STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 28, 2024

HENNESSY FUNDS TRUST

7250 Redwood Boulevard
Suite 200
Novato, California 94945

1-800-966-4354

1-415-899-1555

This Statement of Additional Information (this “SAI”) relates to the Funds and Classes identified below (each, a “Fund” and collectively, the “Funds” or the “Hennessy Funds”). This SAI does not relate to the Hennessy Stance ESG ETF, which is offered in a different Prospectus and Statement of Additional Information, each dated February 28, 2024, as amended and restated from time to time. This SAI is not a prospectus and should be read in conjunction with the current Prospectus of the Funds (the “Fund Prospectus”), dated February 28, 2024, as amended and supplemented from time to time. A copy of the Fund Prospectus may be obtained by calling or writing to the Funds at the telephone number or address shown above.

 

The financial statements, accompanying notes, and report of independent registered public accounting firm contained in the annual reports of the Funds, dated October 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on January 4, 2024, are incorporated by reference into this SAI under Investment Company Act File No. 811-07168. The Funds’ annual and semi‑annual reports are available without charge by calling the Funds at the toll-free telephone number shown above, by visiting the Funds’ website at www.hennessyfunds.com, or on the SEC’s website at www.sec.gov.

 

FUND HISTORY AND CLASSIFICATION	1
INVESTMENT RESTRICTIONS	3
INVESTMENT CONSIDERATIONS	10
TRUSTEES AND OFFICERS	31
OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS	38
MANAGEMENT OF THE FUNDS	50
PORTFOLIO TRANSACTIONS	70
DISCLOSURE OF PORTFOLIO HOLDINGS	73
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION	74
ABANDONED PROPERTY	76
VALUATION OF SHARES	76
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS	77
DESCRIPTION OF CERTAIN INSTRUMENTS	93
ANTI-MONEY LAUNDERING PROGRAM	93
OTHER INFORMATION	94

 

Each Fund is a separate investment portfolio or series of Hennessy Funds Trust (the “Trust”), a Delaware statutory trust organized on September 17, 1992. The Trust is an open-end, management investment company registered under the Investment Company Act of 1940, and the regulations, rules, and guidance issued by the SEC thereunder (the “1940 Act”). The Trust is comprised of seventeen series, including the 16 Funds. The Funds are advised by Hennessy Advisors, Inc. (the “Investment Manager”) and include the following:

 

DOMESTIC EQUITY

 

•	Hennessy Cornerstone Growth Fund (the “Cornerstone Growth Fund”)

•	Hennessy Focus Fund (the “Focus Fund”)

•	Hennessy Cornerstone Mid Cap 30 Fund (the “Cornerstone Mid Cap 30 Fund”)

•	Hennessy Cornerstone Large Growth Fund (the “Cornerstone Large Growth Fund”)

•	Hennessy Cornerstone Value Fund (the “Cornerstone Value Fund”)

MULTI‑ASSET

 

•	Hennessy Total Return Fund (the “Total Return Fund”)

•	Hennessy Equity and Income Fund (the “Equity and Income Fund”)

•	Hennessy Balanced Fund (the “Balanced Fund”)

SECTOR & SPECIALTY

 

•	Hennessy Energy Transition Fund (the “Energy Transition Fund”)

•	Hennessy Midstream Fund (the “Midstream Fund”)

•	Hennessy Gas Utility Fund (the “Gas Utility Fund”)

•	Hennessy Japan Fund (the “Japan Fund”)

•	Hennessy Japan Small Cap Fund (the “Japan Small Cap Fund”)

•	Hennessy Large Cap Financial Fund (the “Large Cap Financial Fund”)

•	Hennessy Small Cap Financial Fund (the “Small Cap Financial Fund”)

•	Hennessy Technology Fund (the “Technology Fund”)

Each Fund identified below is a successor to a series of Hennessy Mutual Funds, Inc., a Maryland corporation (“HMFI”), Hennessy SPARX Funds Trust, a Massachusetts business trust (“HSFT”), or The

Hennessy Funds, Inc., a Maryland corporation (“HFI”), pursuant to a reorganization that took place after the close of business on February 28, 2014:

 

•	The Cornerstone Growth Fund is the successor to the Hennessy Cornerstone Growth Fund, a series of HMFI;

•	The Cornerstone Mid Cap 30 Fund is the successor to the Hennessy Cornerstone Mid Cap 30 Fund, a series of HMFI;

•	The Cornerstone Value Fund is the successor to the Hennessy Cornerstone Value Fund, a series of HMFI;

•	The Total Return Fund is the successor to the Hennessy Total Return Fund, a series of HFI;

•	The Balanced Fund is the successor to the Hennessy Balanced Fund, a series of HFI;

•	The Japan Fund is the successor to the Hennessy Japan Fund, a series of HSFT; and

•	The Japan Small Cap Fund is the successor to the Hennessy Japan Small Cap Fund, a series of HSFT.

Prior to February 28, 2014, each of the above successor Funds had no investment operations. In connection with the reorganization, holders of Investor Class shares of the predecessor funds listed above (collectively, the “Predecessor Hennessy Funds”) received Investor Class shares of the successor Funds, and holders of Institutional Class shares of the Predecessor Hennessy Funds received Institutional Class shares of the successor Funds. Each successor Fund is the accounting and performance information successor of the corresponding Predecessor Hennessy Fund.

 

Each of the Energy Transition Fund and the Midstream Fund is the successor to the BP Capital TwinLine Energy Fund and the BP Capital TwinLine MLP Fund (together, the “Predecessor BP Funds”), respectively, pursuant to a reorganization that became effective after the close of business on October 26, 2018. Prior to that date, neither the Energy Transition Fund nor the Midstream Fund had any investment operations. Each Predecessor BP Fund was managed by BP Capital Fund Advisors, LLC and had substantially similar investment objectives and strategies as its applicable successor Fund. In connection with the reorganization, holders of Class A shares of each Predecessor BP Fund received Investor Class shares of the applicable successor Fund, and holders of Class I shares of each Predecessor BP Fund received Institutional Class shares of the applicable successor Fund identified. Each successor Fund is the accounting and performance information successor of the corresponding Predecessor BP Fund. Prior to the reorganization, the Predecessor BP Funds had a fiscal year end of November 30. In connection with the reorganization, the fiscal year end changed to October 31.

 

Each Predecessor Hennessy Fund and Predecessor BP Fund is referenced in this SAI as the applicable current Fund, even though any reference to any such Fund on or prior to February 28, 2014, and October 26, 2018, respectively, actually refers to that Fund’s predecessor.

 

The chart below identifies which Funds have diversified portfolios and which Funds have non‑diversified portfolios:

 

Although the Energy Transition Fund and the Japan Fund have diversified portfolios, they each employ a relatively concentrated investment strategy and may hold securities of fewer issuers than other diversified funds.

 

Other than the Total Return Fund and the Balanced Fund, each Fund offers both Investor Class shares and Institutional Class shares (each, a “Class”). Investor Class shares and Institutional Class shares represent an interest in the same assets of a Fund, have the same rights, and are identical in all material respects, except that (i) Investor Class shares bear distribution fees, while Institutional Class shares are not subject to such fees, (ii) Investor Class shares bear shareholder servicing fees payable to the Investment Manager, while Institutional Class shares are not subject to such fees, (iii) Institutional Class shares are available only to shareholders who invest directly in a Fund or who invest through a broker-dealer, financial institution, or servicing agent that has entered into appropriate arrangements with a Fund and provides services to the Fund, (iv) Institutional Class shares have a higher minimum initial investment, and (v) the Board of Trustees may elect to have certain expenses specific to Investor Class shares or Institutional Class shares be borne solely by the Class to which such expenses are attributable, but any expenses not specifically allocated to Investor Class shares or Institutional Class shares are allocated to each such Class on the basis of the net asset value (sometimes referred to as “NAV”) of that Class in relation to the NAV of the applicable Fund. The Board of Trustees may classify and reclassify the shares of the Funds into additional classes of shares at a future date.

 

 

FUNDAMENTAL POLICIES

 

The investment restrictions set forth below are fundamental policies of each Fund that cannot be changed without the approval of the holders of the lesser of (i) 67% or more of the Fund’s shares present or

represented at a meeting of shareholders at which holders of more than 50% of the Fund’s outstanding shares are present or represented or (ii) more than 50% of the outstanding shares of the Fund:

 

Senior Securities

 

All Funds other than the Gas Fund may issue senior securities to the extent permitted by the 1940 Act. The Gas Fund may not issue senior securities.

 

Borrowing

 

Each Fund may borrow money as permitted by the 1940 Act, subject to any additional restrictions described below.

 

For the Total Return Fund, the Energy Transition Fund, the Midstream Fund, the Japan Fund, and the Japan Small Cap Fund, there are no additional restrictions.

 

Each Fund other those specified above may borrow money to facilitate redemptions and may borrow an amount up to 33‑1/3% of its total assets (except that the percentage limitation is 10% for the Balanced Fund and 30% for the Gas Fund). In addition, the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, and the Cornerstone Value Fund may also borrow money for other extraordinary or emergency purposes.

 

The Balanced Fund and the Gas Fund may not purchase any portfolio securities while borrowed amounts remain outstanding.

 

Underwriting

 

Except to the extent the Fund may be deemed to be an underwriter under the Securities Act of 1933, as amended (the “1933 Act”), when selling portfolio securities or selling its own shares, no Fund may act as an underwriter.

 

Industry Concentration

 

No Fund other than the Energy Transition Fund, the Midstream Fund, the Gas Fund, the Large Cap Financial Fund, the Small Cap Financial Fund, and the Technology Fund may make an investment in any one industry if such investment would cause the aggregate value of the Fund’s investment in such industry to equal or exceed 25% of the Fund’s net assets. This policy does not apply to U.S. Treasury securities, which are obligations issued or guaranteed by the U.S. government, and U.S. government agency and instrumentality obligations (collectively with U.S. Treasury securities, “U.S. Government Securities”), certificates of deposit, and bankers’ acceptances. Certain of these instruments are described in greater detail under the “DESCRIPTION OF CERTAIN INSTRUMENTS” section of this SAI.

 

None of the Energy Transition Fund, the Midstream Fund, the Gas Fund, the Large Cap Financial Fund, the Small Cap Financial Fund, or the Technology Fund may purchase the securities of any issuer if, as a result, less than 25% of the Fund’s assets would be invested in the securities of issuers principally engaged in (i) with respect to the Energy Transition Fund and the Midstream Fund, the energy industry, (ii) with respect to the Gas Fund, the utilities industry, (iii) with respect to the Large Cap Financial Fund and the Small Cap Financial Fund, financial services companies (including information technology companies that concentrate in financial services), and (iv) with respect to the Technology Fund, the Information Technology sector. For the Energy Transition Fund and the Midstream Fund, this restriction is on a total assets basis. For

the Gas Fund, the Large Cap Financial Fund, the Small Cap Financial Fund, and the Technology Fund, this restriction is on a net assets basis.

 

For the Japan Fund and the Japan Small Cap Fund, the percentage of assets invested in an industry is determined by reference to the 33 industry groups of the Securities Identification Code Committee, which are adopted by the various stock exchanges in Japan, including the Tokyo Stock Exchange and the JASDAQ Securities Exchange.

 

Issuer Concentration

 

Subject to the exceptions noted below, no Fund may purchase securities of any one issuer (except U.S. Government Securities) if, as a result, at the time of purchase more than 5% of the Fund’s total assets would be invested in such issuer or the Fund would own or hold 10% or more of the outstanding voting securities of that issuer.

 

For each non‑diversified Fund, up to 50% of the total assets of the Fund may be invested without regard to this restriction.

 

For each diversified Fund other than the Gas Fund, up to 25% of the total assets of the Fund may be invested without regard to this restriction.

 

For the Gas Fund, there are no exceptions.

 

Real Estate

 

No Fund may purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (although a Fund may invest in securities or other instruments secured by real estate or securities of companies engaged in the real estate business).

 

In addition, (i) the Cornerstone Growth Fund may not purchase securities secured by real estate or issued by companies that invest in real estate and (ii) the Total Return Fund and the Balanced Fund may not invest in the securities of real estate limited partnerships.

 

Commodities

 

No Fund may buy or sell commodities. Other than the Gas Fund, no Fund may purchase or sell commodity contracts (but this does not prevent a Fund from purchasing or selling options and futures contracts or from investing in securities or other instruments backed by physical commodities).

 

Loans

 

None of the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, the Cornerstone Value Fund, the Total Return Fund, the Balanced Fund, the Energy Transition Fund, or the Midstream Fund may make loans. This limitation does not apply to (i) securities lending (except that the Total Return Fund and the Balanced Fund may not lend securities), (ii) repurchase agreements to the extent the entry into a repurchase agreement is deemed to be a loan, or (iii) the purchase of debt securities or other debt instruments.

 

None of the Focus Fund, the Equity and Income Fund, the Large Cap Financial Fund, the Small Cap Financial Fund, or the Technology Fund may lend any security or make any other loan if, as a result, more than 33-1/3% of its total assets would be lent to other parties. This limitation does not apply to (i) repurchase

agreements to the extent the entry into a repurchase agreement is deemed to be a loan and (ii) the purchase of debt securities or other debt instruments.

 

The Gas Fund may not make loans. This restriction does not apply to repurchase agreements provided the Gas Fund maintains collateral equal to at least 100% of the value of the borrowed security and the instrument is marked to market daily.

 

Control Investments

 

The Total Return Fund and the Balanced Fund may not make investments for the purpose of exercising control or management of any company.

 

Margin

 

None of the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, the Cornerstone Value Fund, the Total Return Fund, the Balanced Fund, the Japan Fund, and the Japan Small Cap Fund may purchase securities on margin (other than short‑term credit necessary for clearance of Fund transactions), except that each such Fund other than the Total Return Fund and the Balanced Fund may use options or futures strategies and may make margin deposits in connection with its use of options, futures contracts, and options on futures contracts. A short sale is not deemed to be a margin purchase.

 

The Gas Fund may not purchase securities on margin.

 

Oil, Gas, or Mineral Interests

 

None of the Total Return Fund, the Balanced Fund, the Japan Fund, or the Japan Small Cap Fund may purchase or sell any interest in any oil, gas, or other mineral exploration or development program, including any oil, gas, or mineral lease.

 

The Gas Fund may not purchase the securities of any issuer if, as a result, more than 25% of its total assets would be invested in oil, gas, or other mineral leases.

 

 Pledges

 

None of the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, or the Cornerstone Value Fund may pledge its assets other than to secure borrowings or in connection with hedging transactions, short‑sales, when‑issued and forward commitment transactions, and similar investment strategies (to the extent the Fund’s investment policies permit such strategies). For purposes of this restriction, the deposit of initial or maintenance margin in connection with futures contracts is not deemed a pledge of the assets of the Fund.

 

Neither the Total Return Fund nor the Balanced Fund may pledge its assets, except to secure permitted borrowings.

 

Restricted Securities

 

The Gas Fund may not purchase or sell restricted securities.

 

Short Sales

 

None of the Total Return Fund, the Balanced Fund, or the Gas Fund may make short sales of securities or maintain a short position.

 

OTHER INVESTMENT RESTRICTIONS

 

The following investment restrictions and operating policies of each Fund may be changed by the Board of Trustees without shareholder approval.

 

Borrowing

 

The Cornerstone Growth Fund may not purchase any portfolio securities while borrowed amounts remain outstanding.

 

Naming Rule

 

Each of the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, the Equity and Income Fund, the Energy Transition Fund, the Midstream Fund, the Gas Fund, the Japan Fund, the Japan Small Cap Fund, the Large Cap Financial Fund, the Small Cap Financial Fund, and the Technology Fund normally invests at least 80% of the value of its net assets, plus the amount of any borrowings for investment purposes, in the particular type of investment suggested by the Fund’s name.

