where, in the judgment of the fund, continuation of the privilege would be detrimental to the fund and its shareholders. Such temporary suspension can be without prior notification to shareholders.
| E. | Other Significant Considerations and Consequences of the Proposed Reorganization |
As a result of the Reorganization, the Funds will become part of the Hennessy Cornerstone Mid Cap 30 Fund with Hennessy Advisors as the investment advisor. Following is information regarding the fees and expenses of the Hennessy Cornerstone Mid Cap 30 Fund as compared to the Funds:
| · | The annual advisory fee for the Hennessy Cornerstone Mid Cap 30 Fund is 0.74%, which is less than the annual advisory fee of 0.90% of the Westport Fund and of 1.00% by the Westport Select Cap Fund. |
| · | The annual expense ratio of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund immediately after the closing of the transaction is estimated to be approximately 0.26% lower than the total annual expense ratio of the Class R shares of the Westport Fund for the fiscal year ended December 31, 2015. |
| · | The annual expense ratio of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund immediately after the closing of the transaction is estimated to be approximately 0.10% lower than the total annual expense ratio of the Class I shares of the Westport Fund for the fiscal year ended December 31, 2015. |
| · | The annual expense ratio of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund immediately after the closing of the transaction is estimated to be approximately 0.46% lower than the total annual expense ratio of the Class R shares of the Westport Select Cap Fund for the fiscal year ended December 31, 2015. |
| · | The annual expense ratio of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund immediately after the closing of the transaction is estimated to be approximately 0.20% lower than the total annual expense ratio of the Class I shares of the Westport Select Cap Fund for the fiscal year ended December 31, 2015. |
If the Reorganization is approved by shareholders, the Funds’ assets will be supervised by Hennessy Funds Trust’s Board of Trustees and will be serviced by the Hennessy Cornerstone Mid Cap 30 Fund service providers. The proposed Reorganization is not expected to have any adverse federal or state tax consequences to the Funds or their shareholders.
| F. | Federal Tax Consequences of the Proposed Reorganization |
The Funds will have received on the Closing Date (as defined in the Plan) an opinion of Foley & Lardner LLP, legal counsel to Hennessy Funds Trust, to the effect that the proposed Reorganization will constitute a tax-free reorganization within the meaning of Section 368(a) of the Code. Accordingly, no gain or loss will be recognized by the Funds upon the transfer of assets solely in exchange for shares of the Hennessy Cornerstone Mid Cap 30 Fund and its assumption of liabilities (other than the excluded liabilities) or by shareholders of the Funds upon their receipt of shares of the Hennessy Cornerstone Mid Cap 30 Fund. The tax basis for the
shares of the Hennessy Cornerstone Mid Cap 30 Fund received by shareholders of the Funds will be the same as their tax basis for the shares of the Fund that are constructively surrendered in exchange therefore. In addition, the holding period of the shares of the Hennessy Cornerstone Mid Cap 30 Fund that are received in connection with the Reorganization will include the period during which the shares of the Fund to be constructively surrendered in exchange therefore were held, provided the latter shares were held as capital assets by the shareholders on the date of the exchange.
| II. | PRINCIPAL RISK FACTORS |
By investing in equity securities, the Hennessy Cornerstone Mid Cap 30 Fund, like the Funds, may expose shareholders to certain market risks that could cause shareholders to lose money. While the Funds and the Hennessy Cornerstone Mid Cap 30 Fund are generally subject to the same principal risk factors, the Hennessy Cornerstone Mid Cap 30 Fund employs a formula investment approach that subjects the Hennessy Cornerstone Mid Cap 30 Fund to formula-investing risk (the Funds are not subject to such risk).
The Funds and the Hennessy Cornerstone Mid Cap 30 Fund are all subject to the following principal risks:
| · | Small- and Medium-Sized Companies Risk |
Market Risk: The market value of a security may move up or down, and these fluctuations may cause a security to be worth more or less than the price originally paid for it. Market risk may affect a single company, industry, sector of the economy or the market as a whole.
Small- and Medium- Sized Companies Risk: The funds invest in small- and medium-sized companies, which may have more limited liquidity and greater price volatility than larger, more established companies. Small companies may have limited product lines, markets or financial resources and their management may be dependent on a limited number of key individuals.
Investment Style Risk: Since the funds follow a value investment style, there is the risk that the value style may be out of favor for a period of time, that the market will not recognize a security’s intrinsic value for a long time or that a stock judged to be undervalued may actually be appropriately priced. Historically, value stocks have performed best during periods of economic recovery.
Loss of Money Risk: Loss of money is a risk of investing in the funds.
The Funds are subject to the following additional principal risks:
Investment Diversification Risk: Although each Fund is diversified for purposes of the Investment Company Act, the Funds may invest in a comparatively small number of companies,
as compared to many other mutual funds. Investing in a comparatively small number of companies can increase the potential adverse effects to the Funds caused by a decline in the value of any single company in which the Funds invest.
Manager Risk: The chance that poor security selection by Westport Advisers will cause the Funds to underperform relevant benchmarks or other funds with a similar investment objective.
Cash Equivalents Risk: To the extent the Funds invest in cash or cash equivalents, there is no assurance that the Funds will achieve their investment objective.
The Hennessy Cornerstone Mid Cap 30 Fund is subject to the following additional principal risks:
Formula Investing Risk: The Hennessy Cornerstone Mid Cap 30 Fund will adhere to the Formula during the course of the year, subject to applicable SEC requirements and federal tax requirements relating to mutual funds, despite any adverse developments that may arise. This could result in substantial losses to the Hennessy Cornerstone Mid Cap 30 Fund, if for example, the stocks selected for the Hennessy Cornerstone Mid Cap 30 Fund for a given year are experiencing financial difficulty, or are out of favor in the market because of weak performance, a poor earnings forecast, negative publicity or general market cycles. The Hennessy Cornerstone Mid Cap 30 Fund’s portfolio is rebalanced annually in accordance with the Formula, which may result in the elimination of better performing assets from the Hennessy Cornerstone Mid Cap 30 Fund’s investments and increases in investments with relatively lower total return.
Growth Style Risk: A growth style of investing may subject the Hennessy Cornerstone Mid Cap 30 Fund to above-average fluctuations as a result of seeking higher than average capital growth. Historically, growth stocks have performed best during later stages of economic expansion and value stocks have performed best during periods of economic recovery. There is the risk that the growth investment style may be out of favor for a period of time. At times when the style is out of favor, the Hennessy Cornerstone Mid Cap 30 Fund may underperform the market in general, its benchmark and other mutual funds.
High Portfolio Turnover Risk: High portfolio turnover will produce higher transaction costs (such as brokerage commissions or markups or markdowns) that the Hennessy Cornerstone Mid Cap 30 Fund must pay, and will increase realized gains (or losses) to investors, which may lower the Hennessy Cornerstone Mid Cap 30 Fund’s after-tax performance.
| III. | COMPARISON FEE TABLES AND EXAMPLES |
For both the Funds and the Hennessy Cornerstone Mid Cap 30 Fund, you will indirectly pay various expenses because each Fund and the Hennessy Cornerstone Mid Cap 30 Fund pays fees and expenses that reduce the return on your investment. The following tables describe the fees and expenses that you may pay if you buy and hold shares of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund. The Reorganization itself will not cause a shareholder to directly pay any additional fees.
Westport Fund
| Shareholder Fees | Class R | Class I |
| (fees paid directly from your investment) | None | None |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Management Fees | 0.90% | 0.90% |
Distribution and Service (12b-1) Fees | None | None |
| Other Expenses | 0.33% | 0.17% |
| Shareholder Servicing | 0.13% | None |
| Remaining Other Expenses | 0.20% | 0.17% |
Total Annual Fund Operating Expenses | 1.23% | 1.07% |
Westport Select Cap Fund
| Shareholder Fees | Class R | Class I |
| (fees paid directly from your investment) | None | None |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Management Fees | 1.00% | 1.00% |
Distribution and Service (12b-1) Fees | None | None |
| Other Expenses | 0.43% | 0.17% |
| Shareholder Servicing | 0.13% | None |
| Remaining Other Expenses | 0.30% | 0.17% |
Total Annual Fund Operating Expenses | 1.43% | 1.17% |
Hennessy Cornerstone Mid Cap 30 Fund – Institutional Pro Forma
| Shareholder Fees | Institutional Class | Institutional Class Pro Forma |
| (fees paid directly from your investment) | None | None |
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
| Management Fees | 0.74% | 0.74% |
Distribution and Service (12b-1) Fees | None | None |
| Other Expenses | 0.23% | 0.23%(1) |
| Shareholder Servicing | None | None |
Remaining Other Expenses(2) | 0.23% | 0.23% |
Total Annual Fund Operating Expenses | 0.97% | 0.97% |
(1) “Other Expenses” reflect the pro forma impact of the Reorganization.
(2) Includes acquired fund fees and expenses that do not exceed 0.01% of the Hennessy Cornerstone Mid Cap 30 Fund’s average daily net assets. Acquired fund fees and expenses are not reflected in the Hennessy Cornerstone Mid Cap 30 Fund’s financial statements, with the result that the information presented in the expense table may differ from that presented in the financial highlights.
This example set forth below is intended to help you compare the cost of investing in the Funds and the Hennessy Cornerstone Mid Cap 30 Fund with other mutual funds.
This example assumes that you invest $10,000 in the specified fund for the time periods indicated and then redeem all of your shares at the end of those periods. The example also assumes that you reinvest all dividends and distributions, that your investment has a 5% return each year and that the specified fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on the assumptions, your costs would be:
| Westport Fund | |
| | | | | |
| | One Year | Three Years | Five Years | Ten Years |
| Class R | $125 | $390 | $676 | $1,489 |
| Class I | $109 | $340 | $590 | $1,306 |
| Westport Select Cap Fund | |
| | | | | |
| | One Year | Three Years | Five Years | Ten Years |
| Class R | $146 | $452 | $782 | $1,713 |
| Class I | $119 | $372 | $644 | $1,420 |
Hennessy Cornerstone Mid Cap 30 Fund | |
| | | | | |
| | One Year | Three Years | Five Years | Ten Years |
| Institutional Class | $99 | $309 | $536 | $1,190 |
Institutional Class Pro Forma | $99 | $309 | $536 | $1,190 |
| IV. | THE PROPOSED PLAN AND RESULTING REORGANIZATION |
The following is a summary of key information concerning the proposed Reorganization. Keep in mind that more detailed information appears in the Plan, a copy of which is attached to this Proxy Statement/Prospectus as Exhibit A, and in the documents incorporated by reference into this Proxy Statement/Prospectus.
On May 2, 2016, Westport Advisers and Hennessy Advisors entered into a Transaction Agreement (the “Agreement”) pursuant to which Hennessy Advisors agreed to purchase certain assets of Westport Advisers relating to the Westport Fund and the Westport Select Cap Fund. The Reorganization is a condition to the purchase contemplated by the Agreement. Material terms of the Agreement include:
Purchased Assets. On the Closing Date, Westport Advisers will deliver to Hennessy Advisors:
· | all files, books, records and data files (in whatever form or forms including hard copy, microfilm, microfiche, CD ROM or other electronic media, including the software necessary to access the same) owned by Westport Advisers relating to investment accounts and investment history of the Funds (except to the extent that Westport Advisers is required by applicable law to retain such materials or copies thereof in which event Westport Advisers shall, at its own expense, provide to Hennessy Advisors such materials or copies thereof, whichever is available and complies with applicable law); and |
· | all records required to be maintained and retained under the Investment Company Act or the Investment Advisers Act of 1940, as amended, by Westport Advisers in connection with Westport Advisers’ provision of investment advisory services to the Funds (except to the extent that Westport Advisers is required by applicable law to retain such materials or copies thereof in which event Westport Advisers shall provide to Hennessy Advisors such materials or copies thereof, whichever is available and complies with applicable law), whether or not owned by Westport Advisers. |
Purchase Price. The Agreement includes customary representations, warranties and covenants of Hennessy Advisors and Westport Advisers, and provides for a payment upon closing based on the aggregate average assets under management for the Funds as measured at the close of business on the effective date of the Agreement and on each of the two trading days immediately preceding the Agreement, which were approximately $644.1 million in total based on assets of $646.5 million as of April 28, 2016, assets of $640.6 million as of April 29, 2016 and assets of $645.2 million as of May 2, 2016. Based upon the aggregate average assets under management of the Funds of $644.1 million, the purchase price will be approximately $11.3 million, to be paid upon the closing of the transaction.
| A. | Summary of the Proposed Reorganization |
Pursuant to the Plan, the Hennessy Cornerstone Mid Cap 30 Fund will acquire all of the assets, and assume the liabilities (other than the excluded liabilities), of the Funds solely in exchange for that number of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund having an aggregate net asset value equal to the aggregate net asset value of the Funds as of the close of business on the business day immediately preceding the Closing Date of the proposed Reorganization (the “Valuation Date”). Class R and Class I shareholders of the Westport Fund and the Westport Select Cap Fund will receive Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund. Immediately thereafter, the Funds will distribute the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund to their shareholders by establishing accounts on the Hennessy Cornerstone Mid Cap 30 Fund’s share records in the names of those shareholders representing the respective pro rata number of Hennessy Cornerstone Mid Cap 30 Fund Institutional Class shares deliverable to them, in complete liquidation of the Funds.
Until the Closing Date of the proposed Reorganization, shareholders of the Funds will continue to be able to redeem their shares at the net asset value next determined after receipt by the Funds’ transfer agent of a redemption request in proper form. Redemption and purchase requests received by the transfer agent after the Closing Date will be treated as requests received for the redemption or purchase of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund received by the shareholder in connection with the Reorganization. After the proposed Reorganization is consummated, all of the issued and outstanding shares of the Funds will be canceled on the books of the Funds and the transfer books of the Funds will be permanently closed. Certificates evidencing the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund will not be issued to the Funds’ shareholders. After the consummation of the Reorganization, all necessary steps will be taken to dissolve and deregister The Westport Funds.
Generally, the assets transferred by the Funds to the Hennessy Cornerstone Mid Cap 30 Fund will include all investments the Funds held in their portfolios as of the Valuation Date and all other assets of the Funds as of such time. No sales charges will be imposed on the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund issued in connection with the proposed Reorganization.
Since the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund will be issued at net asset value in exchange for the net assets of the Funds having a value equal to the aggregate net asset value of the shares of the Funds as of the Valuation Date, the net asset value per share of the Hennessy Cornerstone Mid Cap 30 Fund should remain virtually unchanged solely as a result of the Reorganization. Thus, the Reorganization should not result in dilution of the net asset value of the Funds or the Hennessy Cornerstone Mid Cap 30 Fund immediately following consummation of the Reorganization. However, a shareholder of the Funds may end up with a different number of Institutional Class shares compared to what he or she originally held, but the total dollar value of Institutional Class shares held will remain the same.
If the Plan is approved by the Funds’ shareholders at the special meeting, all required regulatory approvals are obtained, and certain conditions are either met or waived, it is expected
that the Reorganization will take place on or about [•], 2016, or such other date as is agreed to by the parties. If the Plan is not approved by a Fund’s shareholders, then the Fund will continue to operate and the Board may take any further action it deems to be in the best interest of the Fund and its shareholders, including terminating the Fund, in all cases subject to approval by the Fund’s shareholders if required by applicable law.
The following is a summary of the significant terms of the Plan. This summary is qualified in its entirety by reference to the Plan, which is attached hereto as Exhibit A.
Valuation. The assets of the Funds will be valued as of the time at which the net asset value is calculated pursuant to the valuation procedures set forth in the Hennessy Cornerstone Mid Cap 30 Fund’s then current Prospectus and Statement of Additional Information on the Valuation Date, or at such time on such earlier or later date as may be mutually agreed on in writing by the parties.
The net asset value of each share of the Hennessy Cornerstone Mid Cap 30 Fund will be the net asset value per share computed on the Valuation Date, using the market valuation procedures set forth in the Hennessy Cornerstone Mid Cap 30 Fund’s then current Prospectus and Statement of Additional Information as of the Valuation Date.
Issuance and Distribution of Hennessy Cornerstone Mid Cap 30 Fund Shares. On the Closing Date, the Hennessy Cornerstone Mid Cap 30 Fund will deliver to the Funds a number of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund, the number of which will be determined by dividing (i) the value of the Funds’ assets, net of the Funds’ liabilities, as of the Valuation Date, computed pursuant to the valuation procedures set forth in the Hennessy Cornerstone Mid Cap 30 Fund’s then current Prospectus and Statement of Additional Information, by (ii) the net asset value of one share of the Hennessy Cornerstone Mid Cap 30 Fund, as of the Valuation Date, computed using the market valuation procedures set forth in the Hennessy Cornerstone Mid Cap 30 Fund’s then current Prospectus and Statement of Additional Information. The Westport Fund will then distribute the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund received pro rata to its shareholders of record as of the Valuation Date in exchange for such shareholders’ proportional interests in the Westport Fund. The Westport Select Cap Fund will then distribute the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund received pro rata to its shareholders of record as of the Valuation Date in exchange for such shareholders’ proportional interests in the Westport Select Cap Fund. The Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund received by a Fund’s shareholder will have the same aggregate net asset value as such shareholder’s interest in the Fund as of the Valuation Date.
Expenses. Westport Advisers and Hennessy Advisors will pay all of the expenses related to the Reorganization (other than expenses related to any portfolio realignment). The expenses of the Reorganization include, but are not limited to, expenses associated with the preparation and filing of the Registration Statement and printing and distribution of the Proxy Statement/Prospectus, legal fees, accounting fees, securities registration fees, proxy solicitation expenses and other expenses of holding the special meeting.
