What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2020-12-01 compared with 2019-12-03 · 311 added, 367 removed, 79 unchanged (90% of the section changed)

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results of operations, financial condition, and stock price could be materially adversely affected by any of the risks we face, including those described below.

RISKS RELATING TO OUR ASSETS UNDER MANAGEMENT

Volatility in and disruption of the capital markets and changes in the economy may significantly affect our revenues.

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Further, sharp declines in the stock market, such as those

experienced during our fiscal year 2019, may also cause increases in redemptions of shares of the Hennessy Funds.

Such redemptions reduce our assets under management and adversely affect our revenues.

experienced during our fiscal year 2020 as a result of the COVID-19 pandemic, may also cause increases in redemptions of shares of the Hennessy Funds.

Such redemptions reduce our assets under management and

adversely affect our revenues.

The COVID-19 pandemic has had, and is expected to continue to

have, an adverse impact on our business and financial performance.

The COVID-19 pandemic has adversely

impacted global commercial activity and contributed to significant volatility in global equity and debt markets.

Initially, national, state, and local governments reacted to the pandemic by instituting quarantines and

stay-at-home orders, prohibiting certain travel, and closing offices, businesses, schools, retail stores, and other public venues.

Some such restrictions remain in

Furthermore, many businesses have implemented additional precautionary measures, and many individuals have opted to continue to limit their own economic and social activities, in each case above and beyond any restrictions imposed on them by

As a result, supply chains and economic activity have been disrupted, with a particularly adverse impact on the transportation, hospitality, tourism, and entertainment industries.

The duration of the pandemics effects remain uncertain and

difficult to assess.

The COVID-19 pandemic has adversely impacted, and may continue to adversely impact, the

value and performance of the Hennessy Funds assets under management and the Hennessy Funds ability to source and manage investments, which has resulted in, and may continue to result in, declines in the Companys revenues.

Adverse opinions of the Hennessy Funds by third parties, including rating agencies or industry analysts, could decrease new investments in, or

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the inability to attract additional investments into the Hennessy Funds from existing and new investors, thereby reducing our assets under management and adversely affecting our revenues.

Investor behavior is influenced by short-term investment performance of mutual funds.

Investor behavior may be based on many factors, including short-term investment performance.

Poor short-term performance of the Hennessy Funds,

irrespective of longer-term success, could potentially lead to a decrease in purchases of shares of the Hennessy Funds and an increase in redemptions, thereby reducing our assets under management and adversely

affecting our revenues.

The failure or negative performance of products offered by competitors may have a negative impact on the Hennessy Funds

within such similar product type, irrespective of our fund performance.

Many competitors offer similar products to the Hennessy

Funds, and the failure or negative performance of competitors products could lead to a loss of confidence in the corresponding products in the Hennessy Funds lineup, irrespective of the performance of the Hennessy Funds.

Any loss of confidence

in a product type could lead to redemptions in the Hennessy Fund within such product type, which could have a material adverse effect on our business, results of operations, and financial condition.

The failure or negative performance of products offered by competitors may have a negative impact on the Hennessy Funds within such similar product

type, irrespective of our fund performance.

Many competitors offer similar products to the Hennessy Funds, and the failure or

negative performance of competitors products could lead to a loss of confidence in the corresponding products in the Hennessy Funds lineup, irrespective of the performance of the Hennessy Funds.

Any loss of confidence in a product type could

lead to redemptions in the Hennessy Fund within such product type, which could have a material adverse effect on our business, results of operations, and financial condition.

RISKS RELATING TO OUR BUSINESS MODEL AND OPERATIONS

We derive a substantial portion of our revenues from a limited number of the Hennessy Funds.

During fiscal year 2019, our average assets under management was concentrated in the following three Hennessy Funds:

(i) the Hennessy

Focus Fund (36% of average assets under management);

(ii) the Hennessy Gas Utility Fund (18% of average assets under management);

For the past several years, approximately two-thirds of our assets under management has been

concentrated in three of our funds.

During fiscal year 2020, our average assets under management was concentrated in the following three funds:

(i) the Hennessy Focus Fund (34% of average assets under management);

(ii) the Hennessy Gas

Utility Fund (17% of average assets under management);

and (iii) the Hennessy Japan Fund (16% of average assets under management).

Consequently, our revenues

followed a similar pattern of concentration:

(a) the Hennessy Focus Fund (42% of total revenue);

Consequently, our revenues followed a similar pattern of concentration:

(a) the Hennessy Focus Fund (42% of

total revenue);

(b) the Hennessy Japan Fund (16% of total revenue);

and (c) the Hennessy Gas Utility Fund (10% of total revenue).

As a result, our

operating results are particularly dependent upon the performance of these funds and our ability to maintain and grow assets under management in these funds.

If any of these funds were to experience a significant increase in redemptions for any

reason, our assets under management would be reduced, adversely affecting our revenues.

We face intense competition in attracting investors and

retaining net assets in the Hennessy Funds.

The investment advisory industry is intensely competitive, and new participants are

continually entering the industry.

We compete directly with numerous global and U.S.

investment advisors, commercial banks, savings and loan associations, brokerage and investment banking firms, broker-dealers, insurance companies, and other

financial institutions that often provide investment products with similar features and objectives to those we offer.

These institutions range from small boutique firms to large financial services complexes.

We are considered a small investment

advisory company.

Many competing companies are part of larger financial services companies that conduct business in more markets and have greater marketing, financial, technical, research, and distribution resources and other capabilities than we

Most of the larger firms offer a broader range of financial services to the same retail and institutional investors that we seek to serve.

If we are unable to attract investors and retain net assets in the Hennessy Funds due to increased

competition, our revenues could decline and we could experience a material adverse effect on our business, results of operations, and financial condition.

For more information regarding competitive factors, see the Competition subheading in Item 1, Business.

Market consolidation and industry trends could negatively impact our business.

In recent years, there have been several instances of industry consolidation in both the distribution and investment management areas.

consolidation may occur in these areas in the future.

The increasing size and market influence of certain distributors of our products and of certain direct competitors may have a negative impact on our ability to compete at the same levels of

profitability in the future.

Additionally, the market environment in recent years has led some investors to increasingly favor lowerfee, passive products.

As a result, investment advisors that emphasize passive products have gained, and may

continue to gain, market share from active managers like us.

While we cannot predict how much market share these competitors will gain, we believe there will always be demand for good active management.

Our investment advisory and shareholder servicing agreements can be terminated on short notice, are

not freely assignable, and must be renewed annually;

the loss of such agreements would reduce our revenues.

We generate all of our

operating revenues from the investment advisory and shareholder servicing agreements with the Hennessy Funds.

These agreements may be terminated without penalty on 60 days notice and may not be assigned without investor consent.

they each must be renewed annually by (i) the Funds Board of Trustees or the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (ii) a majority of the disinterested trustees.