 

If the Board of Trustees were to change this non-fundamental policy for any of the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, the Japan Fund, or the Japan Small Cap Fund, the Fund must provide 60 days’ prior written notice to the shareholders before implementing the change. Any such notice must be in plain English in a separate written document containing the following prominent statement in boldface type: “Important Notice Regarding Change in Investment Policy.” If the notice is included with other communications to shareholders, the aforementioned statement must also be included on the envelope in which the notice is delivered.

 

Securities Lending

 

The Cornerstone Growth Fund may not lend its portfolio securities.

 

Affiliate Investments

 

None of the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, the Cornerstone Value Fund, the Total Return Fund, or the Balanced Fund may acquire or retain any security issued by a company whose officer or director is also an officer or Trustee of the Funds or an officer, director, or other affiliated person of the Investment Manager.

 

Control Investments

 

None of the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, the Cornerstone Value Fund, the Japan Fund, and the Japan Small Cap Fund may make investments for the purpose of exercising control or management of any company.

 

Derivatives

 

No Fund may enter into derivatives transactions, as defined in Rule 18f‑4(a) under the 1940 Act. However, a Fund may enter into reverse repurchase agreements or similar financing transactions, pursuant to

Rule 18f‑4(d)(i), as long as such Fund complies with the asset coverage requirements of Section 18 of the 1940 Act, and combines the aggregate amount of indebtedness associated with all reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the asset coverage ratio.

 

Illiquid Securities

 

No Fund may invest in illiquid securities if at the time of acquisition more than 15% of such Fund’s net assets would be invested in such securities. Illiquid securities are securities that a Fund reasonably expects cannot be sold, disposed of, or reversed in seven calendar days or less under current market conditions without such sale, disposition, or reversal significantly changing the market value of the investment. If a Fund exceeds the limitation on illiquid securities other than by a change in market values, the Fund must report the condition to the Board of Trustees and, when required by Rule 22e-4 of the 1940 Act, to the SEC.

 

Securities that may be resold in accordance with Rule 144A under the 1933 Act (“Rule 144A”), securities offered pursuant to Section 4(a)(2) of the 1933 Act, and securities otherwise subject to restrictions on resale under the 1933 Act are not deemed illiquid solely by reason of being unregistered. The Investment Manager determines the liquidity of a particular security based on the trading markets for the specific security and other factors.

 

Investment Company Securities

 

Pursuant to Section 12(d)(1) of the 1940 Act, no Fund may invest more than 10% of its assets in shares of investment companies. A Fund may invest up to 5% of its assets in any one investment company, as long as no investment represents more than 3% of the voting stock of an acquired investment company. Rule 12d1‑4 provides an exemption from Section 12(d)(1) that allows a Fund to invest all of its assets in other registered funds, including exchange‑traded funds, if the Fund satisfies certain conditions specified in the Rule, including, among other conditions, that the Fund and its advisory group will not control (individually or in the aggregate) an acquired fund (e.g., hold more than 25% of the outstanding voting securities of an acquired fund that is a registered open-end management investment company).

 

Length of Operations

 

Neither the Total Return Fund nor the Balanced Fund may invest in securities of any issuer that has a record of less than three years of continuous operation, including the operation of any predecessor business of a company that came into existence as a result of a merger, consolidation, reorganization, or purchase of substantially all of the assets of such predecessor business.

 

Margin

 

None of the Focus Fund, the Equity and Income Fund, the Large Cap Financial Fund, the Small Cap Financial Fund, or the Technology Fund may purchase securities on margin (except for short‑term credit necessary for clearance of Fund transactions), except that each such Fund may use options or futures strategies and may make margin deposits in connection with its use of options, futures contracts, and options on futures contracts. A short sale is not deemed to be a margin purchase.

 

Oil, Gas, or Mineral Interests

 

The Cornerstone Growth Fund may not purchase any interest in any oil, gas, or other mineral exploration or development program.

 

Options and Warrants

 

The Cornerstone Growth Fund may not use options on futures strategies.

 

The Gas Fund may not invest in warrants.

 

Ownership of Other Investment Companies

 

No Fund may purchase the securities of other investment companies except to the extent such purchases are permitted by the 1940 Act.

 

Pledges

 

Neither the Japan Fund nor the Japan Small Cap Fund may pledge its assets other than to secure permitted borrowings, to the extent related to the purchase of securities on a forward commitment, when‑issued, or delayed-delivery basis, or to the extent related to the deposit of assets in escrow in connection with writing covered put and call options and collateral and initial or variation margin arrangements with respect to permitted transactions.

 

Puts or Calls

 

None of the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, and the Cornerstone Value Fund may write, purchase, or sell puts, call straddles, or spreads, or combinations thereof, except as otherwise permitted in the Fund Prospectus and this SAI.

 

Real Estate

 

The Cornerstone Growth Fund may not purchase securities secured by real estate or issued by companies that invest in real estate.

 

Restricted Securities

 

The Cornerstone Growth Fund may not purchase or sell restricted securities.

 

Reverse Repurchase Agreements

 

The Energy Transition Fund and the Midstream Fund may each invest a maximum of 10% of its total assets in reverse repurchase agreements.

 

Short‑Term Investments

 

None of the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, the Cornerstone Value Fund, the Total Return Fund, or the Balanced Fund may generally use investments in cash or short‑term securities for temporary defensive positions. The portfolio managers do not expect assets invested in cash or liquid short‑term securities to exceed 5% of any such Fund’s total assets other than during rebalance periods or when subscription or redemption activity is excessive.

 

The Focus Fund, the Equity and Income Fund, the Energy Transition Fund, the Midstream Fund, the Gas Fund, the Japan Fund, the Japan Small Cap Fund, the Large Cap Financial Fund, the Small Cap Financial Fund, and the Technology Fund may each hold up to 100% of its total assets in cash and short‑term obligations.

 

The Energy Transition Fund and the Midstream Fund may each acquire certificates of deposit, bankers’ acceptances, and time deposits in U.S. dollar or foreign currencies, but such short-term instruments must, at the time of purchase, have capital, surplus, and undivided profits in excess of $100 million (including assets of both domestic and foreign branches), based on latest published reports, unless the principal amount of such bank obligations are fully insured by the U.S. government.

 

Short Sales

 

None of the Cornerstone Growth Fund, the Cornerstone Mid Cap 30 Fund, the Cornerstone Large Growth Fund, or the Cornerstone Value Fund may make short sales of securities or maintain a short position, except to the extent permitted by the 1940 Act.

 

GENERAL

 

The policies and limitations listed above supplement those set forth in the Fund Prospectus. Unless otherwise noted, whenever an investment policy or limitation states a maximum percentage of a Fund’s assets that may be invested in any security or other asset or sets forth a policy regarding quality standards, such percentage limitation or standard applies to each Fund on an individual basis and is determined immediately after and as a result of the Fund’s acquisition of such security or other asset except in the case of borrowing (or other activities that may be deemed to result in the issuance of a senior security under the 1940 Act). Accordingly, any subsequent change in values, net assets, or other circumstances is not considered when determining whether an investment complies with the Fund’s investment policies and limitations. If the value of a Fund’s holdings of illiquid securities at any time were to exceed the percentage limitation applicable at the time of acquisition due to subsequent fluctuations in value or other reasons, the Board of Trustees would consider what actions, if any, are appropriate to maintain adequate liquidity.

 

 

The Fund Prospectus describes the principal investment strategies and risks of the Funds. This section expands on that discussion and also describes non-principal investment strategies and risks of the Funds.

 

INVESTMENT CONSIDERATIONS APPLICABLE TO ALL FUNDS

 

Certain investment strategies and risks are applicable to all Funds. Such strategies and risks are set forth below.

 

Cash and Short-Term Securities

 

Cash and short-term instruments include high‑grade instruments such as variable amount master demand notes, commercial paper, short‑term notes, certificates of deposit, bankers’ acceptances, repurchase agreements that mature in less than seven days, money market instruments, U.S. Treasury securities, and U.S. government agency and instrumentality obligations. Certain of these instruments are described in greater detail under the “DESCRIPTION OF CERTAIN INSTRUMENTS” section of this SAI. Generally, these securities offer less potential for gains than other types of securities. With respect to money market mutual funds, in addition to the advisory fees and other expenses the Fund bears directly in connection with their own operations, as a shareholder of another investment company, the Fund bears its pro rata portion of the other investment company’s advisory fees and other expenses, and such fees and other expenses are borne indirectly by the Fund’s shareholders.

 

To the extent that the Fund’s assets are invested in cash and short‑term obligations for temporary defensive purposes, such assets would not be invested so as to meet the Fund’s investment objective.

 

Cybersecurity

 

With the increased use of technologies such as mobile devices and web‑based or cloud applications, along with the dependence on the Internet and computer systems to conduct business, the Fund is susceptible to operational, information security, and related risks. Cybersecurity incidents can result from deliberate attacks or unintentional events (arising from external or internal sources), and may cause the Fund to lose proprietary information, suffer data corruption, suffer physical damage to a computer or network system, or lose operational capacity. Cybersecurity attacks include, but are not limited to, infection by malicious software, such as malware or computer viruses, or gaining unauthorized access to digital systems, networks, or devices that are used to service the Fund’s operations (e.g., through hacking, phishing, or malicious software coding) or other means for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cybersecurity attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on the Fund’s website (i.e., efforts to make network services unavailable to intended users). In addition, authorized persons could inadvertently or intentionally release confidential or proprietary information stored on the Fund’s systems.

 

Cybersecurity incidents affecting the Fund, the Investment Manager, the sub-advisors, and other service providers to the Fund (including, but not limited to, the Fund’s accountant, custodian, transfer agent, and financial intermediaries) have the ability to disrupt business operations, potentially resulting in financial losses to both the Fund and its shareholders, interfere with the Fund’s ability to calculate its NAV, impede trading, render Fund shareholders unable to transact business and the Fund unable to process transactions (including fulfillment of subscriptions and redemptions), cause violations of applicable privacy and other laws (including the release of private shareholder information), and result in breach notification and credit monitoring costs, regulatory fines, penalties, litigation costs, reputational damage, reimbursement or other compensation costs, forensic investigation and remediation costs, and additional compliance costs. Similar adverse consequences could result from cybersecurity incidents affecting issuers of securities in which the Fund invests, counterparties with which the Fund engages in transactions, governmental and other regulatory authorities, exchange and other financial market operators, banks, brokers, dealers, insurance companies, and other financial institutions (including financial intermediaries and other service providers).

 

Exclusion from Commodity Pool Operator Definition

 

The Investment Manager has claimed an exclusion from the definition of commodity pool operator (“CPO”) under the Commodity Exchange Act (“CEA”) and the rules of the Commodity Futures Trading Commission, a U.S. government agency (the “CFTC”). As a result, the Investment Manager is not subject to CFTC registration or regulation as a CPO with respect to the Fund. The Investment Manager relies on a related exclusion from the definition of “commodity trading advisor” under the CEA and the rules of the CFTC with respect to the Fund.

 

The terms of the CPO exclusion require the Fund, among other things, to adhere to certain limits on its investments in commodity interests. Commodity interests include commodity futures, commodity options, and swaps, which in turn include non-deliverable currency forward contracts. Because the Investment Manager and the Fund intends to comply with the terms of the CPO exclusion, in the future the Fund may need to adjust its investment strategies, consistent with its investment goal, to limit its investments in these types of instruments. No Fund is intended as a vehicle for trading in the commodity futures, commodity options, or swaps markets. The CFTC has neither reviewed nor approved the Investment Manager’s or the Fund’s reliance on these exclusions, the Fund’s investment strategies, or this SAI. 

 

Generally, the exclusion from CPO regulation on which the Investment Manager relies requires the Fund to meet one of the following tests for its commodity interest positions, other than positions entered into for bona fide hedging purposes (as defined in the rules of the CFTC): (i) the aggregate initial margin and premiums required to establish the Fund’s positions in commodity interests may not exceed 5% of the liquidation value of the Fund’s portfolio (after taking into account unrealized profits and unrealized losses on any such positions); or (ii) the aggregate net notional value of the Fund’s commodity interest positions, determined at the time the most recent such position was established, may not exceed 100% of the liquidation value of the Fund’s portfolio (after taking into account unrealized profits and unrealized losses on any such positions). In addition to meeting one of these trading limitations, no Fund may be marketed as a commodity pool or otherwise as a vehicle for trading in the commodity futures, commodity options, or swaps markets. If, in the future, the Fund can no longer satisfy these requirements, the Investment Manager may need to withdraw its notice claiming an exclusion from the definition of a CPO. If the Investment Manager were required to do that and could not find another exemption, then the Investment Manager would be subject to registration and regulation as a CPO in accordance with CFTC rules that apply to CPOs of registered investment companies. Generally, these rules allow for substituted compliance with CFTC disclosure and shareholder reporting requirements based on the Investment Manager’s compliance with comparable SEC requirements. However, in the event the Investment Manager had to register as a CPO, the Fund might incur additional compliance and other expenses as a result of CFTC regulations governing commodity pools and CPOs.

 

Global Events

 

A rise in protectionist trade policies, the possibility of a national or global recession, risks associated with pandemic and epidemic diseases, trade tensions, the possibility of changes to some international trade agreements, political events, and continuing political tension and armed conflicts may adversely impact financial markets and the broader economy. For example, ongoing armed conflicts between Ukraine and Russia in Europe and among Israel, Hamas, and other militant groups in the Middle East have caused and could continue to cause significant market disruptions and volatility with the markets in Europe and the Middle East, and have had negative impacts on markets in the United States. These events could also have negative effects on a Fund’s investments that cannot be foreseen at the present time. As global systems, economies and financial markets are increasingly interconnected, events that once had only local impact are now more likely to have regional or even global effects. Events that occur in one country, region or financial market will, more frequently, adversely impact issuers in other countries, regions, or markets. These impacts can be exacerbated by failures of governments and societies to adequately respond to an emerging event or threat. Investors will be negatively impacted if the value of their portfolio holdings decreases as a result of such events, if these events adversely impact the operations and effectiveness of the Investment Manager or a sub‑advisor, as applicable, or key service providers or if these events disrupt systems and processes necessary or beneficial to the management of accounts. These events may negatively impact broad segments of businesses and populations and could have a significant and rapid negative impact on the performance of a Fund’s investments, increase a Fund’s volatility, or exacerbate pre‑existing risks to a Fund.

 

Market and Regulatory

 

Events in the financial markets and economy may cause volatility and uncertainty and affect performance. Such adverse effect on performance could include a decline in the value and liquidity of securities held by the Fund, unusually high and unanticipated levels of redemptions, an increase in portfolio turnover, a decrease in NAV, and an increase in Fund expenses. It may also be unusually difficult to identify both investment risks and opportunities, in which case investment objectives may not be met. Market events may affect a single issuer, industry, sector, or the market as a whole. Traditionally liquid investments may experience periods of diminished liquidity. During a general downturn in the financial markets, multiple asset classes may decline in value and the Fund may lose value, regardless of the individual results of the

securities and other instruments in which the Fund invests. It is impossible to predict whether or for how long such market events may continue, particularly if they are unprecedented, unforeseen, or widespread.

 

Governmental and regulatory actions, including tax law changes, may also impair portfolio management and have unexpected or adverse consequences on particular markets, strategies, or investments. Policy and legislative changes in the United States and in other countries affect many aspects of financial regulation and may contribute to decreased liquidity and increased volatility in the financial markets. The impact of these changes on the markets, and the practical implications for market participants, may not be fully known for some time. In addition, economies and financial markets throughout the world are increasingly interconnected. As a result, whether or not the Fund invests in securities of issuers located in, or with significant exposure to, countries experiencing economic and financial difficulties, the value and liquidity of the Fund’s investments may decrease.