Required Approvals. The Plan will be approved as follows by shareholders of the Funds:
| · | Westport Fund: Class R and Class I shareholders of the Westport Fund will vote together to approve the Plan. Assuming a quorum is present, the Plan will be approved by the affirmative “vote of a majority of the outstanding voting securities” (as such phrase is defined in the Investment Company Act) of the Class R and Class I shareholders of the Westport Fund voting together. The “vote of a majority of the outstanding voting securities” means with regard to the Class R and Class I shares of the Westport Fund voting together: the affirmative vote of the lesser of (i) 67% or more of the aggregate outstanding shares of Class R and Class I present at the meeting if more than 50% of the aggregate outstanding shares of Class R and Class I are present in person or by proxy or (ii) more than 50% of the aggregate outstanding shares of Class R and Class I. |
| · | Westport Select Cap Fund: Class R and Class I shareholders of the Westport Select Cap Fund will vote together to approve the Plan. Assuming a quorum is present, the Plan will be approved by the affirmative “vote of a majority of the outstanding voting securities” (as such phrase is defined in the Investment Company Act) of the Class R and Class I shareholders of the Westport Select Cap Fund voting together. The “vote of a majority of the outstanding voting securities” means with regard to the Class R and Class I shares of the Westport Select Cap Fund voting together: the affirmative vote of the lesser of (i) 67% or more of the aggregate outstanding shares of Class R and Class I present at the meeting if more than 50% of the aggregate outstanding shares of Class R and Class I are present in person or by proxy or (ii) more than 50% of the aggregate outstanding shares of Class R and Class I. |
The approval of the Plan by each Fund’s shareholders is required for the consummation of the Reorganization. If neither or only one Fund approves the Plan, the Westport Trust may seek to adjourn the special meeting of shareholders to obtain sufficient votes to approve the Plan. If sufficient votes are not obtained to approve the Plan, the Reorganization will not be consummated.
Amendments and Conditions. Generally, the Plan may be amended by the mutual written consent of the parties thereto, notwithstanding approval thereof by Fund shareholders, provided that no such amendment will have a material adverse effect on the interests of such shareholders without their further approval. The obligations of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund pursuant to the Plan are subject to various conditions, including the requisite approval of the Reorganization by the Funds’ shareholders, the receipt of a legal opinion as to tax matters, and the confirmation by the Westport Trust, on behalf of the Funds, and Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, of the continuing accuracy of their respective representations and warranties contained in the Plan.
Termination. The Plan may be terminated, and the Reorganization abandoned, whether before or after the requisite approval by the shareholders of the Funds, at any time prior to the Closing Date, (i) by the Westport Trust if any conditions precedent to the obligations of the Funds have not been fulfilled or waived; (ii) by Hennessy Funds Trust if any conditions
precedent to the obligations of the Hennessy Cornerstone Mid Cap 30 Fund have not been fulfilled or waived; or (iii) by mutual consent of the Westport Trust and Hennessy Funds Trust.
Indemnification. Hennessy Funds Trust and the Hennessy Cornerstone Mid Cap 30 Fund have agreed to indemnify the Westport Trust and the Funds and their trustees and officers from all liabilities that may arise in connection with, or as a result of, any breach of representation or warranty made by Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund.
The Westport Trust and the Funds have agreed to indemnify Hennessy Funds Trust and the Hennessy Cornerstone Mid Cap 30 Fund and their trustees and officers from all liabilities that may arise in connection with, or as a result of, any breach of representation or warranty made by the Westport Funds, on behalf of the Funds.
| C. | Description of the Hennessy Cornerstone Mid Cap 30 Fund Shares |
Each Institutional Class share of the Hennessy Cornerstone Mid Cap 30 Fund issued to a Fund shareholder in connection with the Reorganization will be duly authorized, validly issued, fully paid and nonassessable when issued, and will be transferable without restriction and will have no preemptive or conversion rights. The Hennessy Cornerstone Mid Cap 30 Fund shares will be sold and redeemed based upon the net asset value of the Hennessy Cornerstone Mid Cap 30 Fund next determined after receipt of the purchase or redemption request.
| D. | Reasons for the Reorganization Considered by the Board |
The Board, including a majority of the Independent Trustees, has determined that the interests of the Funds’ shareholders will not be diluted as a result of the proposed Reorganization and that the proposed Reorganization is in the best interests of the Funds’ shareholders.
The reasons that the Reorganization is proposed by Westport Advisers are described above under “Synopsis – Reasons for the Reorganization and Board Deliberations.”
If the Plan is not approved by a Fund’s shareholders, then the Fund will continue to operate and the Board may take any further action it deems to be in the best interest of the Fund and its shareholders, including terminating the Fund, in all cases subject to approval by the Fund’s shareholders if required by applicable law.
| E. | Federal Income Tax Consequences |
As a condition of the Reorganization, the Funds and the Hennessy Cornerstone Mid Cap 30 Fund will have received an opinion of Foley & Lardner LLP, legal counsel to Hennessy Funds Trust, to the effect that for federal income tax purposes:
· | the transfer by the Westport Fund and the Westport Select Cap Fund of their assets in exchange for the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund and the assumption by the Hennessy Cornerstone Mid Cap 30 Fund of the liabilities of the Funds (other than the excluded liabilities) should be treated as a “reorganization” within the meaning of Section 368(a)(1)(C) of the |
| Code, and the Hennessy Cornerstone Mid Cap 30 Fund and each Fund should each be treated as a “party to a reorganization” within the meaning of Section 368(b) of the Code; |
· | no gain or loss should be recognized by the Hennessy Cornerstone Mid Cap 30 Fund upon the receipt of the assets of the Westport Fund and the Westport Select Cap Fund solely in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund, as well as the assumption by the Hennessy Cornerstone Mid Cap 30 Fund of each Fund’s liabilities (other than the excluded liabilities); |
· | no gain or loss should be recognized by the Westport Fund upon the transfer of its assets to the Hennessy Cornerstone Mid Cap 30 Fund in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund and the assumption by the Hennessy Cornerstone Mid Cap 30 Fund of its liabilities (other than the excluded liabilities) or upon the distribution (whether actual or constructive) of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund to the Westport Fund’s shareholders in complete liquidation of the Westport Fund and no gain or loss should be recognized by the Westport Select Cap Fund upon the transfer of its assets to the Hennessy Cornerstone Mid Cap 30 Fund in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund and the assumption by the Hennessy Cornerstone Mid Cap 30 Fund of its liabilities (other than the excluded liabilities) or upon the distribution (whether actual or constructive) of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund to the Westport Select Cap Fund’s shareholders in complete liquidation of the Westport Select Cap Fund; |
· | no gain or loss should be recognized by the Westport Fund’s shareholders upon the receipt of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund distributed in complete liquidation of the Westport Fund and no gain or loss should be recognized by the Westport Select Cap Fund’s shareholders upon the receipt of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund distributed in complete liquidation of the Westport Select Cap Fund; |
· | the aggregate tax basis of the shares of the Hennessy Cornerstone Mid Cap 30 Fund received by a Fund’s shareholder pursuant to the Reorganization should be the same as the aggregate tax basis of the shares of such Fund held by such shareholder immediately prior to the Reorganization, and the holding period of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund to be received by the Westport Fund’s shareholders and the Westport Select Cap Fund’s shareholders should include the period during which shares of such Fund exchanged therefor were held by such shareholder (provided shares of such Fund were held by such shareholder as capital assets on the date of the Reorganization); |
· | the tax basis of each Fund’s assets acquired by the Hennessy Cornerstone Mid Cap 30 Fund should be the same as the tax basis of such assets to each Fund immediately prior to the Reorganization, and the holding period of the assets of |
| each Fund, in the hands of the Hennessy Cornerstone Mid Cap 30 Fund should include the period during which those assets were held by such Fund; and |
· | the Hennessy Cornerstone Mid Cap 30 Fund should succeed to and take into account, as of the date of the transfer as defined in Section 1.381(b)-1(b) of the income tax regulations issued by the United States Department of the Treasury, the items of the Funds described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the regulations thereunder. |
Although the Funds and the Hennessy Cornerstone Mid Cap 30 Fund are not aware of any adverse state income tax consequences, they have not made any investigation as to those consequences for their shareholders. Additionally, the Hennessy Cornerstone Mid Cap 30 Fund and the Funds have not sought, and will not seek, a private letter ruling form the Internal Revenue Service (“IRS”) with respect to the federal income tax consequences of the Reorganization. The opinion of Foley & Lardner LLP with respect to the federal income tax consequences of the Reorganization is not binding on the IRS and does not preclude the IRS from adopting a contrary position. Shareholders should consult their own advisors concerning potential tax consequences of the Reorganization to them, including any applicable foreign, state or local income tax consequences.
| F. | Comparison of Shareholder Rights |
Set forth below is a discussion of the material similarities and differences in the rights of shareholders of the Funds versus the rights of shareholders of the Hennessy Cornerstone Mid Cap 30 Fund.
Governing Law. The Funds are organized as separate series of the Westport Trust. The Hennessy Cornerstone Mid Cap 30 Fund is organized as a separate series of Hennessy Funds Trust. Both the Westport Trust and Hennessy Funds Trust are organized as statutory trusts under Delaware law. The Funds are authorized to issue an unlimited number of shares of beneficial interest with a par value of $0.001 per share and the Hennessy Cornerstone Mid Cap 30 Fund is authorized to issue an unlimited number of shares of beneficial interest, no par value. The operations of each of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund are governed by their respective trust instrument, bylaws and applicable Delaware law.
Shareholder Rights. Under the Westport Trust’s organizational documents, shareholders of the Funds are not entitled to preemptive rights in connection with the Reorganization. Furthermore, shareholders of a Delaware Trust do not have dissenters’ or appraisal rights.
Shareholder Liability. Under Delaware law, trustees and shareholders of a statutory trust are generally afforded by statute the same limited liability as their corporate counterparts and are permitted liberal indemnification rights. The risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which both inadequate insurance existed and the fund or the fund’s investment advisor was unable to meet its obligations. Both the Funds and the Hennessy Cornerstone Mid Cap 30 Fund are required to indemnify their respective trustees and officers against liabilities and expenses incurred in connection with
proceedings relating to their positions as officers or trustees, except under certain limited circumstances relating to the culpability of such officers or trustees.
Board of Trustees. Each of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund, being a series of a Delaware statutory trust, has a Board of Trustees. Each Board of Trustees is comprised of three Independent Trustees and one interested trustee, but the membership of the Board of Trustees of the Funds is different from that of the Board of Trustees of Hennessy Funds Trust.
For more information, refer to the Statement of Additional Information for the Funds, dated May 1, 2016, and the Statement of Additional Information for the Hennessy Cornerstone Mid Cap 30 Fund, dated February 29, 2016.
The following tables show the capitalization of each of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund as of, and on a pro forma basis (unaudited) as of May 31, 2016, giving effect to the proposed Reorganization. The tables are examples of the number of Class R and Class I shares of each Fund that would be exchanged for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund if the Reorganization were consummated on April 30, 2016, and do not reflect the number of shares or value of shares that would actually be received if the Reorganization occurs on the Closing Date.
| | | Westport Fund | | | Westport Select Cap Fund | | | Hennessy Cornerstone Mid Cap 30 Fund – Institutional Class Only | | | Pro Forma
Adjustments | | | Hennessy Cornerstone Mid Cap 30 Fund – Institutional Class Only After Reorganization Pro Forma | |
| | | | |
| Class R | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Aggregate Net Assets | | $ | 331,502,285 | | | $ | 99,136,874 | | | | --- | | | | --- | | | | --- | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares Outstanding | | | 11,101,857 | | | | 7,246,157 | | | | --- | | | | --- | | | | --- | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value Per | | $ | 29.86 | | | $ | 13.68 | | | | --- | | | | --- | | | | --- | |
| Share | | | |
| | | | |
| Class I | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Aggregate Net Assets | | $ | 110,906,191 | | | $ | 99,082,914 | | | | --- | | | | --- | | | | --- | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares Outstanding | | | 3,677,702 | | | | 6,627,591 | | | | --- | | | | --- | | | | --- | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value Per | | $ | 30.16 | | | $ | 14.95 | | | | --- | | | | --- | | | | --- | |
| Share | | | | | | | | | | | | | | | | | | | | |
| | | | |
| Institutional Class | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Aggregate Net Assets | | | --- | | | | --- | | | $ | 431,088,384 | | | $ | 640,628,264 | | | $ | 1,071,716,648 | |
| | | | | | | | | | | | | | | | | | | | | |
| Shares Outstanding | | | --- | | | | --- | | | | 22,975,060 | | | | 34,148,628 | | | | 57,123,688 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Asset Value Per | | | --- | | | | --- | | | $ | 18.76 | | | $ | 0 | | | $ | 18.76 | |
| Share | | | | | | | | | | | | | | | | | | | | |
| V. | INFORMATION ABOUT THE FUNDS AND THE HENNESSY CORNERSTONE MID CAP 30 FUND |
| A. | Investment Objective and Investment Strategies |
Funds
See the discussion under “Comparison of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund – Investment Objectives and Principal Investment Policies” and “Principal Risk Factors” for a discussion of each Fund’s investment objective, investment strategies and
principal risks. For further discussion of the Funds’ investment objective, investment strategies and risks, see the Prospectus of the Funds, dated May 1, 2016.
Hennessy Cornerstone Mid Cap 30 Fund
See the discussion under “Comparison of the Funds and the Hennessy Cornerstone Mid Cap 30 Fund – Investment Objectives and Principal Investment Policies” and “Principal Risk Factors” for a discussion of the Hennessy Cornerstone Mid Cap 30 Fund’s investment objective, investment strategies and principal risks. In order to provide a degree of flexibility, the Hennessy Cornerstone Mid Cap 30 Fund may change its investment objective without obtaining shareholder approval. An investment objective is not a guarantee.
The Hennessy Cornerstone Mid Cap 30 Fund may temporarily invest a portion of its total assets in cash or liquid short-term securities pending investment of such assets in securities in accordance with the Hennessy Cornerstone Mid Cap 30 Fund’s investment strategy, or to pay expenses or meet redemption requests. The Hennessy Cornerstone Mid Cap 30 Fund generally will not use investments in cash and short-term securities for temporary defensive purposes.
Funds
See the discussion under “Comparison Fee Tables and Examples.” See also the discussion of the Funds’ fees and expenses in the Prospectus of the Funds, dated May 1, 2016.
Hennessy Cornerstone Mid Cap 30 Fund
See the discussion under “Comparison Fee Tables and Examples.” See also the discussion of the Hennessy Cornerstone Mid Cap 30 Fund’s fees and expenses in the Prospectus of the Fund, dated February 29, 2016.
| C. | Performance and Portfolio Turnover |
Funds
For a discussion of the Funds’ performance during the fiscal year ended December 31, 2015, and of the portfolio turnover of the Funds, see the Prospectus of the Funds, dated May 1, 2016.
Hennessy Cornerstone Mid Cap 30 Fund
Performance Information
The following performance information provides some indication of the risks of investing in the Hennessy Cornerstone Mid Cap 30 Fund by showing its performance from year to year and how the Hennessy Cornerstone Mid Cap 30 Fund’s average annual returns for 1, 5 and 10 years compare with those of an index that reflects a broad measure of market performance, the S&P 500 Index, as well as an additional index that reflects the types of securities in which the
Hennessy Cornerstone Mid Cap 30 Fund invests, the Russell Midcap® Index. The Hennessy Cornerstone Mid Cap 30 Fund is the successor to the Hennessy Cornerstone Mid Cap 30 Fund, a series of Hennessy Mutual Funds, Inc. (the “Predecessor Mid Cap 30 Fund”). The performance information provided for the periods on or prior to February 28, 2014, is historical information for the Predecessor Mid Cap 30 Fund, which was managed by the same investment advisor and had the same investment objective and investment strategy as the Hennessy Cornerstone Mid Cap 30 Fund. The Hennessy Cornerstone Mid Cap 30 Fund’s past performance (before and after taxes) is not necessarily an indication of future performance. Performance may be higher or lower in the future. Updated performance information is available on the Hennessy Cornerstone Mid Cap 30 Fund’s website (hennessyfunds.com).
HENNESSY CORNERSTONE MID CAP 30 FUND
CALENDAR YEAR TOTAL RETURNS OF INSTITUTIONAL SHARES
For the period shown in the above bar chart for the Institutional Class shares, the Hennessy Cornerstone Mid Cap 30 Fund’s highest quarterly return was 15.16% for the quarter ended September 30, 2011, and the lowest quarterly return was -21.47% for the quarter ended March 31, 2013.
The year-to-date return of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund through April 30, 2016, is -7.73%.
AVERAGE ANNUAL TOTAL RETURNS
(for the periods ended December 31, 2015)
| | One
Year | Five
Years | Ten
Years |
| | | | |
| Hennessy Cornerstone Mid Cap 30 Fund – Institutional | | | |
| | | | | |
| | Return before taxes | 0.23% | 12.73% | 8.83% |
| | | | | |
| | Return after taxes on distributions | -0.03% | 11.91% | 8.17% |
| | | | | |
| | Return after taxes on distributions and sale of Fund shares | 0.35% | 10.15% | 7.20% |
| | | | |
| Russell Midcap® Index | | | |
| | | | |
| (reflects no deduction for fees, expenses or taxes) | -2.44% | 11.44% | 8.00% |
| | | | |
| S&P 500 Index | | | |
| | | | |
| (reflects no deduction for fees, expenses or taxes) | 1.38% | 12.57% | 7.31% |
The Hennessy Cornerstone Mid Cap 30 Fund uses the Russell Midcap® Index as an additional index because it compares the Hennessy Cornerstone Mid Cap 30 Fund’s performance with the returns of an index reflecting the performance of investments similar to those of the Hennessy Cornerstone Mid Cap 30 Fund.
The after-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown, and the after-tax returns shown are not relevant to investors who hold their Hennessy Cornerstone Mid Cap 30 Fund shares through tax deferred arrangements, such as 401(k) plans or individual retirement accounts. The Hennessy Cornerstone Mid Cap 30 Fund’s return after taxes on distributions and sale of Hennessy Cornerstone Mid Cap 30 Fund shares may be higher than its return before taxes and return after taxes on distributions because it may include a tax benefit resulting from the capital losses that would have resulted.
The inception date of the Hennessy Cornerstone Mid Cap 30 Fund’s Institutional Class is March 3, 2008. Performance shown prior to the inception of Institutional Class shares reflects the performance of the Hennessy Cornerstone Mid Cap 30 Fund’s Investor Class shares and includes expenses that are not applicable to and are higher than those of Institutional Class shares.
The S&P 500 Index is a capitalization-weighted index of 500 stocks that is designed to represent the broad domestic economy through changes in aggregate market value of 500 stocks representing all major industries. The Russell Midcap® Index is comprised of approximately 800 of the smallest securities of the Russell 1000® Index based on a combination of their market capitalization and current index membership.
