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Filed
pursuant to Rule 497(c)
1933
Act File No. 033-52154
1940
Act File No. 811-07168
PROSPECTUS
December 23, 2022
Hennessy
Stance ESG Large Cap ETF
(NYSE Arca,
Inc.: STNC)
This
ETF is different from traditional ETFs.
Traditional
ETFs tell the public what assets they hold each day. This ETF will not. This may
create additional risks for your investment. For example:
You
may have to pay more money to trade the ETF’s shares. This ETF will provide less
information to traders, who tend to charge more for trades when they have less
information.
The
price you pay to buy ETF shares on an exchange may not match the value of the
ETF’s portfolio. The same is true when you sell shares. These price differences
may be greater for this ETF compared to other ETFs because it provides less
information to traders.
These
additional risks may be even greater in bad or uncertain market
conditions.
The
ETF will publish on its website each day a “Portfolio Reference Basket” designed
to help trading in shares of the ETF. While the Portfolio Reference Basket
includes all the names of the ETF’s holdings, it is not the ETF’s actual
portfolio.
The
differences between this ETF and other ETFs may also have advantages. By keeping
certain information about the ETF portfolio secret, this ETF may face less risk
that other traders can predict or copy its investment strategy. This may improve
the ETF’s performance. If other traders are able to copy or predict the ETF’s
investment strategy, however, this may hurt the ETF’s performance.
For
additional information regarding the unique attributes and risks of the ETF, see
“Principal Investment Risks-Portfolio Reference Basket Structure Risk” in the
Summary Section and “Additional Information about the Fund-Portfolio Reference
Basket Structure Risk” below.
www.hennessyetfs.com
| 1-877-671-3199
As with all
funds, the Securities and Exchange Commission has not approved or disapproved of
this Fund or determined if this Prospectus is truthful or complete.
Any
representation to the contrary is a criminal offense.
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No securities dealer, sales
representative, or any other person has been authorized to give any information
or to make any representations, other than those contained in this prospectus or
in approved sales literature in connection with the offer contained herein, and
if given or made, such other information or representations must not be relied
upon as having been authorized by the Hennessy Stance ESG Large Cap ETF or
Hennessy Funds Trust. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction or to any person to whom it is unlawful to make such an
offer.
An investment in the Fund is
not a deposit with a bank and is not guaranteed or insured by the Federal
Deposit Insurance Corporation or any other government agency. Fund prices will
fluctuate, and it is possible to lose money.
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|
Investment Objective
The Hennessy Stance ESG Large
Cap ETF seeks to achieve long-term capital appreciation.
Fund Fees and
Expenses
The following table describes
the fees and expenses that you may pay if you buy, hold, and sell shares of the
Fund. You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the table and example below.
SHAREHOLDER FEES
(fees paid directly from your
investment) |
None |
ANNUAL FUND OPERATING EXPENSES
(expenses that you pay each year as a
percentage of
the value of your investment) |
|
|
Management Fees |
0.95% |
Distribution and Service (12b-1)
Fees |
0.00% |
Other Expenses |
0.00% |
Total Annual Fund Operating Expenses |
0.95% |
Expense Reimbursement(1) |
(0.10)% |
Total Annual Fund Operating Expenses After Expense
Reimbursement |
0.85%
|
EXAMPLE
This
Example is intended to help you compare the cost of investing in shares of the
Fund with the cost of investing in other funds.
The
Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that you reinvest all dividends and distributions, that
your investment has a 5% return each year, and that the Fund’s operating
expenses are equal to the total annual fund operating expenses after expense
reimbursement
for
the first year and equal to total annual fund operating expenses for the
remaining years. Although your actual costs may be higher or lower, based on
those assumptions, your costs would be:
|
One Year |
Three Years |
Five Years |
Ten Years |
|
$87 |
$282 |
$505 |
$1,148 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities, or “turns over” its portfolio. A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
Total Annual Fund Operating Expenses or in the Example, affect the Fund’s
performance. Because the Fund has not yet commenced operations as of the
date of this Prospectus, the Fund does not have any portfolio turnover
information available. The Stance Equity ESG Large Cap Core ETF, a Series of the
RBB Fund, Inc. (the "Predecessor Fund'), had a portfolio turnover rate of 290% for the fiscal year
ended August 31, 2022.
Principal Investment Strategy
The
Fund is an actively managed exchange-traded fund (“ETF”) that will invest, under
normal circumstances, at least 80% of the value of its net assets, plus the
amount of any borrowings for investment purposes, in exchange-traded equity
securities of U.S. large capitalization issuers that meet environmental, social,
and governance (“ESG”) standards, as determined by the Portfolio Managers. The
Fund considers companies within the Russell 1000®
Index and S&P 500®
Index to be large-capitalization issuers.
In
identifying investments for the Fund, the Portfolio Managers utilize three
independent processes. First, the Portfolio Managers apply a rules-based ESG
methodology that seeks to identify the top 50% from each industry and
sub-industry in the universe of large-capitalization companies. Companies that
have exclusively or primarily engaged in weapons, tobacco, or thermal coal are
generally excluded from consideration. The remaining universe is then
quantitatively scored against industry group peers on up to 21
sustainability-related key performance indicators (“KPIs”) such as energy
productivity, carbon intensity, water dependence, waste profile, and KPIs
relating to governance, including capacity to innovate, unfunded pension fund
liabilities, chief executive officer/average worker pay, safety performance,
employee turnover, leadership diversity, percentage tax paid, and percent of
bonus linked to sustainability performance. The securities in the top 50%
may be retained. The Portfolio Managers utilize data feeds from third parties
that the Portfolio Managers consider, in their sole discretion, as trustworthy
or have the expertise in specific KPI areas. The current primary external
data source is Corporate Knights Research, an affiliate of Stance Capital, LLC,
but such firm or firms may change in the Portfolio Managers’ discretion.
Corporate Knights Research is based in Toronto, and is a leading media firm in
Canada focused on climate risk. For over 20 years, it has published an
annual ranking of the most sustainable companies in the world. Its
methodology is rules-based and forms the foundation of the Portfolio Managers’
approach to ESG scoring. Second, the Portfolio Managers apply a machine-learning
model that uses financial, risk, and other factors to identify companies that
are most likely to outperform both in the absolute returns and in risk-adjusted
returns over the next quarter. In the final process, the portfolio is optimized
to
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minimize
tail risk and maximize diversification. Tail risk is the risk that an
investment’s return will move significantly beyond expectations (namely, more
than three standard deviations from its mean). The Portfolio Managers generally
rebalance the portfolio quarterly.
Positions
are sold quarterly if the Portfolio Managers decide they are no longer optimal
in the portfolio. The Fund’s investment portfolio is focused, generally composed
of around 30 investment positions.
While
investing in a particular sector is not a principal investment strategy of the
Fund, its portfolio may be significantly invested in a sector as a result of the
portfolio management decisions made pursuant to its principal investment
strategy. While the Fund does not place any restrictions on its level of sector
concentration, it will limit its investments in industries within any particular
sector to less than 25% of the Fund’s total assets. On each rebalancing date,
investments within a particular sector will also be capped at up to twice the
weight of the sector within the S&P 500 Index.
Semi-Transparent Actively-Managed ETF with Portfolio
Reference Basket Structure: The Fund is an actively-managed,
semi-transparent ETF. Unlike traditional ETFs, which generally publish their
portfolio holdings on a daily basis, the Fund discloses a portfolio transparency
substitute—the “Portfolio Reference Basket”—and certain related information
about the Portfolio Reference Basket relative to the Fund’s actual portfolio
(“Actual Portfolio”) holdings (the “Portfolio Reference Basket Disclosures”),
which are intended to help keep the market price of the Fund’s shares trading at
or close to the underlying net asset value (“NAV”) per share of the Fund.
While the Portfolio Reference Basket includes all of the Fund’s holdings, it is
not the Fund’s Actual Portfolio because the holdings will be weighted
differently, subject to a minimum weightings overlap of 90% with the Fund’s
Actual Portfolio at the beginning of each trading day. The Fund also discloses
the maximum deviation between the weightings of the specific securities in the
Portfolio Reference Basket and the weightings of those specific securities in
the Actual Portfolio, as well as between the weighting of the respective cash
positions (the “Guardrail Amount”). The Guardrail Amount is intended to ensure
that no individual security in the Portfolio Reference Basket will be
overweighted or underweighted by more than the publicly disclosed percentage
when compared to the actual weighting of each security within the Actual
Portfolio as of the beginning of each trading day. The Fund is actively managed
and does not seek to track an index.
Principal Risks
As with
any security, there are market and investment risks associated with your
investment in the Fund. The
value of your investment will fluctuate over time, and it is possible to lose
money.