 

Privacy and Data Protection

 

The Fund is subject to a variety of continuously evolving laws and regulations regarding privacy, data protection, and data security, including laws and regulations governing the collection, storage, handling, use, disclosure, transfer, and security of personal data. In light of recent broad-based cybersecurity attacks, legislators and regulators continue to propose and enact new and more robust privacy‑related laws including, but not limited to, the Arkansas Social Media Safety Act, the California Consumer Privacy Act, as amended by the California Privacy Rights Act, the Colorado Privacy Act, the Connecticut Data Privacy Act, the Illinois Biometric Information Privacy Act, the New York State Department of Financial Services Cybersecurity Requirements for Financial Services Companies, the Texas Capture or Use of Biometric Identifiers Act, the Utah Consumer Privacy Act, and the Virginia Consumer Data Protection Act, all of which give data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from a failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data. Any failure by the Fund to comply with their privacy policies or applicable privacy‑related laws could result in legal or regulatory proceedings against the Fund by governmental authorities, third‑party vendors, or others, which could adversely affect the Fund. The interpretation of existing privacy‑related laws and the various regulators’ approaches to their enforcement continue to evolve over time. The Fund faces the risk that these laws may be interpreted and applied in conflicting ways in different jurisdictions or in a manner that is not consistent with the Fund’s current privacy policies or that regulators may enact new unclear privacy‑related laws.

 

INVESTMENT CONSIDERATIONS APPLICABLE TO SPECIFIC FUNDS

 

Certain investment strategies and risks are applicable only to specific Funds. The tables below indicate which of the investment strategies and risks described in this section are relevant to each Fund (identified by Investor Class ticker).

 

 

EXPLANATION OF INVESTMENT CONSIDERATIONS APPLICABLE TO SPECIFIC FUNDS

 

Asset-Backed and Mortgage‑Backed Securities

 

 

Asset-backed securities are securities backed by pools of loans, installment sale contracts, credit card or other receivables, or other assets. Asset-backed securities are pass-through securities, meaning that principal and interest payments made by the borrower on the underlying assets (such as credit card receivables) are passed through to the Fund. The value of asset-backed securities, like that of traditional fixed‑income securities, typically increases when interest rates fall and decreases when interest rates rise. However, asset-backed securities differ from traditional fixed-income securities because of their potential for prepayment. The price paid by the Fund for its asset-backed securities, the yield the Fund expects to receive from such securities, and the average life of the securities are based in part on the anticipated rate of prepayment of the underlying assets. In periods of declining interest rates, borrowers may prepay the underlying assets more quickly than anticipated, thereby reducing the yield and average life of the

asset‑backed securities. Moreover, when the Fund reinvests the proceeds of a prepayment in these circumstances, it is likely to receive a rate of interest that is lower than the rate on the security that was prepaid. If the Fund purchases asset‑backed securities at a premium, prepayments may result in a loss of some or all of such premium. If the Fund buys such securities at a discount, both scheduled payments and unscheduled prepayments increase current and total returns, and unscheduled prepayments also accelerate the recognition of income which, when distributed to shareholders, is taxable as ordinary income. As a result, when interest rates decline, the value of an asset‑backed security with prepayment features may not increase as much as that of other fixed-income securities. In periods of rising interest rates, prepayments of the underlying assets may occur at a slower than expected rate, creating maturity extension risk. This particular risk may effectively change a security that was considered short-term or intermediate-term at the time of its purchase into a longer‑term security. Since the value of longer-term securities generally fluctuates more widely in response to changes in interest rates than the value of shorter-term securities, maturity extension risk would likely increase the volatility of the Fund.

 

Payment of principal and interest may be largely dependent on the cash flows generated by the assets backing the securities, and, in certain cases, supported by letters of credit, surety bonds, or other credit enhancements. The value of asset‑backed securities may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or any financial institution providing the credit support.

 

In general, the collateral supporting asset-backed securities is of shorter maturity than the collateral supporting mortgage loans and is less likely to experience substantial prepayments. However, asset-backed securities are not backed by any governmental agency.

 

 

Mortgage‑backed securities represent pools of mortgage loans assembled for sale to investors by various governmental agencies or government‑related organizations, including Ginnie Mae, Fannie Mae, and Freddie Mac. Mortgage‑backed securities directly or indirectly represent participations in, are collateralized by, or are payable from mortgage loans secured by real property.

 

As with other debt securities, mortgage-backed securities are subject to credit risk and interest rate risk. However, the yield and maturity characteristics of mortgage-backed securities differ from traditional debt securities. A major difference is that the principal amount of the obligations may normally be prepaid at any time because the underlying mortgage loans generally may be prepaid at any time. The relationship between prepayments and interest rates may give some mortgage-backed securities less potential for growth in value than conventional fixed-income securities with comparable maturities. For example, in periods of rising interest rates, the value of a mortgage‑backed security may decrease and its duration may be lengthened because borrowers may prepay mortgages more slowly than originally expected. However, though the value of a mortgage‑backed security may decline when interest rates rise, the converse is not necessarily true because in periods of falling interest rates, the rate of prepayments tends to increase. During such periods, the reinvestment of prepayment proceeds by the Fund generally is at lower rates than the rates that were carried by the obligations that have been prepaid. Because of these and other reasons, a mortgage‑backed security’s total return, maturity, and duration may be difficult to predict precisely.

 

The ability of borrowers to repay mortgage loans underlying mortgage-backed securities typically depends on the future availability of financing and the stability of real estate values. The U.S. residential real estate market has experienced significant upheaval in the past. During such upheaval, among other things, the value of residential real estate decreased significantly. These significant decreases affected the value of mortgage-backed securities because payments of principal and interest on residential mortgages varied due to foreclosures, job losses, and other factors. As a result of these conditions, mortgage-backed securities lost

value. Such upheaval of the real estate market may occur again in the future. If borrowers are not able or willing to pay the principal balance on the loans, there is a high likelihood that payments on the related mortgage-related securities may not be made. Certain borrowers on underlying mortgages may become subject to bankruptcy proceedings, in which case the value of the mortgage‑backed securities may decline. Rating agencies previously have placed on credit watch or downgraded the ratings of a large number of mortgage-related securities and may continue to do so in the future. If a mortgage-related security in which the Fund is invested is placed on credit watch or downgraded, the value of the security may decline and the Fund may experience losses.

 

Borrowing for Investment Purposes

 

Borrowing for investment is known as leveraging. Leveraging investments by purchasing securities with borrowed money is a speculative technique that increases investment risk but may also increase investment return. When it leverages its investments, the NAV per share of the Fund increases more when the Fund’s portfolio assets increase in value and decreases more when the Fund’s portfolio assets decrease in value than would otherwise be the case. Moreover, interest costs on borrowings may fluctuate with changing market rates of interest and may partially offset or exceed the returns on the borrowed funds. Under adverse conditions, the Fund might have to sell portfolio securities to meet interest or principal payments at a time when investment considerations would not favor such sales. The Fund intends to use leverage whenever it is able to borrow on terms considered by its investment adviser to be reasonable.

 

The Fund’s ability to borrow money is limited by its investment policies and limitations and by the 1940 Act. If the Fund no longer meets such limitations as a result of market fluctuations or for other reasons, the Fund may be required to sell some of its portfolio holdings within three days (excluding Sundays and holidays) to reduce the debt, even though it may be disadvantageous from an investment standpoint to sell securities at that time.

 

Convertible Securities

 

Convertible securities are hybrid securities that combine the investment characteristics of bonds and common stocks. Convertible securities typically consist of debt securities or preferred stock that may be converted on a voluntary or mandatory basis within a specified period, normally for the entire life of the security, into a certain amount of common stock or other equity security of the same or a different issuer at a predetermined price. Convertible securities also include debt securities with warrants or common stock attached and derivatives combining the features of debt securities and equity securities. Other convertible securities may become available in the future. Convertible securities involve risks similar to those of both fixed income and equity securities. In a corporation’s capital structure, convertible securities are senior to common stock but are usually subordinate to senior debt obligations of the issuer.

 

The market value of a convertible security is a function of its investment value and its conversion value. A security’s investment value represents the value of the security without its conversion feature (i.e., a nonconvertible debt security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer, and the seniority of the security in the issuer’s capital structure. A security’s conversion value is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security. If the conversion value of a convertible security is significantly below its investment value, the convertible security trades like nonconvertible debt or preferred stock and its market value is not influenced greatly by fluctuations in the market price of the underlying security. In that circumstance, the convertible security takes on the characteristics of a bond, and its price moves in the opposite direction from interest rates. Conversely, if the

conversion value of a convertible security is near or above its investment value, the market value of the convertible security is more heavily influenced by fluctuations in the market price of the underlying security. In that case, the convertible security’s price may be as volatile as that of common stock. Because both interest rates and market movements can influence its value, a convertible security generally is not as sensitive to interest rates as a similar debt security, nor is it as sensitive to changes in share price as its underlying equity security. Convertible securities are often rated below investment grade or are not rated, and they are generally subject to a high degree of credit risk.

 

Although all markets are prone to change over time, the generally high rate at which convertible securities are retired (through mandatory or scheduled conversions by issuers or through voluntary redemptions by holders) and replaced with newly issued convertible securities may cause the convertible securities market to change more rapidly than other markets. For example, a concentration of available convertible securities in a few economic sectors could elevate the sensitivity of the convertible securities market to the volatility of the equity markets and to the specific risks of those sectors. Moreover, convertible securities with innovative structures, such as mandatory-conversion securities and equity-linked securities, have increased the sensitivity of the convertible securities market to the volatility of the equity markets and to the special risks of those innovations, which may include risks different from, and possibly greater than, those associated with traditional convertible securities. A convertible security may be subject to redemption at the option of the issuer at a price set in the governing instrument of the convertible security. If a convertible security held by the Fund is subject to such redemption option and is called for redemption, the Fund must allow the issuer to redeem the security, convert it into the underlying common stock, or sell the security to a third party.

 

Certain convertible securities that may offer higher income than the common stocks into which they are convertible. Convertible securities may consist of bonds, notes, debentures, and preferred stocks that may be converted or exchanged at a stated or determinable exchange ratio into underlying shares of common stock. The Fund may be required to permit the issuer of a convertible security to redeem the security, convert it into the underlying common stock, or sell it to a third party. Thus, the Fund may not be able to control whether the issuer of a convertible security chooses to convert that security. If the issuer chooses to do so, this action could have an adverse effect on the Fund’s ability to achieve its investment objectives.

 

Dow Jones Industrial Average Concentration

 

The Fund concentrates its investments in stocks in the Dow Jones Industrial Average (the “DJIA”). The DJIA consists of the following 30 common stocks:

 

Company

Exchange

Symbol

Industry

The DJIA is the property of Dow Jones & Company, Inc., which is not affiliated with the Fund or the Investment Manager. Dow Jones & Company, Inc. has not participated in any way in the creation of the Fund or in the selection of stocks included in the Fund and has not approved any information included in this SAI. From time to time, Dow Jones & Company, Inc. changes the stocks comprising the DJIA, although such changes are infrequent.

 

The investment strategy of the Fund is unlikely to be affected by the requirement that it not concentrate its investments, since currently no more than three companies in the DJIA are engaged primarily in any one industry. Similarly, the Fund’s investment strategy is unlikely to be materially affected by the requirement that it meet the diversification requirements of the Internal Revenue Code of 1986, as amended (the “Code”), since the Fund has approximately 50% of its assets invested in U.S. Treasury securities and the remainder of its assets divided among at least 10 stocks. However, the diversification requirement for the Fund may preclude it from effecting a purchase otherwise dictated by its investment strategy. Finally, because of the requirements of the 1940 Act, the Fund may not invest more than 5% of its total assets in the common stock of any issuer that derives more than 15% of its revenues from securities-related activities. From time to time, this requirement may preclude the Fund from effecting a purchase otherwise dictated by its investment strategy.

 

Foreign Issuers – American Depositary Receipts and Certain Other Foreign Issuers

 

The Fund may invest in foreign companies (i) whose securities are listed on U.S. national securities exchanges or (ii) through American Depository Receipts (“ADRs”), which are U.S. dollar‑denominated securities of foreign issuers listed on U.S. national securities exchanges.

 

Investing in foreign companies may include the risk of substantial price volatility or reduced liquidity as a result of political and economic instability or policy and legislative changes in the foreign country and the risk of reduced earnings potential due to significantly higher levels of taxation than U.S. companies, including potentially confiscatory levels of taxation.

 

ADRs are U.S. dollar-denominated securities of foreign issuers that are designed for use in U.S. securities markets and are typically issued by a U.S. bank or trust company evidencing ownership of the underlying securities. Many ADRs are not registered with the SEC, and the issuers of such securities are not subject to SEC reporting requirements. Accordingly, there may be less publicly available information concerning such issuers than is available concerning U.S. companies.

 

The Fund may be required to pay foreign withholding or other taxes on the securities of certain foreign companies or on certain ADRs that it owns, but investors may or may not be able to deduct their pro rata share of such taxes in computing their taxable income or take such shares as a credit against their U.S. federal income tax. See the “CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES” section of this SAI.

 

ADRs may be sponsored by the foreign issuer or may be unsponsored. Unsponsored ADRs are organized independently and without the cooperation of the foreign issuer of the underlying securities. Unsponsored ADRs are offered by companies that are not prepared to meet either the reporting or accounting standards of the United States. While readily exchangeable with stock in local markets, unsponsored ADRs may be less liquid than sponsored ADRs. Additionally, there generally is less publicly available information with respect to unsponsored ADRs.

 

Foreign Issuers – Japan

 

Securities markets in Japan may operate differently than those in the United States and present different risks. Securities trading volume and liquidity may be less than in U.S. markets and, at times, market price volatility may be greater.

 

Because evidences of ownership of the investments by the Fund generally is held outside the United States, the Fund is subject to additional risks that include possible adverse political, social, and economic developments, or adoption of governmental laws or restrictions that might adversely affect securities holdings of investors located outside Japan, whether related to currency or otherwise. Moreover, the portfolio securities of the Fund may trade on days when the Fund does not calculate NAV and thus affect the Fund’s NAVs on days when investors have no access to the Fund.

 

Foreign Issuers – United Kingdom

 

The Fund may invest in foreign companies traded on foreign exchanges, including the London Stock Exchange. While the United Kingdom (the “UK”) and the European Union (the “EU”) have entered into a preliminary trade agreement, the EU-UK Trade and Cooperation Agreement, in connection with the UK’s withdrawal from the EU, many aspects of the EU‑UK trade relationship remain subject to further negotiation. There therefore remains considerable uncertainty relating to the potential ongoing consequences of the UK’s withdrawal from the EU. The impact on the UK and European economies and the broader global economy could be significant, resulting in increased volatility and illiquidity, currency fluctuations, impacts on arrangements for trading and on other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory, or otherwise), and in potentially lower growth for companies in the UK, Europe, and globally, which could have an adverse effect on the value of a Fund’s investments. If one or more other countries were to exit the European Union or abandon the use of the euro as a currency, the value of investments tied to those countries or the euro could decline significantly and unpredictably.

 

Fund Structure

 

Unlike traditional mutual funds that are structured as RICs for U.S. federal income tax purposes, the Fund is taxable as a regular corporation, or C corporation, for U.S. federal income tax purposes. This means the Fund generally is subject to U.S. federal income tax on its taxable income at the rates applicable to corporations (currently a maximum rate of 21%) and also is subject to state and local income taxes.

 

Illiquid and Restricted Securities

 

Illiquid securities are those securities that the Fund reasonably expects cannot be sold, disposed of, or reversed in seven calendar days or less under current market conditions without such sale, disposition, or reversal significantly changing the market value of the investment. In determining the liquidity of the Fund’s investments, the Investment Manager may consider various factors, including (i) the frequency of trades and quotations, (ii) the number of dealers and prospective purchasers in the marketplace, (iii) dealer undertakings to make a market, (iv) the nature of the security (including any demand or tender features), and (v) the nature of the marketplace for trades (including the ability to assign or offset the Fund’s rights and obligations relating to the investment).