Portfolio Turnover
The Hennessy Cornerstone Mid Cap 30 Fund pays transaction costs, such as commissions, when it buys and sells securities, or “turns over” its portfolio. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Hennessy Cornerstone Mid Cap 30 Fund shares are held in a taxable account. These costs, which are not reflected in the Annual Fund Operating Expenses or in the Example set forth in the Hennessy Cornerstone Mid Cap 30 Fund’s Prospectus dated February 29, 2016, affect the Hennessy Cornerstone Mid Cap 30 Fund’s performance. During the most recent fiscal year, the
Hennessy Cornerstone Mid Cap 30 Fund had a portfolio turnover rate of 5% of the average value of its portfolio.
A description of the Hennessy Cornerstone Mid Cap 30 Fund’s policies and procedures regarding the disclosure of its portfolio holdings is available in the Hennessy Cornerstone Mid Cap 30 Fund’s Statement of Additional Information dated February 29, 2016, and on the website of the Hennessy Cornerstone Mid Cap 30 Fund at hennessyfunds.com as of each calendar quarter end.
| D. | Investment Advisor and Portfolio Managers |
Funds
For a discussion of the Funds’ investment advisor and portfolio managers, see the Prospectus of the Funds, dated May 1, 2016.
A discussion regarding the basis for the Board approving the investment advisory agreement for the Funds with their investment advisor is available in the Annual Report to Shareholders for the Funds for the fiscal year ended December 31, 2015.
Hennessy Cornerstone Mid Cap 30 Fund
Hennessy Advisors is the investment manager of the Hennessy Cornerstone Mid Cap 30 Fund. The address of Hennessy Advisors, Inc. is 7250 Redwood Blvd., Suite 200, Novato, California 94945.
Hennessy Advisors has been providing investment advisory services since 1989. Hennessy Advisors furnishes each of the sixteen series of Hennessy Fund Trust with office space and certain administrative services and provides most of the personnel needed by the sixteen series of Hennessy Funds Trust.
As of April 30, 2016, Hennessy Advisors managed approximately $6.47 billion of net assets on behalf of all sixteen series in Hennessy Funds Trust. For its services, the Hennessy Cornerstone Mid Cap 30 Fund pays Hennessy Advisors an investment advisory fee at an annual rate of 0.74% of its average daily net assets.
Neil J. Hennessy and Brian E. Peery are primarily responsible for the day-to-day management of the portfolio of the Hennessy Cornerstone Mid Cap 30 Fund and for developing and executing the Hennessy Cornerstone Mid Cap 30 Fund’s investment program. Mr. Hennessy serves as a Portfolio Manager of the Hennessy Cornerstone Mid Cap 30 Fund, and has been the President, Chief Executive Officer and Chairman of the Board of Directors of Hennessy Advisors, a registered investment advisor, since its organization in 1989. Mr. Peery has served as a Portfolio Manager of the Hennessy Cornerstone Mid Cap 30 Fund since October 2014 and as a Co-Portfolio Manager from February 2011 through September 2014. He has been employed by Hennessy Advisors since 2002. The Statement of Additional Information for the Hennessy Cornerstone Mid Cap 30 Fund provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of securities in the Hennessy Cornerstone Mid Cap 30 Fund.
A discussion regarding the basis for Hennessy Funds Trust’s Board of Trustees approving the investment advisory agreement with Hennessy Advisors for the Hennessy Cornerstone Mid Cap 30 Fund is available in the Semi-Annual Report of the Hennessy Cornerstone Mid Cap 30 Fund for the period ended April 30, 2016.
| E. | Payments to Broker-Dealers and Other Financial Intermediaries |
Funds
If you purchase shares of a Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and/or its related companies may pay the intermediary for shareholder services. In addition, Westport Advisers may pay additional compensation (at its own expense and not as an expense of a Fund) to certain brokers, dealers or other financial intermediaries in connection with the sale or retention of Fund shares. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your salesperson to recommend a Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
Hennessy Cornerstone Mid Cap 30 Fund
If you purchase shares of the Hennessy Cornerstone Mid Cap 30 Fund through a broker-dealer or other financial intermediary (such as a bank), the Hennessy Cornerstone Mid Cap 30 Fund and its related companies may pay the intermediary for performing shareholder services or distribution-related services for the Hennessy Cornerstone Mid Cap 30 Fund. If made, these payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your financial advisor to recommend the Hennessy Cornerstone Mid Cap 30 Fund over another investment. Ask your financial advisor or visit your financial intermediary’s website for more information.
Funds
For a discussion of how the offering price of the Funds’ shares is determined, see the Prospectus of the Funds, dated May 1, 2016.
Hennessy Cornerstone Mid Cap 30 Fund
The net asset value for the shares of the Hennessy Cornerstone Mid Cap 30 Fund normally will be determined on each day the NYSE is open for trading. The net assets of the Hennessy Cornerstone Mid Cap 30 Fund are valued as of the close of the NYSE (normally 4:00 P.M. Eastern time/1:00 P.M. Pacific time) on each business day.
The net asset value per share is computed by dividing the value of the securities held by the Hennessy Cornerstone Mid Cap 30 Fund plus any cash or other assets, less its liabilities, by the number of its outstanding shares, and adjusting the result to the nearest full cent. Securities listed on the NYSE, NYSE Amex Equities, or other national exchanges (other than The NASDAQ Stock Market) are valued at the last sale price on the date of valuation, and securities
that are traded on The NASDAQ Stock Market are valued at the Nasdaq Official Closing Price on the date of valuation. Bonds and other fixed-income securities are valued using market quotations provided by dealers, and also may be valued on the basis of prices provided by pricing services when Hennessy Funds Trust’s Board of Trustees believes that such prices reflect the fair market value of such securities. If there is no sale in a particular security on such day, it is valued at the mean between the bid and ask prices. Other securities, to the extent that market quotations are readily available, are valued at market value in accordance with procedures established by Hennessy Funds Trust’s Board of Trustees. Any other securities and other assets for which market quotations are not readily available are valued in good faith in a manner determined by Hennessy Funds Trust’s Board of Trustees best to reflect their full value. Short-term instruments (those with remaining maturities of 60 days or less) are valued at amortized cost, which approximates market value.
The Hennessy Cornerstone Mid Cap 30 Fund will process purchase and redemption orders received by U.S. Bancorp Fund Services, LLC (the “Transfer Agent”) prior to the close of regular trading on a day that the NYSE is open at the net asset value determined later that day. It will process purchase and redemption orders received after the close of regular trading at the net asset value determined at the close of regular trading on the next day the NYSE is open. If an investor sends a purchase or redemption request to the Hennessy Cornerstone Mid Cap 30 Fund’s corporate address, instead of to its Transfer Agent, the Hennessy Cornerstone Mid Cap 30 Fund will forward it as promptly as practicable to the Transfer Agent, and the effective date of the purchase or redemption request will be delayed until the purchase or redemption request is received in the offices of the Transfer Agent.
Funds
For a discussion of the Funds’ shares, including how the shares may be purchased and redeemed, see the Prospectus of the Funds, dated May 1, 2016.
Hennessy Cornerstone Mid Cap 30 Fund
Classes of Shares. The Hennessy Cornerstone Mid Cap 30 Fund offers both Investor Class and Institutional Class shares. Institutional Class shares are available only to institutional investors or to shareholders who invest directly in the Hennessy Cornerstone Mid Cap 30 Fund, or who invest through certain broker-dealers or financial institutions that have entered into appropriate arrangements with the Hennessy Cornerstone Mid Cap 30 Fund. There is also a higher minimum initial investment for Institutional Class shares as described below.
Account Minimum Investments. The minimum initial investment in Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund is $250,000 (though this minimum does not apply to the Reorganization). For corporate sponsored retirement plans, there is no minimum investment. There is no subsequent minimum investment requirement for the Hennessy Cornerstone Mid Cap 30 Fund. A $100 minimum exists for each additional investment made through an Automatic Investment Plan.
The Hennessy Cornerstone Mid Cap 30 Fund reserves the right to waive or reduce the minimum initial investment amount for Institutional Class shares for purchases made through certain retirement, benefit and pension plans, or for certain classes of shareholders. For investors purchasing Institutional Class shares through a broker-dealer, financial institution or servicing agent, shareholder purchases may be aggregated to meet the minimum initial investment amount. Hennessy Advisors, in its discretion, may take into account the aggregate assets that a shareholder has in determining if the shareholder meets the minimum initial investment amount.
Market Timing Policy. Frequent purchases and redemptions of the Hennessy Cornerstone Mid Cap 30 Fund’s shares by a shareholder may harm other shareholders of the Hennessy Cornerstone Mid Cap 30 Fund by interfering with efficient management of the Hennessy Cornerstone Mid Cap 30 Fund’s portfolio, increasing brokerage and administrative costs, and potentially diluting the value of the Hennessy Cornerstone Mid Cap 30 Fund’s shares. Accordingly, Hennessy Funds Trust’s Board of Trustees discourages frequent purchases and redemptions of Hennessy Cornerstone Mid Cap 30 Fund shares by reserving the right to reject any purchase order for any reason or no reason, including purchase orders from potential investors that the Hennessy Cornerstone Mid Cap 30 Fund believes might engage in frequent purchases and redemptions of Hennessy Cornerstone Mid Cap 30 Fund shares.
The Hennessy Cornerstone Mid Cap 30 Fund tracks shareholder and omnibus account subscription and redemption activity in an effort to detect any shareholders or institutions that might trade with a frequency harmful to other shareholders of the Hennessy Cornerstone Mid Cap 30 Fund. In this regard, pursuant to Rule 22c-2 of the Investment Company Act, the Hennessy Cornerstone Mid Cap 30 Fund enters into shareholder information agreements with financial intermediaries that purchase Hennessy Cornerstone Mid Cap 30 Fund shares for omnibus accounts. These agreements require the financial intermediary to provide the Hennessy Cornerstone Mid Cap 30 Fund access, upon request, to information about underlying shareholder transaction activity in the omnibus account. Any non-public personal information provided to the Hennessy Cornerstone Mid Cap 30 Fund is subject to the Hennessy Cornerstone Mid Cap 30 Fund’s privacy policy.
In considering a shareholder’s trading activity, the Hennessy Cornerstone Mid Cap 30 Fund may consider, among other factors, the shareholder’s trading history both directly and, if known, through financial intermediaries, in any of the sixteen series of Hennessy Funds Trust. If frequent trading or market timing is detected, the Hennessy Cornerstone Mid Cap 30 Fund, based on its assessment of the severity of the market timing, may take one or more of the following actions: (1) advise the owner of the frequently traded account that any such future activity will cause a freezing of the account’s ability to transact subscriptions; (2) freeze the account demonstrating the activity from transacting further subscriptions; or (3) close the account demonstrating frequent trading activity.
Although the Hennessy Cornerstone Mid Cap 30 Fund has taken steps to discourage frequent purchases and redemptions of the Hennessy Cornerstone Mid Cap 30 Fund shares, it cannot guarantee that such trading will not occur.
Telephone Privileges. The Hennessy Cornerstone Mid Cap 30 Fund offers shareholders the ability to redeem or exchange shares or purchase additional shares via telephone. If you do
not wish to have these telephone privileges on your account, please decline this option in the Account Application. Otherwise, the telephone privileges will be available on your account.
How to Purchase Shares. You may purchase shares of the Hennessy Cornerstone Mid Cap 30 Fund on any day the NYSE is open for trading. Purchase requests received prior to the close of regular trading on the NYSE (normally 4:00 P.M. Eastern time/1:00 P.M. Pacific time) will be priced and processed as of the close of business on that day. Requests received after that time will be processed the following trading day at the following trading day’s pricing.
You may purchase Hennessy Cornerstone Mid Cap 30 Fund shares by check, wire or Automated Clearing House (“ACH”) network. The Hennessy Cornerstone Mid Cap 30 Fund will not accept payment in cash or money orders. All purchases must be in U.S. dollars, and all checks must be drawn on U.S. banks. To prevent check fraud, the Hennessy Cornerstone Mid Cap 30 Fund will not accept third party checks, Treasury checks, credit card checks, traveler’s checks or starter checks for the purchase of shares. In addition, the Hennessy Cornerstone Mid Cap 30 Fund cannot accept post-dated checks or any conditional order or payment.
The Hennessy Cornerstone Mid Cap 30 Fund will not issue certificates evidencing shares purchased. Instead, the Hennessy Cornerstone Mid Cap 30 Fund will send investors a written confirmation for all share purchases. The Hennessy Cornerstone Mid Cap 30 Fund reserves the right to reject any purchase in whole or in part.
In compliance with the USA Patriot Act of 2001, please note that the Transfer Agent will verify certain information on your Account Application as part of the Hennessy Cornerstone Mid Cap 30 Fund’s Anti-Money Laundering Compliance Program. The Hennessy Cornerstone Mid Cap 30 Fund might request additional information about you (which may include certain documents, such as articles of incorporation for companies) to help the Transfer Agent verify your identity. As requested on the application, you should supply your full name, date of birth, social security number and permanent street address. Permanent addresses containing a P.O. Box will not be accepted, although an alternate mailing address including a P.O. Box may be established. Please contact the Hennessy Cornerstone Mid Cap 30 Fund at 1-800-966-4354 or 1-415-899-1555 if you need additional assistance when completing your application. If the Hennessy Cornerstone Mid Cap 30 Fund does not have a reasonable belief of the identity of a customer, the account will be rejected or the customer will not be allowed to perform a transaction on the account until such information is received. The Hennessy Cornerstone Mid Cap 30 Fund reserves the right to close the account within five business days if clarifying information/documentation is not received.
Shares of the Hennessy Cornerstone Mid Cap 30 Fund have not been registered for sale outside of the United States. The Hennessy Cornerstone Mid Cap 30 Fund does not sell shares to non-United States citizens, subject to its discretion. Other than United States military personnel with an APO or FPO address, United States citizens living abroad may purchase Hennessy Cornerstone Mid Cap 30 Fund shares only if they have a social security number and a physical address (not a P.O. Box) within the United States, subject to the discretion of the Hennessy Cornerstone Mid Cap 30 Fund. The Hennessy Cornerstone Mid Cap 30 Fund reserves the right, in its sole discretion and to the extent permitted by applicable law, to sell shares to non-United
States citizens and United States citizens living abroad with a social security number but no physical address within the United States.
How Do I Purchase Shares by Check? If you are making an initial investment, simply complete the appropriate Account Application and mail it with a check, made payable to “Hennessy Funds,” to:
For regular mail delivery: Hennessy Funds c/o U.S. Bancorp Fund Services P.O. Box 701 Milwaukee, WI 53201-0701 | For overnight delivery: Hennessy Funds c/o U.S. Bancorp Fund Services 615 East Michigan St., 3rd Floor Milwaukee, WI 53202-5207 |
The Hennessy Cornerstone Mid Cap 30 Fund does not consider the U.S. Postal Service or other independent delivery services to be its agent. Therefore, deposit in the mail or with such services or receipt at the U.S. Bancorp Fund Services, LLC post office box of purchase orders or redemption requests does not constitute receipt by the Transfer Agent.
Subsequent investments must be accompanied by a letter indicating the name(s) in which the account is registered and the account number or by the remittance portion of the account statement and returned to one of the above addresses.
The Transfer Agent will charge a $25.00 fee against a shareholder’s account in addition to any loss sustained by the Hennessy Cornerstone Mid Cap 30 Fund for any payment, check or electronic funds transfer returned to the Transfer Agent.
How Do I Purchase Shares by Wire? Prior to wiring funds, a completed Account Application must be sent to the Transfer Agent by U.S. mail or overnight courier to one of the addresses listed above. If you are making an initial investment in the Hennessy Cornerstone Mid Cap 30 Fund, please contact the Transfer Agent at 1-800-261-6950 between 9:00 A.M. and 8:00 P.M. Eastern time/6:00 A.M. and 5:00 P.M. Pacific time, on a day when the NYSE is open for trading to make arrangements with a service representative to submit your completed application via mail, overnight delivery or fax. Upon receipt of your application, your account will be established and a service representative will contact you within 24 hours to provide an account number and wiring instructions to U.S. Bank, N.A. If you are making a subsequent purchase, prior to wiring funds, please notify the Transfer Agent. U.S. Bank, N.A. must receive wired funds prior to the close of regular trading on the NYSE (normally 4:00 P.M. Eastern time/1:00 P.M. Pacific time) to receive same day pricing. Wired funds received after that time will be processed the following trading day with the following trading day’s pricing. The Hennessy Cornerstone Mid Cap 30 Fund and U.S. Bank, N.A. are not responsible for the consequences of delays resulting from the banking or Federal Reserve wire system.
All wires should specify the Hennessy Cornerstone Mid Cap 30 Fund and class of shares, the name(s) in which the account is registered, the account number and the amount being wired. It is essential that your bank include complete information about your account in all wire instructions. Your bank may charge you a fee for sending a wire to the Hennessy Cornerstone Mid Cap 30 Fund.
To ensure prompt and accurate credit upon receipt of your wire, your bank should transmit immediately available funds by wire in your name to:
Hennessy Funds c/o U.S. Bank, N.A. 777 E. Wisconsin Ave. Milwaukee, WI 53202 ABA# 075000022 | Credit: U.S. Bancorp Fund Services LLC Account Number: 112-952-137 Further Credit: Mutual fund name, shareholder name and account number |
Can I Purchase Shares through Broker-Dealers? You may buy, sell and exchange Hennessy Cornerstone Mid Cap 30 Fund shares through certain brokers (and their agents) that have made arrangements with the Hennessy Cornerstone Mid Cap 30 Fund to sell its shares. When you place your order with such a broker or its authorized agent, your order is treated as if you had placed it directly with the Transfer Agent, and you will pay or receive the next net asset value calculated by the Hennessy Cornerstone Mid Cap 30 Fund. The broker (or its agent) holds your Hennessy Cornerstone Mid Cap 30 Fund shares in the broker’s (or its agent’s) name, and the broker (or its agent) maintains your individual ownership records. Hennessy Advisors may pay the broker (or its agent) for maintaining these records as well as providing other shareholder services. The broker (or its agent) may charge you a fee for handling your order. The broker (or its agent) is responsible for processing your order correctly and promptly, keeping you advised regarding the status of your individual account, confirming your transactions and ensuring that you receive copies of the Hennessy Cornerstone Mid Cap 30 Fund’s Prospectus.