Portfolio Reference Basket Structure Risk:
Unlike traditional ETFs that provide daily disclosure of their portfolio
holdings, the Fund discloses the identities of all portfolio holdings daily, but
not the exact quantities or weightings. Instead, the Fund discloses a Portfolio
Reference Basket generated each day by a proprietary algorithmic process that is
designed to closely track the daily performance of the Fund’s Actual Portfolio
on any given trading day. Although the Portfolio Reference Basket and Portfolio
Reference Basket Disclosures are intended to provide authorized participants
(“APs”) and other market participants with enough information to allow
them
to engage in effective arbitrage transactions that will help keep the market
price of the Fund’s shares trading at or close to the underlying NAV per share
of the Fund, there is a risk that market prices will vary significantly from the
underlying NAV of the Fund, which may be heightened during periods of market
disruption or volatility.
Bid/Ask Spread Risk. The Fund’s shares may
trade at a wider bid/ask spread than shares of traditional ETFs and may
therefore be more costly for investors to trade, which may be heightened during
periods of market disruption or volatility. “Bid” refers to the highest price a
buyer will pay to buy a specified number of shares of a stock at any given time.
“Ask” refers to the lowest price at which a seller will sell the stock. The
difference between the bid price and the ask price is called the “spread.”
Additional Trading Cost
Risk. The Portfolio Reference Basket
structure itself may result in additional trading costs because the Fund may
receive or deliver holdings in different weightings on any given day than the
weightings of the Fund’s Actual Portfolio, which may result in portfolio
turnover, and related transaction costs, to realign the Actual Portfolio with
the Fund’s intended investment strategy.
Arbitrage Risk. There can be no assurance that the Portfolio Reference
Basket structure will operate as intended. The Portfolio Reference Basket
structure is novel and not yet proven as an effective arbitrage mechanism. The
effectiveness of the Portfolio Reference Basket structure as an arbitrage
mechanism is contingent upon, among other things, the effectiveness of the
proprietary algorithmic process employed to create a Portfolio Reference Basket
that performs in a manner substantially identical to the performance of the
Fund’s Actual Portfolio and the willingness of APs and other market participants
to trade based on the Portfolio Reference Basket.
Calculation of Reference
Basket Risk. Although the Fund provides an
independent third party with information to generate the Portfolio Reference
Basket, the Fund is not involved in the actual calculation of the Portfolio
Reference Basket and is not responsible for the calculation or dissemination of
the Portfolio Reference Basket. The Fund makes no warranty as to the accuracy of
the Portfolio Reference Basket or that it will produce the intended results.
Tracking
Error Risk. In the event that the Portfolio Reference Basket structure
does not result in effective arbitrage opportunities in the Fund’s shares, the
Fund may exhibit wider premiums/discounts, bid/ask spreads, and tracking error
than traditional ETFs.
Remedial Action
Risk. For at least the first three years
after the Reorganization, if the tracking error (relative to the Actual
Portfolio) exceeds 1%, or if, for 30 or more days in any quarter or 15 days in a
row, the absolute difference between either the closing price or the mid-point
of the highest bid and lowest offer at the time of calculation of the NAV (the
“Bid/Ask Price”), on one hand, and NAV, on the other, exceeds 2.00% or the
bid/ask spread exceeds 2.00%, the Investment Manager will recommend appropriate
remedial measures to the Board of Trustees for its consideration, which may
include, but are not limited to, liquidation of the Fund.
Authorized Participants, Market Makers, and Liquidity
Providers Concentration Risk: Only an AP may engage in creation or
redemption transactions directly with the Fund. The Fund has a limited number of
financial institutions that are institutional investors and may act as APs. In
addition, there may be a limited number of market makers or liquidity providers
in the marketplace. To the extent either of the following events occur, the
Fund’s shares may trade at a material discount to NAV and possibly face trading
halts or delisting: (i) APs exit the business or otherwise become unable to
process creation or redemption orders and no other APs step forward to
perform
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these
services, or (ii) market makers or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions. These events, among others, may lead to the
Fund shares trading at a premium or discount to NAV. Thus, you may pay more (or
less) than the NAV when you buy shares of the Fund in the secondary market, and
you may receive less (or more) than NAV when you sell those shares in the
secondary market. A diminished market for an ETF’s shares substantially
increases the risk that a shareholder may pay considerably more or receive
significantly less than the underlying value of the ETF shares bought or sold.
In periods of market volatility, APs, market makers, or liquidity providers may
be less willing to transact in Fund shares. Further, the Fund is utilizing a
novel and unique structure, which may affect the number of entities willing to
act as APs, market makers, or liquidity providers.
Cash Transactions Risk: Unlike traditional
ETFs, the securities in the Fund’s basket of securities exchanged for a Creation
Unit will not correspond pro rata to the positions in the Fund’s portfolio, and
the Fund may effect its creations and redemptions partially or wholly for cash
rather than on an in-kind basis. Because of this, the Fund may incur costs such
as brokerage costs or be unable to realize certain tax benefits associated with
in-kind transfers of portfolio securities that may be realized by other ETFs.
These costs may decrease the Fund’s NAV to the extent that the costs are not
offset by a transaction fee payable by an AP. Shareholders may be subject to tax
on gains they would not otherwise have been subject to /or at an earlier date
than if the Fund had effected redemptions wholly on an in-kind basis.
Secondary Market Trading Risk: Although the
Fund’s shares are listed on a national securities exchange, the NYSE Arca, Inc.
(the “Exchange”), there can be no assurance that an active or liquid trading
market for them will develop or be maintained. In addition, trading in shares on
the Exchange may be halted. Trading may be halted because of market conditions
or for reasons that, in the view of the Exchange, make trading in the Fund
inadvisable. These may include: (a) the extent to which trading is not
occurring in the securities or the financial instruments composing the Portfolio
Reference Basket or Actual Portfolio; or (b) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly market are
present. If the Exchange becomes aware that the NAV, Portfolio Reference Basket,
or Actual Portfolio is not disseminated to all market participants at the same
time, the Exchange shall halt trading in such series until such time as the NAV,
Portfolio Reference Basket, or Actual Portfolio is available to all market
participants at the same time. In addition, trading in shares on the Exchange is
subject to trading halts caused by extraordinary market volatility pursuant to
Exchange “circuit breaker” rules, which temporarily halt trading on the
Exchange. Additional rules applicable to the Exchange may halt trading in shares
when extraordinary volatility causes sudden, significant swings in the market
price of shares. If a trading halt or unanticipated early closing of the
Exchange occurs, a shareholder may be unable to purchase or sell shares of the
Fund. Trading halts may have more effect on the Fund because of its
semi-transparent structure. There can be no assurance that shares will trade
with any volume, or at all, on any stock exchange. In stressed market
conditions, the liquidity of the Fund’s shares may begin to mirror the liquidity
of the Fund’s underlying holdings, which can be significantly less liquid than
the Fund’s shares.
Shares May Trade at Prices other than NAV Risk:
As with all ETFs, the Fund’s shares may be bought and sold in the secondary
market at market prices. Although the Portfolio Reference
Basket
structure is intended to provide market participants with enough information to
allow for an effective arbitrage mechanism that will help to keep the market
price of the Fund’s shares at or close to the Fund’s NAV, there is a risk that
market prices for Fund shares will vary significantly from the Fund’s NAV. This
risk is heightened in times of market disruption or volatility or periods of
steep market declines. The market price of shares during the trading day, like
the price of any exchange-traded security, includes a “bid/ask” spread charged
by the exchange specialist, market makers or other participants that trade
shares. In times of severe market disruption, the bid/ask spread can increase
significantly. At those times, shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of shares is
falling fastest, which may be the time that you most want to sell your Fund
shares. This risk may be greater for the Fund than for traditional ETFs that
disclose their full portfolio holdings on a daily basis because the publication
of the Portfolio Reference Basket does not provide the same level of
transparency as the daily publication of the actual portfolio by a traditional
ETF. This could cause the Fund’s shares to have wider bid/ask spreads and larger
premiums/discounts than traditional ETFs using the same or similar investment
strategies. Therefore, the Fund’s shares may cost investors more to trade than
traditional ETF shares, especially during periods of market disruption or
volatility.
Limitations of Intraday Indicative Value (IIV) Risk:
The Exchange or a market data vendor intends to disseminate the
approximate per share value of the Fund’s Portfolio Reference Basket every 15
seconds (the ‘‘intraday indicative value’’ or ‘‘IIV’’). The IIV should not be
viewed as a ‘‘real-time’’ update of the NAV per share of the Fund because (i)
the IIV is not be calculated in the same manner as the NAV, which is computed
once a day, generally at the end of the business day, (ii) the calculation of
NAV may be subject to fair valuation at different prices than those used in the
calculations of the IIV, (iii) unlike the calculation of NAV, the IIV does not
take into account Fund expenses, and (iv) the IIV is based on the Portfolio
Reference Basket and not on the Fund’s Actual Portfolio. The Fund, the
Investment Manager, and their affiliates are not involved in, or responsible
for, any aspect of the calculation or dissemination of the Fund’s IIV, and the
Fund, the Investment Manager, and their affiliates do not make any warranty as
to the accuracy of these calculations.