 

Restricted securities may be sold only in privately negotiated transactions or in public offerings with respect to which a registration statement is in effect under the 1933 Act. Where registration is required, the Fund may be obligated to pay all or part of the registration expenses and a considerable period may elapse between the time of the decision to sell and the time such Fund may be permitted to sell a security under an effective registration statement. If, during such a period, adverse market conditions were to develop, the Fund might obtain a less favorable price than prevailed when it decided to sell.

 

A large institutional market has developed for certain securities that are not registered under the 1933 Act, including securities sold in private placements, repurchase agreements, commercial paper, foreign securities, and corporate bonds and notes. These instruments are often restricted securities because the securities are sold in transactions not requiring registration. Institutional investors generally do not seek to sell these instruments to the general public, but instead often depend either on an efficient institutional market in which such unregistered securities can be readily resold or on an issuer’s ability to honor a demand for repayment. Therefore, the fact that there are contractual or legal restrictions on resale to the general public or certain institutions is not dispositive of the liquidity of such investments.

 

Rule 144A establishes a safe harbor from the registration requirements of the 1933 Act for resales of certain securities to qualified institutional buyers. Institutional markets for restricted securities that might develop as a result of Rule 144A could provide both readily ascertainable values for restricted securities and the ability to liquidate an investment to satisfy share redemption orders. Such markets might include automated systems for the trading, clearance, and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the Financial Industry Regulatory Authority. An insufficient number of qualified buyers interested in purchasing Rule 144A-eligible restricted securities held by the Fund, however, could affect adversely the marketability of securities of such Fund, and the Fund might be unable to dispose of such securities promptly or at favorable prices.

 

The Board of Trustees has delegated the function of making day‑to‑day determinations of liquidity to the Investment Manager pursuant to guidelines approved by the Board of Trustees. The Investment Manager takes into account a number of factors in reaching liquidity decisions, including, but not limited to, (i) the frequency of trades for the security, (ii) the number of dealers that make quotes for the security, (iii) the number of dealers that have undertaken to make a market in the security, (iv) the number of other potential purchasers, and (v) the nature of the security and how trading is effected (e.g., the time needed to sell the security, how bids are solicited, and the mechanics of transfer). The Investment Manager monitors the

liquidity of restricted securities in the Fund and reports periodically on such decisions to the Board of Trustees.

 

The Board of Trustees approved a written liquidity risk management program to assess investment liquidity pursuant to Rule 22e-4 of the 1940 Act and designated a committee comprising four of the Investment Manager’s employees to serve as the administrator of the program. No less than annually, the Board of Trustees must review a written report prepared by the administrator that addresses the operation of the liquidity risk management program and assesses its adequacy and effectiveness.

 

Indexed Securities

 

Indexed securities are securities whose prices are indexed to the prices of other securities, securities indices, currencies, precious metals or other commodities, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Gold-indexed securities, for example, typically provide for a maturity value that depends on the price of gold, resulting in a security whose price tends to rise and fall together with gold prices. Currency-indexed securities typically are short-term to intermediate‑term debt securities whose maturity values or interest rates are determined by reference to the values of one or more specified foreign currencies, and may offer higher yields than U.S. dollar-denominated securities of equivalent issuers.

 

The performance of indexed securities depends to a great extent on the performance of the security, currency, or other instrument to which they are indexed, and performance may also be influenced by interest rate changes in the United States and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer’s creditworthiness deteriorates. Recent issuers of indexed securities have included banks, corporations, and certain U.S. government agencies. Indexed securities may be more volatile than the underlying instruments and may be considered illiquid.

 

IPOs

 

An initial public offering (“IPO”) is a company’s first offering of stock to the public. Shares are given a market value reflecting the company’s assets and expectations for future growth. IPO securities typically are sold when the portfolio managers believe their market price has reached full value and may be sold shortly after purchase.

 

Purchasing IPO shares subjects the Fund to market risk and liquidity risk. The market value of IPO shares fluctuates considerably due to facts such as the absence of a prior public market, unseasoned trading, the small number of shares available for trading, and limited public information about the issuer. As a result, the Fund’s investments in IPOs may increase portfolio turnover, which increases brokerage and administrative costs and may result in taxable distributions to shareholders. Further, the purchase of IPO shares by the Fund may involve high transaction costs. When the Fund’s asset base is small, a significant portion of the Fund’s performance could be attributable to investments in IPOs because such investments would have a magnified impact on the Fund.

 

Investment Company Securities

 

Investment companies, which are professionally managed portfolios, include other open-end investment companies, closed-end investment companies, unit investment trusts, exchange‑traded investment companies (“ETFs”), and exchange-traded notes (“ETNs”) which may be organized as either open-end investment companies or unit investment trusts.

 

As a shareholder of another investment company, the Fund would bear, along with other shareholders, its pro rata portion of the investment company’s expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that the Fund incurs directly in connection with its own operations. Shareholders would also be exposed to the risks associated not only with the investments of the Fund but also with the portfolio investments of the underlying investment companies. Other investment companies may have different investment policies than those of the Fund. Under certain circumstances, an open-end investment company in which the Fund invests may determine to make payment of a redemption by the Fund in whole or in part by a distribution in kind of securities from its portfolio instead of in cash. As a result, the Fund may hold such securities until the portfolio managers determine it is appropriate to dispose of them. Such disposition imposes additional costs on the Fund. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that typically trade on a stock exchange or over the counter at a premium or discount to their NAV. Others are continuously offered at NAV but also may be traded on the secondary market.

 

Investments in closed-end investment companies are subject to various risks, including (i) reliance on management’s ability to meet the closed-end investment company’s investment objective and to manage the closed-end investment company portfolio, (ii) fluctuation in the NAV of closed-end investment company shares compared to the changes in the value of the underlying securities that the closed-end investment company owns, and (iii) bearing a pro rata share of the management fees and expenses of each underlying closed-end investment company, which results in the Fund’s shareholders being subject to higher expenses than if such shareholder invested directly in the closed-end investment company.

 

ETFs are pooled investment vehicles that commonly seek to track the performance of specific indices. ETFs may be organized as open-end investment companies or as unit investment trusts. Their shares are listed on stock exchanges and can be traded throughout the day at market-determined prices. The price of ETF shares is based on (but not necessarily identical to) the value of the securities held by the ETF. Accordingly, the level of risk involved in the purchase or sale of ETF shares is similar to the risk involved in the purchase or sale of traditional common stocks, with the exception that the pricing mechanism for ETF shares is based on a basket of stocks. Disruptions in the markets for the securities underlying ETF shares purchased or sold by the Fund could result in losses on such shares. ETFs are subject to the following risks that do not apply to non‑exchange traded funds: (i) in most cases, ETF shares are not individually redeemable, and therefore the liquidity of ETF shares generally depends on the existence of a secondary trading market; (ii) an ETF’s shares may trade at a market price that is above or below such shares’ NAV; (iii) an active trading market for an ETF’s shares may not develop or be maintained; (iv) an ETF may utilize high leverage ratios; or (v) trading of an ETF’s shares may be halted if the listing exchange’s officials deem such action appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

 

An investment in an ETN involves risks, including possible loss of principal. ETNs are unsecured debt securities issued by a bank that are linked to the total return of a market index. Risks of investing in ETNs also include limited portfolio diversification, uncertain principal payment, and illiquidity. Additionally, the investor fee reduces the amount of return on maturity or at redemption, and as a result, the investor may receive less than the principal amount at maturity or upon redemption, even if the value of the relevant index has increased.

 

Junk Bonds

 

Lower-rated debt securities, commonly referred to as junk bonds (those rated below the fourth‑highest grade by a nationally recognized statistical ratings organization and unrated securities judged by the portfolio managers to be of equivalent quality), have poor protection with respect to the payment of interest and repayment of principal, or that may be in default. These securities are often considered to be

speculative and involve greater risk of loss or price changes due to changes in the issuer’s capacity to pay. The market prices of lower-rated debt securities may fluctuate more than those of higher-rated debt securities and may decline significantly in periods of general economic difficulty, which may follow periods of rising interest rates.

 

The market for lower-rated debt securities may be thinner and less active than that for higher-rated debt securities, which can adversely affect the prices at which the former are sold. If market quotations are not available, lower-rated debt securities are valued in accordance with procedures established by the Board of Trustees, including the use of outside pricing services. Judgment plays a greater role in valuing high-yield corporate debt securities than is the case for securities for which more external sources for quotations and last‑sale information are available. Adverse publicity and changing investor perceptions may affect the ability of outside pricing services to value lower-rated debt securities and the Fund’s ability to sell these securities.

 

Since the risk of default is higher for lower-rated debt securities, the portfolio managers’ research and credit analysis are an especially important part of managing securities of this type held by the Fund. In considering investments for the Fund, the portfolio managers attempt to identify those issuers of high‑yielding debt securities whose financial conditions are adequate to meet future obligations, have improved, or are expected to improve in the future. The analysis focuses on relative values based on such factors as interest or dividend coverage, asset coverage, earnings prospects, and the experience and managerial strength of the issuer.

 

LEAPs

 

LEAPs are long-term call options that allow holders the opportunity to participate in the underlying securities’ appreciation in excess of a specified strike price without receiving payments equivalent to any cash dividends declared on the underlying securities. A LEAP holder is entitled to receive a specified number of shares of the underlying stock upon payment of the exercise price, and therefore the LEAP is exercisable at any time the price of the underlying stock is above the strike price. However, if at expiration the price of the underlying stock is at or below the strike price, the LEAP expires and is worthless.

 

Loans and Other Debt Instruments

 

Loans or other direct debt instruments are interests in amounts owed by a corporate, governmental, or other borrower to another party. They may represent amounts owed to lenders or lending syndicates (loans and loan participation), to suppliers of goods or services (trade claims or other receivables), or to other parties. Direct debt instruments involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the Fund in the event of fraud or misrepresentation. In addition, loan participations involve a risk of insolvency of the lending bank or other financial intermediary. Direct debt instruments may also include standby financing commitments that obligate the Fund to supply additional cash to the borrower on demand.

 

LIBOR Transition

 

The Funds may have been exposed to financial instruments that were tied to the London Interbank Offered Rate (“LIBOR”). Until recently, LIBOR was used as a benchmark or reference rate for various commercial and financial contracts, including corporate and municipal bonds, bank loans, asset-backed and mortgage-related securities, interest rate swaps, and other derivatives.

 

The administrator of LIBOR has phased out LIBOR such that since June 30, 2023, the overnight, 1‑month, 3‑month, 6‑month, and 12‑month U.S. dollar LIBOR settings have ceased to be published or

representative. All other LIBOR settings and certain other interbank offered rates, such as the Euro Overnight Index Average, ceased to be published or representative after December 31, 2021.

 

Actions by regulators have resulted in the establishment of alternative reference rates to LIBOR in most major currencies. The U.S. Federal Reserve, based on the recommendations of the New York Federal Reserve’s Alternative Reference Rate Committee (comprised of major derivative market participants and their regulators), has begun publishing a Secured Overnight Financing Rate (“SOFR”), which has replaced U.S. dollar LIBOR. Market participants generally have adopted alternative rates such as SOFR or otherwise amended such financial instruments to include fallback provisions and other measures that contemplated the discontinuation of LIBOR. To facilitate the transition of legacy derivatives contracts referencing LIBOR, the International SWAPs and Derivatives Association, Inc. (ISDA) launched a protocol to incorporate fallback provisions. Notwithstanding the foregoing actions, there still remains uncertainty regarding successor reference rate methodologies and there is no assurance that the composition or characteristics of any alternative reference rate will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity as did LIBOR prior to its discontinuance or unavailability.

 

The transition process away from LIBOR could lead to increased volatility and illiquidity in markets for instruments whose terms previously relied on LIBOR. It could also lead to a reduction in the value of some LIBOR‑based investments and reduce the effectiveness of new hedges placed against existing LIBOR‑based instruments.

 

MLPs

 

MLPs are entities that are taxed as a partnership under the Code and that has interests (or units) that are traded on securities exchanges like shares of corporate stock. A typical MLP consists of a general partner and limited partners, but some entities receiving partnership taxation treatment under the Code are established as limited liability companies. The general partner manages the partnership, has an ownership stake in the partnership (typically a 2% general partner equity interest and additional common units and subordinated units), and in many cases is eligible to receive an incentive distribution. The limited partners provide capital to the partnership, have a limited (if any) role in the operation and management of the partnership, and are entitled to receive cash distributions with respect to their units. An MLP typically pays an established minimum quarterly distribution to common unitholders, as provided under the terms of its partnership agreement. To qualify as an MLP for U.S. federal income tax purposes, an entity must receive at least 90% of its income from qualifying sources such as interest, dividends, real estate rents, the sale or disposition of real property, certain mineral or natural resources activities, the transportation or storage of certain fuels, and, in certain circumstances, commodities or futures, forwards, and options with respect to commodities, and the sale or other disposition of capital assets held for the production of such income.

 

Investing in MLPs involves various risks. Firstly, holders of an MLP’s units are exposed to a remote possibility of liability for all of the obligations of such MLP in the event that a court determines that the rights of the unitholders to take certain action under the limited partnership agreement would constitute control of the MLP’s business or if a court or governmental agency determines that the MLP is conducting business in a state without complying with the limited partnership statute of that state. Secondly, certain MLPs depend on their parent or sponsor entities for the majority of their revenues. If their parent or sponsor entities were to fail to make such payments or satisfy their obligations, the revenues and cash flows of such MLPs and the ability of such MLPs to make distributions to unitholders, such as the Fund, would be adversely affected. Additionally, much of the benefit that the Fund may derive from its investments in equity securities of MLPs is because MLPs are treated as partnerships for U.S. federal income tax purposes. Partnerships do not pay U.S. federal income tax at the partnership level. Rather, each partner is allocated a share of the partnership’s income, gains, losses, deductions, and expenses and pays taxes on those amounts.

A change in current tax law or a change in the underlying business mix of a given MLP could result in such MLP being treated as a corporation for U.S. federal income tax purposes, which means the MLP would be required to pay U.S. federal income tax (as well as state and local income taxes) on its taxable income. This would reduce the amount of cash available for distribution by the MLP and could reduce the value of the Fund’s investment in the MLP and lower income to the Fund. Finally, to the extent a distribution received by the Fund from an MLP is treated as a return of capital, the Fund’s adjusted tax basis in the interests of the MLP would be reduced, which could increase the Fund’s tax liability upon the sale of the interests in the MLP or upon subsequent distributions in respect of such interests.

 

REITs and Related Structures

 

U.S. real estate investment trusts (“REITs”) and companies with similar characteristics to REITs have a structure in which revenue consists primarily of rent derived from owned, income-producing real estate properties, dividend distributions as a percentage of taxable net income are high (generally greater than 80%), debt levels are generally conservative, and income derived from development activities is generally limited. A number of countries have created REIT-like regimes, which allow real estate investment companies to benefit from flow‑through tax treatment, including Australia (since 1985), Japan (since 2000), South Korea (since 2001), Singapore (since 2002), and Hong Kong (since 2003).

 

One example of a REIT-like regime is a Japan real estate investment trust (“J-REITs”). A J-REIT is an investment vehicle with real estate in Japan as its underlying assets. Income is generated by rents and sale proceeds and distributed to investors in the form of dividends. The J-REIT investment vehicle was modeled on U.S. REITs. Like the U.S. REIT, distributions paid to investors are, under qualifying conditions, deductible from the J-REITs taxable income, thereby providing a tax-efficient flow-through investment vehicle for investors. Typically, J-REITs are a special purpose corporation established for the purpose of investing in and managing real estate assets where the corporation uses investors’ money and third-party funding to buy real estate, in return for which investors receive investment certificates carrying ownership rights, including dividend entitlement. These certificates can be bought and sold on the Japanese stock exchange where they are listed. Although the corporation is technically responsible for owning and managing the real estate properties, in reality this function is sub‑contracted to a third-party manager. The values of securities issued by J-REITs are affected by the Japan real estate market, real estate yields, and interest rates and tax and regulatory requirements and by perceptions of management skill. Some J-REITs are heavily concentrated in specific types of properties, such as office buildings, and are particularly susceptible to developments affecting these types of properties.