The termination or non-renewal of these agreements, or the renegotiation of the terms of these agreements in a manner detrimental to us, could result in a substantial reduction in revenues, which could have a material adverse effect

on our business, results of operations, and financial condition.

We utilize unaffiliated sub-advisors to

manage the portfolio composition of certain of the Hennessy Funds, and any matters that have an adverse impact on their businesses or any change in our relationships with our sub-advisors could lead to a

reduction in assets under management, which would adversely affect our revenues.

We utilize unaffiliated sub-advisors to manage the portfolio composition of some of the Hennessy Funds.

As a result, our operating results are particularly dependent upon the performance of a very small number

funds and our ability to maintain and grow assets under management in these funds.

If any of these funds were to experience a significant increase in redemptions for any reason, our assets under management would be reduced, adversely affecting our

We utilize unaffiliated sub-advisors to manage the portfolio

composition of certain of the Hennessy Funds, and any matters that have an adverse impact on their businesses or any change in our relationships with our sub-advisors could lead to a reduction in assets under

management, which would adversely affect our revenues.

We utilize unaffiliated

sub-advisors to manage the portfolio composition of some of the Hennessy Funds.

Although we perform due diligence on our sub-advisors, we do not manage their day-to-day business activities.

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reduction in assets under management, which would adversely affect our revenues.

Assets invested through third-party intermediaries have a risk of

redemption, which could reduce our revenues.

Third-party intermediaries are attractive to investors because of the ease of

accessibility to a variety of funds, but this may cause the investments to be more sensitive to fluctuations in performance, especially in the short-term.

If we were unable to retain the assets of the Hennessy Funds held through third-party

intermediaries, our assets under management would be reduced.

As a result, our revenues could decline and our business, results of operations, and financial condition could be materially adversely affected.

We depend on key personnel to manage our business, and the loss of

any key persons services, combined with our inability to identify and retain a suitable replacement for such person, could materially adversely affect us.

Additionally, the cost to retain our key personnel could put pressure on our operating

Our success is largely dependent on the skills, experience, and performance of our key personnel.

The business acumen,

investment advisory expertise, and business relationships of our key personnel are critical elements in operating and expanding our business.

Financial services professionals are in high demand, and we face significant competition for qualified

The loss of services of any of our key personnel for any reason, combined with our inability to identify and retain a suitable replacement for such person, could have a material adverse effect on our business, results of operations, and

financial condition.

Moreover, in order to retain key personnel, we may be required to increase compensation to such individuals, resulting in additional expense.

We depend on third-party investment professionals and the distribution channels they utilize to market the Hennessy Funds.

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Mergers and other corporate transactions among distributors also may affect our distribution relationships.

Moreover, fiduciary regulations have led to significant shifts in distributors business models and more limited

offerings, and additional regulations could lead to further changes, potentially resulting in reduced distribution of certain of the Hennessy Funds.

Our lack of access to these distribution

channels could have a material adverse effect on our business because investment professionals may not distribute the Hennessy Funds if we are no longer participants on the platforms of firms that permit their investment professionals to utilize no-load funds for their investors.

Either of these events could cause the net assets of the Hennessy Funds to decline, which would decrease our revenues and have a material adverse effect on our results of

In addition, these intermediaries generally offer their customers a broad array of investment products that are in addition

to, and compete with, the Hennessy Funds.

Moreover, regulations have led to significant shifts in distributors business models and more limited product

offerings, which has resulted in reduced distribution of certain of the Hennessy Funds, and additional regulations could lead to further adverse changes.

Our lack of access to these distribution channels material adversely affects our business

because investment professionals may opt not to distribute the Hennessy Funds if we are no longer participants on the platforms of firms that permit their investment professionals to utilize no-load funds for

their investors.

Either of these events could cause the net assets of the Hennessy Funds to decline, which would decrease our revenues and have a material adverse effect on our results of operations.

In addition, these intermediaries generally offer their customers a broad array of investment products that are in addition to, and compete

with, the Hennessy Funds.

The intermediaries or their customers may favor competing investment products over the Hennessy Funds.

To the extent that current or future intermediaries or their customers prefer to do business with our

competitors, our market share, revenues, and net income could decline.

Industry trends and market pressure to lower our investment advisory fees

could reduce our profit margin.

Our profits are highly dependent on the fees we are able to charge to the Hennessy Funds for

investment advisory services.

To the extent we are forced to compete on the basis of the investment advisory fees we charge to the Hennessy Funds, we may not be able to maintain our current fee structures.

We have historically competed primarily on

the performance of the Hennessy Funds and not on the level of our investment advisory fees relative to those of our competitors.

In recent years, however, there has been a trend toward lower fees in the investment advisory industry.

To maintain our

fee structures in a competitive environment, we must be able to provide our mutual fund investors with investment returns and service that will adequately compensate them for investing in our mutual funds with our current fee structures.

succeed in maintaining our current fee structures, and fee reductions on existing or future business could have a material adverse effect on our results of operations.

We may be required to forego all or a portion of our fees under our investment advisory agreements with the Hennessy Funds.

On an annual basis, the Funds Board of Trustees must assess the reasonableness of our investment advisory fees.

We regularly analyze the

expense ratios of the Hennessy Funds and have the right to waive fees at our discretion to compete with other mutual funds with lower expense ratios (although in the past we have only waived fees based on contractual obligations).

Any waiver of or

reduction in fees would cause our revenues to decline and could adversely affect our business, results of operations, and financial condition.

Any fee waiver would only apply on a going-forward basis.

To the extent that current or future intermediaries or their customers prefer to do business with our competitors, our

market share, revenues, and net income could decline.

Management contracts purchased by us are currently classified as an indefinite-life asset subject to impairment analysis.

The impairment analysis is based on subjective criteria, and an impairment loss could be recorded.

The management contracts we have purchased, an $80.6 million asset on the balance sheet as of the end of fiscal year 2020, are considered

an intangible asset with an indefinite useful life.

Management reviews the indefinite life classification of our management contracts asset each reporting period.

If the management contracts asset is ever reclassified as an asset with a definite

life, we would begin amortizing the management contracts over their remaining useful life.

If the management contracts asset continues to be classified as an indefinite-life asset, we will continue to

periodically review the carrying value to determine if any impairment has occurred.

The impairment analysis is based on anticipated future cash flows, which are calculated based on assets under management.

Although the management contracts asset is

not currently impaired, there is always a possibility of impairment in the future, which could require us to write off all or a portion of the asset.

A write-off, depending on the amount, could have

operational risks and could have a significant impact on the value of our equity and our earnings per share.

We may be required to forego all or a portion of our fees under our investment advisory agreements

with the Hennessy Funds.