Early Close/Trading Halt Risk: An exchange or
market may close or issue trading halts on specific securities, or the ability
to buy or sell certain securities or financial instruments may be restricted,
which may result in the Fund being unable to buy or sell certain securities or
financial instruments. In such circumstances, the Fund may be unable to
rebalance its portfolio, may be unable to accurately price its investments, or
may incur substantial losses and may limit or stop purchases of the Fund.
Environmental, Social, and Governance Investing Risk.
ESG investing risk is the risk stemming from the environmental, social,
and governance factors that the Fund applies in selecting securities. The Fund
intends to invest in companies with measurable high ESG ratings relative to
their sector peers, and screen out particular companies that do not meet its ESG
criteria. This may affect the Fund’s exposure to certain companies or industries
and cause the Fund to forego certain investment opportunities. The Fund’s
returns may be lower than other funds that do not seek to invest in companies
based on ESG ratings or screen out certain companies or industries. The Fund
seeks to identify companies that it believes may have higher ESG ratings, but
investors may differ
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in
their views of ESG characteristics. As a result, the Fund may invest in
companies that do not reflect the beliefs and values of any particular
investor.
Third Party Data Provider
Risk. In
evaluating issuers, the Portfolio Managers rely upon information and data,
including from third party data providers, that may be incomplete, inaccurate,
or unavailable, or that may present conflicting information and data with
respect to an issuer, which in each case could cause the Portfolio Manager to
incorrectly assess an issuer’s business practices with respect to ESG. As
a result, the Fund may underperform funds that do not screen or score companies
based on ESG factors or funds that use a different third party data
providers.
Market and Equity Investments Risk: The
market value of a security may move up or down, and these fluctuations may cause
a security to be worth more or less than the price originally paid for it.
Market risk may affect a single company, an industry, a sector of the economy,
or the market as a whole. The value of equity securities fluctuate due to many
factors, including the past and predicted earnings of the issuer, the quality of
the issuer’s management, general market conditions, political and other events,
forecasts for the issuer’s industry, and the value of the issuer’s assets.
Large-Cap Companies Risk: The stocks of large
capitalization companies as a group could fall out of favor with the market,
causing the Fund to underperform investments that focus solely on small- or
medium- capitalization stocks.
Model Risk: The Fund seeks to pursue its
investment objective by using proprietary models that
incorporate
quantitative analysis. Investments selected using these models may perform
differently than as forecasted due to the factors incorporated into the models
and the weighting of each factor, changes from historical trends, and issues in
the construction and implementation of the models (including, but not limited
to, software issues and other technological issues). There is no guarantee that
the Portfolio Managers’ use of these models will result in effective investment
decisions for the Fund. The information and data used in the models may be
supplied by third parties. Inaccurate or incomplete data may limit the
effectiveness of the models. In addition, some of the data that the models use
may be historical data, which may not accurately predict future market movement.
There is a risk that the models will not be successful in selecting investments
or in determining the weighting of investment positions that will enable the
Fund to achieve its investment objective.
New Fund Risk: The Fund is a recently
organized, diversified management investment company with a limited operating
history. As a result, prospective investors have a limited track record on which
to base their investment decision. In addition, there can be no assurance that
the Fund will grow to, or maintain, an economically viable size, in which case
the Board of Trustees may determine to liquidate the Fund.
High Portfolio Turnover Risk: High portfolio
turnover will produce higher transaction costs (such as brokerage commissions
and dealer markups) that the Fund must pay, thus reducing the Fund’s
performance. High portfolio turnover may also result in higher taxes when Fund
shares are held in a taxable account.
Sector Risk: From time to time, the Fund may
concentrate its investments in one or more industry sectors. The Fund is
currently substantially invested in the Consumer Discretionary and Health Care
sectors and its performance is therefore tied closely to, and affected by,
developments in these industries. Companies in the Consumer Discretionary sector
may be affected by commodity price volatility, consumer preferences,
competition, changing demographics, and labor relations. These companies depend
heavily on disposable household income and consumer spending, and social trends
and marketing campaigns may significantly affect demand for their products.
Consumer discretionary companies may also lose value more quickly in periods of
economic downturns because their products are viewed as nonessential luxury
items. Companies in the Health Care
sector are
subject to extensive government regulation and can be significantly affected by
government reimbursement for medical expenses, rising costs of medical products
and services, pricing pressure, and an increased emphasis on outpatient
services.
Tax Law Change Risk: Tax law is subject to
change, possibly with retroactive effect, or to different interpretations. In
particular, Congress is considering substantial changes to U.S. federal income
tax laws, and some with retroactive effect, that could result in substantial
adverse U.S. federal income tax consequences to the Fund and its shareholders.
Any future changes are highly uncertain, and the impact on the Fund or its
shareholders cannot be predicted. Prospective shareholders should consult their
own tax advisors regarding the impact to them of possible changes in tax
laws.
Predatory Trading Practices Risk:
Although the Fund seeks to benefit from keeping its portfolio holdings
information secret, market participants may attempt to use the Portfolio
Reference Basket and related Portfolio Reference Basket Disclosures to identify
the Fund’s holdings and trading strategy. If successful, this could result in
such market participants engaging in predatory trading practices that could harm
the Fund and its shareholders. The Portfolio Reference Basket and related
Portfolio Reference Basket Disclosures have been designed to minimize the risk
that market participants could “reverse engineer” the Fund’s portfolio and
investment strategy, but they may not be successful in this
regard.
Performance
Information
Performance information for the Predecessor
Fund is not included because the Predecessor Fund did not have a full calendar
year of performance prior to December 31, 2021 or piror to the date of this
Prospectus. When the Fund has been in operation for
a full calendar year, performance information will be shown in the Fund
Prospectus. Updated performance information for the Fund will be available at
www.hennessyetfs.com.
Investment
Manager
Hennessy Advisors, Inc. is the investment manager
of the Fund.
Sub-Advisors
Stance Capital, LLC (“Stance
Capital”) and Vident Investment Advisory, LLC (“Vident”) serve as sub‑advisors
to the Fund.
Portfolio
Managers
The Stance Capital team, which
comprises Bill Davis and Kyle Balkissoon, is primarily responsible for the
day‑to‑day management of the portfolio of the Fund and for developing and
executing the Fund’s investment program, other than the trading functions
delegated to Vident. Each of Messrs. Davis and Balkissoon have served as a
Portfolio Manager of the Fund since its inception and as a Portfolio Manager of
the Predecessor Fund since its inception in March 2021, and each is also a
Managing Director of Stance Capital.
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The Vident team, which
comprises Rafael Zayas and Ryan Dofflemeyer, is primarily responsible for
selecting broker-dealers to execute purchase and sale transactions for the Fund,
as instructed by Stance Capital. Each of Messrs. Zayas and Dofflemeyer have
served as a Portfolio Manager of the Fund since its inception in
March 2021. Mr. Zayas also serves as a Senior Vice President, Head of
Portfolio Management and Trading at Vident.
Purchase
and Sale of Fund Shares
Shares of
the Fund are listed on a national securities exchange, such as the Exchange, and
most investors will buy and sell shares through brokers at market prices, rather
than NAV. Because shares trade at market prices rather than NAV, shares may
trade at a price greater than NAV (premium) or less than NAV (discount). An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares (bid) and the lowest price a
seller is willing to accept for shares (ask) when buying or selling shares in
the secondary market.
The Fund
issues and redeems shares at NAV only in large blocks known as “Creation Units,”
which only APs (typically broker-dealers) may purchase or redeem. Creation Units
generally consist of 5,000 shares, though this may change from time to time.
Creation Unit transactions are typically conducted in exchange for the deposit
or delivery of in-kind securities or cash.
The Fund
is new and therefore does not have any information regarding how often shares
are traded on the Exchange at a price above (i.e., at a premium) or below (i.e.,
at a discount) the NAV of the Fund. Once available, this information will be
presented, free of charge, on the Fund’s website at www.hennessyetfs.com.
Tax
Information
The
Fund’s distributions generally will be taxable to you as ordinary income or
capital gains regardless of whether they are paid in cash or reinvested in Fund
shares, unless you invest through a tax-deferred arrangement, such as a 401(k)
plan or an IRA, in which case such distributions may be taxable at a later
date.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you
purchase Fund shares through a broker-dealer or other financial intermediary
(such as a bank), the Fund and its related companies may pay the intermediary
for performing shareholder services or distribution-related services for the
Fund. If made, these payments may create a conflict of interest by influencing
the broker-dealer or other financial intermediary and your financial adviser to
recommend the Fund over another investment. Ask your financial adviser or visit
your financial intermediary’s website for more information.
Investment
Objectives
The
Hennessy Stance ESG Large Cap ETF seeks to achieve long-term capital
appreciation.