 

Reverse Repurchase Agreements

 

A reverse repurchase agreement allows the Fund to borrow funds for temporary purposes. Pursuant to such agreements, the Fund sells portfolio securities to financial institutions such as banks and broker‑dealers and agree to repurchase the securities at the mutually agreed-upon date and price. The Fund intends to enter into reverse repurchase agreements only to avoid otherwise selling securities during unfavorable market conditions to meet redemptions.

 

Certain trading practices and investments, such as reverse repurchase agreements, may be considered to be borrowings or involve leverage and thus are subject to the 1940 Act restrictions. In accordance with Rule 18f‑4 under the 1940 Act, when a Fund engages in reverse repurchase agreements and similar financing transactions, the Fund may either (i) maintain asset coverage of at least 300% with respect to such transactions and any other borrowings in the aggregate, or (ii) treat such transactions as “derivatives transactions” and comply with Rule 18f‑4 with respect to such transactions.

 

Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price at which the Fund is obligated to repurchase the securities. Reverse repurchase agreements are considered to be borrowing by the Fund under the 1940 Act.

 

Simultaneous Investments

 

Certain inherent conflicts of interest may arise from the fact that a sub‑advisor to the Fund or its affiliates may carry on substantial investment activities (including activities that employ substantially similar strategies as the Fund) for other client accounts, discretionary accounts, and other pooled investment vehicles, for their own accounts, and for others. Investment decisions for the Fund are made independently from other Funds and from those decisions made for other clients advised by the sub‑advisor or its affiliates, and the Fund has no interest in the investment activities of such other clients. If, however, such other Fund or clients desire to invest in, or dispose of, the same securities as the Fund, available investments or opportunities for sales are allocated equitably to each. In some cases, this procedure may adversely affect the size of the position obtained for or disposed of by the Fund or the price paid or received by the Fund. In addition, when purchases or sales of the same security for the Fund and other client accounts managed by the sub‑advisor occur contemporaneously, the purchase or sale orders may be aggregated in order to obtain any price advantages available to large denomination purchases and sales. The Fund, together with the other Fund and clients advised by the portfolio managers and affiliates of the sub‑advisor, may own large positions the size of which, depending on market conditions, may affect adversely the Fund’s ability to dispose of some or all of its positions should it desire to do so.

 

SPACs

 

A special purpose acquisition vehicle (“SPAC”), a type of company known as a blank-check company, is a publicly traded company that raises investment capital through an IPO for the purpose of acquiring an existing company. The shares of a SPAC are typically issued in units that include one share of common stock and one right or warrant (or partial right or warrant) conveying the right to purchase additional shares or partial shares. At a specified time following the SPAC’s IPO (generally between one and two months), the rights and warrants may be separated from the common stock at the election of the holder, after which they become freely tradeable. After going public and until an acquisition is completed, a SPAC holds the proceeds of its IPO (less a portion retained to cover expenses) in trust and generally invests them in U.S. Government Securities, money market securities, and cash. If a SPAC does not complete an acquisition within a specified period after going public, the SPAC is dissolved and the invested funds are returned to the SPAC’s shareholders (less certain permitted expenses), and any rights or warrants issued by the SPAC expire.

 

 Because SPACs are blank‑check companies without an operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity’s management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within certain industries or regions, which may increase the volatility of their prices. In addition, the securities issued by a SPAC, which are typically traded in the over-the-counter market, may be considered illiquid or be subject to restrictions on resale.

 

Tax Estimation and NAV

 

Because the Fund is taxed as a corporation, in calculating the Fund’s NAV, the Fund accounts for, among other things, its current taxes and deferred tax liability and deferred tax asset balances. The Fund accrues a deferred income tax liability balance, at the then-effective statutory U.S. federal income tax rate (currently 21%) plus an estimated state and local income tax rate, for its future tax liability associated with the capital appreciation of its investments and the distributions received by the Fund on interests of MLPs

(and other entities that have economic characteristics similar to MLPs) considered to be return of capital and for any net operating gains. Any deferred tax liability balance would reduce the Fund’s NAV. The Fund may also accrue a deferred tax asset balance, which reflects an estimate of the Fund’s future tax benefit associated with net operating losses and unrealized losses. Any deferred tax asset balance would increase the Fund’s NAV. To the extent the Fund has a deferred tax asset balance, consideration is given as to whether or not a valuation allowance, which would offset the value of some or all of the deferred tax asset balance, is required. The Fund relies to some extent on information provided by MLPs (and other entities that have economic characteristics similar to MLPs), which may not be provided to the Fund on a timely basis, to estimate current taxes and deferred tax liability and asset balances for purposes of financial statement reporting and determining its NAV. The daily estimate of the Fund’s current taxes and deferred tax liability and asset balances used to calculate the Fund’s NAV could vary dramatically from the Fund’s actual tax liability or benefit, and, as a result, the determination of the Fund’s actual tax liability or benefit may have a material impact on the Fund’s NAV. From time to time, the Fund may modify its estimates or assumptions regarding its current taxes and deferred tax liability and asset balances as new information becomes available, which may have a material impact on the Fund’s NAV. Shareholders who redeem their shares at an NAV that is based on estimates of the Fund’s current taxes and deferred tax liability and asset balances may benefit at the expense of remaining shareholders (or remaining shareholders may benefit at the expense of redeeming shareholders) if the estimates are later revised or ultimately differ from the Fund’s actual current taxes and tax liability and asset balances.

 

U.S. Government Securities

 

Certain U.S. Government Securities, including U.S. Treasury securities and U.S. government agency and instrumentality securities, are described in greater detail under the “DESCRIPTION OF CERTAIN INSTRUMENTS” section of this SAI. The U.S. government is considered to be the best credit-rated issuer in the debt markets. Since U.S. Treasury securities are direct obligations of the U.S. government, they are considered to have minimal credit risk. While most other government-sponsored securities are not direct obligations of the U.S. government (although some are guaranteed by the U.S. government), they also offer little credit risk. However, market and interest risk relating to U.S. Government Securities still may affect the Fund. For example, debt securities with longer maturities tend to produce higher yields and generally are subject to potentially greater capital appreciation and depreciation than obligations with shorter maturities and lower yields. The market value of U.S. Government Securities generally varies inversely with changes in market interest rates. An increase in interest rates, therefore, generally would reduce the market value of any U.S. Government Security held by the Fund, while a decline in interest rates generally would increase the market value of such investment.

 

Variable or Floating Rate Securities

 

Variable or floating rate securities provide for periodic adjustments of the interest rate paid. Variable rate securities provide for a specific periodic adjustment in the interest rate, while floating rate securities have interest rates that change whenever there is a change in a designated benchmark rate. Some variable or floating rate securities have put features.

 

Warrants

 

Investments in warrants are pure speculation in that they have no voting rights, pay no dividends, and have no rights with respect to the assets of the corporation issuing them. Warrants are options to purchase equity securities at a specific price valid for a specific period of time. They do not represent ownership of the securities, but only the right to buy them. Warrants differ from call options in that warrants are issued by the issuer of the security that may be purchased on their exercise, whereas call options may be written or issued by anyone. The prices of warrants do not necessarily move parallel to the prices of the

underlying securities. Warrants involve the risk that the Fund could lose the purchase value of the warrant if the warrant is not exercised prior to its expiration. They also involve the risk that the effective price paid for the warrant added to the subscription price of the related security may be greater than the value of the subscribed security’s market price.

 

DISCUSSION OF GAS UTILITY FUND INDEX METHODOLOGY

 

The American Gas Association Stock Index (the “AGA Stock Index”) consists of the publicly traded members of the American Gas Association (“AGA”) whose securities are traded on a U.S. stock exchange, excluding treasury stock. While the securities of the approximately 50 companies included in the AGA Stock Index are domestic U.S. securities, they may include domestic securities of foreign companies, such as ADRs, EDRs, or GDRs. These companies engage to varying degrees in the distribution or transmission of natural gas. ScottMadden, Inc. (“ScottMadden”) performs the computations required to produce the AGA Stock Index pursuant to a contractual agreement between AGA and ScottMadden. AGA has the ultimate responsibility to ensure that ScottMadden performs its calculations in accordance with AGA’s Administrative Services Agreement with the Fund.

 

The AGA Stock Index is computed at least monthly by multiplying the number of outstanding shares of common stock of each AGA member company by the closing market price per share at the AGA Stock Index date. This product then is multiplied by the percentage of each company’s assets devoted to natural gas distribution and transmission or, when this information is not available, by the percentage of property, plant, and equipment (“PP&E”) devoted to natural gas distribution and transmission. The result reflects the natural gas component of the company’s asset base and is called such company’s “gas market capitalization value.” The total of all AGA Stock Index companies’ gas market capitalization values is called the “industry’s gas market capitalization value.” To determine each company’s stock percentage within the AGA Stock Index, the company’s gas market capitalization value is divided by the industry’s gas market capitalization value. In computing the AGA Stock Index, individual stocks are limited to no more than 5% of the AGA Stock Index, meaning that any representation in the AGA Stock Index exceeding 5% is reallocated. The Fund’s portfolio managers seek to purchase sufficient shares of each company’s stock such that its proportion of the Fund’s assets substantially equal that stock’s proportion of the AGA Stock Index. As market conditions dictate and as significant shareholder purchases and redemptions occur, the portfolio managers buy or sell stocks to maintain holdings of each stock to reflect proper weightings within the AGA Stock Index. The gas market capitalization value for each company is recalculated at least annually.

 

In both rising and falling markets, the Fund attempts to achieve a correlation of monthly returns with the AGA Stock Index of approximately 95% or better. A correlation of 100% means the total return of the Fund’s assets would increase and decrease at exactly the same rate as the total return of the AGA Stock Index. For fiscal year 2023, the Gas Utility Fund achieved a correlation with the AGA Stock Index of 99.9% after expenses. Since the AGA Stock Index weightings change in very small amounts during the trading day, to track the AGA Stock Index exactly, the portfolio managers would need to make continual small adjustments and would need to purchase and sell every stock within the AGA Stock Index as contributions and redemptions to the Fund were made. To minimize brokerage and transaction expenses, the portfolio managers compare the actual composition of the Fund to the theoretical target daily and typically makes adjustments to the holdings of any single stock at least weekly whenever the actual proportion of that stock in the Fund varies by more than 0.5% of the weighting of that stock in the AGA Stock Index. The percentage of each stock holding is based on the Fund’s NAV. For example, if Stock A represented 3% of the total weighting in the AGA Stock Index at the close of business, an adjustment to the holdings of Stock A would be made if the value of Stock A were greater than 3.5% or less than 2.5% of the net assets. Adjustments may be made at other times when these tolerances are not exceeded if the adjustment can be made without incurring, in the portfolio managers’ view, unreasonable transaction expenses.

 

 

 

MANAGEMENT INFORMATION

 

The business and affairs of the Funds are managed under the direction of the Board of Trustees of the Trust, and the Board of Trustees elects the officers of the Trust (“Officers”). From time to time, the Board of Trustees also has appointed advisers to the Board of Trustees (“Advisers”) with the intention of having qualified individuals serve in an advisory capacity to garner experience in the investment fund and asset management industry and be considered as potential Trustees in the future. There are currently two Advisers, Brian Alexander and A.J. Hennessy. As Advisers, Mr. Alexander and Mr. A.J. Hennessy attend meetings of the Board of Trustees and act as non‑voting participants. Information pertaining to the Trustees, Advisers, and the Officers of the Trust is set forth below. The Trustees and Officers serve until their successors are duly elected and qualified or until their earlier death, resignation, or removal. Each Trustee oversees all 16 Funds covered by this SAI, as well as the Hennessy Stance ESG ETF. The Hennessy Stance ESG ETF is covered in a different Statement of Additional Information. Unless otherwise indicated, the address of all persons listed below is 7250 Redwood Boulevard, Suite 200, Novato, CA 94945.

 

Name, Year of Birth, and Position Held with the Trust

Start Date of Service

Principal Occupation(s) During Past Five Years

Other Directorships Held Outside of Fund Complex During Past Five Years

_______________

 

 

 

 

 

 

Pursuant to the terms of the Management Agreements (as defined below) with the Trust, the Investment Manager, on behalf of the Funds, pays the compensation of all Officers (other than all or a portion of the salaries and benefits of the Funds’ compliance officers) and Trustees who are affiliated persons of the Investment Manager.

 

TRUSTEE AND ADVISER QUALIFICATIONS

 

Neil J. Hennessy has been a Trustee and portfolio manager of the Hennessy Funds for many years. His experience and skills as a portfolio manager, as well as his familiarity with the investment strategies utilized by the Investment Manager and with the Cornerstone series of the Hennessy Funds’ portfolios, led to the conclusion that he should serve as a Trustee. J. Dennis DeSousa’s experience as a real estate investor has honed his understanding of financial statements and the issues that confront businesses, and his diligent and thoughtful service as a Trustee for over 25 years has provided him with a solid understanding of the investment fund industry. Serving as a sheriff for over 26 years before retiring, Robert T. Doyle honed his organizational and problem solving skills, making him a valuable resource when addressing issues that confront the Hennessy Funds. Further, Mr. Doyle’s diligent and thoughtful service as a Trustee for over 25 years has provided him with a detailed understanding of the investment fund industry. Doug Franklin was employed by the Allianz-Fireman’s Fund (FFIC) for 28 years, where he rose through the company to senior leadership, including positions as Chief Actuary and Chief Risk Officer before retiring in 2015. His considerable leadership experience and ability to grasp complex issues makes him a valuable resource to the Board of Trustees. Claire Garvie is the founder and Chief Operations Officer of Kiosk, an internet marketing and services firm, and brings over 20 years of experience leading successful marketing programs for firms

like Sony, Delta Airlines, and many others. Kiosk was founded in 2004 and has offices in the San Francisco Bay Area and Liverpool, UK, as well as staff across nine states in the U.S. Her vast experience in digital marketing makes her a valuable addition to the Board of Trustees. As the chief executive officer of a company, Gerald P. Richardson gained familiarity with financial statements and developed a deep understanding of the demands of operating a business and addressing the issues that confront businesses. Further, Mr. Richardson’s experience in the securities industry as a consultant and his diligent and thoughtful service as a Trustee for nearly two decades makes him a valuable resource to the Board of Trustees. Mr. DeSousa, Mr. Doyle, Mr. Franklin, Ms. Garvie, and Mr. Richardson take conservative and thoughtful approaches to addressing issues facing the Hennessy Funds. The combination of skills and attributes discussed above led to the conclusion that Mr. DeSousa, Mr. Doyle, Mr. Franklin, Ms. Garvie, and Mr. Richardson should serve as Trustees.

 

With over 15 years of experience in the complex healthcare industry, Brian Alexander’s leadership roles at Solis Mammography and in various senior positions within the Sutter Health organization have required significant management, administrative, and customer service expertise, which makes him a valuable resource as an Adviser to the Board of Trustees. A.J. Hennessy has worked for the Investment Manager for over 12 years. His primary focus is business development, researching acquisition opportunities, fostering connections in the industry, and helping to initiate and complete strategic transactions for the firm. He is integral in supporting the sales and distribution team, including overseeing a CRM (client relationship management) software system. A.J. Hennessy is also very active in the community and currently serves on the boards of several charitable organizations. His experience in the investment fund industry and his community leadership makes him a valuable resource as an Adviser to the Board of Trustees.

 

BOARD LEADERSHIP STRUCTURE

 

The Board of Trustees has general oversight responsibility with respect to the operation of the Hennessy Funds. The Board of Trustees has engaged the Investment Manager to manage the Hennessy Funds and is responsible for overseeing the Investment Manager and other service providers to the Hennessy Funds in accordance with the provisions of the 1940 Act and other applicable laws. The Board of Trustees has established an Audit Committee to assist the Board of Trustees in performing its oversight responsibilities.