On an annual basis, the Funds Board of Trustees must assess the reasonableness of our investment

advisory fees.

While the Funds Board of Trustees has found our investment advisory fees to be reasonable in the past, we cannot guarantee that it will continue to do so.

Additionally, we regularly analyze the expense ratios of the Hennessy

Funds and have the right to waive fees to compete with other mutual funds with lower expense ratios (although in the past we have only waived fees based on contractual obligations).

Any waiver of or reduction in fees would cause our revenues to

decline and could adversely affect our business, results of operations, and financial condition.

Any fee waiver would apply only on a going-forward basis.

The Hennessy Japan Fund and the Hennessy Japan Small Cap Fund invest in the Japanese stock market in yen, which involves foreign exchange and economic

uncertainties.

The Hennessy Japan Fund and the Hennessy Japan Small Cap Fund are invested in securities listed on the Japanese

stock market, which exposes these funds to risks that are not typically associated with an investment in a U.S.

The values of these funds fluctuate with changes in the value of the Japanese yen versus the U.S.

Investments in

Japanese securities also expose these funds to the economic uncertainties affecting Japan.

Japanese financial accounting standards and practices may differ, and there may be less information on Japanese companies available publicly.

circumstances result in a reduction in the total assets of the Hennessy Japan Fund and the Hennessy Japan Small Cap Fund, our assets under management would be reduced, which would adversely affect our revenues.

We utilize quantitative investment strategies for some of the Hennessy Funds that require us to invest in specific portfolios of securities and hold

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formula-driven funds adhere to quantitative investment strategies, and the portfolios of stocks held by such funds are rescreened and rebalanced at designated times in accordance with such investment

Adhering to our investment strategies may result in the sale of securities that have been performing well in the near term and the purchase of securities that have been performing less well in the near term.

Additionally, we will

maintain a position in a relatively poorly performing security throughout the course of the portfolio holding period.

Either of these actions could, in theory, result in relatively low performance of the

formula-driven Hennessy Funds and adversely affect the net assets of such Hennessy Funds.

Adhering to our investment strategies regardless of any adverse developments that may arise could result in substantial losses to the formula-driven Hennessy Funds if, for example, the stocks

selected for a fund are experiencing financial difficulty or are out of favor with investors in a given period This could, in theory, result in relatively low performance of the formula-driven Hennessy Funds

and adversely affect the net assets of such Hennessy Funds.

A decrease in the net assets of the Hennessy Funds would adversely affect our revenues.

The Hennessy Japan Fund and the Hennessy Japan Small Cap Fund invest in the Japanese stock market in

yen, which involves foreign exchange and economic uncertainties.

The Hennessy Japan Fund and the Hennessy Japan Small Cap Fund are

invested in securities listed on the Japanese stock market, which exposes these funds to risks that are not typically associated with an investment in a U.S.

The values of these funds fluctuate with changes in the value of the Japanese yen

versus the U.S.

Investments in Japanese securities also expose these funds to the economic uncertainties affecting Japan.

Japanese financial accounting standards and practices may differ, and there may be less information on Japanese

companies available publicly.

If these circumstances result in a reduction in the total assets of the Hennessy Japan Fund and the Hennessy Japan Small Cap Fund, our assets under management would be reduced, which would adversely affect our revenues.

The terms of our loan agreement may restrict our current and future operations, particularly our ability to respond to certain changes or to take

future actions.

In addition, certain events could cause us to default on our loan agreement.

As of the end of fiscal year 2019,

the gross amount outstanding under our loan agreement with U.S.

Bank National Association (U.S.

Bank) was $17.5 million.

The loan agreement contains a number of covenants that collectively impose operating and financial restrictions

on us, including restrictions that may limit our ability to engage in acts that may be in our long-term best interests.

The loan agreement also sets forth a number of events that, if they occur, would constitute events of default, such as a failure

by us to comply with the covenants in the loan agreement or the termination or non-renewal of one or more of our investment advisory agreements if such termination or

non-renewal would reasonably be expected to have a material adverse effect on us.

The occurrence of an event of default would give U.S.

Bank the right to declare our borrowings, together with accrued and

unpaid interest, to be immediately due and payable.

In addition, U.S.

Bank would have the right to proceed against the collateral we granted to it, which consists of substantially all of our assets.

If the debt under our loan agreement were

accelerated, we might not have sufficient cash on hand or be able to sell sufficient collateral to repay this debt, which would have an immediate material adverse effect on our business, results of operations, and financial condition.

An increase in our borrowing costs may adversely affect our earnings and liquidity, and changes to LIBOR could affect interest rates under our existing

loan agreement.

Under our loan agreement with U.S.

Bank, our effective interest rate as of the end of fiscal year 2019 is 4.350%.

Because the interest payable is a floating rate, the interest expense we incur varies with changes in the applicable reference rate.

As a result, an increase in short-term interest rates would increase our interest costs and could adversely affect

our liquidity.

Failure to maintain adequate liquidity could lead to unanticipated costs and force us to revise our strategic and business initiatives, materially adversely affecting our business, results of operations, and financial condition.

Further, we currently use a one-month LIBOR rate contract as the reference rate to calculate interest

rates payable under our loan agreement with U.S.

Bank (see further discussion in Note 7 under Item 8, Financial Statements and Supplementary Data).

In 2017, the United Kingdoms Financial Conduct Authority, which regulates

LIBOR, announced that it intends to phase out LIBOR by the end of 2021.

It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to exist after 2021.

Our loan agreement

is our most significant exposure to LIBOR, and we have amended our loan agreement to address the possible LIBOR changes.

We depend on key personnel to manage our business, and the loss of any of their services, combined

with our inability to identify and retain a suitable replacement for such person, could materially adversely affect us.

Additionally, the cost to retain our key personnel could put pressure on our operating margins.

Our success is largely dependent on the skills, experience, and performance of our key personnel.

The business acumen, investment advisory

expertise, and business relationships of our key personnel are critical elements in operating and expanding our business.

Financial services professionals are in high demand, and we face significant competition for qualified employees.

services of any of our key personnel for any reason, combined with our inability to identify and retain a suitable replacement for such person, could have a material adverse effect on our business, results of operations, and financial condition.

Moreover, in order to retain key personnel, we may be required to increase compensation to such individuals, resulting in additional expense.

Management contracts purchased by us are currently classified as an indefinite life asset subject to impairment analysis.

The impairment analysis is

based on subjective criteria, and an impairment loss could be recorded.

The investment management contracts that we have

purchased, a $80.6 million asset on the balance sheet as of the end of fiscal year 2019, are considered an intangible asset with an indefinite useful life.

Management reviews the classification of the asset as an asset with an indefinite

life each reporting period.

If our purchased investment management contracts are ever classified as an asset with a definite life, we would begin amortizing such agreements over their remaining useful life.