In order to
provide a degree of flexibility, the Fund may change its investment objective
without obtaining shareholder approval. If the Fund does so, it must provide 60
days’ notice to shareholders prior to implementing the change. An investment
objective is not a guarantee.
Principal
Investment Strategy
The
Fund is an actively managed ETF that will invest, under normal circumstances, at
least 80% of the value of its net assets, plus the amount of any borrowings for
investment purposes, in exchange-traded equity securities of U.S. large
capitalization issuers that meet ESG standards, as determined by the Portfolio
Managers. The Fund considers companies within the Russell 1000®
Index and S&P 500®
Index to be large-capitalization issuers. Please see the full description of the
Fund’s principal investment strategy under “Summary Information – Principal
Investment Strategy.”
Principal
Risks
Please
see the full description of the Fund’s principal risks under “Summary
Information – Principal Risks.”
Portfolio
Holdings
The Statement
of Additional Information for the Fund, which is incorporated by reference into
this Prospectus, contains a description of the Fund’s policies and procedures
regarding disclosure of its portfolio holdings.
If the Fund
acquires another fund, the Fund may hold indefinitely the portfolio securities
transferred to the Fund from the acquired fund (“acquired portfolio securities”)
unless this violates the investment limitations of the Fund. The Fund may
sell acquired portfolio securities in the ordinary course of business in order
to rebalance its portfolio or adjust its portfolio in accordance with its
investment strategy or to meet redemption requests.
Shareholders can access
information about the Portfolio Reference Basket and Portfolio Reference Basket
Disclosures for each business day on hennessyetfs.com. Recent information,
including information regarding the Fund’s NAV, market price, premiums and
discounts, and bid/ask spreads, is also available at hennessyetfs.com.
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Investment
Manager
Hennessy
Advisors, Inc. is a registered investment advisor and is the investment manager
of the Fund. The Investment Manager’s address is 7250 Redwood Boulevard, Suite
200, Novato, CA 94945.
The
Investment Manager has been providing investment advisory services since 1989.
The Investment Manager furnishes the Fund with office space and certain
administrative services and provides most of the personnel needed by the Fund.
As of August 31, 2022, the Investment Manager managed over $3.2 billion of net
assets on behalf of Hennessy Funds Trust (the “Trust”).
Management
Fees
For its
services, the Fund pays the Investment Manager a unitary management fee that is
computed daily and paid monthly at an annual rate of 0.95%. For the fiscal year
ended August 31, 2022, the Predecessor Fund’s investment manager received a
unitary management fee of 0.85% of the average daily net assets of the
Predecessor Fund.
A
discussion regarding the basis for the Board of Trustees’ approval of the
investment advisory agreement and the sub-advisory agreements for the Fund will
available in the Fund’s first annual or semi-annual report to
shareholders.
Sub-Advisors
The
Investment Manager has delegated the day-to-day management of the portfolio
composition of the Fund to Stance Capital, LLC (“Stance Capital”), located at 131
Dartmouth Street, 3rd Floor, Boston, MA 02116, other than the trading functions
delegated to Vident Investment Advisory, LLC. Stance Capital has been registered
with the Securities and Exchange Commissions (the “SEC”) as an investment
advisor since 2021.
The Investment Manager has
delegated the responsibility for selecting broker-dealers to execute purchase
and sale transactions for the Fund, as instructed by Stance Capital, to Vident
Investment Advisory, LLC (“Vident”), located at 1125 Sanctuary Parkway, Suite
515, Alpharetta, GA 30009. Vident has been registered with the SEC as an
investment advisor since 2014.
Portfolio
Managers Employed by Stance Capital
The Fund’s management is
conducted with research, stock selection, portfolio composition, and day-to-day
trading decisions distributed equally among the Portfolio Managers unless
specifically noted otherwise.
Bill Davis has served as a Portfolio Manager of the
Fund since its inception in 2021. Mr.
Davis founded Stance Capital, LLC to bring to market investment portfolios that
mitigate material environmental, social, and governance risks and generate
excess returns while at the same time allowing investors to align their
portfolios with their belief systems. Prior to forming Stance Capital, Mr. Davis
was co-founder and Managing Director of Empirical Asset Management, and a
Portfolio Manager on EAM Sustainable Equity, a strategy he launched in 2014.
Prior to co-founding Empirical, he was the founder and CEO of Ze-gen, a venture
and private equity backed renewable energy company. Mr. Davis received a B.A.
from Connecticut College, and his career in business has included serving as CEO
or founder of numerous companies including Database Marketing Corporation,
Holland Mark, and Cambridge Brand Analytics. He serves on the Board of Ceres,
chairs Ceres’ President’s Council, and leads a shareholder engagement effort
within Climate Action 100+, a collaborative effort between United Nations
Principles of Responsible Investment (UNPRI) and Ceres.
Kyle Balkissoon has served as a Portfolio
Manager of the Fund since its inception in 2021. Mr. Balkissoon joined Stance
Capital to leverage and advance state-of-the-art machine learning and
analysis methods to help clients outperform while adhering to their values.
Prior to joining Stance Capital, Kyle led Cognitive Forecasting at IBM, where he
was responsible for the development of large forecasting systems for clients in
areas such as sales growth, crop yield, replenishment, demand forecasting,
advertising, and others. He was an independent data science consultant and led
quantitative ESG research at Corporate Knights Capital. Kyle has an M.SC in
Financial Markets from EDHEC, a B.Sc in Mathematical Sciences from McMaster
University, and a B.A. in Economics from McMaster University. He has contributed
to several open source packages in the quantitative finance space and given
talks at various conferences in quantitative finance.
Rafael Zayas, CFA, has served as a Portfolio Manager of the
Fund since its inception in 2021. Mr. Zayas has over 15 years of trading and
portfolio management experience in global equity products and ETFs. He is SVP,
Head of Portfolio Management and Trading at Vident with a prior focus on
international equities and specializing in managing and trading of developed,
emerging, and frontier market portfolios. Prior to joining Vident, he was a
Portfolio Manager at Russell Investments for over $5 billion in quantitative
strategies across global markets, including emerging, developed and frontier
markets and listed alternatives. Before that, he was an equity Portfolio Manager
at BNY Mellon Asset Management, where he was responsible for $150 million in
internationally listed global equity ETFs and assisted in managing $3 billion of
global ETF assets. Mr. Zayas holds a B.S. in Electrical Engineering from Cornell
University.
Ryan Dofflemeyer has served as a Portfolio
Manager of the Fund since its inception in 2021. Mr. Dofflemeyer has over 16
years of trading and portfolio management experience across various asset
classes including both ETFs and mutual funds. He is Senior Portfolio Manager for
Vident, specializing in managing and trading of global equity and multi-asset
portfolios. Prior to joining Vident, he was a Senior Portfolio Manager at
Proshares for over $3 billion in ETF assets across global equities, commodities,
and volatility strategies. Before that, he was a Research Analyst at the
Investment Company Institute in Washington DC. Mr. Dofflemeyer holds a B.A. from
the University of Virginia and an MBA from the University of Maryland.
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Sub-Advisory
Fee
The Investment Manager pays Stance Capital a sub-advisory fee calculated
daily and paid monthly at an annual rate of 0.40% of the Fund’s average daily
net assets up to $125 million, 0.37% of average daily net assets for assets over
$125 million and up to $250 million, and 0.35% for average daily net assets in
excess of $250 million. The Investment Manager pays Vident a sub-advisory fee
calculated daily and paid monthly at an annual rate of 0.05 % of the Fund’s
average daily net assets up to $250 million, 0.045% of average daily net assets
for assets over $250 million and up to $500 million, and 0.04% for average daily
net assets in excess of $500 million. In addition, the Investment Manager
has agreed to pay a minimum sub-advisory fee to Vident of $18,750 on an annual
basis. The Investment Manager pays sub-advisory fees from its own assets, and
these fees are not additional expenses of the Fund. For the fiscal year
ended August 31, 2021, the Predecessor Fund’s investment manager (not the
Predecessor Fund) paid a sub-advisory fee, based upon the daily net assets of
the Predecessor Fund, at an annual rate of 0.40% to Stance Capital and at an
annual rate of 0.05 % of average daily net assets up to $250 million, 0.045% of
average daily net assets for assets over $250 million and up to $500 million,
and 0.04% for average daily net assets in excess of $500 million.
Additional
Investment Manager and Sub-Advisor Information
The Statement of Additional
Information for the Fund, which is incorporated by reference into this
Prospectus, provides additional information about the Portfolio Managers’
compensation, other accounts managed by the Portfolio Managers, and the
Portfolio Managers’ ownership of securities in the Fund.