 

Neil J. Hennessy serves as the Chairman of the Board of Trustees. The Hennessy Funds do not have a lead disinterested Trustee. The small size of the Board of Trustees, consisting of one interested Trustee and five disinterested Trustees, facilitates open discussion and significant involvement by all of the Trustees without the need for a lead disinterested Trustee. Mr. Neil Hennessy’s in-depth knowledge of the Hennessy Funds and their operations enables him to effectively set board agendas and ensure appropriate processes and relationships are established with both the Investment Manager and the Board of Trustees, while the business acumen and many years of experience in the investment fund industry serving as Trustees or Advisers of the Hennessy Funds of Mr. DeSousa, Mr. Doyle, Mr. Franklin, Ms. Garvie, and Mr. Richardson, enables them to effectively and accurately assess the information being provided to the Board of Trustees to ensure that they are appropriately fulfilling their fiduciary duties to the Hennessy Funds and their shareholders. In light of these factors, the Trust has determined that its leadership structure is appropriate.

 

BOARD OVERSIGHT OF RISK

 

The Board of Trustees performs a risk oversight function for the Hennessy Funds directly through its oversight role and indirectly through the Audit Committee, officers of the Hennessy Funds, and service providers to the Hennessy Funds. To effectively perform its risk oversight function, the Board of Trustees performs the following activities, among other things: (i) receives and reviews reports related to the performance and operations of the Hennessy Funds; (ii) reviews and approves, as applicable, the compliance

policies and procedures of the Hennessy Funds; (iii) approves the Hennessy Funds’ principal investment policies; (iv) meets with representatives of various service providers, including the Investment Manager and the independent registered public accounting firm of the Hennessy Funds, to review and discuss the activities of the Hennessy Funds and to provide direction with respect thereto; and (v) appoints a chief compliance officer of the Hennessy Funds who oversees the implementation and testing of the Hennessy Funds’ compliance program and reports to the Board of Trustees regarding compliance matters for the Hennessy Funds and their service providers.

 

The Hennessy Funds have an Audit Committee, which is discussed in greater detail below. The Audit Committee plays a significant role in the risk oversight of the Hennessy Funds as they meet annually with the independent registered public accounting firm of the Hennessy Funds (the “Auditor”) to discuss, among other things, financial risk, including internal controls over financial reporting. From time to time upon request, the Audit Committee meets with the Funds’ chief compliance officer and Fund counsel.

 

BOARD COMMITTEES

 

The Audit Committee of the Board of Trustees comprises Mr. DeSousa, Mr. Doyle (Chair), Ms. Garvie, and Mr. Richardson. The primary functions of the Audit Committee are to recommend to the Board of Trustees the independent registered public accounting firm to be retained to perform the annual audit, to review the results of the audit, to review the Funds’ internal controls, and to review certain other matters relating to the Funds’ independent registered public accounting firm and financial records. The Audit Committee met twice during fiscal year 2023.

 

In overseeing the Auditor, the Audit Committee (i) reviews the Auditor’s independence from the Funds and management, and from the Investment Manager, (ii) reviews periodically the level of fees approved for payment to the Auditor and the pre‑approved non-audit services it has provided to the Funds to ensure their compatibility with the Auditor’s independence, (iii) reviews the Auditor’s performance, qualifications and quality control procedures, (iv) reviews the scope of and overall plans for the annual audit, (v) reviews the Auditor’s performance, qualifications and quality control procedures, (vi) consults with management and the Auditors with respect to the Funds’ processes for risk assessment and risk management, (vii) reviews with management the scope and effectiveness of the Funds’ disclosure controls and procedures, including for purposes of evaluating the accuracy and fair presentation of the company’s financial statements in connection with certifications made by the chief executive officer and chief financial officer, and (viii) reviews significant legal developments and the Funds’ processes for monitoring compliance with law as it relates to the financial statements and related disclosure.

 

BOARD AND OTHER INTERESTED PERSONS COMPENSATION

 

The Trust pays Trustees who are not interested persons of the Funds (each, a “Disinterested Trustee”) and Advisers who are not interested persons of the Funds (each, a “Disinterested Adviser”) fees for their service. During fiscal year 2023, each Disinterested Trustee received a fee of $16,000 and each Disinterested Adviser received a fee of $5,000 for each meeting of the Board of Trustees attended, in each case allocated equally across all Funds. The Trust may also reimburse Trustees and Advisers for travel expenses incurred in order to attend meetings of the Board of Trustees.

 

The table below sets forth the compensation paid by the Trust to each Trustee for service as a Trustee, to each Adviser for service as an Adviser, and to each officer or affiliated person who received

aggregate compensation from the Trust exceeding $60,000, in each case for the 12 months ended October 31, 2023.

 

_______________

 

Because the Investment Manager, the sub-advisors, and Fund Services (as defined below under “THE ADMINISTRATOR”) perform substantially all of the services necessary for the operation of the Funds, the Funds do not require any employees. Other than the Funds’ compliance officer, no officer, director, or employee of the Investment Manager, any sub‑advisor, or Fund Services receives any compensation from the Trust for acting as a Trustee or Officer.

 

 

As of January 31, 2024, the 15 Officers, Trustees, and Advisers of the Hennessy Funds as a group owned an aggregate of less than 1% of (i) the outstanding Investor Class shares of each Fund, except for the Balanced Fund (1.2%) and the Technology Fund (2.5%), and (ii) the outstanding Institutional Class shares of each Fund, except for the Cornerstone Large Growth Fund (1.3%), the Cornerstone Value Fund (3.0%), the Energy Transition Fund (3.2%), the Large Cap Financial Fund (2.5%), the Small Cap Financial Fund (3.3%), and the Technology Fund (8.6%).

 

No person is deemed to “control” any of the Funds, as that term is defined in the 1940 Act, because no Fund knows of any person who owns beneficially or through controlled companies more than 25% of a Fund’s shares, who acknowledges the existence of control, or who was deemed to control based on an adjudication that has become final under Section 2(a)(9) of the 1940 Act. The Funds do not control any person.

 

As of January 31, 2024, the shareholders listed in the table below, referred to as principal shareholders, owned more than 5% of the outstanding voting securities of the Funds. All principal shareholders are owners of record unless otherwise indicated with an asterisk, which denotes beneficial ownership.

 

	Investor Class		Institutional Class
	Shares	Percentage	Shares	Percentage

	Investor Class		Institutional Class
	Shares	Percentage	Shares	Percentage

	Investor Class		Institutional Class
	Shares	Percentage	Shares	Percentage

	Investor Class		Institutional Class
	Shares	Percentage	Shares	Percentage

	Investor Class		Institutional Class
	Shares	Percentage	Shares	Percentage

	Investor Class		Institutional Class
	Shares	Percentage	Shares	Percentage

	Investor Class		Institutional Class
	Shares	Percentage	Shares	Percentage

	Investor Class		Institutional Class
	Shares	Percentage	Shares	Percentage

 

The tables below sets forth, as of December 31, 2023, the dollar range of equity securities beneficially owned by each Trustee and Adviser in each Fund and in the family of investment companies overseen by the Trustees, which includes the Funds and the Hennessy Stance ESG ETF. None of the Disinterested Trustees or Disinterested Advisers, nor any member of their immediate families, owns shares of the Investment Manager, the sub‑advisors, or companies, other than registered investment companies, controlled by or under common control with the Investment Manager or the sub‑advisors.

 

 

(1)	Each of Neil J. Hennessy and A.J. Hennessy is considered an interested person, as defined in the 1940 Act, because he is an officer of the Trust.

(2)	The Hennessy Funds covered in this SAI and the Hennessy Stance ESG ETF are the only funds in the fund complex. The Hennessy Stance ESG ETF is covered in a different Statement of Additional Information.

 

THE INVESTMENT MANAGER

 

The investment manager of the Funds is Hennessy Advisors, Inc. The Investment Manager acts as the investment manager of each Fund pursuant to management agreements with the Trust (collectively, the “Management Agreements”). The Investment Manager furnishes continuous investment advisory services and management to the Funds. The Investment Manager is controlled by Neil J. Hennessy, who currently owns approximately 26.5% of the outstanding voting securities of the Investment Manager.

 

Under the Management Agreements, the Investment Manager is entitled to an investment advisory fee in respect of each Fund, computed daily and payable monthly, at the annual rate of each Fund’s average daily net assets as shown below:

 

Pursuant to the Management Agreements, the Investment Manager is responsible for investment management of each Fund’s portfolio, subject to general oversight by the Board of Trustees, and provides the Funds with office space. In addition, the Investment Manager is obligated to keep certain books and records of the Funds. In connection therewith, the Investment Manager furnishes each Fund with those ordinary clerical and bookkeeping services that are not being furnished by the Funds’ custodian, administrator, or transfer agent.

 

Under the terms of the Management Agreements, each Fund bears all expenses incurred in its operation that are not specifically assumed by the Investment Manager, Fund Services, or the Distributor (as defined below), other than pursuant to the 12b-1 plan for each Fund. General expenses of the Funds not readily identifiable as belonging to one of the Funds are allocated among the Funds by or under the direction of the Board of Trustees in such manner as the Board of Trustees determines to be fair and equitable. Expenses borne by each Fund include, but are not limited to, the following (or the Fund’s allocated share of the following): (i) the cost (including brokerage commissions, if any) of securities purchased or sold by the

Fund and any losses incurred in connection therewith; (ii) investment management fees; (iii) organizational expenses; (iv) filing fees and expenses relating to the registration and qualification of the Trust or the shares of a Fund under federal or state securities laws and maintenance of such registrations and qualifications; (v) fees and expenses payable to Disinterested Trustees and Disinterested Advisers; (vi) taxes (including any income or franchise taxes) and governmental fees; (vii) costs of any liability, trustees’ and officers’ insurance, and fidelity bonds; (viii) legal, accounting, and auditing expenses; (ix) charges of the custodian, transfer agent, and other agents; (x) expenses of setting in type and providing a camera-ready copy of the Fund Prospectus and supplements thereto, expenses of setting in type and printing or otherwise reproducing statements of additional information and supplements thereto, and reports and proxy materials for existing shareholders; (xi) any extraordinary expenses (including fees and disbursements of counsel) incurred by the Trust or the Fund; (xii) fees, voluntary assessments, and other expenses incurred in connection with membership in investment company organizations; (xiii) a portion of the salaries of the Funds’ compliance officers; and (xiv) costs of meetings of shareholders. The Investment Manager may voluntarily waive its management fee or subsidize other Fund expenses. This may have the effect of increasing a Fund’s return.

 

Under the Management Agreements, the Investment Manager is not liable for any error of judgment or mistake of law or for any loss suffered by the Trust or any Fund in connection with the performance of the Management Agreements, except a loss resulting from willful misfeasance, bad faith, or gross negligence on the part of the Investment Manager in the performance of its duties or from reckless disregard of its duties and obligations thereunder.

 

Each Management Agreement has an initial term of two years and may be renewed from year to year thereafter so long as such continuance is specifically approved at least annually in accordance with the requirements of the 1940 Act. Each Management Agreement provides that it terminates in the event of its assignment (as defined in the 1940 Act). The Management Agreements may be terminated by the Trust with respect to a Fund or by the Investment Manager upon 60 days’ prior written notice.

 

The Investment Manager reimburses the Cornerstone Growth Fund and the Cornerstone Value Fund to the extent that the aggregate annual operating expenses of such Funds (for both Investor Class and Institutional Class shares), including the investment advisory fee, exceeds the expense limitations applicable to either of these Funds imposed by applicable state securities laws or regulations thereunder, as such limitations may be raised or lowered from time to time.

 

The Investment Manager reimburses the Cornerstone Large Growth Fund to the extent that the aggregate annual total expenses of the Fund (for both Investor Class and Institutional Class shares), including the investment advisory fee but excluding all federal, state, and local taxes, interest, brokerage commissions, and other costs incurred in connection with the purchase or sale of securities and extraordinary items in any year, exceeds that percentage of the average NAV of the Fund for such year, as determined by valuations made as of the close of each business day, which is the most restrictive percentage provided by the state laws of the various states in which Investor Class or Institutional Class shares, as applicable, of the Fund are qualified for sale.

 

The Investment Manager reimburses the Total Return Fund and the Balanced Fund to the extent that the aggregate annual total expenses of Investor Class shares of such Funds, including the investment advisory fee and the administration fee but excluding any interest, taxes, brokerage fees and commissions, distribution fees, and extraordinary expenses, exceeds that percentage of the average net assets of either of such Fund for such year, as determined by valuations made as of the close of each business day, which is either (i) the most restrictive percentage provided by the state laws of the various states in which Investor Class shares of such Funds are qualified for sale or (ii) if the states in which Investor Class shares of such Funds are qualified for sale impose no such restrictions, 3%.

 

Effective October 26, 2018, the Investment Manager agreed in writing to waive a portion of its investment advisory fees and assume certain expenses of Investor Class shares and Institutional Class shares of the Midstream Fund to the extent annual fund operating expenses exceed 1.75% and 1.50%, respectively, of the average daily net assets (excluding all federal, state, and local taxes, interest, brokerage commissions, dividend and interest expenses on short sales, extraordinary items, and acquired fund fees and expenses (as defined in Form N‑1A under the 1940 Act or any successor form thereto) and other expenses incurred in connection with the purchase and sale of securities) of such Fund until October 25, 2020, and the Investment Manager has since agreed in writing to extend the waiver until February 28, 2025, at which time the contractual arrangement automatically terminates (and it may not be terminated prior to that date).

 

Effective February 28, 2017, the Investment Manager agreed in writing to waive a portion of its investment advisory fees and assume certain expenses of Investor Class shares and Institutional Class shares of the Technology Fund to the extent annual fund operating expenses exceed 0.98% of the average daily net assets (excluding all federal, state, and local taxes, interest, brokerage commissions, 12b‑1 fees, shareholder servicing fees payable to the Investment Manager, acquired fund fees and expenses and other costs incurred in connection with the purchase and sale of securities, and extraordinary items) of such Fund until February 28, 2018, and the Investment Manager has since agreed in writing to extend the waiver until February 28, 2025, at which time the contractual arrangement automatically terminates (and it may not be terminated prior to that date).

 

From December 1, 2017, through November 30, 2019, the Investment Manager agreed in writing to waive a portion of its investment advisory fees and assume certain expenses of Investor Class shares and Institutional Class shares of the Cornerstone Large Growth Fund to the extent that the aggregate annual operating expenses exceeded 1.29% and 0.98%, respectively, of the average daily net assets (excluding all federal, state and local taxes, interest, brokerage commissions, acquired fund fees and expenses and other costs incurred in connection with the purchase and sale of securities, and extraordinary items) of such Fund.

 

If the accrued expenses of the Fund exceeds the expense limitation, the Fund creates an account receivable from the Investment Manager for such excess. In such a situation, the monthly payment of the Investment Manager’s fee is reduced by the amount of such excess (and if the amount of such excess in any month is greater than the monthly payment of the Investment Manager’s fee, the Investment Manager pays the Fund the amount of such difference), subject to monthly adjustment during the remainder of the Fund’s fiscal year if accrued expenses fall below this limit. The Investment Manager may recoup from the Fund any expenses waived or reimbursed for three years after such expenses are incurred, including for the three years following the expiration of the expense limitation agreement, if such recoupment can be achieved within the expense limits and any expense limits in place at the time of recoupment.