If the contracts continue to be

classified as an indefinite life asset, we will continue to review the carrying value to determine if any impairment has occurred.

The impairment analysis has been based on anticipated future cash flows, which are calculated based on assets under

Although the contracts are not currently impaired, there is always a possibility of impairment in the future, which could require us to write off all or a portion of the contracts.

depending on the amount, could have operational risks and could have a significant impact on the value of our equity and our earnings per share.

pursue strategic asset purchases as part of our regular business strategy, and such acquisitions involve inherent risks that could adversely affect our operating results and financial condition and potentially dilute the holdings of current

shareholders.

As part of our regular business strategy, we pursue strategic purchases of the assets related to the management of

additional mutual funds.

We pursue strategic asset purchases as part of our regular business strategy, and such acquisitions involve inherent risks that could adversely affect

our operating results and financial condition and potentially dilute the holdings of current shareholders.

As part of our regular

business strategy, we pursue strategic purchases of the assets related to the management of additional mutual funds.

This strategy is accompanied by risks including, among others, the possibility of the following:

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our inability to value potential asset purchases accurately and negotiate acceptable purchase terms;

our inability to secure enough affirmative votes to gain approval of the proposed fund reorganization from the

target funds shareholders;

our inability to obtain quorum and secure enough affirmative votes to gain approval of the proposed fund

reorganization from the target funds shareholders;

the loss of mutual fund assets paid for in an asset purchase through redemptions by shareholders of the mutual

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If one or more of these risks occur, we may be unable to successfully complete a purchase of management-related

assets (thereby requiring us to write off any related expenses), we may experience an impairment of management contract valuations, we may receive negative publicity or suffer other negative impacts on our reputation, and we may not achieve the

assets (thereby requiring us to write off any related expenses), we may experience an impairment of our management contract asset, we may receive negative publicity or suffer other negative impacts on our reputation, and we may not achieve the

expected return on investment.

Any of these results could have an adverse effect on our business, results of operations, and financial condition.

The potential future growth of our business may place significant demands on our resources and employees, and may increase our expenses, risks, and

regulatory oversight.

The potential future growth of our business may place significant demands on our infrastructure, investment

team, and other employees, which may increase our expenses.

The potential inability of our systems to accommodate an increasing volume of transactions could constrain our ability to expand our businesses.

We may face significant challenges in

maintaining and developing adequate financial and operational controls, implementing new or updated information and financial systems, managing and appropriately sizing our work force, and updating other components of our business on a timely basis

and in a cost-effective manner.

There can be no assurance that we will be able to manage the potential future growth of our business effectively, and any failure to do so could adversely affect our ability to generate revenues and control our

Higher insurance premiums and increased insurance coverage risks could increase our costs and reduce our profitability.

While we carry insurance in amounts and under terms that we believe are appropriate, we cannot guarantee that our insurance will cover all

liabilities and losses to which we may be exposed or, if covered, that such liabilities and losses will not exceed the limits of available insurance coverage or that our insurers will remain solvent and meet their obligations.

In addition, we cannot

guarantee that our insurance policies will continue to be available at current terms and fees.

We are subject to regulatory and

governmental inquiries and civil litigation.

An adverse outcome of any such proceeding could involve substantial financial penalties.

Various claims may also arise against us in the ordinary course of business, such as employment-related claims.

There has been increased incidence of litigation and regulatory investigations in the financial services industry in recent years, including customer claims and class action suits alleging substantial monetary damages.

Certain insurance coverage may

not be available or may be prohibitively expensive in future periods.

As our insurance policies come up for renewal, we may need to assume higher deductibles or co-insurance liabilities, or pay higher

premiums, which would increase our expenses and have a material adverse effect on our results of operations.

We are highly dependent on various

software applications and other technologies, as well as on third parties who utilize various software applications and other technologies, for our business to function properly and to safeguard confidential information;

any significant limitation,

failure, or security breach could adversely affect our operations.

We use software and related technologies throughout our business and also utilize

third-party vendors who use software and related technologies to provide services to us and the Hennessy Funds.

Although we take protective measures (including striving to understand the protective measures taken by our third-party vendors) and

endeavor to modify such protective measures as circumstances warrant, we may experience system delays and interruptions as a result of natural disasters, power failures, acts of war, third-party failures, or other unexpected events.

predict with certainty all of the adverse effects that could result from the failure to efficiently address and resolve these delays and interruptions.

We could also be subject to losses if we fail to properly safeguard sensitive and confidential and proprietary information that we and our third-party vendors store and transmit as part of our normal business operations.

Although we take protective measures, the security of our and our vendors computer systems, software, and networks may be

vulnerable to hacking, breaches, unauthorized access, misuse, computer viruses, or other malicious code, as well as to other events that could have a security impact, such as an employee or vendor inadvertently or intentionally causing us to release

confidential or proprietary information.

Additionally, although we take precautions to password protect and encrypt our laptops and other mobile electronic hardware, if such hardware is stolen, misplaced, or left unattended, it may become vulnerable

to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions.

There have been a

number of highly publicized cases in recent years involving financial services and consumer-based companies reporting the unauthorized disclosure of client or customer information, as well as cyber-attacks involving the dissemination, theft, and

destruction of corporate information or other assets, as a result of employees or contractors failure to follow procedures or as a result of actions by third parties, including actions by terrorist organizations and hostile foreign

We, the Hennessy Funds, and our third-party vendors may be vulnerable to such unauthorized disclosures and cyber-attacks.

Our increased use of mobile and cloud technologies could heighten these and other operational risks, and any

failure by mobile technology and cloud service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations and result in misappropriation, corruption, or loss of

confidential or proprietary information.

If any of these events were to occur, we could suffer a financial loss, a disruption of our

business, liability to the Hennessy Funds and their investors, regulatory intervention, or reputational damage, any of which could have a material adverse effect on our business, results of operations, and financial condition.

We also may be

required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures.

Finally, cybersecurity and data privacy have become high priorities for regulators, and many jurisdictions are enacting laws and regulations

in these areas.

One such law is the California Consumer Privacy Act of 2018, which takes effect in 2020.

Enactment of new privacy laws or regulations could, among other things, result in additional costs of compliance or litigation.

while we strive to comply with the relevant laws and regulations, any failure to comply could result in regulatory investigations and penalties as well as negative publicity, which could materially adversely affect our business, results of

operations, and financial condition.

We are exposed to legal risk and litigation, which could increase our expenses and reduce our profitability.

In recent years, the volume of claims and amount of damages claimed in litigation and regulatory proceedings against the financial

services industry have been increasing.

While we strive to conduct our business in accordance with the highest ethical standards, we nevertheless remain exposed to litigation risk.

We could be sued by many different parties, including, by way of

example, investors in the Hennessy Funds, our own shareholders, our employees or regulators.