If you decide to purchase Hennessy Cornerstone Mid Cap 30 Fund shares through a broker, please carefully review the program materials provided to you by the broker (or its agent), because particular brokers may adopt policies or procedures that are separate from those described herein. The broker (or its agent) is responsible for ensuring that you receive copies of the Hennessy Cornerstone Mid Cap 30 Fund’s Prospectus, Annual Report, Semi-Annual Report, and other Hennessy Cornerstone Mid Cap 30 Fund disclosure documents.
To inquire about an agreement, broker-dealers should call the Hennessy Cornerstone Mid Cap 30 Fund at 1-800-966-4354 or 1-415-899-1555.
How Do I Purchase Shares by Telephone? Shareholders may purchase additional shares of the Hennessy Cornerstone Mid Cap 30 Fund by calling 1-800-261-6950. Unless you have elected to decline telephone privileges on your Account Application, telephone orders will be accepted via electronic funds transfer from your bank account on record through the ACH network. You must have banking information established on your account prior to making a purchase. Each telephone purchase must be in the amount of $100 or more. If an account has more than one owner or authorized person, the Hennessy Cornerstone Mid Cap 30 Fund will accept telephone instructions from any one owner or authorized person.
Automatic Investment Plan. For your convenience, the Hennessy Cornerstone Mid Cap 30 Fund offers an Automatic Investment Plan. This plan allows money to be moved from the shareholder’s bank account on record to the shareholder’s Hennessy Cornerstone Mid Cap 30 Fund account on a systematic schedule (e.g., monthly, quarterly, semi-annually and annually) that the shareholder selects. After your initial investment in the Hennessy Cornerstone Mid Cap
30 Fund, you may authorize the Hennessy Cornerstone Mid Cap 30 Fund to withdraw amounts of $100 or more.
If you wish to enroll in this plan, complete the appropriate section on the initial Account Application, or complete the Automatic Investment Plan Application. You may call the Hennessy Cornerstone Mid Cap 30 Fund at 1-800-966-4354 or 1-415-899-1555 and request an application, or the application can be found at hennessyfunds.com. Signed applications should be received by the Transfer Agent at least 15 business days prior to your initial transaction. The Transfer Agent will charge you a $25 fee if the automatic investment cannot be made due to insufficient funds, stop payment or for any other reason. The Hennessy Cornerstone Mid Cap 30 Fund may terminate or modify this privilege at any time. Any request to change or terminate an Automatic Investment Plan should be submitted to the Transfer Agent by telephone at 1-800-261-6950 or in written form five calendar days prior to the effective date.
Retirement Plans. You may invest in the Hennessy Cornerstone Mid Cap 30 Fund under the following retirement plans:
| · | Coverdell Education Savings Account |
| · | SEP-IRA for sole proprietors, partnerships and corporations |
The Hennessy Cornerstone Mid Cap 30 Fund recommends that investors consult with a financial and/or tax advisor regarding IRAs before investing in the Hennessy Cornerstone Mid Cap 30 Fund. The annual IRA maintenance fee is $15 (capped at $30 per social security number). The fee for a transfer, distribution (exclusive of systematic distribution plans) or recharacterization of an IRA is $25 per transaction. Complete details on fees are outlined in our Individual Retirement Account & Coverdell Educational Savings Account Disclosure Statement.
How To Sell Shares. You may sell (redeem) your Hennessy Cornerstone Mid Cap 30 Fund shares on any day the NYSE is open for trading either directly through the Hennessy Cornerstone Mid Cap 30 Fund or through your investment representative, as applicable. Redemption requests received prior to the close of regular trading on the NYSE (normally 4:00 P.M. Eastern time/1:00 P.M. Pacific time) will be priced and processed as of the close of business on that day. Requests received after that time will be processed the following trading day at the following trading day’s pricing. Redemption requests for an IRA, Coverdell Education Plan or other retirement or qualified plan must be made in writing and cannot be made via telephone.
How Do I Sell Shares by Mail? You may redeem your Hennessy Cornerstone Mid Cap 30 Fund shares by sending a written request to the Transfer Agent. After your request is received in “good order,” the Hennessy Cornerstone Mid Cap 30 Fund will redeem your shares at the next
net asset value calculated by the Hennessy Cornerstone Mid Cap 30 Fund. To be in “good order,” redemption requests must include the following: (i) the name in which the account is registered; (ii) the account number; (iii) the number of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund or the dollar value of Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund to be redeemed; (iv) any signature guarantees that are required; and (v) any additional documents that might be required for redemptions by corporations, executors, administrators, trustees, guardians or other similar shareholders. In addition, please specify whether proceeds are to be sent by mail, wire or electronic funds transfer through the ACH network to your bank account on record. If you are redeeming from an IRA or other retirement or qualified plan, please indicate on your written request whether or not to withhold federal income tax (generally 10%). Unless a redemption request specifies not to have federal income tax withheld, the transaction will be subject to withholding. To add wire instructions to an account at the time of the redemption, a signature guarantee is required. The letter should be signed by all shareholders whose names appear on the account registration. Corporate and institutional investors and fiduciaries should contact the Transfer Agent to ascertain what additional documentation is required. Please see “When Are Signature Guarantees Required?” below.
How Do I Sell Shares by Telephone? Unless you have declined telephone privileges on your account, you may redeem all or some of your Hennessy Cornerstone Mid Cap 30 Fund shares, up to a maximum of $100,000, by calling the Transfer Agent at 1-800-261-6950 between 9:00 A.M. and 8:00 P.M. Eastern time/6:00 A.M. and 5:00 P.M. Pacific time, on a day when the NYSE is open for trading. Telephone redemptions will not be accepted for retirement accounts.
When you establish telephone privileges, you are authorizing the Hennessy Cornerstone Mid Cap 30 Fund and the Transfer Agent to act upon the telephone instructions of the person or persons you have designated in your Account Application. If an account has more than one owner or authorized person, the Hennessy Cornerstone Mid Cap 30 Fund will accept telephone instructions from any one owner or authorized person. Redemption proceeds will be sent by check to the address of record unless you elect to have proceeds transferred to your bank account on record.
Before acting on instructions received by telephone, the Hennessy Cornerstone Mid Cap 30 Fund and the Transfer Agent will use reasonable procedures to confirm that the telephone instructions are genuine. These procedures may include recording the telephone call and asking the caller for a form of personal identification. If the Hennessy Cornerstone Mid Cap 30 Fund and the Transfer Agent follow these reasonable procedures, they will not be liable for any loss, expense or cost arising out of any telephone transaction request that is reasonably believed to be genuine. This includes any fraudulent or unauthorized request. The Hennessy Cornerstone Mid Cap 30 Fund may change, modify or terminate these privileges at any time upon written notice to shareholders. The Hennessy Cornerstone Mid Cap 30 Fund may suspend temporarily the redemption privilege in emergency situations or in cases where, in the judgment of the Hennessy Cornerstone Mid Cap 30 Fund, continuation of the privilege would be detrimental to the Hennessy Cornerstone Mid Cap 30 Fund and its shareholders. Such temporary suspension can be without prior notification to shareholders.
You may request telephone redemption privileges after your account is opened by writing to the Transfer Agent at one of the addresses set forth under “How Do I Purchase Shares by Check?” above. Your written request for telephone privileges must include name in which the account is registered and account number and must be signed by the registered owner(s) of the account. A signature guarantee or other acceptable form of authentication from a financial institution source may also be required. Please contact the Transfer Agent at 1-800-261-6950 before sending your instruction.
Telephone trades must be received prior to the close of regular trading on the NYSE to receive same day pricing. During periods of high market activity, shareholders may encounter higher than usual call wait times. Please allow sufficient time to place your telephone transaction. You may have difficulties in making a telephone redemption during periods of abnormal market activity. If this occurs, you may make your redemption request in writing.
When Are Signature Guarantees Required? To protect the Hennessy Cornerstone Mid Cap 30 Fund and its shareholders, a signature guarantee from either a Medallion program member or a non-Medallion program member is required in the following situations:
| · | The redemption request includes a change of address, or a change of address request was received by the Transfer Agent within the last 30 calendar days; |
| · | The redemption proceeds are to be payable or sent to any person, address or bank account not on record; |
| · | Account ownership is being changed. |
In addition to the situations described above, the Hennessy Cornerstone Mid Cap 30 Fund or the Transfer Agent may require a signature guarantee in other instances based on the circumstances relative to the particular situation.
Non-financial transactions, including establishing or modifying certain services on an account, may require a signature guarantee, signature verification from a Signature Validation Program member or other acceptable form of authentication from a financial institution source.
Signature guarantees will generally be accepted from domestic banks, brokers, dealers, credit unions, national securities exchanges, registered securities associations, clearing agencies and savings associations, as well as from participants in the NYSE Medallion Signature Program and the Securities Transfer Agents Medallion Program (STAMP). A notarized signature is not an acceptable substitute for a signature guarantee.
The Hennessy Cornerstone Mid Cap 30 Fund reserves the right, at its sole discretion, to waive the signature guarantee requirement for a specific redemption request.
When Will I Receive My Redemption Proceeds? Payment of your redemption proceeds will be made promptly, but not later than seven calendar days after the receipt of your request in proper form. If you did not purchase your Hennessy Cornerstone Mid Cap 30 Fund shares by
wire, the Hennessy Cornerstone Mid Cap 30 Fund may delay payment of your redemption proceeds for up to 15 calendar days from date of purchase or until your check has cleared, whichever occurs first. In addition, the Hennessy Cornerstone Mid Cap 30 Fund can suspend redemptions and/or postpone payments of redemption proceeds beyond seven calendar days at times when the NYSE is closed or during emergency circumstances, as determined by the SEC.
You may have a check sent to you at your address of record, proceeds may be wired to your bank account on record, or funds may be sent via electronic funds transfer through the ACH network to your bank account on record. The minimum amount that may be wired is $1,000. You will be charged a wire transfer fee of $15. This fee will be deducted from your redemption proceeds for a complete redemption, or deducted from your remaining account balance for a partial redemption, and paid to the Transfer Agent to cover costs associated with the transfer. In addition, your bank may charge a fee for receiving wires. There is no charge to receive redemption proceeds via the ACH network, but credit may not be available for two to three business days.
The Hennessy Cornerstone Mid Cap 30 Fund has the right to pay redemption proceeds to you in whole or in part by a distribution of securities from the Hennessy Cornerstone Mid Cap 30 Fund’s portfolio. It is not expected that the Hennessy Cornerstone Mid Cap 30 Fund would do so except in unusual circumstances. If the Hennessy Cornerstone Mid Cap 30 Fund pays your redemption proceeds by a distribution of securities, you could incur brokerage or other charges in converting the securities to cash.
Can My Account Be Involuntarily Redeemed or Converted? The Hennessy Cornerstone Mid Cap 30 Fund may involuntarily redeem your shares upon certain conditions as determined by Hennessy Funds Trust’s Board of Trustees, including for example, but not limited to, (i) if you fail to provide the Hennessy Cornerstone Mid Cap 30 Fund with identification required by law, (ii) if the Hennessy Cornerstone Mid Cap 30 Fund is unable to verify information received from you, or (iii) to reimburse the Hennessy Cornerstone Mid Cap 30 Fund for any loss sustained by reason of any failure by you to make full payment for shares purchased. Additionally, as discussed in more detail below, shares may be redeemed or converted in connection with the closing of small accounts.
If your Institutional Class shares account balance falls below $250,000 for any reason, you will be given 60 calendar days to make additional investments so that your account balance is $250,000 or more. If you do not, the Hennessy Cornerstone Mid Cap 30 Fund may convert your Institutional Class shares into Investor Class shares, at which time your account will be subject to the involuntary redemption policies and procedures for Investor Class shares. Any such conversion will occur at the relative net asset value of the two share classes, without the imposition of any fees or other charges. Where a retirement plan or other financial intermediary holds Institutional Class shares on behalf of its participants or clients, the above policy applies to any such participants or clients when they roll over their accounts with the retirement plan or financial intermediary into an individual retirement account and they are not otherwise eligible to purchase Institutional Class shares. This right of involuntary redemption does not apply to former Class R shareholders of the Funds who become Institutional Class shareholders of the Hennessy Cornerstone Mid Cap 30 Fund.
What Happens If My Account is Inactive for an Extended Period of Time? Your account may be transferred to your state of residence if no activity occurs within your account during the “inactivity period” specified in your state’s abandoned property laws. If the Hennessy Cornerstone Mid Cap 30 Fund is unable to locate a shareholder, it will determine whether the shareholder’s account can legally be considered abandoned. The Hennessy Cornerstone Mid Cap 30 Fund is legally obligated to escheat (or transfer) abandoned property to the appropriate state’s unclaimed property administrator in accordance with statutory requirements. The shareholder’s last known address of record determines which state has jurisdiction. No interest or income will be earned on any redemption or distribution check sent to you during the time the check remains uncashed.
How to Exchange Shares. You may exchange shares of the Hennessy Cornerstone Mid Cap 30 Fund for shares of any of the other fifteen series of Hennessy Funds Trust any day the NYSE is open for trading either directly through the Hennessy Cornerstone Mid Cap 30 Fund or through your investment representative, as applicable. Exchange requests received prior to the close of regular trading on the NYSE (normally 4:00 P.M. Eastern time/1:00 P.M. Pacific time) will be priced and processed as of the close of business on that day. Requests received after that time will be processed the following trading day at the following trading day’s pricing. Prior to making an exchange into any other series of Hennessy Funds Trust, you should obtain and carefully read that fund’s Prospectus, which may be obtained by calling 1-800-966-4354 or 1-415-899-1555 or visiting hennessyfunds.com. Please keep in mind the minimum investment of $2,500 ($250 for IRAs) for Investor Class shares and $250,000 for Institutional Class shares when determining the number of shares you want to exchange.
You may also exchange shares of the Hennessy Cornerstone Mid Cap 30 Fund for shares of the First American Prime Obligations Fund, a money market mutual fund not affiliated with any services of Hennessy Funds Trust, Hennessy Advisors or any sub-advisor to a series of Hennessy Funds Trust. The exchange privilege does not constitute an offering or recommendation on the part of the Hennessy Cornerstone Mid Cap 30 Fund, Hennessy Advisors or any sub-advisor to any series of Hennessy Funds Trust of an investment in the First American Prime Obligations Fund. Prior to making an exchange into the First American Prime Obligations Fund, you should obtain and carefully read that fund’s prospectus, which may be obtained by calling 1-800-966-4354 or 1-415-899-1555. If you exchange your Hennessy Cornerstone Mid Cap 30 Fund shares into shares of the First American Prime Obligations Fund, you may establish checkwriting privileges on that money market account for regular (non-IRA) accounts. Contact the Transfer Agent at 1-800-261-6950 for a checkwriting application and signature card.
The Hennessy Cornerstone Mid Cap 30 Fund reserves the right on notice to shareholders to limit the number of exchanges that can be made in any year to avoid excess Hennessy Cornerstone Mid Cap 30 Fund expenses. The Hennessy Cornerstone Mid Cap 30 Fund reserves the right to reject any exchange order. The Hennessy Cornerstone Mid Cap 30 Fund may modify or terminate the exchange privilege upon written notice to shareholders. The Hennessy Cornerstone Mid Cap 30 Fund may suspend temporarily the exchange privilege in emergency situations or in cases where, in its judgment, continuation of the privilege would be detrimental to it and its shareholders. Such temporary suspension can be without prior notification to shareholders. You may have a taxable gain or loss as a result of an exchange because the Code treats an exchange as a sale of shares.
Exchanging Shares by Mail. You may exchange your Hennessy Cornerstone Mid Cap 30 Fund shares simply by sending a written request to the Transfer Agent. You should give the name in which your account is registered, account number, the number of Hennessy Cornerstone Mid Cap 30 Fund shares or the dollar value of Hennessy Cornerstone Mid Cap 30 Fund shares to be exchanged, and the name of the other fund into which the exchange is being made. If you have an existing account with the other fund, you should also give the name and account number for that fund. The letter should be signed by all shareholders whose names appear on the account registration.
Exchanging Shares by Telephone. Unless you have declined telephone privileges on your Account Application, you may also exchange Hennessy Cornerstone Mid Cap 30 Fund shares by calling the Transfer Agent at 1-800-261-6950 before the close of regular trading on the NYSE (normally 4:00 P.M. Eastern time/1:00 P.M. Pacific time). If you are exchanging Hennessy Cornerstone Mid Cap 30 Fund shares by telephone, you will be subject to certain identification procedures, which are listed under “How Do I Sell Shares by Telephone?” above. If an account has more than one owner or authorized person, the Hennessy Cornerstone Mid Cap 30 Fund will accept telephone instructions from any one owner or authorized person.
Householding. To help keep the Hennessy Cornerstone Mid Cap 30 Fund’s costs as low as possible, Hennessy Funds Trust generally delivers a single copy of most financial reports and Prospectuses to shareholders who share an address, even if the accounts are registered under different names. This process, known as “householding,” does not apply to account statements. You may, of course, request an individual copy of a Prospectus or financial report at any time. If you would like to receive separate mailings, please call the Transfer Agent at 1-800-261-6950 and we will begin individual delivery within 30 calendar days of your request. If your account is held through a financial institution or other intermediary, please contact them directly to request individual delivery.
Electronic Delivery. The Hennessy Cornerstone Mid Cap 30 Fund offers shareholders the option to receive account statements, Prospectuses, tax forms and reports online. To sign up for eDelivery, please visit hennessyfunds.com. You may change your delivery preference at any time by visiting our website or contacting the Hennessy Cornerstone Mid Cap 30 Fund at 1-800-261-6950.
| H. | Taxes, Dividends and Distributions |
Funds
For a discussion of the Funds’ policy with respect to dividends and distributions and the tax consequences of an investment in the Funds’ shares, see the Prospectus of the Funds, dated May 1, 2016.
Hennessy Cornerstone Mid Cap 30 Fund
Dividends and Distributions. The Hennessy Cornerstone Mid Cap 30 Fund will make distributions of dividends and capital gains, if any, annually, usually in December of each year. The Hennessy Cornerstone Mid Cap 30 Fund may make additional distributions if necessary to comply with the distribution requirements of the Code.