 

During fiscal years 2023, 2022, and 2021, the Funds listed below paid the following investment advisory fees to the Investment Manager:

 

Fiscal Year Ended  October 31, 2023

Fiscal Year Ended  October 31, 2022

Fiscal Year Ended  October 31, 2021

During fiscal year 2023, the Funds listed below paid investment advisory fees to the Investment Manager and received fee waivers and reimbursements of expenses as set forth below:

 

During fiscal year 2022, the Funds listed below paid investment advisory fees to the Investment Manager and received fee waivers and reimbursements of expenses as set forth below:

 

During fiscal year 2021, the Funds listed below paid investment advisory fees to the Investment Manager and received fee waivers and reimbursements of expenses as set forth below:

 

SUB-ADVISORS

 

The Investment Manager has delegated the day-to-day management of the portfolio composition of the Focus Fund, the Equity and Income Fund, the Japan Fund, and the Japan Small Cap Fund to sub‑advisors and has entered into a sub-advisory agreement with each sub‑advisor. Pursuant to the sub‑advisory agreements, the sub-advisors make specific portfolio investments in accordance with the applicable Fund’s investment objective and the sub-advisor’s investment approach and strategies.

 

The Investment Manager employs the sub‑advisors and may terminate them subject to prior approval by the Board of Trustees. Pursuant to the 1940 Act, employing a new sub‑advisor requires prior approval of the applicable Fund’s shareholders. The Trust may request an SEC order exempting a Fund from such requirements, but there can be no assurance that, if requested, such an order would be granted. Selection and retention criteria for a sub-advisor include the following: (i) historical performance records; (ii) consistent performance in the context of the markets; (iii) organizational stability and reputation; (iv) quality and depth of investment personnel; and (v) ability to apply a consistent approach. Different sub‑advisors may not necessarily exhibit all of the criteria to the same degree. Sub-advisors are paid by the Investment Manager, not by the sub‑advised Funds. Each sub-advisor’s activities are subject to general supervision by the Investment Manager and the Board of Trustees. Although the Investment Manager and the Board of Trustees do not evaluate the investment merits of a sub-advisor’s specific securities selections, they do review the performance of each sub-advisor relative to the selection criteria.

 

Broad Run Investment Management, LLC (Focus Fund)

 

The Investment Manager has delegated the day-to-day management of the portfolio composition of the Focus Fund to Broad Run Investment Management, LLC (“Broad Run”) and has entered into a sub‑advisory agreement with Broad Run (the “Broad Run Sub‑Advisory Agreement”). Broad Run is an investment adviser registered under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and is wholly owned by David S. Rainey, Brian E. Macauley, and Ira M. Rothberg. Pursuant to the Broad Run Sub-Advisory Agreement, Broad Run makes specific portfolio investments in accordance with the Focus Fund’s investment objective and Broad Run’s investment approach and strategies. In consideration thereof, the Investment Manager (not the Fund) pays Broad Run monthly at an annual rate of 0.29% of the average daily net assets of the Fund.

 

The Broad Run Sub-Advisory Agreement may be terminated by either party at any time without the payment of any penalty upon giving 60 days’ prior written notice to the other party. In addition, it terminates automatically if it is assigned.

 

The Broad Run Sub-Advisory Agreement provides that, absent willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations, Broad Run is not liable to the Investment Manager for any act or omission in the course of, or connected with, rendering services under the Broad Run Sub‑Advisory Agreement or for any losses that may be sustained in the purchase, holding, or sale of any security. The Broad Run Sub‑Advisory Agreement also provides that Broad Run is free to render similar services to others and to engage in other activities, as long as the services rendered under the sub‑advisory agreement are not impaired.

 

FCI Advisors (Equity and Income Fund – Fixed Income Allocation)

 

The Investment Manager has delegated the day-to-day management of the portfolio composition of the fixed income allocation of the Equity and Income Fund to FCI Advisors and has entered into a sub‑advisory agreement with FCI Advisors (the “FCI Sub‑Advisory Agreement”). FCI Advisors is an investment adviser registered under the Advisers Act and was founded in 1966. FCI Advisors’ ultimate

parent company is MTC Holding Corporation, which is a holding company that is majority owned by Bradley A. Bergman, a Director of FCI Advisors and the President and Director of MTC Holding Corporation. Pursuant to the FCI Sub‑Advisory Agreement, FCI Advisors makes specific portfolio investments in accordance with the Equity and Income Fund’s investment objectives and FCI Advisors’ investment approach and strategies. In consideration thereof, the Investment Manager (not the Fund) pays FCI Advisors monthly at an annual rate of 0.27% of the average daily net assets of the Fund in its fixed income allocation.

 

The FCI Sub‑Advisory Agreement may be terminated by either party at any time without the payment of any penalty upon giving 60 days’ prior written notice to the other party. In addition, the FCI Sub‑Advisory Agreement terminates automatically if it is assigned.

 

The FCI Sub‑Advisory Agreement provides that, absent willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations, FCI Advisors is not liable to the Investment Manager for any act or omission in the course of, or connected with, rendering services under the sub‑advisory agreement or for any losses that may be sustained in the purchase, holding, or sale of any security. The FCI Sub‑Advisory Agreement also provides that FCI Advisors is free to render similar services to others and to engage in other activities, as long as the services rendered under the sub‑advisory agreement are not impaired.

 

The London Company of Virginia, LLC (Equity and Income Fund – Equity Allocation)

 

The Investment Manager has delegated the day-to-day management of the portfolio composition of the equity allocation of the Equity and Income Fund to The London Company of Virginia, LLC (“The London Company”) and has entered into a sub‑advisory agreement with The London Company (“The London Company Sub‑Advisory Agreement”). The London Company is an investment adviser registered under the Advisers Act and was founded by Stephen M. Goddard, CFA, in 1994. The London Company is currently majority employee‑owned. Pursuant to The London Company Sub‑Advisory Agreement, The London Company makes specific portfolio investments for the equity allocation of the Equity and Income Fund in accordance with the Fund’s investment objective and The London Company’s investment approach and strategies. In consideration thereof, the Investment Manager (not the Fund) pays The London Company monthly at an annual rate of 0.33% of the average daily net assets of the Fund in its equity allocation.

 

The London Company Sub‑Advisory Agreement may be terminated by either party at any time without the payment of any penalty upon giving 60 days’ prior written notice to the other party. In addition, it terminates automatically if it is assigned.

 

The London Company Sub‑Advisory Agreement provides that, absent willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations, The London Company is not liable to the Investment Manager for any act or omission in the course of, or connected with, rendering services under the sub‑advisory agreement or for any losses that may be sustained in the purchase, holding, or sale of any security. The London Company Sub‑Advisory Agreement also provides that The London Company is free to render similar services to others and to engage in other activities, as long as the services rendered under the sub‑advisory agreement are not impaired.

 

SPARX Asset Management Co., Ltd. (Japan Fund and Japan Small Cap Fund)

 

The Investment Manager has delegated the day-to-day management of the portfolio composition of the Japan Fund and the Japan Small Cap Fund to SPARX Japan and has entered into a sub‑advisory agreement with SPARX Japan for both such Funds (the “SPARX Japan Sub‑Advisory Agreement”). SPARX Japan is an investment adviser registered under the Advisers Act that was founded in 1989 and is

headquartered in Tokyo. SPARX Japan is also registered with the Japanese authority to conduct the investment management business, the investment advisory and agency business, and the second financial instruments business. In addition, SPARX Japan performs various investment and research functions and performs investment advisory activities and fund administration for its Japanese and international clients in the area of Japanese equity investment. SPARX Japan is a wholly owned subsidiary of SPARX Group Co., Ltd. (“SPARX Group”). SPARX Group is a publicly listed company traded on the JASDAQ securities exchange, which is controlled by majority shareholder and Chairman, Mr. Shuhei Abe. Pursuant to the SPARX Japan Sub‑Advisory Agreement, SPARX Japan makes specific portfolio investments in accordance with the Japan Fund’s or the Japan Small Cap Fund’s investment objectives, as applicable, and SPARX Japan’s investment approach and strategies. In consideration thereof, the Investment Manager (not the Funds) pays SPARX Japan monthly at an annual rate equal to 0.35% of the first $500 million of the average daily net assets of each Fund, 0.40% of the next $500 million of the average daily net assets of each Fund, and 0.42% of the average daily net assets of each Fund in excess of $1 billion.

 

The SPARX Japan Sub-Advisory Agreement may be terminated by either party (i) at any time without the payment of any penalty upon giving 60 days’ prior written notice to the other party or (ii) if such party provides written notice to the other party that the other party is in material breach of the sub-advisory agreement, unless the other party cures such breach within 30 days following receipt of such written notice. In addition, it terminates automatically if it is assigned.

 

The SPARX Japan Sub-Advisory Agreement provides that SPARX Japan is not liable to the Investment Manager for, and the Investment Manager may not take any action against SPARX Japan or hold SPARX Japan liable for, any error of judgment or mistake of law or for any loss suffered by the Japan Fund or the Japan Small Cap Fund (including, without limitation, by reason of the purchase, sale, or retention of any security) in connection with the performance of SPARX Japan’s duties under the sub‑advisory agreement, except for a loss resulting from willful misfeasance, bad faith or gross negligence on the part of SPARX Japan in the performance of its duties under the sub‑advisory agreement, or by reason of its reckless disregard of its obligations and duties under the sub‑advisory agreement. The SPARX Japan Sub-Advisory Agreement also provides that SPARX Japan and its officers, directors, and employees are not prohibited from engaging in any other business activity or from rendering services to any other person, or from serving as partners, officers, directors, trustees, or employees of any other firm or corporation.

 

In addition to entering into the SPARX Japan Sub-Advisory Agreement, the Investment Manager and SPARX Japan have entered into an arrangement that requires certain payments by the Investment Manager (and not by the Funds) in the event of the termination of SPARX Japan as sub-advisor. Specifically, if the Investment Manager terminates the SPARX Japan Sub-Advisory Agreement with respect to either or both of the Japan Fund and the Japan Small Cap Fund without providing SPARX Japan with at least 60 calendar days’ advance written notice of such termination, then the Investment Manager owes SPARX Japan sub-advisory fees as if such agreement had continued to be in effect for an additional 60 full calendar days after the date SPARX Japan received written notice of its termination. Such additional fees are calculated based on the aggregate NAV of the applicable Fund as of the close of business on the business day immediately preceding the termination date.

 

THE PORTFOLIO MANAGERS

 

Funds Advised Solely by the Manager:

 

•	Cornerstone Growth Fund

•	Cornerstone Mid Cap 30 Fund

•	Cornerstone Large Growth Fund

•	Cornerstone Value Fund

•	Total Return Fund

•	Balanced Fund

•	Energy Transition Fund

•	Midstream Fund

•	Gas Utility Fund

•	Large Cap Financial Fund

•	Small Cap Financial Fund

•	Technology Fund

The portfolio managers of each of the Funds listed above may have responsibility for the day-to-day management of other Funds within the Hennessy Funds complex, but they do not manage any other accounts as of October 31, 2023.

 

The portfolio managers of a Fund are often responsible for managing other Funds and may be responsible for accounts other than the Funds in the future. The side-by-side management of the Funds and other accounts may raise potential conflicts of interest due to the interest held by the Investment Manager or one of its affiliates in an account and certain trading practices used by the portfolio managers (for example, cross trades between the Funds and another account and allocation of aggregated trades). The Investment Manager has developed policies and procedures reasonably designed to mitigate those conflicts. In particular, the Investment Manager has adopted policies limiting the ability of portfolio managers to cross securities between Funds and policies designed to ensure the fair allocation of securities purchased on an aggregated basis.

 

The portfolio managers are compensated in various forms. The following table outlines the forms of compensation paid to the portfolio managers as of October 31, 2023:

 

Form of  Compensation

Source of  Compensation

Method Used to Determine Compensation (Including Any Differences in Method Between Account Types)

The following tables set forth the dollar range of equity securities of each Fund beneficially owned by its portfolio managers as of October 31, 2023:

 

 

Sub-Advised Funds

 

 

Broad Run is the sole sub-advisor to the Focus Fund. The portfolio managers of the Focus Fund may have responsibility for accounts other than the Focus Fund. Information regarding the accounts managed by each portfolio manager as of October 31, 2023, other than the Focus Fund, is set forth below.

 

 

 

The Focus Fund investments and the investments of other accounts managed by Broad Run are not likely to experience any material conflict of interest. Broad Run employs a trade rotation policy to ensure that all accounts managed by Broad Run are handled in a fair and equitable manner by each portfolio manager. Broad Run also maintains a detailed compliance manual designed to address any potential conflicts of interest.

 

The portfolio managers for the Focus Fund receive an annual salary plus distributions based on firm profitability.

 

As of October 31, 2023, each of David S. Rainey and Ira M. Rothberg owned $500,001 to $1,000,000 in shares of the Focus Fund and Brian E. Macauley owned $100,001 to $500,000 in shares of the Focus Fund.

 

 

The London Company is the sub-advisor for the equity allocation of the Equity and Income Fund. The portfolio managers of the equity allocation of the Equity and Income Fund may have responsibility for

accounts other than the Equity and Income Fund. Information regarding the accounts managed by each portfolio manager as of October 31, 2023, other than the Equity and Income Fund, is set forth below.

 

 

 

 

Actual or potential conflicts of interest may arise when the portfolio manager has management responsibilities for more than one client account including and not limited to the execution and allocation of investment opportunities, use of soft dollars and other brokerage practices, and personal securities trading. The London Company has adopted policies and procedures it believes are reasonably designed to address such conflicts. The London Company employs a trade rotation policy to ensure that all accounts managed by it are handled in a fair and equitable manner by each portfolio manager. The London Company also maintains a detailed compliance manual designed to address any potential conflicts of interest.

 

Each portfolio manager receives an annual salary and a year-end bonus based on firm performance and overall contribution to The London Company. No specific benchmark is used to determine the amount of bonuses paid to employees. Bonuses are measured using a general assessment of stock and portfolio performance compared to relevant benchmarks, which include the S&P 500, Russell 1000^®, and Russell 2000^® Indices (on a pre-tax basis over a three-year to five-year period) relative to the market capitalization, stock sector and objective of the portfolios being managed. Portfolio managers also have the potential to become owners of The London Company after a reasonable tenure with the firm.

 

As of October 31, 2023, Stephen M. Goddard owned over $1 million in shares of the Equity and Income Fund, and none of the other portfolio managers owned shares of the Equity and Income Fund.

 

 

FCI Advisors is the sub-advisor for the fixed income allocation of the Equity and Income Fund. The portfolio managers of the fixed income allocation of the Equity and Income Fund may have responsibility for

accounts other than the Equity and Income Fund. Information regarding the accounts managed by each portfolio manager as of October 31, 2023, other than the Equity and Income Fund, is set forth below.

 

 

With respect to potential conflicts of interest, to the extent that the Equity and Income Fund and another client of FCI Advisors seek to acquire the same security at about the same time, the Equity and Income Fund may not be able to acquire as large a position in such security as it desires, or it may have to pay a higher price for the security. Similarly, the Equity and Income Fund may not be able to obtain as large an execution of an order to sell or as high a price for any particular portfolio security if the other client desires to sell the same portfolio security at the same time. On the other hand, if the same securities are bought or sold at the same time by more than one client, the resulting participation in volume transactions could produce better executions for the Equity and Income Fund. In the event that more than one client wants to purchase or sell the same security on a given date, the purchases and sales normally would be made by random client selection. FCI Advisors maintains a detailed trading policy manual designed to address these conflicts of interest.

 

Each portfolio manager is compensated for his services by FCI Advisors. Each portfolio manager’s compensation consists of a fixed base salary, a performance-based bonus, and the right to participate in FCI Advisors’ profit sharing and 401(k) plan. Each portfolio manager is eligible to receive an annual bonus from FCI Advisors. The annual performance based bonus is calculated 15% based on client retention and other bonus considerations and 85% based on the performance of FCI Advisors’ fixed income composites compared to the appropriate Bloomberg Capital Indices. Performance is calculated for the prior calendar year on a pre-tax basis. Senior portfolio managers have an opportunity to be shareholders of the privately held holding company, MTC Holding, the parent company of FCI Advisors.

 

As of October 31, 2023, neither portfolio manager owned shares of the Equity and Income Fund.