Lawsuits or investigations that we may become involved in could be very expensive and highly damaging to our reputation, even if the underlying claims are

without merit.

In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the

Exchange Act to compensate and protect whistleblowers who voluntarily provide original information to the SEC and establishes a fund to be used to pay whistleblowers who will be entitled to receive a payment equal to between 10% and 30% of certain

monetary sanctions imposed in a successful government action resulting from the information provided by the whistleblower.

According to a recent annual report to Congress on the Dodd-Frank Whistleblower Program, whistleblower claims have increased

significantly since the enactment of these provisions.

Addressing such claims could generate significant expenses and take up significant management time, even if such claims are frivolous or non-meritorious.

Any damage to our reputation could harm our business and lead to a reduction in revenues and profitability.

Our success depends, in part, on maintaining a strong reputation in the investment community.

Our reputation is vulnerable to many threats that

can be difficult or impossible to control and costly or impossible to remediate, even if they are without merit or are satisfactorily addressed.

Our reputation may be impacted by many factors, including, but not limited to, litigation, regulatory

inquiries or investigations, conflicts of interest, employee misconduct, and rumors.

Any damage to our reputation could result in redemptions by investors in the Hennessy Funds, impede our ability to attract new investors, or negatively impact our

relationships with third-party intermediaries, any of which could have a material adverse effect on our business, results of operations, and financial condition.

Our business is extensively regulated, which increases our costs of doing business, and our failure to comply with regulatory requirements may harm our

financial condition.

Our business is subject to extensive regulation in the United States, particularly by the SEC.

We are subject

to regulation under the Securities Act of 1933, as amended, the Exchange Act, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and various other statutes.

The regulations we are subject to are designed primarily to protect

investors in the Hennessy Funds as opposed to our shareholders.

In addition to an increased number of applicable laws and regulations, the mutual fund industry has undergone increased scrutiny by the SEC and state regulators for the past several

years, resulting in numerous enforcement actions, sweep examinations, and new rules and rule proposals.

These actions have increased our costs in managing the Hennessy Funds, and we could continue to experience higher costs if new rules,

regulations, or legislation require us to spend more time, hire additional personnel, or buy new technology to comply with these rules, regulations, and laws.

Any changes in rules, regulations, and laws could also have a material adverse effect on

us by limiting the sources of our revenues and increasing our costs.

In addition to securities regulations, our business also may be materially adversely affected by other types of regulations and policies.

For example, the amount of net assets in

the Hennessy Funds in a given time period could be affected by existing and proposed tax legislation or the interest rate policies of the Federal Reserve Board.

Additionally, in the past we have been affected by legislation such as the

Department of Labor fiduciary rule, which significantly expanded the class of advisers and the scope of investment advice that are subject to fiduciary standards, causing financial advisers and broker-dealers to make significant

operational changes, including, in some cases, to remove one or more of the Hennessy Funds from their platforms.

While the U.S.

Court of Appeals for the Fifth Circuit issued a mandate vacating the fiduciary rule in its entirety in June 2018,

many companies had already implemented a number of business and compliance initiatives in order to change their distribution methods and operations in response to the rule.

Additionally, on June 5, 2019, the SEC adopted Regulation Best Interest (Regulation BI), which establishes a standard of

conduct applicable to broker-dealers (including natural persons who are associated persons of a broker-dealer) when making recommendations to retail customers with

respect to any securities transaction, investment strategy involving securities, or the opening of an account.

Specifically, Regulation BI requires a broker-dealer or associated person to act in the retail customers best interest and not place

the broker-dealers or associated persons own interests ahead of the retail customers interests.

BI may cause broker-dealers and associated persons to make significant operational changes, which may include removing one or more of the Hennessy Funds

from their platforms.

This could result in a decrease in purchases of shares or an increase in redemptions of shares of the Hennessy Funds, either of which could have a material adverse effect on our business, results of operations, and financial

Although we strive to conduct our business in accordance with applicable rules, regulations, and laws, if we were found to

have violated an applicable rule, regulation, or law, we could be subject to fines, suspensions of personnel, or other sanctions, including revocation of our registration as an investment advisor.

If a sanction were imposed against us or our

personnel, even if only for a small monetary amount, the adverse publicity related to such a sanction could harm our reputation, result in redemptions by investors in the Hennessy Funds, and impede our ability to attract new investors, all of which

Our investment advisory and shareholder servicing agreements can be terminated on short notice, are not freely assignable, and must be renewed annually;

the loss of such agreements would reduce our revenues.

We generate all of our operating revenues from the investment advisory and

shareholder servicing agreements with the Hennessy Funds.

These agreements may be terminated without penalty on 60 days notice and may not be assigned without the consent of investors in the Hennessy Funds.

In addition, they each must be

renewed annually by the Funds Board of Trustees (or, in the case of our investment advisory agreements, by the vote of a majority of the outstanding shares of the applicable Hennessy Fund), including a majority of the disinterested

The termination or non-renewal of these agreements, or the renegotiation of the terms of these agreements in a manner detrimental to us, could result in a substantial reduction in revenues, which

could have a material adverse effect on our business, results of operations, and financial condition.

RISKS RELATING TO OUR INDUSTRY

Investor behavior is influenced by short-term investment performance of mutual funds.

Investor behavior may be based on many factors, including short-term investment performance.

Poor short-term performance of the Hennessy Funds,

irrespective of longerterm success, could potentially lead to a decrease in purchases of shares of the Hennessy Funds and an increase in redemptions, thereby reducing our assets under management and adversely affecting our revenues.

Assets invested through third-party intermediaries have a risk of redemption, which could reduce our revenues.

Third-party intermediaries are attractive to investors because of the ease of accessibility to a variety of funds, but this may cause the

investments to be more sensitive to fluctuations in performance, especially in the short-term.

If we were unable to retain the assets of the Hennessy Funds held through third-party intermediaries, our assets under management would be reduced.

result, our revenues could decline and our business, results of operations, and financial condition could be materially adversely affected.

We face intense competition in attracting investors and retaining net assets in the Hennessy Funds.

The investment advisory industry is intensely competitive, and new participants are continually entering the industry.

directly with numerous global and U.S.

investment advisors, commercial banks, savings and loan associations, brokerage and investment banking firms, broker-dealers, insurance companies, and other financial institutions that often provide investment

products with similar features and objectives to those we offer.

These institutions range from small boutique firms to large financial services complexes.

We are considered a small investment advisory company.

Many competing companies are part of

larger financial services companies that conduct business in more markets and have greater marketing, financial, technical, research, and distribution resources and other capabilities than we do.

Most of the larger firms offer a broader range of

financial services to the same retail and institutional investors that we seek to serve.