The Investment Manager has
overall supervisory responsibility for the general management and investment of
the Fund’s securities portfolios and, as such, performs the following services
for the Fund:
• |
sets
the Fund’s overall investment strategies; |
• |
performs
daily reconciliations of the Fund’s positions and
cash; |
• |
monitors
the liquidity of the Fund; |
• |
monitors
the Fund’s compliance with its investment objectives and restrictions and
federal securities laws; |
• |
maintains
a comprehensive compliance program and conducts ongoing reviews of the
compliance programs of the Fund’s
sub-advisors; |
• |
oversees
the selection and continued employment of the Fund’s sub-advisors, reviews
the Fund’s investment performance, and monitors the sub-advisors’
adherence
to the Fund’s investment objectives, policies, and
restrictions; |
• |
oversees
outside service providers; |
• |
maintains
in-house marketing and distribution departments on behalf of the
Fund; |
• |
prepares
or directs the preparation of all regulatory filings for the
Fund; |
• |
oversees
distribution of the Fund through third-party broker/dealers and
independent financial institutions; |
• |
pays
the incentive compensation of the Fund’s compliance officers and employs
other staff, such as legal, marketing, national accounts, distribution,
sales,
administrative,
and trading oversight personnel, as well as management
executives; |
• |
provides a
quarterly compliance certification to the Board;
and |
• |
prepares
or reviews all Board materials, frequently presents to the Board and leads
Board discussions, prepares or reviews all meeting minutes, and arranges
for Board training and education. |
The price
you will pay to buy Fund shares or the amount you will receive when you sell
your Fund shares is called the net asset value (“NAV”). NAV is calculated by
dividing the Fund’s assets, minus its liabilities, by the number of shares
outstanding. The NAV of the Fund’s shares is normally determined as of the close
of regular trading on the NYSE, which is normally 4:00 p.m. Eastern time/1:00
p.m. Pacific time. When the NYSE closes early on a valuation day, the Fund
calculates its NAV as of such early closing time. The NYSE is closed for trading
on New Year’s Day, Dr. Martin Luther King, Jr. Day, Washington’s Birthday, Good
Friday, Memorial Day, Juneteenth National Independence Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. Additionally, when any of the
aforementioned holidays falls on a Saturday, the NYSE will not be open for
trading on the preceding Friday and when any such holiday falls on a Sunday, the
NYSE will not be open for trading on the succeeding Monday, unless unusual
business conditions exist, such as the ending of a monthly or the yearly
accounting period. The NYSE also may close for trading on national days of
mourning or due to natural disasters or other extraordinary events or
emergencies. On a day when the NYSE is closed, the Fund does not determine its
NAV, and investors may not purchase or redeem Fund shares. The Fund calculates
its NAV based on the market prices of the securities it holds.
If market
quotations are not available or deemed unreliable, the Fund will value
securities at their fair value pursuant to the procedures established by and
under the supervision of the Board of Trustees. The fair value of a security is
the amount the Fund might reasonably expect to receive upon a current sale. The
fair value of a security may differ from the last quoted price, and the Fund may
not be able to sell a security at the fair value. Market quotations may not be
available if, for example, trading in particular securities was halted during
the day and not resumed prior to the close of trading on the applicable stock
exchange.
The Fund
issues and redeems its shares at NAV only in Creation Units. Only APs may
acquire shares directly from the Fund, and only APs may tender their shares for
redemption directly to the Fund, at NAV. APs must be (i) a broker-dealer or
other participant in the clearing process through the Continuous Net Settlement
System of the NSCC, a clearing agency that is registered with the SEC; or (ii) a
DTC participant (as discussed below). In addition, each AP must execute a
Participant Agreement that has been agreed to by the Distributor, and that has
been accepted by the Transfer Agent, with respect to purchases and redemptions
of Creation Units. Once created, Fund shares trade in the secondary market in
quantities less than a Creation Unit. Most investors buy and sell shares in
secondary market transactions through brokers. Shares are listed for trading on
the secondary market on the Exchange and can be bought and sold throughout the
trading day like other publicly traded securities. When buying or selling Fund
shares through a broker, you will incur customary brokerage commissions and
charges, and you may pay some or all of the spread between the bid and the offer
price in the secondary market on each leg of a round trip (purchase and sale)
transaction. In addition, because secondary market transactions occur at
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market
prices, you may pay more than NAV when you buy shares, and receive less than NAV
when you sell those shares.
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding shares. Investors owning Fund shares are beneficial owners as shown
on the records of DTC or its participants. DTC serves as the securities
depository for all shares. DTC’s participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and other institutions
that directly or indirectly maintain a custodial relationship with DTC. As a
beneficial owner of shares, you are not entitled to receive physical delivery of
stock certificates or to have shares registered in your name, and you are not
considered a registered owner of shares. Therefore, to exercise any right as an
owner of shares, you must rely upon the procedures of DTC and its participants.
These procedures are the same as those that apply to any other securities that
you hold in book entry or “street name” through your brokerage account.
Trading
prices of Fund shares on the Exchange may differ from the Fund’s daily NAV.
Market forces of supply and demand, economic conditions, and other factors may
affect the trading prices of Fund shares. Neither the Fund nor the Exchange
intends to disseminate the approximate share value of the Fund’s Portfolio
Reference Basket, but arbitrageurs and market participants could use the
component securities in the Portfolio Reference Basket to calculate intraday
values that approximate the value of the Actual Portfolio (the “intraday
indicative value” or “IIV”). Intraday pricing information for all constituents
of the Portfolio Reference Basket for the Fund that are exchange traded, which
includes all eligible instruments except cash and cash equivalents, is available
on the exchanges on which they are traded or through major market data vendors
or subscription services. Intraday pricing information for cash equivalents is
available through major market data vendors, subscription services, or pricing
services. Any such IIV should not be viewed as a ‘‘real-time’’ update of the NAV
per share of the Fund because (i) the IIV is not be calculated in the same
manner as the NAV, which is computed once a day, generally at the end of the
business day, (ii) the calculation of NAV may be subject to fair valuation at
different prices than those used in the calculations of the IIV, (iii) unlike
the calculation of NAV, the IIV does not take into account Fund expenses, and
(iv) the IIV is based on the Portfolio Reference Basket and not on the Fund’s
Actual Portfolio. The Fund is not involved in or responsible for any aspect of
the calculation or dissemination of the IIVs and makes no representation or
warranty as to the accuracy of the IIVs.
The Fund
imposes no restrictions on the frequency of purchases and redemptions of Fund
shares. In determining not to approve a written, established policy, the Board
of Trustees evaluated the risks of market timing activities by Fund
shareholders. Purchases and redemptions by APs, who are the only parties that
may purchase or redeem Fund shares directly with the Fund, are an essential part
of the ETF process and help keep share trading prices in line with NAV. As
such,
the Fund
accommodates frequent purchases and redemptions by APs. However, the Board of
Trustees has also determined that frequent purchases and redemptions for cash
may increase tracking error and portfolio transaction costs and may lead to the
realization of capital gains or losses. To minimize these potential consequences
of frequent purchases and redemptions, the Fund employs fair value pricing and
imposes transaction fees on purchases and redemptions of Creation Units to cover
the custodial and other costs incurred by the Fund in effecting trades. In
addition, the Fund reserves the right to reject any purchase order at any
time.
The Fund
declares and pays capital gains and dividends, if any, at least annually,
usually in December.
The Fund
may make additional distributions if necessary to comply with the distribution
requirements of the Code. Brokers may make the DTC book-entry dividend
reinvestment service available to their customers who own Fund
shares. If this service is available and used, dividend distributions of
both capital gains and dividends will automatically be reinvested in additional
whole shares of the Fund purchased on the secondary market. Without this
service, investors would receive their distributions in cash. In order to
achieve the maximum total return on their investments, investors are encouraged
to use the dividend reinvestment service. To determine whether the dividend
reinvestment service is available and whether there is a commission or other
charge for using this service, consult your broker. Brokers may require the
Fund’s shareholders to adhere to specific procedures and timetables.
The
following discussion regarding federal income taxes is based on laws that were
in effect as of the date of this Prospectus and summarizes only some of the
important federal income tax considerations affecting the Fund and you as a
shareholder. It does not apply to foreign or tax-exempt shareholders or those
holding Fund shares through a tax-advantaged account, such as a 401(k) plan or
IRA. This discussion is not intended as a substitute for careful tax planning.
You should consult your tax adviser about your specific tax situation. Please
see the Fund’s Statement of Additional Information for additional federal income
tax information.
The Fund
has elected to be treated and intends to qualify each year as a RIC. A RIC is
not subject to tax at the corporate level on income and gains from investments
that are distributed in a timely manner to shareholders. However, the Fund’s
failure to qualify as a RIC would result in corporate level taxation and
consequently, a reduction in income available for distribution to you as a
shareholder.
Taxes on Distributions. The Fund intends to
distribute, at least annually, substantially all of its net investment income
and net capital gains income. For federal income tax purposes, distributions of
investment income are generally taxable as ordinary income or qualified dividend
income. Taxes on distributions of capital gains (if any) are determined by how
long the Fund owned the investments that generated them, rather than how long a
shareholder has owned his or her shares. Sales of assets held by the Fund for
more than one year generally result in long-term capital gains
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and
losses, and sales of assets held by the Fund for one year or less generally
result in short-term capital gains and losses. Distributions of the Fund’s net
capital gain (the excess of net long-term capital gains over net short-term
capital losses) that are reported by the Fund as capital gain dividends
(“Capital Gain Dividends”) will be taxable as long-term capital gains, which for
non-corporate shareholders are subject to tax at reduced rates.