 

 

SPARX Japan is the sole sub-advisor to the Japan Fund and the Japan Small Cap Fund. The portfolio managers of the Japan Fund and the Japan Small Cap Fund may have responsibility for accounts other than such Funds. Information regarding the accounts managed by each portfolio manager as of October 31, 2023, other than the Japan Fund and the Japan Small Cap Fund, is set forth below.

 

 

The portfolio managers of the Japan Fund and the Japan Small Cap Fund manage multiple accounts for a diverse client base, including institutional investors, banking and thrift institutions, pension and profit sharing plans, businesses, private investment partnerships and companies, and sophisticated, high net worth individuals. SPARX Japan has a fiduciary obligation to recognize potential conflicts of interest and manage them carefully through appropriate policies, procedures, and oversight. Although the potential for conflicts of interest exist when an investment adviser and portfolio managers manage other accounts with similar investment objectives and strategies as the Japan Fund or the Japan Small Cap Fund (“Similar Accounts”), SPARX Japan has procedures in place that are designed to ensure that all accounts are treated fairly and that the Funds are not disadvantaged, including procedures regarding trade allocations and conflicting trades (e.g., long and short positions in the same security, as described below), which include internal review processes and oversight by independent third parties. In addition, the Japan Fund and Japan Small Cap Fund, as series of a registered investment company, are subject to different regulations than certain of the Similar Accounts, and, consequently, may not be permitted to engage in all the investment techniques or transactions, or to engage in such techniques or transactions to the same degree, as the Similar Accounts.

 

Potential conflicts of interest may arise because of SPARX Japan’s side-by-side management of the Japan Fund, the Japan Small Cap Fund, and Similar Accounts, including hedge funds (where SPARX Japan receives performance-based fees). For example, conflicts of interest may arise with both the aggregation and allocation of securities transactions and allocation of limited investment opportunities, as SPARX Japan may be perceived as causing accounts it manages to participate in an offering to increase SPARX Japan’s overall allocation of securities in that offering, or to increase SPARX Japan’s ability to participate in future offerings by the same underwriter or issuer. Allocations of bunched trades, particularly trade orders that were only partially filled due to limited availability, and allocation of investment opportunities generally, could raise a potential conflict of interest, as SPARX Japan may have an incentive to allocate securities that are expected

to increase in value to preferred accounts. IPOs, in particular, are frequently of very limited availability. Additionally, portfolio managers may be perceived to have a conflict of interest because of the multiple Similar Accounts that they are managing on behalf of SPARX Japan in addition to the Japan Fund and the Japan Small Cap Fund. Although SPARX Japan does not track each individual portfolio manager’s time dedicated to each account, SPARX Japan periodically reviews each portfolio manager’s overall responsibilities to ensure that they are able to allocate the necessary time and resources to manage effectively the Japan Fund and the Japan Small Cap Fund. In addition, SPARX Japan could be viewed as having a conflict of interest to the extent that SPARX Japan or the portfolios managers have a materially larger investment in a Similar Account than their investment in the Japan Fund or the Japan Small Cap Fund.

 

A potential conflict of interest may be perceived to arise if transactions in one account closely follow related transactions in a different account, such as when a purchase increases the value of securities previously purchased by the other account, or when a sale in one account lowers the sale price received in a sale by a second account. Certain hedge funds managed by SPARX Japan may also be permitted to sell securities short. When SPARX Japan engages in short sales of securities of the type in which the Japan Fund or the Japan Small Cap Fund invests, SPARX Japan could be seen as harming the performance of the Japan Fund or the Japan Small Cap Fund for the benefit of the account engaging in short sales if the short sales contribute to the fall in the market value of the securities. As described above, SPARX Japan has procedures in place to address these conflicts. SPARX Japan’s trading policies and procedures attempt to follow established best practices and to address, where necessary, the challenges SPARX Japan faces in managing specifically the Japan Fund, the Japan Small Cap Fund, and the Similar Accounts.

 

SPARX Japan’s portfolio managers are generally responsible for managing multiple types of accounts that may, or may not, have similar investment objectives, strategies, risks, and fees to those managed on behalf of the Japan Fund and the Japan Small Cap Fund. Portfolio managers responsible for managing the Funds may also manage sub-advised registered investment companies, collective investment trusts, unregistered funds, or other pooled investment vehicles and separate accounts.

 

SPARX Japan compensates portfolio managers by a competitive salary and bonus structure, which is determined both quantitatively and qualitatively. The compensation package for the portfolio managers of the Japan Fund and the Japan Small Cap Fund consists of a salary and incentive bonus comprising cash and equity in SPARX Japan’s parent company. Various factors are considered in the determination of a portfolio manager’s compensation. Portfolio managers are compensated on the performance of the aggregate group of portfolios managed by them rather than for a specific fund or account. All of the portfolios managed by a portfolio manager are comprehensively evaluated to determine his positive and consistent performance contribution over time. Further factors include the amount of assets in the portfolios as well as qualitative aspects that reinforce SPARX Japan’s investment philosophy such as leadership, teamwork, and commitment.

 

In determining the incentive bonus, consideration is given to the portfolio manager’s quantitative performance, as measured by his ability to make investment decisions that contribute to total returns, by comparison to a predetermined benchmark (for the Japan Fund and the Japan Small Cap Fund, as set forth in the Fund Prospectus) over the current fiscal year and the longer-term performance (three-year, five-year, or ten-year, as applicable), as well as performance relative to peers. In addition, the portfolio manager’s bonus can be influenced by subjective measurement of his ability to help others make investment decisions. The executive management team of the SPARX Group has discretion to determine the size of the portfolio manager’s bonus. As a result, the percentage of compensation of salary and bonus vary.

 

The portfolio managers of the Japan Fund and the Japan Small Cap Fund also have the opportunity to participate in the SPARX Japan equity program, which awards stock or stock options to those individuals

who have been identified as key contributors as well as future leaders of SPARX Japan. The awards generally vest over three-year to five-year periods.

 

As of October 31, 2023, Messrs. Takeda, Lee, and Matsui did not own shares of the Japan Fund and Messrs. Okumura and Fujimura did not own shares of the Japan Small Cap Fund.

 

THE ADMINISTRATOR

 

U.S. Bancorp Fund Services, LLC, d/b/a U.S. Bank Global Fund Services (“Fund Services”), 615 East Michigan Street, Milwaukee, Wisconsin 53202, provides administration services to the Funds pursuant to a Fund Administration Servicing Agreement with the Trust (the “Administration Agreement”). The Administration Agreement provides that Fund Services must furnish the Funds with various administrative services including, but not limited to, (i) the preparation and coordination of reports to the Board of Trustees, (ii) preparation and filing of securities and other regulatory filings (including state securities filings), (iii) marketing materials, tax returns and shareholder reports, (iv) review and payment of Fund expenses, (v) monitoring and oversight of the activities of the Funds’ other servicing agents (i.e., transfer agent, custodian, accountants, etc.), (vi) maintaining books and records of the Funds, and (vii) administering shareholder accounts. Under the Administration Agreement, Fund Services is required to exercise reasonable care and is not liable for any error of judgment or mistake of law or for any loss suffered by the Funds in connection with its performance as administrator, except a loss resulting from willful misfeasance, bad faith, or negligence on the part of Fund Services in the performance of its duties under the Administration Agreement. The Administration Agreement remains in effect until terminated by either party. It may be terminated at any time, without the payment of any penalty, by the Board of Trustees upon 90 days’ prior written notice to Fund Services, or by Fund Services upon 90 days’ prior written notice to the Trust.

 

For all services provided pursuant to the Administration Agreement, the Fund Accounting Servicing Agreement (see below), the Custodian Agreement (see below), and the Transfer Agent Agreement (see below), Fund Services and its affiliates receive from the Funds an annual fee, payable monthly, based on the average daily net assets of all of the Funds. Subject to certain fee waivers, the annual fee for the 16 Funds covered by this SAI is equal to 0.10% of the first $2 billion of the aggregate average daily net assets, 0.07% of the next $2 billion, 0.06% of the next $2 billion, 0.05% of the next $1 billion, 0.04% of the next $3 billion, and 0.03% of the aggregate average daily net assets in excess of $10 billion, subject to a minimum annual fee for all 16 Funds of $600,000.

 

During fiscal years 2023, 2022, and 2021, Fund Services received the following amounts in administration fees from the Funds:

The American Gas Association provides administrative services to the Gas Utility Fund pursuant to an Administrative Services Agreement between the Gas Utility Fund and AGA. These administrative services include overseeing the calculation of the AGA Stock Index. ScottMadden performs the actual computations required to produce the AGA Stock Index and receives a fee for such calculations pursuant to a contractual arrangement with AGA. AGA does not furnish other securities advice to the Gas Utility Fund or the Investment Manager or make recommendations regarding the purchase or sale of securities by the Gas Utility Fund. Under the terms of an agreement approved by the Board of Trustees, AGA provides the Investment Manager with current information regarding the common stock composition of the AGA Stock Index no less than quarterly but may supply such information more frequently. In addition, AGA provides the Gas Utility Fund with information on the natural gas industry. The Gas Utility Fund pays AGA in its capacity as administrator a fee at an annual rate of 0.04% of the average daily net assets of the Gas Utility Fund.

 

During fiscal years 2023, 2022, and 2021, the Gas Utility Fund paid the following administration fees to AGA:

 

ACCOUNTING SERVICES AGREEMENT

 

Fund Services also provides fund accounting services to the Funds pursuant to a Fund Accounting Servicing Agreement with the Trust (the “Fund Accounting Servicing Agreement”). For its accounting services, Fund Services and its affiliates are entitled to receive annual fees, payable monthly, based on the fee schedule set forth above under “THE ADMINISTRATOR.”

 

TRANSFER AGENT AND CUSTODIAN

 

Fund Services provides transfer agency services to Funds pursuant to a Transfer Agent Agreement with the Trust (the “Transfer Agent Agreement”). Under the Transfer Agent Agreement, Fund Services has agreed to issue and redeem shares of each Fund, make dividend and other distributions to shareholders of each Fund, respond to correspondence by Fund shareholders and others relating to its duties, maintain shareholder accounts, and make periodic reports to the Funds.

 

U.S. Bank, National Association (the “Custodian”), Custody Operations, 1555 North Rivercenter Drive, Suite 302, Milwaukee, Wisconsin 53212, serves as custodian for the Funds pursuant to a Custodian Agreement with the Trust (the “Custodian Agreement”). The Custodian and Fund Services are affiliates of each other. Under the Custodian Agreement, the Custodian is responsible for, among other things, receipt of and disbursement of funds from the Funds’ accounts, establishment of segregated accounts as necessary, and transfer, exchange, and delivery of Fund portfolio securities.

 

THE DISTRIBUTOR

 

Quasar Distributors, LLC (the “Distributor”), 111 East Kilbourn Avenue, Suite 2200, Milwaukee, Wisconsin 53202, serves as the distributor for the Funds pursuant to a distribution agreement with the Trust.

 

CODE OF ETHICS

 

The Trust and the Investment Manager have adopted a Code of Ethics pursuant to Rule 17j‑1 under the 1940 Act (“Rule 17j-1”). Such Code of Ethics permits Access Persons (as defined in Rule 17j‑1) of the Trust and the Investment Manager to invest in securities, including securities that may be purchased or held by the Funds, subject to receiving pre‑clearance of any personal securities transactions in securities other than direct obligations of the U.S. government, bankers’ acceptances, bank certificates of deposit, commercial paper, and high‑quality short‑term debt instruments, including repurchase agreements, and shares issued by open‑end registered investment companies. With certain exceptions, such Code of Ethics generally prohibits the purchase or sale of securities if the Access Person of the Trust or Investment Manager knows at the time of such purchase or sale that the security is being considered for purchase or sale by a Fund or is being purchased or sold by a Fund. While Foreside Financial Group, LLC, on behalf of the Distributor and its affiliates, has adopted a code of ethics that is compliant with Rule 17j-1, Foreside Financial Group, LLC and the Distributor are not required to adopt a code of ethics pursuant to Rule 17j-1, in reliance on the exemption found in Rule 17j-1(c)(3).

 

Each sub‑advisor has adopted a Code of Ethics pursuant to Rule 17j‑1 that permits Access Persons of the sub‑advisor to invest in securities, including securities that may be purchased or held by the Funds, subject to following the procedures set forth in the personal securities transactions policy of the sub‑advisor.

 

PROXY VOTING POLICY

 

Information on how the Funds voted proxies during the most recent 12-month period ended June 30 is available on the Funds’ website, without charge, at www.hennessyfunds.com or the website of the SEC at http://www.sec.gov.

 

Funds Advised Solely by the Manager:

 

•	Cornerstone Growth Fund

•	Cornerstone Mid Cap 30 Fund

•	Cornerstone Large Growth Fund

•	Cornerstone Value Fund

•	Total Return Fund

•	Balanced Fund

•	Energy Transition Fund

•	Midstream Fund

•	Gas Utility Fund

•	Large Cap Financial Fund

•	Small Cap Financial Fund

•	Technology Fund

When the Funds listed above vote proxies relating to securities that they own, they follow the Wall Street Rule, which means that they vote in accordance with management’s recommendation. The portfolio managers of such Funds believe that following the Wall Street Rule is consistent with the economic best interests of the Funds’ investors. A Fund may not exercise voting authority on matters where the cost of voting would be high, such as with some foreign securities, or where the benefit to the Fund would be low, such as when casting a vote would not reasonably be expected to have a material effect on the value of the Fund’s investment.

 

There may be instances where the interests of the Investment Manager may conflict, or appear to conflict, with the interests of one of the Funds. In such instances, the Investment Manager follows the same policy and votes in accordance with the Wall Street Rule.

 

Sub-Advised Funds

 

The Board of Trustees has delegated authority for making voting decisions with respect to the portfolio securities of the Funds that are sub‑advised to the sub‑advisors of such Funds.

 

 

The proxy voting policies and procedures of Broad Run address the responsibility of Broad Run to ensure that proxies received for portfolio securities held by the Focus Fund are voted in the best interest of the Focus Fund, including in those situations involving a conflict of interest between the Focus Fund on the one hand, and Broad Run or its affiliated persons, on the other hand. Such voting responsibilities must be exercised in a manner that is consistent with the general antifraud provisions of the Advisers Act, as well as Broad Run’s fiduciary duties under federal and state law to act in the best interest of its clients.

 

Proxies solicited for items of business with respect to issuers whose voting securities are owned by the Focus Fund must be voted in the best interests of the Focus Fund. Proxies are voted on a case‑by‑case basis in the best economic interest of the Focus Fund’s investors taking into consideration all relevant contractual obligations and other circumstances at the time of the vote. Broad Run may abstain from voting a proxy when the effect on the economic interests of investors in the Focus Fund or the value of the Focus Fund’s portfolio holding is indeterminable or insignificant or when the cost of voting the proxies outweighs the benefits, for example, when voting certain non‑U.S. securities.

 

 

The proxy voting policies and procedures of FCI Advisors provide that it is FCI Advisors’ intention to vote on all proxy proposals for all securities held by the Equity and Income Fund in its fixed income

allocation in a timely manner, unless abstaining on a particular ballot is seen to be in the best interests of the investors.

 

In some instances, a proxy vote may present a conflict between the interests of the Equity and Income Fund, on the one hand, and FCI Advisors’ interests or the interests of a person affiliated with FCI Advisors, on the other hand. In such a case, FCI Advisors must disclose this conflict to the Equity and Income Fund when the conflict arises and obtain its consent before voting. After the potential conflict analysis has been completed, all proxies that contain only routine director and auditor votes are voted automatically on FCI Advisors’ behalf by a proxy advisory service. FCI Advisors has proxy voting guidelines that address proxy voting on other types of matters, such as corporate governance, equity‑based compensation plans, corporate structure, and shareholder rights plans. For example, FCI Advisors generally:

 

•	votes for measures that act to increase the independence of the board of directors;

•	supports measures intended to increase stock ownership by executives and the use of employee stock purchase plans to increase company stock ownership by employees;