You have four distribution options:
| · | Automatic Reinvestment Option – |
| · | Both dividend and capital gains distributions will be reinvested in additional Hennessy Cornerstone Mid Cap 30 Fund shares. |
| · | Split Cash Reinvest Options – |
| · | Your dividends will be paid in cash and your capital gains distributions will be reinvested in additional Hennessy Cornerstone Mid Cap 30 Fund shares; or |
| · | Your dividends will be reinvested in additional Hennessy Cornerstone Mid Cap 30 Fund shares and your capital gains distributions will be paid in cash. |
| · | Both dividends and capital gains distributions will be paid in cash. |
If you elect to receive distributions and/or capital gains paid in cash, and the U.S. Postal Service cannot deliver the check, or if a check remains outstanding for at least six months, the Hennessy Cornerstone Mid Cap 30 Fund reserves the right to reinvest the distribution check in your account, at the current net asset value of the Hennessy Cornerstone Mid Cap 30 Fund, and to reinvest all subsequent distributions.
You may make this election on the Account Application. If you do not make an election, your distributions will be reinvested in additional Hennessy Cornerstone Mid Cap 30 Fund shares. You may change your election by writing to the Transfer Agent or by calling 1-800-261-6950. Any changes should be submitted at least five calendar days prior to the record date of the distribution.
Tax Information. The Hennessy Cornerstone Mid Cap 30 Fund’s distributions, whether received in cash or additional Hennessy Cornerstone Mid Cap 30 Fund shares, may be subject to federal and state income tax. These distributions may be taxed as ordinary income, dividend income or capital gains (which may be taxed at different rates depending on the length of time the Hennessy Cornerstone Mid Cap 30 Fund holds the assets generating the capital gains).
If you exchange or sell your Hennessy Cornerstone Mid Cap 30 Fund shares, it is considered a taxable event for you. Depending on the purchase price and the sale price of the shares you exchange or sell, you may have a gain or a loss on the transaction. You are responsible for any tax liabilities generated by your transaction.
As of January 1, 2012, federal law requires that mutual fund companies report their shareholders’ cost basis, gain/loss, and holding period to the IRS on the shareholders’ Consolidated Form 1099s when “covered” shares of the mutual funds are sold. Covered shares are any fund and/or dividend reinvestment plan shares acquired on or after January 1, 2012.
The Hennessy Cornerstone Mid Cap 30 Fund has chosen average cost as its standing (default) tax lot identification method for all shareholders, which means this is the method the Hennessy Cornerstone Mid Cap 30 Fund will use to determine which specific shares are deemed to be sold when there are multiple purchases on different dates at differing net asset values, and the entire position is not sold at one time. You may choose a method other than the Hennessy Cornerstone Mid Cap 30 Fund’s standing method at the time of your purchase or upon the sale of covered shares. The cost basis method a shareholder elects may not be changed with respect to a redemption of shares after the settlement date of the redemption. Hennessy Cornerstone Mid Cap 30 Fund shareholders should consult with their tax advisors to determine the best IRS-accepted cost basis method for their tax situation and to obtain more information about how the new cost basis reporting rules apply to them.
This summary is not intended to be and should not be construed to be legal or tax advice to any current holder of Hennessy Cornerstone Mid Cap 30 Fund shares. Shareholders should consult their own tax advisors to determine the tax consequences of owning Hennessy Cornerstone Mid Cap 30 Fund shares.
Funds
For financial information about the Funds, see the Prospectus of the Funds, dated May 1, 2016.
Hennessy Cornerstone Mid Cap 30 Fund
The financial highlights for the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund for the past five fiscal years ended October 31, 2015, are attached hereto as Exhibit B. The accounting survivor of the Reorganization will be the Hennessy Cornerstone Mid Cap 30 Fund.
| J. | Distribution Arrangements |
Funds
For a discussion of the Funds’ distribution arrangements, see the Prospectus of the Funds, dated May 1, 2016.
Hennessy Cornerstone Mid Cap 30 Fund
Quasar Distributors, LLC, 615 East Michigan Street, Milwaukee, Wisconsin 53202 serves as the distributor for the Hennessy Cornerstone Mid Cap 30 Fund. As such, Quasar is responsible for all purchases, sales, redemptions and other transfers of shares. As distributor, Quasar also provides certain administrative services. Shares of the Hennessy Cornerstone Mid Cap 30 Fund are offered for sale on a continuous basis at net asset value per share. Quasar is a registered broker-dealer and member of FINRA.
All shares of the Funds are entitled to vote on the proposals. Thirty-three and one-third percent of a Fund’s outstanding shares present in person or represented by proxy and entitled to vote at a shareholders’ meeting constitutes a quorum at such meeting. The Plan will be approved as follows by shareholders of The Westport Funds:
· | Westport Fund: Class R and Class I shareholders of the Westport Fund will vote together to approve the Plan. Assuming a quorum is present, the Plan will be approved by the affirmative “vote of a majority of the outstanding voting securities” (as such phrase is defined in the Investment Company Act) of the Class R and Class I shareholders of the Westport Fund voting together. The “vote of a majority of the outstanding voting securities” means with regard to the Class R and Class I shares of the Westport Fund voting together: the affirmative vote of the lesser of (i) 67% or more of the aggregate outstanding shares of Class R and Class I present at the meeting if more than 50% of the aggregate outstanding shares of Class R and Class I are present in person or by proxy or (ii) more than 50% of the aggregate outstanding shares of Class R and Class I. |
· | Westport Select Cap Fund: Class R and Class I shareholders of the Westport Select Cap Fund will vote together to approve the Plan. Assuming a quorum is present, the Plan will be approved by the affirmative “vote of a majority of the outstanding voting securities” (as such phrase is defined in the Investment Company Act) of the Class R and Class I shareholders of the Westport Select Cap Fund voting together. The “vote of a majority of the outstanding voting securities” means with regard to the Class R and Class I shares of the Westport Select Cap Fund voting together: the affirmative vote of the lesser of (i) 67% or more of the aggregate outstanding shares of Class R and Class I present at the meeting if more than 50% of the aggregate outstanding shares of Class R and Class I are present in person or by proxy or (ii) more than 50% of the aggregate outstanding shares of Class R and Class I. |
The approval of the Plan by each Fund’s shareholders is required for the consummation of the Reorganization. If neither or only one Fund approves the Plan, the Westport Trust may seek to adjourn the special meeting of shareholders to obtain sufficient votes to approve the Plan. If sufficient votes are not obtained to approve the Plan, the Reorganization will not be consummated.
All shares represented by each properly signed proxy received before the meeting will be voted at the special meeting. Proxies may be voted by mail, by telephone at the toll-free telephone number listed on your proxy card or via the Internet at the website shown on your proxy card. If a shareholder specifies how the proxy is to be voted on any business properly to come before the special meeting, it will be voted in accordance with instruction given. If no choice is indicated on the proxy, it will be voted “FOR” approval of the Reorganization. If any other matters come before the special meeting, proxies will be voted by the persons named as proxies in accordance with their best judgment.
All proxies voted, including abstentions and broker non-votes (where the underlying holder has not voted and the broker does not have discretionary authority to vote the shares), will be counted toward establishing a quorum. Approval of the Plan to implement the Reorganization will occur only if a sufficient number of votes are cast “FOR” that proposal. Abstentions and broker non-votes do not constitute a vote “FOR” and will have no effect on the outcome of the voting.
Shareholders are also being asked to vote on a proposal to adjourn the special meeting to solicit additional proxies if a quorum does not exist or if a quorum exists but there are insufficient votes at the time of the adjournment to approve the Plan. Any business that might have been transacted at the special meeting may be transacted at any such adjourned session(s) at which a quorum is present. Approval of the proposal to adjourn the special meeting to solicit additional proxies if there are insufficient votes at the time of the adjournment to approve the Plan, requires a majority of the votes represented at the special meeting, whether or not a quorum is present. The special shareholder meeting may be held as adjourned without further notice if such time and place are announced at the special meeting at which the adjournment is taken and the adjourned meeting is held within a reasonable time after the date set for the original meeting unless a new record date of the adjourned meeting is fixed by the Board. Notice of any such adjourned meeting will be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the Funds’ bylaws.
With respect to the proposal to adjourn, there will be no broker non-votes and abstentions will have no effect on the outcome of the proposal. Unless marked to the contrary, proxies received will be voted “FOR” the proposal to adjourn.
| A. | Method and Cost of Solicitation |
This Proxy Statement/Prospectus is being sent to you in connection with the solicitation of proxies by the Board for use at the special meeting. It is expected that the solicitation of proxies will be primarily by mail, telephone and via the Internet. Westport Advisers and Hennessy Advisors will pay all of the expenses related to the special meeting, including expenses associated with the solicitation of proxies such as copying, printing and mailing proxy materials.
Westport Advisers and Hennessy Advisors have retained, at their expense, Broadridge Financial Solutions, Inc. to assist in the solicitation of proxies. The cost of solicitation for the Reorganization is currently estimated to be approximately $[•] in the aggregate.
Any shareholder giving a proxy may revoke it before it is exercised at the special meeting, either by providing written notice to the Funds, by submission of a later-dated, duly executed proxy or by voting in person at the special meeting. If not so revoked, the votes will be cast at the special meeting, and any postponements or adjournments thereof. Attendance by a shareholder at the special meeting does not, by itself, revoke a proxy.
| C. | Voting Securities and Principal Holders |
Shareholders of the Funds at the close of business on June 28, 2016 (the “Record Date”), will be entitled to be present and vote at the special meeting. Each outstanding share is entitled to one vote. As of the Record Date, with regard to Class R shares there were:
· | [•] Class R shares of the Westport Fund outstanding and entitled to vote (including omnibus accounts representing multiple underlying beneficial owners such as those in the names of brokers), representing total net assets of approximately $[•]; and |
· | [•] Class R shares of the Westport Select Cap Fund outstanding and entitled to vote (including omnibus accounts representing multiple underlying beneficial owners such as those in the names of brokers), representing total net assets of approximately $[•]. |
As of the Record Date, with regard to Class I shares there were:
· | [•] Class I shares of the Westport Fund outstanding and entitled to vote (including omnibus accounts representing multiple underlying beneficial owners such as those in the names of brokers), representing total net assets of approximately $[•]; and |
· | [•] Class I shares of the Westport Select Cap Fund outstanding and entitled to vote (including omnibus accounts representing multiple underlying beneficial owners such as those in the names of brokers), representing total net assets of approximately $[•]. |
Principal Holders of the Funds
As of the Record Date, the Funds’ shareholders of record and/or beneficial owners (to the Funds’ knowledge) who owned five percent or more of the Funds’ total outstanding shares is set forth below:
| Westport Fund – Class R | Shares | Percentage |
| | | |
| [Table] | | |
| Westport Fund – Class I | Shares | Percentage |
| | | |
| [Table] | | |
| Westport Select Cap Fund – Class R | Shares | Percentage |
| | | |
| [Table] | | |
| Westport Select Cap Fund – Class I | Shares | Percentage |
| | | |
| [Table] | | |
As of the Record Date, the officers and trustees of the Funds, as a group, owned of record and beneficially [•]% of the outstanding shares of each of the Funds referenced above.
No person is deemed to “control” any of the Funds, as that term is defined in the Investment Company Act, because no Fund knows of any person who owns beneficially or through controlled companies more than 25% of a Fund’s shares or who acknowledges the existence of control.
Principal Holders Hennessy Cornerstone Mid Cap 30 Fund
As of the Record Date, the Hennessy Cornerstone Mid Cap 30 Fund’s shareholders of record and/or beneficial owners (to the Hennessy Cornerstone Mid Cap 30 Fund’s knowledge) who owned five percent or more of the Hennessy Cornerstone Mid Cap 30 Fund’s total outstanding shares is set forth below:
| Hennessy Cornerstone Mid Cap 30 Fund – Institutional Class | Shares | Percentage |
| | | |
| [Table] | | |
As of the Record Date, the officers and trustees of the Hennessy Cornerstone Mid Cap 30 Fund owned of record and beneficially [•]% of the outstanding shares of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund.
No person is deemed to “control” the Hennessy Cornerstone Mid Cap 30 Fund, as that term is defined in the Investment Company Act, because Hennessy Cornerstone Mid Cap 30 Fund knows of no person who owns beneficially or through controlled companies more than 25% of the Hennessy Cornerstone Mid Cap 30 Fund’s shares or who acknowledges the existence of control.
Pro Forma Principal Holders Hennessy Cornerstone Mid Cap 30 Fund
If the Reorganization had been effected as of the Record Date, the Hennessy Cornerstone Mid Cap 30 Fund’s Institutional Class shareholders of record and/or beneficial owners (to the Hennessy Cornerstone Mid Cap 30 Fund’s knowledge) who would have owned five percent or more of the Hennessy Cornerstone Mid Cap 30 Fund’s total outstanding Institutional Class shares is set forth below:
| Hennessy Cornerstone Mid Cap 30 Fund – Institutional Class Pro Forma | Shares | Percentage |
| | | |
| [Table] | | |
If the Reorganization had been effected as of the Record Date, the officers and trustees of the Hennessy Cornerstone Mid Cap 30 Fund would have owned of record and beneficially [•]% of the outstanding shares of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund.
| VII. | ADDITIONAL INFORMATION |
Documents that relate to the Funds are available, without charge, by writing to the Secretary of The Westport Trust at 253 Riverside Avenue, Westport, Connecticut 06880, by calling 1-888-593-7878 or over the Internet at www.westportfunds.com.
Documents that relate to the Hennessy Cornerstone Mid Cap 30 Fund are available, without charge, by writing to Hennessy Funds Trust at 7250 Redwood Blvd., Suite 200, Novato, California 94945, by calling 1-800-966-4353 or 1-415-899-1555 or over the Internet at hennessyfunds.com.
The Funds and the Hennessy Cornerstone Mid Cap 30 Fund are subject to the requirements of the Securities Exchange Act of 1934, as amended, and the Investment Company Act, and in accordance therewith, file reports, proxy materials, and other information relating to the Funds and the Hennessy Cornerstone Mid Cap 30 Fund, respectively, with the SEC. Reports, proxy and information statements, and other information filed by the Funds and the Hennessy Cornerstone Mid Cap 30 Fund, can be obtained by calling or writing the funds and can also be inspected and copied by the public at the public reference facilities maintained by the SEC in Washington, DC located at 100 F Street, N.E., Washington DC 20549. Copies of such material can be obtained at prescribed rates from the Public Reference Branch, Office of Consumer Affairs and Information Services, SEC, Washington D.C. 20549, or obtained electronically from the EDGAR database on the SEC’s website (www.sec.gov).
It is expected that this Proxy Statement will be mailed to shareholders on or about July [•], 2016.
| VIII. | MISCELLANEOUS INFORMATION |
The Board knows of no other business to be brought before the special meeting. If any other matters come before the special meeting, it is the Board’s intention that proxies that do not contain specific restrictions to the contrary will be voted on those matters in accordance with the judgment of the persons named in the enclosed form of proxy.
| B. | Next Meeting of Shareholders |
The Funds are not required and do not intend to hold annual or other periodic meetings of shareholders except as required by the Investment Company Act. By observing this policy, the Funds seek to avoid the expenses customarily incurred in the preparation of proxy materials and the holding of shareholder meetings, as well as the related expenditure of staff time. If the Reorganization is not completed, the next meeting of the shareholders of the Funds will be held at such time as the Board may determine or at such time as may be legally required. Any shareholder proposal intended to be presented at such meeting must be received by the Funds at their office at a reasonable time before the meeting, as determined by the Board, to be included in the Funds’ Proxy Statement and form of proxy relating to that meeting, and it must satisfy all other legal requirements.
The validity of the issuance of the Hennessy Cornerstone Mid Cap 30 Fund shares will be passed upon by Foley & Lardner LLP, Milwaukee, Wisconsin.
The financial statements of the Funds are incorporated by reference in the Statement of Additional Information, which is part of such Registration Statement, to the Funds’ Annual Report to Shareholders and have been audited by Tait, Weller & Baker LLP, an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference. Such financial statements have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The financial statements of the Hennessy Cornerstone Mid Cap 30 Fund are incorporated by reference in the Statement of Additional Information, which is part of such Registration Statement, to the Hennessy Cornerstone Mid Cap 30 Fund’s Annual Report to Shareholders and have been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference. Such financial statements have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
| By Order of the Board of Trustees of The |
| Westport Funds, |
| | |
| |
| Edmund H. Nicklin, Jr., President |
| The Westport Funds |
July [•], 2016
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this “Agreement”) is made as of this [•] day of [•], 2016, by and between Hennessy Funds Trust, a Delaware statutory trust (“Hennessy Funds Trust”), on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, and The Westport Funds, a Delaware statutory trust (the “Westport Trust”), on behalf of the Westport Fund and the Westport Select Cap Fund (each a “Reorganizing Fund”, and, together, the “Reorganizing Funds”). Shareholders of the Reorganizing Funds are referred to herein as “Investors”.
Westport Advisers, LLC (“Westport Advisers”) joins this Agreement solely for purposes of Section 9. Westport Advisers represents and warrants that the execution, delivery and performance of this Agreement by Westport Advisers will have been duly authorized prior to the Closing Date (as defined in Section 3.1) by all necessary action on the part of Westport Advisers, and this Agreement will constitute a valid and binding obligation of Westport Advisers enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights, and to general equity principles. Hennessy Advisors, Inc. (“Hennessy Advisors”) joins this Agreement solely for purposes of Section 9. Hennessy Advisors represents and warrants that the execution, delivery and performance of this Agreement by Hennessy Advisors will have been duly authorized prior to the Closing Date by all necessary action on the part of Hennessy Advisors, and this Agreement will constitute a valid and binding obligation of Hennessy Advisors enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights, and to general equity principles.