Distributions of short-term capital gain will generally be taxable as ordinary
income. Dividends and distributions are generally taxable to you whether you
receive them in cash or reinvest them in additional shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Fund receives in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. The amount of the Fund’s
distributions that qualify for this favorable treatment may be reduced as a
result of the Fund’s securities lending activities, if any, a high portfolio
turnover rate or investments in non-qualified foreign corporations. Corporate
shareholders may be entitled to a dividends-received deduction for the portion
of dividends they receive from the Fund that are attributable to dividends
received by the Fund from U.S. corporations, subject to certain
limitations. The amount of the dividends qualifying for this deduction
may, however, be reduced as a result of the Fund’s securities lending
activities, if any, by a high portfolio turnover rate, or by investments in
non-U.S. corporations. Shortly after the close of each calendar year, you will
be informed of the character of any distributions received from the Fund.
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8%
Medicare contribution tax on all or a portion of their “net investment income,”
which includes interest, dividends, and certain capital gains (including capital
gains distributions and capital gains realized on the sale of shares). This 3.8%
tax also applies to all or a portion of the undistributed net investment income
of certain shareholders that are estates and trusts.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are
generally taxable even if they are paid from income or gains earned by the Fund
before your investment (and thus were included in the Fund shares’ NAV when you
purchased your shares).
You may
wish to avoid investing in the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable to you even
though it may economically represent a return of a portion of your investment.
This adverse tax result is known as “buying into a dividend.”
Taxes When Shares are Sold on the Exchange. For
federal income tax purposes, any capital gain or loss realized upon a sale of
Fund shares generally is treated as
a long-term capital gain or loss if shares have been held for more than 12
months and as a short-term capital
gain or loss if shares have been held for 12 months or less. However, any
capital loss on a sale of Fund
shares
held for
six months or less is treated as long-term capital loss to the extent of
Capital Gain Dividends paid with
respect to such shares. Any loss realized on a sale will be disallowed to
the extent Fund shares are acquired,
including through reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the sale of Fund shares. If disallowed, the loss will be reflected in an upward adjustment to
the basis of the Fund shares acquired.
Taxes on Purchases and Redemptions of Creation Units.
An AP having the U.S. dollar as its functional currency for U.S. federal
income tax purposes who exchanges securities for Creation Units generally
recognizes a gain or a loss. The gain or loss will be equal to the difference
between the market value of the Creation Units at the time of the exchange and
the sum of the AP’s aggregate basis in the securities surrendered plus the
amount of cash paid for such Creation Units. The Internal Revenue Service
(“IRS”), however, may assert that a loss realized upon an exchange of securities
for Creation Units cannot be deducted currently under the rules governing “wash
sales,” or on the basis that there has been no significant change in economic
position. Any gain or loss realized by an AP upon a creation of Creation Units
will be treated as capital gain or loss if the AP holds the securities exchanged
therefor as capital assets, and otherwise will be ordinary income or loss. Any
capital gain or loss realized upon the creation of Creation Units will generally
be treated as long-term capital gain or loss if the securities exchanged for
such Creation Units have been held by the AP for more than 12 months, and
otherwise will be short-term capital gain or loss.
The
Trust, on behalf of the Fund, has the right to reject an order for a purchase of
Creation Units if the AP (or a group of APs) would, upon obtaining the Creation
Units so ordered, own 80% or more of the outstanding shares of the Fund and if,
pursuant to Section 351 of the Code, the Fund would have a basis in the
securities different from the market value of such securities on the date of
deposit. The Trust also has the right to require information necessary to
determine beneficial share ownership for purposes of the 80% determination. If
the Fund does issue Creation Units to an AP (or group of APs) that would, upon
obtaining the Creation Units so ordered, own 80% or more of the outstanding
shares of the Fund, the AP (or group of APs) may not recognize gain or loss upon
the exchange of securities for Creation Units.
An AP who
redeems Creation Units will generally recognize a gain or loss equal to the
difference between the sum of the aggregate market value of any securities
received plus the amount of any cash received for such Creation Units and the
AP’s basis in the Creation Units. Any gain or loss realized by an AP upon a
redemption of Creation Units will be treated as capital gain or loss if the AP
holds the shares comprising the Creation Units as capital assets, and otherwise
will be ordinary income or loss. Any capital gain or loss realized upon the
redemption of Creation Units will generally be treated as long-term capital gain
or loss if the shares comprising the Creation Units have been held by the AP for
more than 12 months, and otherwise will generally be short-term capital gain or
loss. Any capital loss realized upon a redemption of Creation Units held for six
months or less will be treated as a long-term capital loss to the extent of any
amounts treated as distributions to the applicable AP of long-term capital gains
with respect to the Creation Units (including any amounts credited to the AP as
undistributed capital gains).
The Fund
may include a payment of cash in addition to, or in place of, the delivery of a
basket of securities upon the redemption of Creation Units. The Fund may sell
portfolio securities to obtain
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the cash
needed to distribute redemption proceeds. This may cause the Fund to recognize
investment income or capital gains or losses that it might not have recognized
if it had completely satisfied the redemption in-kind. As a result, the Fund may
be less tax efficient if it includes such a cash payment in the proceeds paid
upon the redemption of Creation Units.
Persons
purchasing or redeeming Creation Units should consult their own tax advisors
with respect to the tax treatment of any creation or redemption
transaction.
The
Distributor, Quasar Distributors, LLC, is a broker-dealer registered with the
SEC. The Distributor distributes Creation Units for the Fund on an agency basis
and does not maintain a secondary market in shares. The Distributor has no role
in determining the policies of the Fund or the securities that are purchased or
sold by the Fund. The Distributor’s principal address is 111 East Kilbourn
Avenue, Suite 2200, Milwaukee, Wisconsin 53202.
Information regarding how
often the shares of the Fund traded on the Exchange at a price above (i.e., at a
premium) or below (i.e., at a discount) the NAV of the Fund during the prior
calendar year and subsequent quarters, when available, can be found at
www.hennessyetfs.com.
The method by
which Creation Units are purchased and traded may raise certain issues under
applicable securities laws. Because new Creation Units are issued and sold by
the Fund on an ongoing basis, at any point a “distribution,” as such term is
used in the Securities Act of 1933, as amended (the “Securities Act”), may
occur. Broker-dealers and other persons are cautioned that some activities on
their part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the Prospectus delivery and liability
provisions of the Securities Act.
For example, a
broker-dealer firm or its client may be deemed a statutory underwriter if it
takes Creation Units after placing an order with the Distributor, breaks them
down into individual shares, and sells such shares directly to customers, or if
it chooses to couple the creation of a supply of new shares with an active
selling effort involving solicitation of secondary market demand for shares. A
determination of whether one is an underwriter for purposes of the Securities
Act must take into account all the facts and circumstances pertaining to the
activities of the broker-dealer or its client in the particular case, and the
examples mentioned above should not be considered a complete description of all
the activities that could lead to categorization as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in shares of the Fund, whether or not participating in the
distribution of shares of the Fund, are generally required to deliver a
prospectus. This is because the prospectus delivery exemption in Section 4(a)(3)
of the Securities Act is not available with respect to such
transactions
as a result of Section 24(d) of the Investment Company Act of 1940, as amended.
As a result, broker dealer-firms should note that dealers who are not
underwriters but are participating in a distribution (as contrasted with
ordinary secondary market transactions) and thus dealing with shares of the fund
that are part of an over-allotment within the meaning of Section 4(a)(3)(a) of
the Securities Act would be unable to take advantage of the prospectus delivery
exemption provided by Section 4(a)(3) of the Securities Act. Firms that incur a
prospectus delivery obligation with respect to shares of the Fund are reminded
that under Rule 153 of the Securities Act, a prospectus delivery obligation
under Section 5(b)(2) of the Securities Act owed to an exchange member in
connection with a sale on the Exchange is satisfied by the fact that the Fund’s
Prospectus is available on the SEC’s electronic filing system. The prospectus
delivery mechanism provided in Rule 153 is only available with respect to
transactions on an exchange.
The Fund is a
semi-transparent actively managed ETF that operates pursuant to an SEC exemptive
order. In many respects, the Fund operates similarly to traditional ETFs. For
example, as described in this Prospectus, shares of the Fund are generally
purchased and redeemed in Creation Unit aggregations through authorized
participants, shares of the Fund are listed and traded on a stock exchange, and
individual investors can purchase or sell shares in less than Creation Unit
sizes and for cash in the secondary market through a broker. The Fund’s Creation
Units generally can be purchased or redeemed in-kind or for cash in exchange for
the Portfolio Reference Basket.