If we are unable to attract investors and retain net assets in the Hennessy Funds due to increased competition, our revenues could decline and we could

experience a material adverse effect on our business, results of operations, and financial condition.

For more information regarding

competitive factors, see the Competition subheading in Item 1, Business.

Market consolidation and industry trends

could negatively impact our business.

In recent years, there have been several instances of industry consolidation in both the

distribution and investment management areas.

Further consolidation may occur in these areas in the future.

The increasing size and market influence of certain distributors of our products and of certain direct competitors may have a negative impact

on our ability to compete at the same levels of profitability in the future.

Additionally, the market environment in recent years has led some investors to increasingly favor lowerfee, passive products.

As a result, investment advisors that

emphasize passive products have gained, and may continue to gain, market share from active managers like us.

While we cannot predict how much market share these competitors will gain, we believe there will always be demand for good active

Industry trends and market pressure to lower our investment advisory fees could reduce our profit margin.

Our profits are highly dependent on the fees we are able to charge to the Hennessy Funds for investment advisory services.

To the extent we are

forced to compete on the basis of the investment advisory fees we charge to the Hennessy Funds, we may not be able to maintain our current fee structures.

We have historically competed primarily on the performance of the Hennessy Funds and not on

the level of our investment advisory fees relative to those of our competitors.

In recent years, however, there has been a trend toward lower fees in the investment advisory industry.

To maintain our fee structures in a competitive environment, we

must be able to provide our mutual fund investors with investment returns and service that will adequately compensate them for investing in our mutual funds with our current fee structures.

We may not succeed in maintaining our current fee

structures, and fee reductions on existing or future business could have a material adverse effect on our results of operations.

Higher insurance

premiums and increased insurance coverage risks could increase our costs and reduce our profitability.

We carry insurance in

amounts and under terms that we believe are appropriate, but we cannot guarantee that our insurance policies will cover all liabilities and losses to which we may be exposed or, if covered, that such liabilities and losses will not exceed insurance

coverage limits or that our insurers will remain solvent and meet their obligations.

In addition, insurance premiums and required retentions have increased in recent years and may continue to do so.

We are subject to regulatory and governmental inquiries and civil litigation.

An adverse outcome of any such proceeding could involve

substantial financial penalties.

Various claims may also arise against us in the ordinary course of business, such as employment-related claims.

There has been increased incidence of litigation and regulatory investigations in the financial services

industry in recent years, including customer claims and class action suits alleging substantial monetary damages.

Certain insurance coverage may not be available or may be prohibitively expensive in future periods.

As our insurance policies come up

for renewal, we may need to assume higher deductibles or co-insurance liabilities, or pay higher premiums, which would increase our expenses and have a material adverse effect on our results of operations.

We are highly dependent on various software applications and other technologies, as well as on third

parties who utilize various software applications and other technologies, for our business to function properly and to safeguard confidential information;

any significant limitation, failure, or security breach could adversely affect our operations.

We use software and related technologies throughout our business and also utilize third-party vendors who use software and related

technologies to provide services to us and the Hennessy Funds.

Although we take protective measures (including striving to understand the protective measures taken by our third-party vendors) and endeavor to modify such protective measures as

circumstances warrant, we may experience system delays and interruptions as a result of natural disasters, power failures, acts of war, third-party failures, or other unexpected events.

We cannot predict with certainty all of the adverse effects

that could result from the failure to efficiently address and resolve these delays and interruptions.

We could also be subject to losses

if we fail to properly safeguard sensitive and confidential and proprietary information that we and our third-party vendors store and transmit as part of our normal business operations.

Although we take

protective measures, the security of our and our vendors computer systems, software, and networks may be vulnerable to hacking, breaches, unauthorized access, misuse, computer viruses, or other malicious code, as well as to other events that

could have a security impact, such as an employee or vendor inadvertently or intentionally causing us to release confidential or proprietary information.

Additionally, although we take precautions to password protect and encrypt our laptops and

other mobile electronic hardware, if such hardware is stolen, misplaced, or left unattended, it may become vulnerable to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions.

There have been a number of highly publicized cases in recent years involving financial services and consumer-based companies reporting the

unauthorized disclosure of client or customer information, as well as cyber-attacks involving the dissemination, theft, and destruction of corporate information or other assets, as a result of employees or contractors failure to follow

procedures or as a result of actions by third parties, including actions by terrorist organizations and hostile foreign governments.

We, the Hennessy Funds, and our third-party vendors may be vulnerable to such unauthorized disclosures and

cyber-attacks.

Our increased use of mobile and cloud technologies could heighten these and other operational risks, and any failure by mobile technology and cloud service providers to adequately safeguard their systems and prevent cyber-attacks could disrupt our operations and result in misappropriation, corruption, or loss of confidential or proprietary information.

If any of these events were to occur, we could suffer a financial loss, a disruption of our business, liability to the Hennessy Funds and

their investors, regulatory intervention, or reputational damage, any of which could have a material adverse effect on our business, results of operations, and financial condition.

We also may be required to expend significant additional resources

to modify our protective measures or to investigate and remediate vulnerabilities or other exposures.

Finally, cybersecurity and data

privacy have become high priorities for regulators, and many jurisdictions are enacting laws and regulations in these areas.

One such law is the California Consumer Privacy Act of 2018, which took effect in 2020.

Enactment of new privacy laws or

regulations could, among other things, result in additional costs of compliance or litigation.

In addition, while we strive to comply with the relevant laws and regulations, any failure to comply could result in regulatory investigations and

penalties as well as negative publicity, which could materially adversely affect our business, results of operations, and financial condition.

are exposed to legal risk and litigation, which could increase our expenses and reduce our profitability.

In recent years, the

volume of claims and amount of damages claimed in litigation and regulatory proceedings against the financial services industry have been increasing.

While we strive to conduct our business in accordance with the highest ethical standards, we

nevertheless remain exposed to litigation risk.

We could be sued by many different parties, including, by way of example, investors in the Hennessy Funds, our own shareholders, our employees, or regulators.

Lawsuits or investigations that we may

become involved in could be very expensive and highly damaging to our reputation, even if the underlying claims are without merit.

addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Exchange Act to compensate and protect whistleblowers who voluntarily provide original information to the SEC and establishes a fund to be used to pay whistleblowers

who will be entitled to receive a payment equal to between 10% and 30% of certain monetary sanctions imposed in a successful government action resulting from the information provided by the whistleblower.

According to a recent annual report to

Congress on the Dodd-Frank Whistleblower Program, whistleblower claims have increased significantly since the enactment of these provisions.

Addressing such claims could generate significant expenses and take up significant management time, even if

such claims are frivolous or without merit.

Our business is extensively regulated, which increases our costs of doing business, and our failure to

comply with regulatory requirements may harm our financial condition.

Our business is subject to extensive regulation in the

United States, particularly by the SEC.