In accordance with the terms and conditions set forth in this Agreement, the parties desire that all of the assets of each Reorganizing Fund be transferred to the Hennessy Cornerstone Mid Cap 30 Fund, and that the Hennessy Cornerstone Mid Cap 30 Fund assume all liabilities, expenses, costs, charges and reserves of the Reorganizing Funds, whether absolute or contingent, known or unknown, accrued or unaccrued (other than Excluded Liabilities, as defined in that certain Transaction Agreement between Hennessy Advisors and Westport Advisers, dated as of May 2, 2016) (each a “Liability” and together the “Liabilities”), in exchange for Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund (“Shares”), and that these Shares be distributed immediately after the Closing (as defined in the preamble to Section 1), as appropriate, by such Reorganizing Fund to its Investors in liquidation of such Reorganizing Fund. Holders of Class R and Class I shares of each of the Reorganizing Funds will receive Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund. This Agreement is intended to be and is adopted as a plan of reorganization and liquidation within the meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated thereunder.
In consideration of the promises and of the covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound hereby, covenant and agree as follows:
Subject to the terms and conditions herein set forth, and on the basis of the representations and warranties contained herein, each Reorganizing Fund shall assign, deliver and otherwise transfer its assets (the “Reorganizing Fund Assets”) to the Hennessy Cornerstone Mid Cap 30 Fund and the Hennessy Cornerstone Mid Cap 30 Fund shall assume the Reorganizing Funds’ Liabilities. The Hennessy Cornerstone Mid Cap 30 Fund shall, as consideration therefor, on the Closing Date, deliver to the Westport Fund and the Westport Select Cap Fund, the Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund, the number of which shall be determined by dividing (a) the value of said Reorganizing Fund Assets, net of the Liabilities, computed in the manner and as of the time and date set forth in Section 2.1, by (b) the net asset value of one share of the Hennessy Cornerstone Mid Cap 30 Fund Shares computed in the manner and as of the time and date set forth in Section 2.2. Holders of Class R and Class I shares of each of the Reorganizing Funds will receive Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund. Such transfer, delivery and assumption shall take place as provided for in Section 3.1 (hereinafter sometimes referred to as the “Closing”). Immediately following the Closing, the Westport Fund and the Westport Select Cap Fund shall distribute the appropriate number of Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund to the Investors of both classes of each Reorganizing Fund in liquidation of the Reorganizing Funds, as provided in Section 1.4 hereof. The Agreement and transactions contemplated hereunder for each Reorganizing Fund and the Hennessy Cornerstone Mid Cap 30 Fund are hereinafter referred to as the “Reorganization”.
1.1 (a) With respect to each Reorganizing Fund, the Reorganizing Fund Assets shall consist of all property and assets of any nature whatsoever, including, without limitation, all cash, cash equivalents, securities, instruments, claims and receivables (including dividend and interest receivables) owned by such Reorganizing Fund, and any prepaid expenses shown as an asset on such Reorganizing Fund’s books on the Closing Date.
(b) Not less than ten calendar days before the Closing Date, each of the Reorganizing Funds will provide the Hennessy Cornerstone Mid Cap 30 Fund with a schedule of its assets and its known liabilities, and the Hennessy Cornerstone Mid Cap 30 Fund will provide the Reorganizing Funds with a copy of the current investment objective and policies of the Hennessy Cornerstone Mid Cap 30 Fund. Each of the Reorganizing Funds reserves the right to sell or otherwise dispose of any of the securities or other assets shown on the list of the applicable Reorganizing Fund’s assets before the Closing Date, but will not, without the prior approval of the Hennessy Cornerstone Mid Cap 30 Fund, acquire any additional securities. If it is determined that the portfolios of a Reorganizing Fund and the Hennessy Cornerstone Mid Cap 30 Fund, when aggregated, would contain investments exceeding certain percentage limitations to which the Hennessy Cornerstone Mid Cap 30 Fund is or will be subject with respect to such investments, the Reorganizing Fund, if requested by the Hennessy Cornerstone Mid Cap 30
Fund, will dispose of and/or reinvest a sufficient amount of such investments as may be necessary to avoid violating such limitations as of the Closing Date.
1.2 Each of the Reorganizing Funds will endeavor to discharge all of its known liabilities and obligations prior to the Closing Date. The Hennessy Cornerstone Mid Cap 30 Fund will assume all of the Liabilities of the Reorganizing Funds. The Hennessy Cornerstone Mid Cap 30 Fund shall not assume any Liability for any obligation of a Reorganizing Fund to file reports with the Securities and Exchange Commission (the “SEC”), Internal Revenue Service or other regulatory or tax authority covering any reporting period ending prior to or at the Closing Date with respect to the Reorganizing Fund.
1.3 Immediately following the Closing, the Westport Fund will distribute the Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund received by the Westport Fund pursuant to the preamble to Section 1 pro rata to its Investors of record determined as of the close of business on the Closing Date in complete liquidation of the Westport Fund and the Westport Select Cap Fund will distribute the Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund received by the Westport Select Cap Fund pursuant to the preamble to Section 1 pro rata to its Investors of record determined as of the close of business on the Closing Date in complete liquidation of the Westport Select Cap Fund. Holders of Class R and Class I shares of each of the Reorganizing Funds will receive Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund. The distribution will be accomplished by an instruction, signed by an appropriate officer of Hennessy Funds Trust, to transfer the Hennessy Cornerstone Mid Cap 30 Fund’s Shares then credited to the applicable Reorganizing Fund’s account on the books of the Hennessy Cornerstone Mid Cap 30 Fund to open accounts on the books of the Hennessy Cornerstone Mid Cap 30 Fund established and maintained by the Hennessy Cornerstone Mid Cap 30 Fund’s transfer agent in the names of record of the Reorganizing Funds’ Investors and representing the number of Shares of the Hennessy Cornerstone Mid Cap 30 Fund due each Investor of the Reorganizing Funds. All issued and outstanding shares of both classes of each of the Reorganizing Funds will be cancelled simultaneously therewith on the Reorganizing Funds’ books, and any outstanding share certificates representing interests in the Reorganizing Funds will represent only the right to receive such number of the applicable Hennessy Cornerstone Mid Cap 30 Fund’s Shares after the Closing as determined in accordance with the preamble to Section 1.
1.4 Following the transfer of assets by the Reorganizing Funds to the Hennessy Cornerstone Mid Cap 30 Fund, the assumption of the Liabilities by the Hennessy Cornerstone Mid Cap 30 Fund, and the distribution by the Reorganizing Funds of the Hennessy Cornerstone Mid Cap 30 Fund’s Shares received by it pursuant to Section 1.3, the Reorganizing Funds shall terminate their qualification, classification and registration with all appropriate federal and state agencies. Any reporting or other responsibility of the Reorganizing Funds is and shall remain the responsibility of the Reorganizing Funds up to and including the date on which the Reorganizing Funds are terminated and deregistered, subject to any reporting or other obligations described in Section 4.8.
2.1 The value of the Reorganizing Fund Assets shall be the value of those assets computed as of the time at which net asset value is calculated pursuant to the valuation procedures set forth in the Hennessy Cornerstone Mid Cap 30 Fund’s then-current Prospectus and Statement of Additional Information on the business day immediately preceding the Closing Date, or at such time on such earlier or later date as may mutually be agreed upon in writing among the parties hereto (such time and date being herein called the “Valuation Date”). As of the close of business on the Valuation Date, the movement of records and materials of the Reorganizing Funds, and conversion thereof, to the fund accounting and administrative services agent of the Hennessy Cornerstone Mid Cap 30 Fund shall commence for completion prior to the Closing Date.
2.2 The net asset value of each share of the Hennessy Cornerstone Mid Cap 30 Fund’s Shares shall be the net asset value per share computed on the Valuation Date, using the market valuation procedures set forth in the Hennessy Cornerstone Mid Cap 30 Fund’s then-current Prospectus and Statement of Additional Information.
2.3 All computations of value contemplated by this Section 2 shall be made by the Hennessy Cornerstone Mid Cap 30 Fund’s administrator in accordance with its regular practice as pricing agent. The Hennessy Cornerstone Mid Cap 30 Fund shall cause its administrator to deliver a copy of its valuation report to the Reorganizing Funds at the Closing.
| 3. | CLOSING AND CLOSING DATE |
3.1 The Closing for the Reorganization shall occur on [•], 2016, and/or on such other date as may be mutually agreed upon in writing by the parties hereto (each, a “Closing Date”). All acts taking place at the Closing shall be deemed to take place simultaneously, immediately after the close of business on the Closing Date unless otherwise provided.
3.2 The Hennessy Cornerstone Mid Cap 30 Fund’s custodian shall deliver at the Closing evidence that: (a) the Reorganizing Fund Assets have been delivered in proper form to the Hennessy Cornerstone Mid Cap 30 Fund as of the Closing Date and (b) all necessary taxes including all applicable federal and state stock transfer stamps, if any, have been paid, or provision for payment shall have been made, by the Reorganizing Funds in conjunction with the delivery of portfolio securities.
3.3 Notwithstanding anything herein to the contrary, if on the Valuation Date (a) the New York Stock Exchange shall be closed to trading or trading thereon shall be restricted or (b) trading or the reporting of trading on such exchange or elsewhere shall be disrupted so that, in the judgment of the Hennessy Cornerstone Mid Cap 30 Fund, accurate appraisal of the value of the net assets of a Hennessy Cornerstone Mid Cap 30 Fund or a Reorganizing Fund is impracticable, the Valuation Date shall be postponed until the first business day after the day when trading shall have been fully resumed without restriction or disruption and reporting shall have been restored.
| 4. | COVENANTS WITH RESPECT TO THE HENNESSY CORNERSTONE MID CAP 30 FUND AND THE REORGANIZING FUNDS |
4.1 With respect to the Reorganizing Funds, the Westport Trust has called or will call a meeting of shareholders of the Reorganizing Funds to consider and act upon this Agreement and to take all other actions reasonably necessary to obtain the approval of the transactions contemplated herein, including approval for each of the Reorganizing Fund’s liquidating distribution of Shares of the Hennessy Cornerstone Mid Cap 30 Fund contemplated hereby, and for each of the Reorganizing Funds to terminate its qualification, classification and registration if requisite approvals are obtained with respect to the Reorganizing Funds. The Westport Trust on behalf of the Reorganizing Funds shall assist Hennessy Funds Trust on behalf of the Hennessy Cornerstone Mid Cap 30 Fund in preparing the notice of meeting, form of proxy and proxy statement/prospectus (collectively, “Proxy Materials”) to be used in connection with that meeting and the registration statement on Form N-14 to be prepared by Hennessy Funds Trust pursuant to Section 4.6.
4.2 The Westport Trust on behalf of the Reorganizing Funds covenants that the Shares of the Hennessy Cornerstone Mid Cap 30 Fund to be issued hereunder are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms of this Agreement.
4.3 The Westport Trust on behalf of the Reorganizing Funds will assist the Hennessy Cornerstone Mid Cap 30 Fund in obtaining such information as the Hennessy Cornerstone Mid Cap 30 Fund reasonably requests concerning the beneficial ownership of shares of the Reorganizing Funds.
4.4 Subject to the provisions hereof, Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, and the Westport Trust, on behalf of the Reorganizing Funds, will take, or cause to be taken, all actions, and do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated herein.
4.5 The Reorganizing Funds shall furnish to the Hennessy Cornerstone Mid Cap 30 Fund on the Closing Date, a final statement of the total amount of each Reorganizing Fund’s assets and liabilities as of the Closing Date.
4.6 Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, has prepared and filed, or will prepare and file, with the SEC a registration statement on Form N-14 under the Securities Act of 1933, as amended (the “1933 Act”), relating to the Shares of the Hennessy Cornerstone Mid Cap 30 Fund (the “Registration Statement”). The Reorganizing Funds have provided or will provide the Hennessy Cornerstone Mid Cap 30 Fund with necessary or advisable information and disclosure relating to the Reorganizing Funds for inclusion in the Proxy Materials, which are part of the Registration Statement, and with such other information and documents relating to the Reorganizing Funds as are requested by the Hennessy Cornerstone Mid Cap 30 Fund and as are reasonably necessary or advisable for the preparation of the Registration Statement.
4.7 After the Closing, Hennessy Funds Trust shall or shall cause its agents to prepare any federal, state or local tax returns, including any Forms 1099, required to be filed by the Hennessy Cornerstone Mid Cap 30 Fund, which returns shall include the activity of the Reorganizing Funds for the period January 1, 2016, through the close of business on the Valuation Date, and shall further cause such tax returns and Forms 1099 to be duly filed with the appropriate taxing authorities.
4.8 Following the transfer of Reorganizing Fund Assets by the Reorganizing Funds to the Hennessy Cornerstone Mid Cap 30 Fund and the assumption of the Liabilities in exchange for Shares of the Hennessy Cornerstone Mid Cap 30 Fund as contemplated herein, the Westport Trust on behalf of the Reorganizing Funds will file any final regulatory reports, including but not limited to any Form N-SAR and Rule 24f-2 filings with respect to the Reorganizing Funds, promptly after the Closing Date and also will take all other steps as are necessary and proper to effect the termination or declassification of the Reorganizing Funds in accordance with the laws of Delaware and other applicable requirements.
4.9 Hennessy Funds Trust and the Westport Trust will provide each other and their respective representatives with such cooperation, assistance and information as either of them reasonably may request of the other in filing any tax returns, amended return or claim for refund, determining a liability for taxes or a right to a refund of taxes or participating in or conducting any audit or other proceeding in respect of taxes, or in determining the financial reporting of any tax position.
| 5. | REPRESENTATIONS AND WARRANTIES |
5.1 Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, represents and warrants to the Reorganizing Funds as of the date hereof and as of the Closing Date as follows:
(a) Hennessy Funds Trust was duly created pursuant to its Trust Instrument by its Board of Trustees for the purpose of acting as a management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”), and is validly existing under the laws of Delaware, and the Trust Instrument directs the Board of Trustees to manage the affairs of Hennessy Funds Trust and grants them all powers necessary or desirable to carry out such responsibility, including administering the Hennessy Cornerstone Mid Cap 30 Fund’s business as currently conducted by the Hennessy Cornerstone Mid Cap 30 Fund and as described in the current Prospectus of the Hennessy Cornerstone Mid Cap 30 Fund. The Hennessy Cornerstone Mid Cap 30 Fund is a series of Hennessy Funds Trust. Hennessy Funds Trust is registered as an investment company classified as an open-end management company, under the 1940 Act, and its registration with the SEC as an investment company is in full force and effect;
(b) The Hennessy Cornerstone Mid Cap 30 Fund is a legally designated, separate series of Hennessy Funds Trust duly organized and validly existing under the laws of Delaware, and for each full and partial taxable year from its inception through the Closing Date, the Hennessy Cornerstone Mid Cap 30 Fund has qualified as a separate regulated investment
company under the Code and has taken all necessary and required actions to maintain such status;
(c) The Registration Statement with respect to Hennessy Funds Trust and the Hennessy Cornerstone Mid Cap 30 Fund conforms or will conform, at all times up to and including the Closing Date, in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the regulations thereunder and does not include or will not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(d) The Hennessy Cornerstone Mid Cap 30 Fund is not in violation of, and the execution, delivery and performance of this Agreement by Hennessy Funds Trust for itself and on behalf of the Hennessy Cornerstone Mid Cap 30 Fund does not and will not (i) violate the Trust of Instrument or Bylaws of Hennessy Funds Trust, or (ii) result in a breach or violation of, or constitute a default under, any material agreement or material instrument or other undertaking, to which Hennessy Funds Trust is a party or by which its properties or assets are bound;
(e) Except as previously disclosed in writing to the Reorganizing Funds, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to the best knowledge of Hennessy Funds Trust, threatened against Hennessy Funds Trust, any affiliated entity or its business, the Hennessy Cornerstone Mid Cap 30 Fund or any of its properties or assets, which, if adversely determined, would materially and adversely affect Hennessy Funds Trust or the Hennessy Cornerstone Mid Cap 30 Fund’s financial condition or the conduct of their business. Hennessy Funds Trust knows of no facts that might form the basis for the institution of any such proceeding or investigation, and the Hennessy Cornerstone Mid Cap 30 Fund is not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body which materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions contemplated herein;
(f) The audited financial statements of the Hennessy Cornerstone Mid Cap 30 Fund as of and for the fiscal year ended October 31, 2015, and the unaudited financial statements for the fiscal period ended April 30, 2016 (copies of which have been furnished to the Reorganizing Funds) fairly present, in all material respects, the Hennessy Cornerstone Mid Cap 30 Fund’s financial condition as of such date and its results of operations for such periods in accordance with generally accepted accounting principles consistently applied, and as of each such respective date there were no liabilities of the Hennessy Cornerstone Mid Cap 30 Fund (contingent or otherwise) known to the Hennessy Cornerstone Mid Cap 30 Fund that were not disclosed therein but that would be required to be disclosed therein in accordance with generally accepted accounting principles;
(g) Since the date of the most recent audited financial statements, there has not been any material adverse change with respect to the Hennessy Cornerstone Mid Cap 30 Fund’s financial condition, assets, liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by the Hennessy Cornerstone Mid Cap 30 Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed in writing to and accepted by the Reorganizing Funds, prior to the Closing Date (for the purposes of this subparagraph, neither a decline in the Hennessy Cornerstone Mid Cap 30 Fund’s net asset value per share nor a decrease in the Hennessy Cornerstone Mid Cap 30 Fund’s size due to redemptions shall be deemed to constitute a material adverse change);
(h) The Hennessy Cornerstone Mid Cap 30 Fund has timely filed all federal and other tax returns and reports that are required by law to have been filed by the Hennessy Cornerstone Mid Cap 30 Fund, all such tax returns and reports were complete and accurate, all taxes owed by the Hennessy Cornerstone Mid Cap 30 Fund have been timely paid, and to the best of the Hennessy Cornerstone Mid Cap 30 Fund’s knowledge, no such return is currently under audit and no assessment of a tax deficiency has been made with respect to any such return;
(i) All issued and outstanding shares, including shares to be issued in connection with the Reorganization, of the Hennessy Cornerstone Mid Cap 30 Fund will, as of the Closing Date, be duly authorized and validly issued and outstanding, fully paid and nonassessable, the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund issued and outstanding before the Closing Date were offered and sold in compliance with the applicable registration and regulatory requirements, or exemptions therefrom, of the 1933 Act, the 1940 Act, and all applicable state securities laws, and the regulations thereunder, and the Hennessy Cornerstone Mid Cap 30 Fund does not have outstanding any option, warrants or other rights to subscribe for or purchase any of its shares nor is there outstanding any security convertible into any of its shares;
(j) The execution, delivery and performance of this Agreement on behalf of the Hennessy Cornerstone Mid Cap 30 Fund will have been duly authorized prior to the Closing Date by all necessary action on the part of Hennessy Funds Trust, the trustees of the Board of Trustees of Hennessy Funds Trust and the Hennessy Cornerstone Mid Cap 30 Fund, and this Agreement will constitute a valid and binding obligation of Hennessy Funds Trust and the Hennessy Cornerstone Mid Cap 30 Fund enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors’ rights, and to general equity principles;
(k) On the effective date of the Registration Statement, at the time of the meeting of the Reorganizing Funds’ shareholders and on the Closing Date, any written information furnished by Hennessy Funds Trust with respect to the Hennessy Cornerstone Mid Cap 30 Fund for use in the Proxy Materials, the Registration Statement or any other materials provided in connection with the Reorganization does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading; and
(l) To the knowledge of Hennessy Funds Trust, no governmental consents, approvals, authorizations or filings are required under the 1933 Act, the Securities Exchange Act
of 1934 (the “1934 Act”), the 1940 Act or Delaware law for the execution of this Agreement by Hennessy Funds Trust, for itself and on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, or the performance of this Agreement by Hennessy Funds Trust for itself and on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, except for such consents, approvals, authorizations and filings as have been made or received, and except for such consents, approvals, authorizations and filings as may be required after the Closing Date.
(m) The Hennessy Cornerstone Mid Cap 30 Fund currently complies, and has complied since its organization, in all material respects with the requirements of, and the rules and regulations under all applicable federal and state securities laws.
5.2 The Westport Trust, on behalf of each of the Reorganizing Funds, represents and warrants to the Hennessy Cornerstone Mid Cap 30 Fund as of the date hereof and as of the Closing Date as follows:
(a) The Westport Trust was duly created pursuant to its Declaration of Trust by its Board of Trustees for the purpose of acting as a management investment company under the 1940 Act and is validly existing under the laws of Delaware, and the Declaration of Trust directs the Board of Trustees to manage the affairs of the Westport Trust and each of the Reorganizing Funds and grants them all powers necessary or desirable to carry out such responsibility, including administering the Reorganizing Funds’ business as currently conducted by the Reorganizing Funds and as described in the current Prospectus of the Reorganizing Funds. Each of the Reorganizing Funds is a series of the Westport Trust. The Westport Trust is registered as an investment company classified as an open-end management company, under the 1940 Act and its registration with the SEC as an investment company is in full force and effect;
(b) The Reorganizing Funds are each a legally designated, separate series of the Westport Trust duly organized and validly existing under the laws of Delaware, and for each full and partial taxable year from its inception through the Closing Date, the Reorganizing Funds each have qualified as a separate regulated investment company under the Code and each has taken all necessary and required actions to maintain such status;
(c) All of the issued and outstanding shares of each of the Reorganizing Funds have been offered and sold in compliance in all material respects with applicable federal and state securities laws; all issued and outstanding shares of each class of each of the Reorganizing Funds are, and on the Closing Date will be, duly authorized and validly issued and outstanding, and fully paid and nonassessable, free and clear of all liens, pledges, security interests, charges or other encumbrances, and none of the Reorganizing Funds have outstanding any options, warrants or other rights to subscribe for or purchase any of its shares, nor is there outstanding any security convertible into any of its shares;
(d) The Registration Statement with respect to the Westport Trust and the Reorganizing Funds conforms or will conform, at all times up to and including the Closing Date, in all material respects to the applicable requirements of the 1933 Act and the 1940 Act and the regulations thereunder and does not include or will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading;
(e) The Reorganizing Funds are not in violation of, and the execution, delivery and performance of this Agreement by the Westport Trust for itself and on behalf of the Reorganizing Funds does not and will not (i) violate the Declaration of Trust or Bylaws of the Westport Trust, or (ii) result in a breach or violation of, or constitute a default under, any material agreement or material instrument or other undertaking to which the Westport Trust is a party or by which its properties or assets are bound;
(f) Except as previously disclosed in writing to the Hennessy Cornerstone Mid Cap 30 Fund, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or, to the best knowledge of the Westport Trust, threatened against any one of the Reorganizing Funds or any of its properties or assets which, if adversely determined, would materially and adversely affect the financial condition or the conduct of its business, the Westport Trust knows of no facts that might form the basis for the institution of any such proceeding or investigation, and the Reorganizing Funds are not a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects, or is reasonably likely to materially and adversely affect, its business or its ability to consummate the transactions contemplated herein;
(g) The audited financial statements of the Reorganizing Funds as of and for the fiscal year ended December 31, 2015 (copies of which have been furnished to the Hennessy Cornerstone Mid Cap 30 Fund), fairly present, in all material respects, the Reorganizing Funds’ financial condition as of such date and their results of operations for each such periods in accordance with generally accepted accounting principles consistently applied, and as of each such respective date there were no liabilities of any of the Reorganizing Funds (contingent or otherwise) known to the Reorganizing Funds that were not disclosed therein but that would be required to be disclosed therein in accordance with generally accepted accounting principles;
(h) Since the date of the most recent audited financial statements, there has not been any material adverse change with respect to any of the Reorganizing Fund’s financial condition, assets, liabilities or business, other than changes occurring in the ordinary course of business, or any incurrence by a Reorganizing Fund of indebtedness maturing more than one year from the date such indebtedness was incurred, except as otherwise disclosed in writing to and accepted by the Hennessy Cornerstone Mid Cap 30 Fund, prior to the Closing Date (for the purposes of this subparagraph, neither a decline in a Reorganizing Fund’s net asset value per share nor a decrease in a Reorganizing Fund’s size due to redemptions shall be deemed to constitute a material adverse change);
(i) The Reorganizing Funds have timely filed all federal and other tax returns and reports that are required by law to have been filed by the Reorganizing Funds, all such tax returns and reports were complete and accurate, all taxes owed by the Reorganizing Funds have been timely paid, and to the best of the Reorganizing Funds’ knowledge, no such return is
currently under audit and no assessment of a tax deficiency has been made with respect to any such return;
(j) At the Closing Date, the Reorganizing Funds will have good and marketable title to Reorganizing Fund Assets and full right, power and authority to assign, deliver and otherwise transfer such Reorganizing Fund Assets hereunder, and upon delivery and payment for such Reorganizing Fund Assets as contemplated herein, the Hennessy Cornerstone Mid Cap 30 Fund will acquire good and marketable title thereto, subject to no restrictions on the ownership or transfer thereof other than such restrictions as might arise under the 1933 Act;
(k) The execution, delivery and performance of this Agreement on behalf of the Reorganizing Funds will have been duly authorized prior to the Closing Date by all necessary action on the part of the Westport Trust, the trustees of the Board of Trustees of the Westport Trust and the Reorganizing Funds, and this Agreement will constitute a valid and binding obligation of the Westport Trust and each of the Reorganizing Funds enforceable in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors, rights and to general equity principles;
(l) On the effective date of the Registration Statement, at the time of the meeting of the Reorganizing Funds’ shareholders and on the Closing Date, the Proxy Materials (exclusive of the portions of the Hennessy Cornerstone Mid Cap 30 Fund’s Prospectus contained or incorporated by reference therein): (i) will comply in all material respects with the applicable provisions of the 1933 Act, the 1934 Act and the 1940 Act and the regulations thereunder and (ii) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and as of such dates and times, any written information furnished by any of the Reorganizing Funds, on behalf of the Reorganizing Funds, for use in the Registration Statement or in any other manner that may be necessary in connection with the transactions contemplated hereby does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the information provided not misleading;
(m) To the knowledge of the Westport Trust, no governmental consents, approvals, authorizations or filings are required under the 1933 Act, the 1934 Act, the 1940 Act or Delaware law for the execution of this Agreement by the Westport Trust, for itself and on behalf of any of the Reorganizing Funds, or the performance of this Agreement by the Westport Trust and on behalf of any of the Reorganizing Funds, except for such consents, approvals, authorizations and filings as have been made or received, and except for such consents, approvals, authorizations and filings as may be required after the Closing Date; and
(n) The Reorganizing Funds currently comply, and have complied since their organization, in all material respects with the requirements of, and the rules and regulations under all applicable federal and state securities laws.
| 6. | CONDITIONS PRECEDENT TO OBLIGATIONS OF REORGANIZING FUNDS |
The obligations of the Westport Trust to consummate the Reorganization with respect to the Reorganizing Funds shall be subject to the performance by Hennessy Funds Trust on behalf of the Hennessy Cornerstone Mid Cap 30 Fund of all the obligations to be performed by them hereunder on or before the Closing Date and, in addition thereto, the following conditions with respect to the Hennessy Cornerstone Mid Cap 30 Fund:
6.1 All representations and warranties of Hennessy Funds Trust with respect to the Hennessy Cornerstone Mid Cap 30 Fund contained herein shall be true, correct and complete in all respects (in the case of any representation or warranty qualified by materiality or material adverse change) or in all material respects (in the case of any representation or warranty not qualified by materiality or material adverse change) at and as of the Closing Date as though such representations and warranties were made at and as of such time (except those representations and warranties that address matters only as of specific date, the accuracy of which shall be determined as of that specified date in all respects).
6.2 Hennessy Funds Trust on behalf of itself and the Hennessy Cornerstone Mid Cap 30 Fund shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date.
6.3 Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, shall have delivered to the Reorganizing Funds at the Closing a certificate executed on behalf of the Hennessy Cornerstone Mid Cap 30 Fund by Hennessy Funds Trust’s President, Vice President, Assistant Vice President, Secretary or Assistant Secretary, in a form reasonably satisfactory to the Reorganizing Funds and dated as of the Closing Date, to the effect that the representations and warranties of Hennessy Funds Trust on behalf of the Hennessy Cornerstone Mid Cap 30 Fund made herein are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated herein, and as to such other matters as the Reorganizing Funds shall reasonably request.
6.4 The Reorganizing Funds shall have received at the Closing an opinion of Foley & Lardner LLP, legal counsel to Hennessy Funds Trust (“Counsel”), in a form reasonably satisfactory to the Reorganizing Funds (which opinion may be subject to customary qualifications), substantially to the effect that:
(a) Hennessy Funds Trust is a duly registered, open-end, management investment company, and its registration with the SEC as an investment company under the 1940 Act is in full force and effect;
(b) the Hennessy Cornerstone Mid Cap 30 Fund is a separate portfolio of Hennessy Funds Trust, which is a Delaware statutory trust duly organized, validly existing and in good standing under the laws of Delaware;
(c) this Agreement has been duly authorized, executed and delivered by Hennessy Funds Trust on its behalf and on behalf of the Hennessy Cornerstone Mid Cap 30 Fund and, assuming due authorization, execution and delivery of this Agreement on behalf of the Reorganizing Funds, is a valid and binding obligation of Hennessy Funds Trust, enforceable against Hennessy Funds Trust in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors, rights and to general equity principles;
(d) the Shares of the Hennessy Cornerstone Mid Cap 30 Fund to be issued to the Reorganizing Funds and then distributed to the Reorganizing Funds’ Investors pursuant to this Agreement are duly registered under the 1933 Act on the appropriate form, and are duly authorized and upon such issuance will be validly issued and outstanding and fully paid and nonassessable, and no shareholder of the Hennessy Cornerstone Mid Cap 30 Fund has any preemptive rights to subscription or purchase in respect thereof;
(e) to the knowledge of such counsel, no consent, approval, authorization, filing or order of any court or governmental authority of the United States or any state is required for the consummation of the Reorganization with respect to the Hennessy Cornerstone Mid Cap 30 Fund, except for such consents, approvals, authorizations and filings as have been made or received, and except for such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date; and
(f) to the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to Hennessy Funds Trust or the Hennessy Cornerstone Mid Cap 30 Fund or any of their properties or assets and neither Hennessy Funds Trust nor the Hennessy Cornerstone Mid Cap 30 Fund is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely affects its business.
| 7. | CONDITIONS PRECEDENT TO OBLIGATIONS OF THE HENNESSY CORNERSTONE MID CAP 30 FUND |
The obligations of Hennessy Funds Trust to consummate the Reorganization with respect to the Hennessy Cornerstone Mid Cap 30 Fund shall be subject to the performance by the Westport Trust on behalf of the Reorganizing Funds of all the obligations to be performed by it hereunder, with respect to the Reorganizing Funds, on or before the Closing Date and, in addition thereto, the following conditions:
7.1 All representations and warranties of the Westport Trust with respect to the Reorganizing Funds contained herein shall be true, correct and complete in all respects (in the case of any representation or warranty qualified by materiality or material adverse change) or in all material respects (in the case of any representation or warranty not qualified by materiality or material adverse change) at and as of the Closing Date as though such representations and warranties were made at and as of such time (except those representations and warranties that address matters only as of specific date, the accuracy of which shall be determined as of that specified date in all respects).
7.2 The Westport Trust on behalf of itself and each of the Reorganizing Funds shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date.
7.3 The Westport Trust on behalf of the Reorganizing Funds, shall have delivered to the Hennessy Cornerstone Mid Cap 30 Fund at the Closing a certificate executed on behalf of each of the Reorganizing Funds, by the Westport Trust’s President, Vice President, Assistant Vice President, Secretary or Assistant Secretary, in a form reasonably satisfactory to the Hennessy Cornerstone Mid Cap 30 Fund and dated as of the Closing Date, to the effect that the representations and warranties of the Westport Trust on behalf of the Reorganizing Funds made herein are true and correct at and as of the Closing Date, except as they may be affected by the transactions contemplated herein, and as to such other matters as the Hennessy Cornerstone Mid Cap 30 Fund shall reasonably request.
7.4 The Hennessy Cornerstone Mid Cap 30 Fund shall have received at the Closing an opinion of Dechert LLP in a form reasonably satisfactory to the Hennessy Cornerstone Mid Cap 30 Fund (which opinion may be subject to customary qualifications), substantially to the effect that:
(a) the Westport Trust is a duly registered, open-end, management investment company, and its registration with the SEC as an investment company under the 1940 Act is in full force and effect;
(b) each of the Reorganizing Funds is a separate portfolio of the Westport Trust, which is a business trust duly created pursuant to its Declaration of Trust, is validly existing and in good standing under the laws of Delaware, and the Declaration of Trust directs the trustees of the Board of Trustees of the Westport Trust to manage the affairs of each of the Reorganizing Funds and grants them all powers necessary or desirable to carry out such responsibility, including administering the Reorganizing Funds’ business as described in the current Prospectus of the Reorganizing Funds;
(c) this Agreement has been duly authorized, executed and delivered by the Westport Trust on behalf of each of the Reorganizing Funds and, assuming due authorization, execution and delivery of this Agreement on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, is a valid and binding obligation of the Westport Trust, enforceable against the Westport Trust in accordance with its terms, subject as to enforcement, to bankruptcy, insolvency, reorganization, arrangement, moratorium and other similar laws of general applicability relating to or affecting creditors, rights and to general equity principles;
(d) to the knowledge of such counsel, no consent, approval, authorization, filing or order of any court or governmental authority of the United Sates or any state is required for the consummation of the Reorganization with respect to any of the Reorganizing Funds, except for such consents, approvals, authorizations and filings as have been made or received, and except for such consents, approvals, authorizations and filings as may be required subsequent to the Closing Date;
(e) to the knowledge of such counsel, no litigation or administrative proceeding or investigation of or before any court or governmental body is presently pending or threatened as to any one of the Reorganizing Funds or any of its properties or assets and none of the Reorganizing Funds is a party to or subject to the provisions of any order, decree or judgment of any court or governmental body that materially and adversely effects its business; and
(f) the shares of each of the Reorganizing Funds then issued and outstanding are duly registered under the 1933 Act on the appropriate form, and are duly authorized and are validly issued and outstanding and fully paid and nonassessable, and no Investor of any of the Reorganizing Funds has any preemptive rights to subscription or purchase in respect thereof.
7.5 The transfer agent to the Reorganizing Funds shall have delivered to the Hennessy Cornerstone Mid Cap 30 Fund at the Closing a certificate executed on its own behalf by an authorized officer in form and substance satisfactory to the Hennessy Cornerstone Mid Cap 30 Fund and dated as of the Closing Date, to the effect that the shareholder records of each of the Reorganizing Funds are complete and accurate and as to such other matters as the Hennessy Cornerstone Mid Cap 30 Fund shall reasonably request.
7.6 The administrator, fund accountant and custodian to the Reorganizing Funds shall have delivered to the Hennessy Cornerstone Mid Cap 30 Fund at the Closing certificates executed on their behalf by authorized officers in form and substance satisfactory to the Hennessy Cornerstone Mid Cap 30 Fund and dated as of the Closing Date, to the effect that the books and records of each of the Reorganizing Funds covered by its contracts with the Reorganizing Funds are complete and accurate and as to such other matters as the Hennessy Cornerstone Mid Cap 30 Fund shall reasonably request.
7.7 The Reorganizing Funds shall arrange to make the Reorganizing Funds’ auditors available to the Hennessy Cornerstone Mid Cap 30 Fund and its agents to answer their questions at a mutually agreeable time prior to the Closing.
| 8. | FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE HENNESSY CORNERSTONE MID CAP 30 FUND AND THE REORGANIZING FUNDS |
The obligations of Hennessy Funds Trust on behalf of the Hennessy Cornerstone Mid Cap 30 Fund and of the Westport Trust on behalf of the Reorganizing Funds herein are each subject to the further conditions that on or before the Closing Date with respect to the Hennessy Cornerstone Mid Cap 30 Fund and the Reorganizing Funds:
8.1 This Agreement and the transactions contemplated herein shall have been approved by the requisite vote of the holders of the outstanding shares of the Reorganizing Funds in accordance with the provisions of their Declaration of Trust and the requirements of the 1940 Act, and certified copies of the resolutions evidencing such approval shall have been delivered to the Hennessy Cornerstone Mid Cap 30 Fund.
8.2 On the Closing Date, no action, suit or other proceeding shall be pending before any court or governmental agency in which it is sought to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or any of the transactions contemplated herein.
8.3 All consents of other parties and all other consents, orders, approvals and permits of federal, state and local regulatory authorities (including, without limitation, those of the SEC and of state securities authorities) deemed necessary by Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, or the Westport Trust on behalf of the Reorganizing Funds, to permit consummation, in all material respects, of the transactions contemplated herein shall have been obtained, except where failure to obtain any such consent, order or permit would not involve a risk of a material adverse effect on the assets or properties of the Hennessy Cornerstone Mid Cap 30 Fund or the Reorganizing Funds.
8.4 The Registration Statement shall have become effective under the 1933 Act, no stop orders suspending the effectiveness thereof shall have been issued and, to the best knowledge of the parties hereto, no investigation or proceeding for that purpose shall have been instituted or be pending, threatened or contemplated under the 1933 Act.
8.5 Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund, and the Westport Trust, on behalf of each of the Reorganizing Funds, shall each have considered the federal and income tax issues. The Hennessy Cornerstone Mid Cap 30 Fund and the Reorganizing Funds shall have each received an opinion of Counsel as to the federal income tax consequences mentioned below. In rendering such opinion, Counsel may rely as to factual matters, exclusively and without independent verification, on the representations and warranties made in this Agreement, and on officers’ certificates and certificates of public officials if Counsel so requests. The opinion shall be substantially to the effect that for federal income tax purposes:
(a) the transfer by each Reorganizing Fund of the Reorganizing Fund Assets in exchange for Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund, as applicable, and the assumption by the Hennessy Cornerstone Mid Cap 30 Fund of the Liabilities should be treated as a “reorganization” within the meaning of Section 368(a)(1)(C) of the Code and the Hennessy Cornerstone Mid Cap 30 Fund and each Reorganizing Fund should each be treated as a “party to a reorganization” within the meaning of Section 368(b) of the Code;
(b) no gain or loss should be recognized by the Hennessy Cornerstone Mid Cap 30 Fund upon the receipt of the Reorganizing Fund Assets solely in exchange for Institutional Class Shares of the Hennessy Cornerstone Mid Cap 30 Fund and the assumption by the Hennessy Cornerstone Mid Cap 30 Fund of the Liabilities;
(c) no gain or loss should be recognized by the Westport Fund upon the transfer of its Reorganizing Fund Assets to the Hennessy Cornerstone Mid Cap 30 Fund in exchange for the Hennessy Cornerstone Mid Cap 30 Fund’s Institutional Class Shares and the assumption of the Westport Fund’s Liabilities or by the Westport Select Cap Fund upon the transfer of its Reorganizing Fund Assets to the Hennessy Cornerstone Mid Cap 30 Fund in exchange for the Hennessy Cornerstone Mid Cap 30 Fund’s Institutional Class Shares and the
assumption by the Hennessy Cornerstone Mid Cap 30 Fund of the Westport Select Cap Fund’s Liabilities or upon the distribution (whether actual or constructive) of the Hennessy Cornerstone Mid Cap 30 Fund’s Shares to the Reorganizing Fund’s Investors in complete liquidation of the Reorganizing Fund;
(d) no gain or loss should be recognized by a Reorganizing Fund’s Investors upon the receipt of the Hennessy Cornerstone Mid Cap 30 Fund’s Institutional Class Shares distributed in complete liquidation of the Reorganizing Fund;
(e) the aggregate tax basis of the Hennessy Cornerstone Mid Cap 30 Fund’s Shares received by an applicable Reorganizing Fund’s Investor pursuant to the Reorganization should be the same as the aggregate tax basis of the Reorganizing Fund’s Shares held by such Investor immediately prior to the Reorganization, and the holding period of the Hennessy Cornerstone Mid Cap 30 Fund’s Shares to be received by such Reorganizing Fund’s Investor should include the period during which the Reorganizing Fund’s Shares exchanged therefor were held by such Investor (provided the Reorganizing Fund’s Shares were held by such Investor as capital assets on the date of the Reorganization);
(f) the tax basis of the Reorganizing Funds’ assets acquired by the Hennessy Cornerstone Mid Cap 30 Fund should be the same as the tax basis of such assets of the Reorganizing Funds immediately prior to the Reorganization, and the holding period of the assets of the Reorganizing Funds, in the hands of the Hennessy Cornerstone Mid Cap 30 Fund should include the period during which those assets were held by the Reorganizing Funds; and
(g) the Hennessy Cornerstone Mid Cap 30 Fund should succeed to and take into account, as of the date of the transfer as defined in Section 1.381(b)-1(b) of the income tax regulations issued by the United States Department of the Treasury, the items of the Reorganizing Funds described in Section 381(c) of the Code, subject to the conditions and limitations specified in Sections 381, 382, 383 and 384 of the Code and the Regulations thereunder.
8.6 On or before the Closing Date, each Reorganizing Fund shall declare and pay a dividend or dividends, with a record date and ex-dividend date prior to the Valuation Date, which, together with all previous such dividends, shall have the effect of distributing to such Reorganizing Fund’s Investors all of the Reorganizing Fund’s previously undistributed (i) “investment company taxable income” within the meaning of Section 852(b)(2) of the Code (computed without regard to Section 852(b)(2)(D) of the Code), (ii) the excess, if any, of (A) the amount specified in Section 852(a)(1)(B)(i) of the Code over (B) the amount specified in Section 852(a)(1)(B)(ii) of the Code, and (iii) all of the Reorganizing Fund’s net capital gains realized (after reduction for any capital loss carry forward), if any, in all taxable periods or years ending on or before the Closing Date.
Each of the Reorganizing Funds and the Hennessy Cornerstone Mid Cap 30 Fund, or their affiliated investment advisers, shall be responsible for paying its own professional fees and
other costs and expenses incurred by it in connection with entering into and carrying out the provisions of this Agreement, provided that the Reorganizing Funds or their affiliated investment adviser, shall bear all of the costs associated with the proxy vote of the shareholders of the Reorganizing Funds other than the legal fees and accounting fees of the Hennessy Cornerstone Mid Cap 30 Fund, or its affiliated investment adviser, related to the proxy vote, but including the costs and expenses of the third-party solicitation firm, printing costs, mailing costs and all of the other reasonable and documented costs and expenses incurred in connection with the proxy vote.
| 10. | ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES |
10.1 This Agreement constitutes the entire agreement between the parties and supersedes any prior or contemporaneous understanding or arrangement with respect to the subject matter hereof.
10.2 Except as otherwise specified below, the representations and warranties contained in this Agreement or in any document delivered pursuant to or in connection with this Agreement, shall survive the consummation of the transactions contemplated herein for a two year period, except that any representation or warranty with respect to taxes shall survive for the expiration of the statutory period of limitations for assessments of tax deficiencies as the same may be extended from time to time by the taxpayer. The covenants and agreements included or provided for herein shall survive and be continuing obligations in accordance with their terms.
11.1 This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time before the Closing by:
(a) the Westport Trust if the conditions set forth in Section 6 or Section 8 are not satisfied as specified in such Sections;
(b) Hennessy Funds Trust if the conditions set forth in Section 7 or Section 8 are not satisfied as specified in such Sections; or
(c) the mutual consent of both parties to this Agreement.
11.2 If this Agreement is terminated pursuant to and in accordance with Section 11.1, then the termination shall be without liability of any party; provided however that if the termination shall result from the material breach by a party of a covenant or agreement of such party contained in this Agreement, then such party responsible for the material breach shall be fully liable for any and all reasonable costs and expenses (including reasonable counsel fees and disbursements) sustained or incurred by the non-breaching party.
This Agreement may be amended, modified or supplemented in such manner as may be mutually agreed upon in writing by the authorized officers of the Westport Trust on behalf of the
Reorganizing Funds, and officers of Hennessy Funds Trust, on behalf of the Hennessy Cornerstone Mid Cap 30 Fund; provided, however, that following the meeting of the shareholders of the Reorganizing Funds, no such amendment may have the effect of changing the provisions for determining the number of shares of the Hennessy Cornerstone Mid Cap 30 Fund to be delivered to the Reorganizing Funds’ Investors under this Agreement to the detriment of such Reorganizing Funds’ Investors, or otherwise materially and adversely affecting the Reorganizing Funds, without the Reorganizing Funds obtaining the Reorganizing Funds’ Investors’ further approval except that nothing in this Section 12 shall be construed to prohibit the Hennessy Cornerstone Mid Cap 30 Fund and the Reorganizing Funds from amending this Agreement to change the Closing Date or Valuation Date by mutual agreement.
13.1 Hennessy Funds Trust and the Hennessy Cornerstone Mid Cap 30 Fund shall indemnify, defend and hold harmless the Westport Trust and the Reorganizing Funds, their respective officers, trustees, employees and agents against any and all claims, actions, damages, obligations, losses, liabilities, costs and expenses, including reasonable attorneys’ fees, costs of collection and other costs of defense, actually incurred by the Westport Trust and arising from or in connection with (a) any breach of any representation or warranty of Hennessy Funds Trust on behalf of itself and the Hennessy Cornerstone Mid Cap 30 Fund contained in or made pursuant to this Agreement or (b) any breach of any covenant of Hennessy Funds Trust on behalf of itself and the Hennessy Cornerstone Mid Cap 30 Fund contained in or made pursuant to this Agreement. No party shall be entitled to indemnification under this Agreement unless written notice of the events or circumstances giving rise to such claim for indemnification has been provided to the indemnifying party or parties no later than twenty-four months after the Closing Date, except that the representations and warranties contained in Sections 5.1(a), 5.1(d), 5.2(a), 5.2(e) and 5.2(j) (collectively, the “Fundamental Representations”) shall survive indefinitely.
13.2 The Westport Trust and each of the Reorganizing Funds shall indemnify, defend and hold harmless Hennessy Funds Trust and the Hennessy Cornerstone Mid Cap 30 Fund, its respective officers, trustees, employees and agents against any and all claims, actions, damages, obligations, losses, liabilities, costs and expenses, including reasonable attorneys’ fees, costs of collection and other costs of defense, actually incurred by Hennessy Funds Trust and arising from or in connection with (a) any breach of any representation or warranty of the Westport Trust on behalf of itself and each of the Reorganizing Funds contained in or made pursuant to this Agreement or (b) any breach of any covenant of the Westport Trust on behalf of itself and each of the Reorganizing Funds contained in or made pursuant to this Agreement. No party shall be entitled to indemnification under this Agreement unless written notice of the events or circumstances giving rise to such claim for indemnification has been provided to the indemnifying party or parties no later than twenty-four months after the Closing Date, except that the Fundamental Representations shall survive indefinitely.
Any notice, report, statement or demand required or permitted by any provision of this Agreement shall be in writing and shall be given by prepaid telegraph, telecopy, certified mail or overnight express courier addressed to:
For Hennessy Funds Trust, on behalf of itself and the Hennessy Cornerstone Mid Cap 30 Fund:
Hennessy Funds Trust 7250 Redwood Blvd Suite 200 Novato, California 94945 Attention: Neil J. Hennessy |
With a copy to: Foley & Lardner LLP 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Peter D. Fetzer |
For the Westport Trust on behalf of itself and the Reorganizing Funds: The Westport Funds 253 Riverside Avenue Westport, Connecticut 06880 Attention: Andrew J. Knuth |
With a copy to: Dechert LLP 1900 K Street NW Washington, DC 20006 Attention: Megan C. Johnson |
| 15. | HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY |
15.1 The section and paragraph headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references herein to Sections, paragraphs, subparagraphs or Exhibits shall be construed as referring to Sections, paragraphs or subparagraphs hereof or Exhibits hereto, respectively. Whenever the terms “hereto,” “hereunder,” “herein” or “hereof” are used in this Agreement, they
shall be construed as referring to this entire Agreement, rather than to any individual Section, paragraph, subparagraph or sentence.
15.2 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
15.3 This Agreement shall be governed by and construed in accordance with the laws of Delaware without regard to conflict of law provisions.
15.4 This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and assigns, but no assignment or transfer hereof or of any rights or obligations hereunder shall be made by any party without the written consent of the other parties. Nothing herein expressed or implied is intended or shall be construed to confer upon or give any person, firm or corporation, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.
15.5 It is expressly agreed that the obligations of the Reorganizing Funds hereunder shall not be binding upon any of the trustees, shareholders, nominees, officers, agents, or employees of the Westport Trust personally, but shall bind only the Westport Trust property of the Reorganizing Funds, as provided in the Westport Trust’s Declaration of Trust. The execution and delivery of this Agreement has been authorized by the trustees of the Westport Trust on behalf of the Reorganizing Funds and signed by authorized officers of the Westport Trust, acting as such. Neither the authorization by such trustees nor the execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the Westport Trust property of the Reorganizing Funds as provided in the Westport Trust’s Declaration of Trust.
* * *
[Signatures follow on the next page.]
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be duly executed by its authorized officer.
Hennessy Funds Trust, for itself and on behalf of the Hennessy Cornerstone Mid Cap 30 Fund Neil J. Hennessy, President and Chief Executive Officer | | The Westport Funds, for itself and on behalf of the Westport Fund and the Westport Select Cap Fund Edmund H. Nicklin, Jr. President |
| | | |
Hennessy Advisors, Inc., solely for purposes of Section 9 President and Chief Executive Officer | | Westport Advisers, LLC, solely for purposes of Section 9 Andrew J. Knuth Managing Member |
EXHIBIT B
FINANCIAL HIGHLIGHTS – INSTITUTIONAL CLASS SHARES
The following tables are intended to help you understand the financial performance of the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund for the past five years. Certain information reflects financial results for a single Hennessy Cornerstone Mid Cap 30 Fund share. The total returns in the table represent the rate that an investor would have earned on an investment in the Hennessy Cornerstone Mid Cap 30 Fund (assuming reinvestment of all dividends and distributions). This information has been derived from financial statements audited by KPMG LLP, an independent registered public accounting firm. KPMG LLP’s report and the Hennessy Cornerstone Mid Cap 30 Fund’s financial statements are included in the Annual Report, which is available upon request. The Hennessy Cornerstone Mid Cap 30 Fund’s unaudited financial statements for the six months ended April 30, 2016, are included in the Hennessy Cornerstone Mid Cap 30 Fund’s semi-annual report, which is available upon request.
The Hennessy Cornerstone Mid Cap 30 Fund is a successor to a series of Hennessy Mutual Funds, Inc., a Maryland corporation, with the same fund name pursuant to a reorganization that took place after the close of business on February 28, 2014. Prior to that date, the successor Hennessy Cornerstone Mid Cap 30 Fund had no investment operations. As a result of the reorganization, holders of Institutional Class shares of the predecessor Hennessy Cornerstone Mid Cap 30 Fund received Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund (the Institutional Class shares of the Hennessy Cornerstone Mid Cap 30 Fund is the successor to the accounting and performance information of the predecessor Hennessy Cornerstone Mid Cap 30 Fund).
| HENNESSY CORNERSTONE MID CAP 30 FUND – INSTITUTIONAL CLASS |
| | Year Ended October 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| PER SHARE DATA: | | | | | |
| Net asset value, beginning of year | $19.36 | $17.62 | $14.31 | $12.32 | $11.29 |
| | | | | | |
| Income from investment operations: | | | | | |
| Net investment income (loss) | (0.03) | (0.08) | 0.14 | 0.09 | (0.05) |
| Net realized and unrealized gains on investments | 2.38 | 3.17 | 3.41 | 1.90 | 1.08 |
| Total from investment operations | 2.35 | 3.09 | 3.55 | 1.99 | 1.03 |
| | | | | | |
| Less distributions: | | | | | |
| Dividends from net investment income | — | (0.09) | (0.24) | — | — |
| Dividends from net realized gains | (1.16) | (1.26) | — | — | — |
| Total distributions | (1.16) | (1.35) | (0.24) | — | — |
| | | | | |
Net asset value, end of year | $20.55 | $19.36 | $17.62 | $14.31 | $12.32 |
| TOTAL RETURN | 12.62% | 18.57% | 25.15% | 16.15% | 9.12% |
| | | | | | |
| SUPPLEMENTAL DATA AND RATIOS: | | | | | |
| Net assets, end of year (millions) | $306.04 | $75.53 | $51.19 | $41.62 | $24.06 |
| Ratio of expenses to average net assets: | | | | | |
| Before expense reimbursement | 0.96% | 1.07% | 1.11% | 1.16% | 1.14% |
| After expense reimbursement | 0.96% | 0.98% | 0.98% | 0.98% | 0.98% |
| Ratio of net investment income (loss) to average net assets: | | | | | |
| Before expense reimbursement | 0.41% | (0.29)% | 0.71% | 0.90% | (0.41)% |
| After expense reimbursement | 0.41% | (0.20)% | 0.84% | 1.08% | (0.57)% |
Portfolio turnover rate(1) | 5% | 132% | 212% | 25% | 107% |
(1) Portfolio turnover is calculated on the basis of the fund as a whole.
Pursuant to Chapter 38 of Title 12 of the Delaware Code, the Trust Instrument of Hennessy Funds Trust (the “Registrant”), dated September 16, 1992, contains the following article, which is in full force and effect and has not been modified or canceled:
(a) Subject to the exceptions and limitations contained in Section 10.2(b) below:
(i) every Person who is, or has been, a Trustee or officer of the Trust (hereinafter referred to as a “Covered Person”) shall be indemnified by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee or officer and against amounts paid or incurred by him in the settlement thereof;
(ii) the words “claim,” “action,” “suit,” or “proceeding” shall apply to all claims, actions, suits or proceedings (civil, criminal or other, including appeals), actual or threatened while in office or thereafter, and the words “liability” and “expenses” shall include, without limitation, attorneys’ fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
(i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its Shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office or (B) not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a determination that such Trustee or officer did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office,
provided, however, that any Shareholder may, by appropriate legal proceedings, challenge any such determination by the Trustees or by independent counsel.
Insofar as indemnification for and with respect to liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing provisions or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person or Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
ITEM 16. EXHIBITS.
(b) Consent of Independent Registered Public Accounting Firm (filed herewith).
ITEM 17. UNDERTAKINGS.
(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as part of an amendment to the Registration Statement and will not be used until the amendment is effective, and that, in determining any liability under the 1933 Act, each post-effective amendment shall be deemed to be a new registration statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.
As required by the Securities Act of 1933, this Registration Statement has been signed on behalf of the Registrant, in the City of Novato and State of California, on the 7th day of June, 2016.
As required by the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