However, the
Fund has some novel features that differentiate it from traditional ETFs. As
described above, the Fund does not disclose its complete portfolio holdings each
business day, and instead, the Fund discloses other information to the market
that is designed to facilitate arbitrage opportunities in Shares of the
Fund to maintain efficient secondary market trading of such Shares. On each
business day before the commencement of trading in shares of the Fund on the
listing exchange, the Fund publishes on its website a Portfolio Reference Basket
that is designed to closely track the daily performance of the Fund’s Actual
Portfolio. The Portfolio Reference Basket is comprised of all of the names of
the securities in the Fund’s Actual Portfolio, and only the securities that are
in the Fund’s Actual Portfolio (unless cash or cash equivalents are included),
although the weightings of such holdings in the Portfolio Reference Basket will
differ from the Actual Portfolio. The Portfolio Reference Basket will have a
minimum weightings overlap of 90% with the Fund’s Actual Portfolio at the
beginning of each trading day.
The Portfolio
Reference Basket is constructed utilizing a proprietary algorithmic process to
minimize daily deviations in return of the Portfolio Reference Basket relative
to the Actual Portfolio and is used to facilitate the creation/redemption
process and arbitrage. The Portfolio Reference Basket may be updated daily. In
determining whether to update the Portfolio Reference Basket, Stance Capital and
Vident will consider various factors, including relative valuation of individual
securities, liquidity of the securities in the Portfolio Reference Basket,
tracking error of the Portfolio Reference Basket relative to the Actual
Portfolio, and the cost to create and trade the Portfolio Reference
Basket.
Hennessy
Funds |
1-877-671-3199 |
21 |
In addition to
the disclosure of the Portfolio Reference Basket, the Fund also publishes the
Portfolio Reference Basket Disclosures (which include, among other things, the
“Guardrail Amount”) on its website on each business day before the commencement
of trading in Shares on the Exchange. The Guardrail Amount is the maximum
deviation between the weightings of the specific securities in the Portfolio
Reference Basket and the weightings of those specific securities in the Actual
Portfolio, as well as between the weighting of the respective cash positions.
The Guardrail Amount is intended to ensure that no individual security in the
Portfolio Reference Basket will be overweighted or underweighted by more than
the publicly disclosed percentage when compared to the actual weighting of each
security within the Actual Portfolio as of the beginning of each trading day.
The Guardrail Amount is designed to help investors evaluate the risk of tracking
error, which is the degree to which the performance of the Portfolio Reference
Basket deviates from the performance of the Actual Portfolio.
Householding is a process in
which shareholders who share an address and have the same last name will be sent
only one copy of shareholder documents, including Prospectuses, supplements,
shareholder reports, notices, proxy statements, and other similar documents.
This process does not apply to account statements. Householding for the Fund is
available through certain broker-dealers, and you may contact your broker-dealer
to enroll in householding. Once enrolled, this process will continue
indefinitely unless you instruct your broker-dealer otherwise. If you prefer not
to have these documents householded, please contact your broker-dealer. At any
time you may view current Prospectuses, supplements, and shareholder reports at
www.hennessyetfs.com.
Shareholders may sign up for
electronic delivery of account statements, Prospectuses, tax forms, and
shareholder reports. To enroll in electronic delivery, please contact your
broker dealer and complete the information requested by your broker-dealer,
which will include the email address where you would like to receive
notifications for electronic documents. If you change your mind, you can cancel
electronic delivery at any time and revert to physical delivery of your
materials by contacting your broker-dealer. At any time you may view current
Prospectuses, supplements, and shareholder reports at www.hennessyetfs.com.
The Fund
enters into contractual arrangements with various parties, including among
others the Fund’s investment manager and sub-advisors, who provide services to
the Fund. Shareholders are not parties to, or intended (or “third party”)
beneficiaries of, those contractual arrangements.
The Prospectus
and the SAI provide information concerning the Fund that you should consider in
determining whether to purchase Shares of the Fund. The Fund may make changes to
this information from time to time. Neither this Prospectus nor the SAI is
intended to give rise to any contract rights or other rights in any shareholder,
other than any rights conferred explicitly by federal or state securities laws
that may not be waived.
NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS
NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND’S SAI INCORPORATED HEREIN BY
REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE COMPANY OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
Hennessy
Funds |
1-877-671-3199 |
23 |
The following table is
intended to help you understand the financial performance of the shares of the
Predecessor Fund for the periods shown below. Certain information reflects
financial results for a single share of the Fund. The “Total Return” figure
shows how much your investment would have increased or decreased during the
period, assuming you had reinvested all dividends and distributions. After the
close of business on December 22, 2022, the Fund acquired all of the assets and
liabilities of the Predecessor Fund, in exchange for shares of the Fund.
Accordingly, the Fund is the successor to the Predecessor Fund and has carried
forward the historic performance and financial statements of the Predecessor
Fund. This information has been derived from financial statements audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm.
PricewaterhouseCoopers LLP’s report and the Predecessor Fund’s financial
statements (which have been adopted by the Fund) are included in the
annual
report of the Predecessor Fund for the fiscal year ended August 31, 2022,
which is available upon request.
Financial Highlights
|
|
FOR THE YEAR
ENDED AUGUST 31, 2022 |
|
|
FOR THE PERIOD
ENDED AUGUST 31, 2021(1) |
|
|
PER
SHARE OPERATING PERFORMANCE |
|
|
|
|
|
|
|
Net asset value,
beginning of period |
|
$ |
27.82 |
|
|
$ |
25.00 |
|
|
Net investment
income/(loss)(2) |
|
|
0.20 |
|
|
|
0.02 |
|
|
Net realized and
unrealized gain/(loss) from investments |
|
|
(3.10 |
) |
|
|
2.80 |
|
|
Net increase/(decrease)
in net assets resulting from operations |
|
|
(2.90 |
) |
|
|
2.82 |
|
|
|
|
|
|
|
|
|
|
|
|
DIVIDENDS
AND DISTRIBUTIONS TO SHAREHOLDERS FROM: |
|
|
|
|
|
|
|
|
|
Net investment
income |
|
|
(0.10 |
) |
|
|
— |
|
|
Net realized capital
gains |
|
|
(0.02 |
) |
|
|
— |
|
|
Total dividends and
distributions to shareholders |
|
|
(0.12 |
) |
|
|
— |
|
|
Net asset value, end of
period |
|
$ |
24.80 |
|
|
$ |
27.82 |
|
|
Market value, end of
period |
|
$ |
24.83 |
|
|
$ |
27.91 |
|
|
Total investment
return/(loss) on net asset value(3) |
|
|
-10.50 |
% |
|
|
11.23 |
% |
(5) |
Total investment
return/(loss) on market price(4) |
|
|
-10.63 |
% |
|
|
11.56 |
% |
(5) |
|
|
|
|
|
|
|
|
|
|
RATIO/SUPPLEMENTAL
DATA |
|
|
|
|
|
|
|
|
|
Net assets, end of period
(000’s omitted) |
|
$ |
42,530 |
|
|
$ |
37,285 |
|
|
Ratio of expenses to
average net assets with waivers and/or reimbursements |
|
|
0.85 |
% |
|
|
0.85 |
% |
(6) |
Ratio of expenses to
average net assets without waivers and/or reimbursements |
|
|
0.95 |
% |
|
|
0.95 |
% |
(6) |
Ratio of net investment
income/(loss) to average net assets |
|
|
0.74 |
% |
|
|
0.19 |
% |
(6) |
Portfolio turnover
rate(7) |
|
|
290 |
% |
|
|
180 |
% |
(5) |
(1) |
Inception date of the Fund was March 15,
2021. |
(2) |
Per share data calculated using average shares
outstanding method. |
(3) |
Total investment return/(loss) on net asset
value is calculated assuming a purchase of shares on the first day and a
sale of shares on the last day of each period reported and includes
reinvestments of dividends and distributions, if
any. |
(4) |
Total investment return/(loss) on market price
is calculated assuming an initial investment made at the market price on
the first day of the period, reinvestment of dividends and distributions
at market price during the period and redemption at market price on the
last day of the period. |
(7) |
Excludes effect of in-kind
transfers. |
Hennessy
Funds |
1-877-671-3199 |
25 |
Stance Capital
has experience in managing other accounts with substantially similar investment
objectives, policies, and strategies as the Fund. The tables on the following
pages are provided to illustrate the past performance of Stance Capital in
managing the other accounts and do not represent the performance of the Fund.
Investors should not consider this performance information as a substitute for
the performance of the Fund, nor should investors consider this information as
an indication of the future performance of the Fund or of Stance Capital.
This
performance history is net of all fees charged to investors in the other
accounts constituting the composite and reflects the impact of any expense
reimbursements or waivers, including sales loads. The performance for the Fund
would differ from the information below to the extent that the Fund and the
other accounts do not have the same expenses. The fees and expenses of the other
accounts are lower than those of the Fund and performance of the other accounts
would be lower if the fees and expenses of the Fund were used. However, the
Fund’s results in the future also may be different because the other accounts
are not subject to certain investment limitations, diversification requirements,
and other restrictions imposed on mutual funds under applicable U.S. securities
and tax laws that, if applicable, could have adversely affected the performance
of the other accounts. In addition, the securities held by the Fund will not be
identical to the securities held by the other accounts. Composite performance
was calculated using Global Investment Performance Standards (“GIPS”). This
method of calculating performance differs from the SEC’s standardized
methodology, which may produce different results.
The
performance of the other accounts is also compared to the performance of an
appropriate broad-based securities benchmark index. This index is unmanaged and
is not subject to fees and expenses typically associated with managed funds,
including the Fund. Investors cannot invest directly in the index. The
performance information is accompanied by additional disclosures, which are an
integral part of the information.
Average
Annual Returns (periods ending December 31, 2020)
Period |
Composite |
S&P
500 TR Index |
1 Year |
19.44% |
18.40% |
3 Years |
16.77% |
14.18% |
5 Years |
17.45% |
15.22% |
Since Inception (January
1, 2014) |
13.98% |
12.92% |
MONTHLY
PERFORMANCE OF COMPOSITE NET OF FEES
|
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
Year |
2020 |
0.575 |
-6.370 |
-10.135 |
11.441 |
5.589 |
-1.133 |
7.838 |
4.873 |
-2.724 |
-2.503 |
11.086 |
1.821 |
19.437 |
2019 |
7.336 |
5.332 |
0.408 |
2.031 |
-6.387 |
8.165 |
1.552 |
1.247 |
-0.138 |
2.164 |
4.997 |
1.970 |
31.718 |
2018 |
5.481 |
-4.989 |
-0.599 |
-0.510 |
0.153 |
3.077 |
4.693 |
2.539 |
1.238 |
-4.861 |
4.519 |
-8.464 |
1.95 |
2017 |
1.273 |
4.088 |
0.688 |
1.774 |
1.771 |
1.812 |
0.708 |
-2.278 |
4.911 |
0.492 |
3.130 |
0.868 |
21.72 |
2016 |
-1.584 |
1.348 |
7.337 |
1.748 |
0.197 |
1.499 |
3.403 |
-0.770 |
0.551 |
-3.316 |
3.464 |
1.620 |
17.21 |
2015 |
0.561 |
0.481 |
-0.365 |
-1.847 |
0.917 |
-1.863 |
3.188 |
-4.549 |
0.270 |
2.594 |
-0.526 |
1.555 |
1.16 |
2014 |
-4.161 |
5.080 |
1.273 |
-0.817 |
1.465 |
1.197 |
-1.626 |
4.256 |
-2.173 |
3.798 |
2.676 |
0.528 |
12.55 |
Hennessy
Funds |
1-877-671-3199 |
27 |
PRIVACY
POLICY
We collect the following personal information about
you:
1. |
Information we receive
from you in applications or other forms, correspondence, or conversations,
including, but not limited to, your name, address, phone number, social
security number, assets, income, and date of
birth; |
2. |
Information about your
transactions with us, our affiliates, or others, including, but not
limited to, your account number and balance, payments history, parties to
transactions, cost basis information, and other financial information;
and |
3. |
Other personal
information we collect from various sources, even if you have not entered
into a prior transaction with us, including the
following: |
• |
Name, alias, address,
unique personal identifier, online identifier, IP address, email address,
telephone number, account name, and other similar
identifiers; |
• |
Age and marital
status; |
• |
Commercial information,
including records of products purchased; |
• |
Browsing history, search
history, and information on interaction with our
website; |
• |
Employment and
employment history, educational history, financial information, and
purchasing and consuming histories or tendencies;
and |
• |
Inferences drawn from
the above-listed information to create a profile about your preferences,
characteristics, predispositions, and behavior. |
We
collect this information directly from you, indirectly in the course of
providing services to you, directly and indirectly from your activity on our
website, from broker dealers, marketing agencies, and other third parties that
interact with us in connection with the services we perform and products we
offer, and from anonymized and aggregated consumer information.
We use
this information to fulfill the reason you provided the information to us, to
provide you with other relevant products that you request from us, to provide
you with information about products that may interest you, to improve our
website or present our website’s contents to you, and as otherwise described to
you when collecting your personal information.
We do not
disclose any personal information to unaffiliated third parties, except as
permitted by law. We may disclose your personal information to our affiliates,
vendors, and service providers for a business purpose. For example, we are
permitted by law to disclose all of the information we collect, as described
above, to our transfer agent to process your transactions. When disclosing your
personal information to third parties, we enter into a contract with each third
party describing the purpose of such disclosure and requiring that such personal
information be kept confidential and not used for any purpose except to perform
the services contracted or respond to regulatory or law enforcement
requests.
Furthermore,
we restrict access to your personal information to those persons who require
such information to provide products or services to you. As a result, we do not
provide a means for opting out of our limited sharing of your information. We
maintain physical, electronic, and procedural safeguards that comply with
federal standards to guard your personal information.
If you hold shares of the Fund
through a financial intermediary, including, but not limited to, a
broker-dealer, bank, or trust company, the privacy policy of your financial
intermediary governs how your personal information is shared with unaffiliated
third parties.
Supplemental
Privacy Notice for Residents of California
The
California Consumer Privacy Act of 2018 (the “CCPA”) provides you, as a
California resident, with certain additional rights relating to your personal
information. Under the CCPA, you have the right to request that we disclose to
you the categories of personal information we have collected about you over the
past 12 months, the categories of sources of such information, our business
purpose for collecting the information, the categories of third parties, if any,
with whom we shared the information, and the specific information we have
collected about you. You also have the right to request that we delete any of
your personal information, and, unless an exception applies, we will delete such
information upon receiving and confirming your request. To make a request, call
us at 1-800-966-4354, email us at
[email protected], or go to
www.hennessyfunds.com/contact. We will not discriminate against you for
exercising your rights under the CCPA. Further, we will not collect additional
categories of your personal information or use the personal information we
collected for materially different, unrelated, or incompatible purposes without
providing you notice.
Hennessy
Funds |
1-877-671-3199 |
29 |
For
information, questions, or assistance, please call
Hennessy Funds
1-877-671-3199
or 1-415-899-1555
INVESTMENT
MANAGER
Hennessy Advisors,
Inc.
7250 Redwood
Boulevard, Suite 200
Novato, California
94945 |
COUNSEL
Foley & Lardner LLP
777 East Wisconsin Avenue
Milwaukee, Wisconsin
53202-5306 |
ADMINISTRATOR,
TRANSFER
AGENT,
DIVIDEND
PAYING AGENT, &
SHAREHOLDER
SERVICING AGENT
U.S. Bancorp Fund Services, LLC
d/b/a U.S. Bank Global Fund Services
P.O. Box 701
Milwaukee, Wisconsin
53201-0701 |
INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING
FIRM
Tait, Weller & Baker
LLP
Two Liberty Place
50 South 16th
Street, Suite 2900
Philadelphia, Pennsylvania
19102-2529 |
CUSTODIAN
U.S. Bank N.A.
Custody Operations
1555 North River Center Dr., Suite 302
Milwaukee, Wisconsin 53212
|
DISTRIBUTOR
Quasar Distributors, LLC
111 East Kilbourn Avenue, Suite 2200
Milwaukee, Wisconsin 53202 |
TRUSTEES
Neil J. Hennessy
Robert T. Doyle
J. Dennis DeSousa
Claire Garvie
Gerald P. Richardson |
|
To learn more about the Hennessy
Funds, please read the Fund’s Statement of Additional Information (the
“SAI”), which contains additional information about the Fund. The Fund has
incorporated by reference the SAI into this Prospectus. This means that you should
consider the contents of the SAI to be part of this Prospectus.
You also
may learn more about the Fund’s investments by reading the Fund’s annual and
semi-annual reports to shareholders, when available. The Fund’s annual
report will include a discussion of the market conditions and investment
strategies that significantly affected the Fund’s performance
during the last fiscal year.
The SAI and
the annual and semi-annual reports are all available to shareholders and
prospective investors without charge, upon request, by calling 1-877-671-3199 or
1-415-899-1555 or at www.hennessyetfs.com.
Prospective
investors and shareholders who have questions about the Fund may also call
1-877-671-4354 or 1-415-899-1555 or write to the following address:
Hennessy
Funds
7250 Redwood
Blvd.
Suite
200
Novato,
CA 94945
The general
public can review and copy information about the Fund (including the SAI) on the
EDGAR Database on the Securities and Exchange Commission’s website at
www.sec.gov. Copies of this information may be obtained, upon payment of a
duplicating fee, by emailing
[email protected].
When
seeking information about the Fund, please refer to Hennessy Funds Trust’s
Investment Company Act File No. 811-07168.