We are subject to regulation under the Securities Act of 1933, as amended, the Exchange Act, the Investment Company Act of 1940, the Investment Advisers Act of 1940, and various other statutes.

which we are subject are designed primarily to protect investors in the Hennessy Funds as opposed to our shareholders.

In addition to an increased number of applicable laws, the mutual fund industry has undergone increased scrutiny by the SEC and

state regulators in recent years, resulting in numerous enforcement actions and sweep examinations.

Increased regulation has increased our costs in managing the Hennessy Funds, and we could continue to experience higher costs if new laws require us

to spend more time, hire additional personnel, or buy new technology to comply effectively.

Any change in law could also have a material adverse effect on us by limiting the sources of our revenues and increasing our costs.

In addition to securities

regulations, our business also may be materially adversely affected by other types of laws and policies.

For example, the amount of net assets in the Hennessy Funds in a given time period could be affected by existing and proposed tax legislation or

the interest rate policies of the Federal Reserve Board.

In recent years, we have been affected by changes in law such as the

Department of Labor fiduciary rule, which significantly expanded the class of advisers and the scope of investment advice that are subject to fiduciary standards, and the SECs Regulation Best Interest (Regulation BI),

which requires broker-dealers to act in the retail customers best interest and not place the broker-dealers interests ahead of the retail customers interests.

Both the fiduciary rule and

Regulation BI caused financial advisers and broker-dealers to make significant operational changes, including, in some cases, removing one or more of the Hennessy Funds from their platforms.

This resulted in

fewer purchases of shares and increased redemptions of shares of the Hennessy Funds, and the effects of such regulations may persist even if they are ultimately replaced, retracted, or overturned.

For example, while the U.S.

Court of Appeals for the

Fifth Circuit issued a mandate vacating the fiduciary rule in its entirety in June 2018, many companies had already implemented a number of business and compliance initiatives in order to change their distribution methods and operations in

response to the rule, and most of these companies did not halt these initiatives following the courts ruling.

Although we strive to

conduct our business in accordance with applicable law, if we were found to have violated an applicable law, we could be subject to fines, suspensions of personnel, or other sanctions, including revocation of our registration as an investment

If a sanction were imposed against us or our personnel, even if only for a small monetary amount, the adverse publicity related to such a sanction could harm our reputation, result in redemptions by investors in the Hennessy Funds, and

impede our ability to attract new investors, all of which could have a material adverse effect on our business, results of operations, and financial condition.

Changes to U.S.

tax laws, including the Tax

Cuts and Jobs Act of 2017, our failure to adequately comply with U.S.

tax laws, or the outcome of any audits or regulatory disputes with respect to our compliance with U.S.

tax laws could adversely affect us.

The enactment of the Tax Cuts and Jobs Act of 2017 (the 2017 Tax Act) resulted in fundamental changes to U.S.

affected, and will continue to affect, our business operations and the Hennessy Funds investment activities.

In addition, other changes to U.S.

tax law could be enacted in the future that could have a material adverse effect on our business,

results of operations, and financial condition.

We are also subject to potential tax audits in various jurisdictions and in such event,

tax authorities may disagree with certain positions we have taken and assess penalties or additional taxes.

While we assess regularly the likely outcomes of these potential audits, there can be no assurance that we will accurately predict the

outcome of a potential audit, and an audit could have a material adverse impact on our business, results of operations, and financial condition.

Our investment advisory agreements require us to adhere to the investment policies and strategies of the Hennessy Funds;

any failure to comply with such

requirements could result in claims, losses, or regulatory sanctions.

Our investment advisory agreements with the Hennessy Funds

contain contractual provisions that require us to comply with the investment policies and strategies of the Hennessy Funds when we provide our investment advisory services.

We are also required to comply with numerous investment, asset valuation,

distribution, and tax requirements under applicable law and regulations.

Any allegation of a failure to adhere to these requirements could result in investor claims, reputational damage, withdrawal of assets, and potential regulatory sanctions, any

of which could negatively impact our revenues and earnings.

We have implemented procedures and utilize the services of experienced administrators, accountants, and lawyers to assist in satisfying these requirements, but there can be no assurance

that these precautions will protect us from potential liabilities.

Failure to establish adequate controls and risk management policies, as

well as circumvention of established controls and policies by employees, could harm us by impairing our ability to attract and retain investors in the Hennessy Funds and by subjecting us to significant legal liability, regulatory scrutiny, and

reputational harm.

or state tax laws, our failure to adequately comply with U.S.

or state tax laws, or the outcome of any audits or regulatory disputes

with respect to our compliance with U.S.

or state tax laws could adversely affect us.

Changes to U.S.

or state tax law could be

enacted in the future that could have a material adverse effect on our business, results of operations, and financial condition.

Further, we are subject to potential tax audits in various jurisdictions and in such event, tax authorities may disagree

with certain positions we have taken and assess penalties or additional taxes.

While we assess regularly the likely outcomes of these potential audits, there can be no assurance that we will accurately predict the outcome of a potential audit, and

an audit could have a material adverse impact on our business, results of operations, and financial condition.

Our investment advisory agreements require us to adhere to the investment policies and strategies of

the Hennessy Funds;

any failure to comply with such requirements could result in claims, losses, or regulatory sanctions.

investment advisory agreements with the Hennessy Funds contain contractual provisions that require us to comply with the investment policies and strategies of the Hennessy Funds when we provide our investment advisory services.

We are also required

to comply with numerous investment, asset valuation, distribution, and tax requirements under applicable law and regulations.

Any allegation of a failure to adhere to these requirements could result in investor claims, reputational damage,

withdrawal of assets, and potential regulatory sanctions, any of which could negatively impact our revenues and earnings.

We have implemented procedures and utilize the services of experienced administrators, accountants, and lawyers to assist in

satisfying these requirements, but there can be no assurance that these precautions will protect us from potential liabilities.

to raise additional capital to fund new business initiatives, and resources may not be available to us in sufficient amounts or on acceptable terms, which could have an adverse impact on our business.

Our ability to meet our future cash needs is dependent upon our ability to generate cash.

Although we have been successful in generating

sufficient cash in the past, we may not be successful in the future.

We may need to raise additional capital to fund new business initiatives, and financing may not be available to us in sufficient amounts, on acceptable terms, or at all.

ability to access bank financing or capital markets efficiently depends on a number of factors, including the state of credit and equity markets, interest rates, and credit spreads.

If we are unable to access sufficient capital on acceptable terms,

our business could be adversely impacted.

Failure to establish adequate controls and risk management policies, as well as circumvention of

established controls and policies by employees, could harm us by impairing our ability to attract and retain investors in the Hennessy Funds and by subjecting us to significant legal liability, regulatory scrutiny, and reputational harm.

Our reputation is critical to attracting and retaining investors in the Hennessy Funds.

In recent years, there

have been a number of highly publicized cases involving fraud, conflicts of interest, or other misconduct by individuals in the financial services industry.

We have extensive controls and risk management policies to monitor and manage risks, but we

cannot be certain that such controls and policies will successfully identify and manage internal and external risks.

Further, although we strive to conduct our business in accordance with the highest ethical standards and emphasize the importance of

doing so to our employees, there is a risk that our

employees could engage in misconduct that adversely affects our business.

For example, if an employee were to engage in, or be accused of engaging in, illegal or suspicious activity (such as

improper trading, disclosure of confidential information, or breach of fiduciary duties), we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial position, and ability to maintain and grow the number of

investors in the Hennessy Funds.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the

Sarbanes-Oxley Act could have a material adverse effect on our business and our stock price.

As a public company, we are required

to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002.

Internal control over financial reporting is complex and may be revised over time to adapt to changes in our

business, or changes in applicable accounting rules and therefore we cannot assure you that our internal control over financial reporting will be effective at all times in the future.

If our internal control over financial reporting were deemed

ineffective, we could be subjected to adverse regulatory consequences, including, among others, administrative cease and desist orders, injunctive orders, civil monetary penalties, or a negative reaction in the financial markets due to a loss of

investor confidence in us and the reliability of our financial statements.

Any of these potential consequences could have a material adverse effect on our business or result in a decline in our stock price.

In recent years, there have been a number

of highly publicized cases involving fraud, conflicts of interest, or other misconduct by individuals in the financial services industry.

We have extensive controls and risk management policies to monitor and manage risks, but we cannot be certain

that such controls and policies will successfully identify and manage internal and external risks.

Further, although we strive to conduct our business in accordance with the highest ethical standards and emphasize the importance of doing so to our

employees, there is a risk that our employees could engage in misconduct that adversely affects our business.

For example, if an employee were to engage in, or be accused of engaging in, illegal or suspicious activity (such as improper trading,

disclosure of confidential information, or breach of fiduciary duties), we could be subject to regulatory sanctions and suffer serious harm to our reputation, financial position, and ability to maintain and grow the number of investors in the

Hennessy Funds.

The historical performance of the Hennessy Funds should not be considered indicative of the future results of the Hennessy Funds or

of any returns expected on our common stock.

The historical performance of the Hennessy Funds is relevant to returns on our common

stock only insofar as the fees we have earned in the past and may earn in the future, which are based on average assets under management, may impact the performance of our common stock.

Positive performance of the Hennessy Funds typically increases

our revenues, which in turn could positively affect our business, and poor performance typically reduces our revenues, which in turn could adversely affect our business.

However, the historical and potential future returns of the Hennessy Funds are

not directly linked to returns on our common stock, such that positive performance of the Hennessy Funds will not necessarily result in positive returns on our common stock and poor performance of the Hennessy Funds will not necessary result in

negative returns on our common stock.

Moreover, the historical performance of the Hennessy Funds should not be considered indicative of the future results that should be expected from such funds.

RISKS RELATING TO OUR COMMON STOCK

Ownership of a large percentage of our common stock is concentrated with a small number of shareholders, which could increase the volatility in our stock

trading and significantly affect our share price and causes us to experience limited trading volume in our securities.

limited number of shareholders, and a large percentage of our common stock is held by an even fewer number of shareholders.

If our larger shareholders were to decide to liquidate their ownership positions, it could cause significant fluctuations in

the share price of our common stock.

Having a limited number of shareholders also causes us to experience limited trading volume in our securities.

We intend to pay regular dividends to our shareholders, but our ability to do so is subject to the discretion of our Board of Directors.

We have consistently paid dividends each year since 2005.

The declaration, amount, and payment of dividends to our shareholders by us are

We have consistently paid dividends each year since 2005, but the declaration, amount, and payment of dividends to our shareholders by us are

subject to the discretion of our Board of Directors.

Our Board of Directors will take into account general economic and business conditions, our strategic plans, our financial results and condition, any contractual, legal, and regulatory

restrictions on our payment of dividends, and such other factors as our Board of Directors deem relevant to determining whether to declare dividends and the amount of such dividends.

The historical performance of the Hennessy Funds should not be considered indicative of the future results of the Hennessy Funds or of any returns

expected on our common stock.

The historical performance of the Hennessy Funds is relevant to returns on our common stock only

insofar as the fees we have earned in the past and may earn in the future, which are based on average assets under management, may impact the performance of our common stock.

Positive performance of the Hennessy Funds typically increases our

revenues, which in turn could positively affect our business, and poor performance typically reduces our revenues, which in turn could adversely affect our business.

However, the historical and potential future returns of the Hennessy Funds are not

directly linked to returns on our common stock, such that positive performance of the Hennessy Funds will not necessarily result in positive returns on our common stock and poor performance of the Hennessy Funds will not necessary result in negative

returns on our common stock.

Moreover, the historical performance of the Hennessy Funds should not be considered indicative of the future results that should be expected from such funds.

We may need to raise additional capital to fund new business initiatives or refinance existing debt, and resources may not be available to us in

sufficient amounts or on acceptable terms, which could have an adverse impact on our business.

Our ability to meet our future cash

needs is dependent upon our ability to generate cash.

Although we have been successful in generating sufficient cash in the past, we may not be successful in the future.

We may need to raise additional capital to fund new business initiatives or

refinance existing debt, and financing may not be available to us in sufficient amounts, on acceptable terms, or at all.

Our ability to access capital markets efficiently depends on a number of factors, including the state of credit and equity

markets, interest rates, and credit spreads.

If we are unable to access sufficient capital on acceptable terms, our business could be adversely impacted.

Equity markets and our common stock have historically been volatile.

The market price of our common stock historically has experienced, and may continue to experience, volatility, and the broader equity markets

have experienced, and may again experience, significant price and volume fluctuations.

In addition, our announcements of quarterly operating results, changes in general conditions in the economy or the financial markets, and other developments

affecting us or our competitors could cause the market price of our common stock to fluctuate substantially.

Our common stock has relatively

limited trading volume, and ownership of a large percentage is concentrated with a small number of shareholders, which could increase the volatility in our stock trading and significantly affect our share price.

We have a limited number of shareholders, and a large percentage of our common stock is held by an even smaller number of shareholders.

larger shareholders were to decide to liquidate their ownership positions, it could cause significant fluctuations in the share price of our common stock.

Public companies like us that have limited numbers of shareholders often experience limited

trading volume in their securities.

Our Board of Directors takes into account general economic and business conditions, our strategic plans, our financial results and condition, any contractual, legal, and regulatory restrictions on

our payment of dividends, and such other factors as our Board of Directors deems relevant to determining whether to declare dividends and the amount of such dividends.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors