AMERICAN
GROWTH FUND, INC.
1636 N. Logan Street, Denver, Colorado
80203
303-626-0600
Series One
Class A AMRAX - Class B AMRBX -
Class C AMRCX - Class D AMRGX
STATEMENT OF ADDITIONAL
INFORMATION
May 30, 2024
This Statement of Additional Information is not a
prospectus. Prospective investors should read this Statement of Additional
Information only in conjunction with the Prospectuses of Series One of American
Growth Fund, Inc. (the "Fund") dated November 30, 2023. A copy of the Prospectus
may be obtained at no cost by writing World Capital Brokerage, Inc. (the
"Distributor"), 1636 N. Logan Street, Denver, Colorado 80203, or by calling
800-525-2406 or on the Fund´s web site,
www.americangrowthfund.com.
A
ADDITIONAL INVESTMENT INFORMATION,
5
AUTOMATIC CASH WITHDRAWAL PLAN, 17
B
BOARD OF DIRECTORS,
8
BROKERAGE, 20
C
CALCULATION OF NET ASSET VALUE,
21
CLASSIFICATION, 2
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES,
11
D
DEALER REALLOWANCES, 12
DISCLOSURE OF PORTFOLIO HOLDINGS,
6
DISTRIBUTION OF SHARES, 13
DISTRIBUTION PLANS, 18
DIVIDENDS,
DISTRIBUTIONS AND TAXES, 21
F
FUND HISTORY,
2
I
INVESTMENT ADVISORY AGREEMENT, 11
INVESTMENT RISKS,
3
INVESTMENT STRATEGIES, 2
M
MANAGEMENT OF THE FUND,
7
O
OTHER INVESTMENT ADVICE, 12
OTHER SERVICE PROVIDERS,
12
P
PERFORMANCE DATA, 24
PORTFOLIO MANAGERS, 13
PORTFOLIO
TURNOVER, 6
PRINCIPAL UNDERWRITER, 11
PROXY VOTING POLICIES,
10
R
RETIREMENT PLANS, 17
RULE 12b-1 PLANS,
12
S
SECURITIES LENDING, 13
SERVICE AGREEMENTS,
12
T
TEMPORARY DEFENSIVE POSITION, 6
FUND
HISTORY
The
Fund was established in August of 1958 as a diversified, open-end, management
investment company organized and incorporated in the State of
Maryland.
CLASSIFICATION
The
American Growth Fund is a diversified, open-end management investment
company.
INVESTMENT
STRATEGIES
In attempting to achieve its investment objective, the
Fund will typically invest at least 80% of its assets in common stocks and
securities convertible into common stocks traded on national securities
exchanges or over-the-counter.
We perform our own extensive internal
research to determine whether companies meet our growth criteria. From time to
time we meet company management teams and other key staff face-to-face and tour
corporate facilities and manufacturing plants to get a complete picture of a
company before we invest.
We limit the amount of the Fund´s assets invested
in any one industry and in any individual security. At the time of purchase we
do not invest more than 5% of the Fund´s total assets in any one issuer nor do
we invest more than 25% in any one industry. We also follow a rigorous selection
process designed to identify undervalued securities before choosing securities
for the portfolio.
Although the Fund will normally invest in large
capitalization companies, the Fund may invest in companies of all sizes.
Investment Research Corporation, the Fund´s investment advisor (the Advisor or
IRC), generally will choose common stocks (or convertible securities) that it
believes have a potential for capital appreciation because of existing or
anticipated economic conditions or because the securities are considered
undervalued or out of favor with investors or are expected to increase in price
over the short-term. Convertible debt securities will be rated at least A by
Moody´s Investor Service or Standard and Poor’s Ratings Services, or, if
unrated, will be comparable quality in the opinion of the Advisor.
We
maintain a long-term investment approach and focus on stocks we believe can
appreciate over an extended time frame regardless of interim market
fluctuations. Using the following disciplined approach, we look for companies
having some or all of these characteristics:
l Large
capitalization companies, although on occasion the Fund may invest in small and
mid-cap companies, if the Advisor believes it is in the best interests of the
Fund. Large cap companies are generally companies with market capitalization
exceeding $5 billion at the date of acquisition;
l growth that
is faster than the market as a whole and sustainable over the long
term;
l strong
management team;
l leading
market positions and growing brand identities;
l financial,
marketing, and operating strength.
The Fund emphasizes investments in common
stocks with the potential for capital appreciation. These stocks generally pay
regular dividends, although the Fund also may invest in non-dividend-paying
companies if, in the opinion of an Advisor, they offer better prospects for
capital appreciation.
When the Advisor believes the securities the Fund
holds may decline in value, the Fund may sell them and, if the Advisor believes
market conditions warrant the Fund may assume a defensive position. While in a
defensive position, the Fund may invest all or part of its assets in corporate
bonds, debentures (both short and long term) or preferred stocks rated A or
above by Moody’s Investors Service, Inc. or Standard and Poor’s (or, if unrated,
of comparable quality in the opinion of the Advisor), United States Government
securities, repurchase agreements meeting approved credit worthiness standards
(e.g., whereby the underlying security is issued by the United States Government
or any agency thereof), or retain funds in cash or cash equivalents. There is no
maximum limit on the amount of fixed income securities in which the Fund may
invest for temporary defensive purposes. If the Fund takes a temporary defensive
position in attempting to respond to adverse market, economic, political or
other conditions, it may not achieve its investment objective. The Fund´s
performance could be lower during periods when it retains or invests its assets
in these more defensive holdings.
A repurchase agreement is a contract under
which the seller of a security agrees to buy it back at an
agreed
upon price and time in the future.
The Fund will enter into repurchase
transactions only with parties who meet creditworthiness standards approved by
the Fund´s Board of Directors.
The Fund may invest in foreign
securities in the form of American Depositary Receipts (ADRs) which represents
ownership in the shares of a non-U.S. company that trades in U.S. financial
markets. We typically invest only a small portion of the Fund´s portfolio in
foreign corporations through ADRs. We do not invest directly in foreign
securities. When we do purchase ADRs, they are generally denominated in U.S.
dollars and traded on a U.S. exchange.
Consistent
with its investment objective, policies, and restrictions, the Fund also may
invest in securities, such as Exchange Traded Funds (“ETFs”).
We seek to
limit exposure to illiquid securities.
INVESTMENT RISKS
The primary risks of
investing in the Fund are:
Investing in any mutual fund involves risk,
including the risk that you may receive little or no return on your investment,
and the risk that you may lose part or all of the money you
invest.
l Stock Market
risk is the risk that all or a majority of the securities in a certain market -
such as the stock or bond market - will decline in value because of factors such
as economic conditions, future expectations or investor confidence, sometimes
rapidly and unpredictably.
l Operational
and cybersecurity risk - Cybersecurity breaches may allow an unauthorized party
to gain access to fund assets, customer data, or proprietary information, or
cause a fund or its service providers to suffer data corruption or lose
operational functionality. Similar incidents affecting the companies and other
issuers in which the Fund invests may negatively impact performance. Operational
risk may arise from human error, error by third parties, communication errors,
or technology failures, among other causes. In addition, markets and market
participants are increasingly reliant on information data systems. Inaccurate
data, software or other technology malfunctions, programming inaccuracies,
unauthorized use or access, and similar circumstances may impair the performance
of these systems and may have an adverse impact upon a single issuer, a group of
issuers, or the market at large, which could negatively impact the value of one
or more of the Fund’s investments.
l Market Risk -
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in general financial markets, a particular financial market or other
asset classes due to a number of factors, including inflation (or expectations
for inflation), deflation (or expectations for deflation), interest rates,
global demand for particular products or resources, market instability, debt
crises and downgrades, embargoes, tariffs, sanctions and other trade barriers,
regulatory events, other governmental trade or market control programs and
geopolitical events, such as political or economic dysfunction within nations.
In addition, the value of the Fund’s investments may be negatively affected by
the occurrence of global events such as war, terrorism, environmental disasters,
natural disasters or events, country instability, and infectious disease
epidemics or pandemics or other public health crises. Policy changes by the U.S.
government and/or the Fed and political events within the United States and
other countries may affect investor and consumer confidence and may adversely
impact financial markets and the broader economy, perhaps suddenly and to a
significant degree. A downgrade of the ratings of U.S. government debt
obligations, or concerns about the U.S. government’s credit quality in general,
could have a substantial negative effect on the U.S. and global economies.
Downgrades affecting other countries also could have similar impacts. In
addition, high public debt in the United States and other countries creates
ongoing systemic and market risks and policymaking uncertainty.
l Early
Close/Trading Halt Risk is the risk that 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 prevent
the Fund from buying or selling certain securities or financial instruments. In
these circumstances, the Fund may be unable to rebalance its portfolio, may be
unable to accurately price its investments and may incur substantial trading
losses.
l Industry and
security risk is the risk that the value of securities in a particular industry
or the value of an individual stock or bond generally will decline because of
changing expectations for the performance of
that
industry or for the individual company issuing the stock or bond.
l Management
risk is the risk that the Advisor´s assessment of a company´s ability to
increase earnings faster than the rest of the market is not correct, the
securities in the portfolio may not increase in value, and could decrease in
value.
l Interest rate
risk is the risk that changes in interest rates may affect the yield, liquidity
and value of investments in income producing or debt securities. As rates rise,
the price of a fixed rate bond will fall.
l Credit risk
is the possibility that a bond´s issuer (or an entity that insures a bond) will
be unable to make timely payments of interest and principal.
l Foreign
investment risk is the risk that foreign securities may be adversely affected by
political instability, changes in currency exchange rates, foreign economic
conditions or inadequate regulatory and accounting standards outside the United
States.
l Liquidity
risk - a given security or asset may not be readily marketable. Illiquid
investments may be difficult or impossible to sell or purchase at an
advantageous time or price or in sufficient amounts to achieve the Fund's
desired level of exposure.
l Small Cap
stocks tend to have a high risk exposure to market fluctuations and
failure.
l Mid Cap
stocks also tend to have a greater risk exposure to market fluctuations and
failure but normally not as much so as the Small Cap stocks.
l Equity Risk.
In general, stocks and other equity security values fluctuate, and sometimes
widely fluctuate, in response to changes in a company’s financial condition as
well as general market, economic and political conditions and other factors. The
level of volatility could be high.
l Repurchase
Agreements Risk. The Fund may enter into repurchase agreements under which it
purchases a security that a seller has agreed to repurchase from the Fund at a
later date at the same price plus interest. If a seller defaults and the
security declines in value, the Fund might incur a loss. If the seller declares
bankruptcy, the Portfolio Fund may not be able to sell the security at the
desired time.
l Depositary
Receipts Risk. Investments in depositary receipts (including American Depositary
Receipts, European Depositary Receipts and Global Depositary Receipts) are
generally subject to the same risks of investing in the foreign securities that
they evidence or into which they may be converted. In addition, issuers
underlying unsponsored depositary receipts may not provide as much information
as U.S. issuers and issuers underlying sponsored depositary receipts.
Unsponsored depositary receipts also may not carry the same voting privileges as
sponsored depositary receipts.
l Convertible
Securities have the risk of loss of principal at maturity, however, this loss is
limited to the value of the bond floor.
l Large Cap
Company Risk is the risk that larger more established companies may be unable to
respond quickly to new competitive challenges such as changes in technology and
consumer tastes. Many larger companies also may not be able to attain the high
growth rate of successful smaller companies, especially during extended periods
of economic expansion.
l Investments
in Other Investment Companies is the risk that the Fund’s investments in other
investment companies will be subject to the risks of the purchased investment
company’s portfolio securities. The Fund’s shareholders must bear not only their
proportionate share of the Fund’s fees and expenses, but they also must bear
indirectly the fees and expenses of the other investment company. In addition,
the Fund’s net asset value is subject to fluctuations in the net asset values of
the other investment companies in which it invests. The ability of the Fund to
meet its investment objective will depend, to a significant degree, on the
ability of the other investment companies to meet their
objectives.
l Exchange-Traded
Funds (“ETFs”). ETFs are investment companies whose shares are listed on a
securities exchange and trade like a stock throughout the day. Investments in
ETFs are subject to a variety of risks, including risks associated with the
underlying securities that the ETF holds. The Fund’s net asset value will be
subject to fluctuations in the market values of the ETFs in which it invests.
Also, ETFs that track particular indices typically will be unable to match the
performance of the index exactly due to the ETF’s operating expenses and
transaction costs, among other things. Similar to investments in other
investment companies, the Fund’s shareholders must bear not only their
proportionate share of the Fund’s fees and expenses, but they also must bear
indirectly the fees and expenses of the ETF. In addition, the ability of the
Fund to meet its investment objective will directly depend on the ability of the
ETFs to meet their investment objectives. The extent to which the investment
performance and risks associated with the Fund correlate to those of a
particular ETF will depend upon the extent to which the Fund’s assets are
allocated from time to time for investment in the ETF, which will
vary.
l Technology
Securities Risk is the risk that certain technology related companies may face
special risks
that
their products or services may not prove to be commercially successful.
Technology related companies are also strongly affected by worldwide scientific
or technological developments. As a result, their products may rapidly become
obsolete. Such companies are also often subject to governmental regulation and
may, therefore, be adversely affected by governmental policies. Investments in
technology companies generally can be volatile and fluctuate widely, sometimes
rapidly and unpredictably.
Loss of some
or all of the money you invest is a risk of investing in the Fund.
ADDITIONAL INVESTMENT INFORMATION
The
following information supplements the information in the American Growth Fund,
Inc. (the "Fund") Prospectuses under the heading Principal Investment
Strategy.
The Fund is subject to certain fundamental restrictions on its
investment policies, including the following:
1. No securities may be
purchased on margin, the Fund may not sell securities short, and will not
participate in a joint or joint and several basis with others in any securities
trading account.
2. Not more than 5% of the value of the assets of the
Fund at the time of investment may be invested in securities of any one issuer
other than securities issued by the United States government.
3. Not more
than 10% of any class of voting securities or other securities of any one issuer
may be held in the portfolio of the Fund.
4. The Fund cannot act as an
underwriter of securities of other issuers.
5. The Fund cannot borrow
money except from a bank as a temporary measure for extraordinary or emergency
purposes, and then only in an amount not to exceed 10% of its total assets taken
at cost, or mortgage or pledge any of its assets.
6. The Fund cannot make
or purchase loans to any person including real estate mortgage loans, other
than through the purchase of a portion of publicly distributed debt securities
pursuant to the investment policy of the Fund.
7. The Fund cannot issue
senior securities or purchase the securities of another investment company or
investment trust except in the open market where no profit to a sponsor or
dealer, other than the customary brokers commission, results from such purchase
(but the total of such investment shall not exceed 10% of the net assets of the
Fund), or except when such purchase is part of a plan of merger or
consolidation. The Fund may purchase securities of other investment companies in
the open market if the purchase involves only customary broker´s commissions and
only if immediately thereafter (i) no more than 3% of the voting securities of
any one investment company are owned by the Fund, (ii) no more than 5% of the
value of the total assets of the Fund would be invested in any one investment
company, and (iii) no more than 10% of the value of the total assets of the Fund
would be invested in the securities of such investment companies. Should the
Fund purchase securities of other investment companies, the Fund´s shareholders
may incur additional management and distribution fees.
8. The Fund cannot
invest in the securities of issuers which have been in operation for less than
three years if such purchase at the time thereof would cause more than 5% of the
net assets of the Fund to be so invested, and in any event, any such investments
must be limited to utility or pipeline companies.
9. The Fund cannot
invest in companies for the purpose of exercising management or
control.
10. The Fund cannot deal in real estate, commodities or
commodity contracts.
11. In applying its restrictions on concentration of
investments in any one industry, the Fund uses industry classifications based,
where applicable, on Bridge Information Systems, Reuters, the S&P Stock
Guide published by Standard & Poor’s, the O´Neil Database published by
William O´Neil & Co., Inc., information obtained from Value Line, Bloomberg
L.P. and Moody´s International, and/or the prospectus of the
issuing
company, and/or other recognized classification resources. Selection of an
appropriate industry classification resource will be made by management in the
exercise of its reasonable discretion. The Fund will not concentrate its
investments in any particular industry nor will it purchase a security if, as a
result of such purchase, more than 25% of its assets will be invested in a
particular industry.
12. The Fund cannot invest in puts, calls,
straddles, spreads or any combination thereof.
The foregoing policies can
be changed only by approval of a majority of the outstanding shares of the Fund,
which means the lesser of (i) 67% of the shares represented at a meeting at
which more than 50% of the outstanding shares are present in person or by proxy,
or (ii) more than 50% of the outstanding shares.
When the Fund makes
temporary investments in U.S. Government securities, it ordinarily will
purchase U.S. Treasury Bills, Notes, or Bonds. The Fund may make temporary
investments in repurchase agreements where the underlying security is issued or
guaranteed by the U.S. Government or an agency thereof. The Fund will not invest
more than 10% of its assets in repurchase agreements maturing in more than seven
days, or securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale. The Fund will
not invest in real estate limited partnership interests, other than interests in
readily marketable real estate investment trusts. The Fund will not invest in
oil, gas or mineral leases, or invest more than 5% of its net assets in warrants
or rights, valued at the lower of cost or market, nor more than 2% of its net
assets in warrants or rights (valued on the same basis) which are not listed on
the New York or American Stock Exchanges.
TEMPORARY
DEFENSIVE POSITION
If the
Fund invests in fixed-income securities, for temporary defensive purposes, these
securities generally are U.S. government obligations. If corporate fixed-income
securities are used, the securities normally are rated A or higher by Moody´s
Investor Service, Inc. (Moody´s) or A or higher by Standard & Poor’s
(S&P). There is no maximum limit on the amount of fixed income securities in
which the Fund may invest for temporary defensive purposes.
PORTFOLIO TURNOVER
Normal portfolio turnover for
Series One is approximately 3.2%. In 2023 Series One’s portfolio turnover was
3%.
DISCLOSURE OF PORTFOLIO
HOLDINGS
The Fund’s portfolio information is publicly available: (1)
at the time such information is filed with the SEC in a publicly available
filing; and/or (2) when such information is posted on the Fund’s website. The
Fund’s publicly available portfolio information, which may be provided to third
parties without prior approval, are complete portfolio holdings disclosed in the
Fund’s semi-annual or annual reports and filed with the SEC on Form N-CSR, and
complete portfolio holdings disclosed in the Fund’s quarterly reports and filed
with the SEC on Form N-PORT.
The Fund’s President, in consultation with the
CCO may grant exceptions to permit additional disclosure of Fund portfolio
holdings information at differing times and with different lag times (the period
from the date of the information to the date the information is made available),
if any, in instances where the Fund has legitimate business purposes for doing
so, it is in the best interests of Fund shareholders, and the recipients are
subject to a duty of confidentiality, including a duty not to trade on the
nonpublic information, and are required to execute an agreement to that effect.
The Board will be informed of any such disclosures at its next regularly
scheduled meeting or as soon as is reasonably practicable thereafter. In no
event will the Fund, IRC, or any other party receive any direct or indirect
compensation in connection with the disclosure of information about the Fund’s
portfolio holdings. No person is authorized to disclose the Fund’s portfolio
holdings or other investment positions except in accordance with the Fund’s
policies and procedures.
The Board exercises continuing oversight of the
disclosure of the Fund’s portfolio holdings by (1) overseeing the implementation
and enforcement of the Fund’s portfolio holdings policies and procedures by the
CCO and the Fund; (2) considering reports and recommendations by the CCO
concerning any material compliance matters that may arise in connection with any
portfolio holdings policies and
procedures;
and (3) considering whether to approve or ratify any amendment to any of the
portfolio holdings policies and procedures. The Board and the Fund reserve the
right to amend the policies and procedures in their sole discretion at any time
and from time to time without prior notice to shareholders.
Currently, the
Fund has no ongoing arrangements or commitment to release non-public portfolio
holdings to any individual or group.
MANAGEMENT OF THE FUND
The day-to-day operations
of the Fund are managed by its officers subject to the overall supervision and
control of the Board of Directors. The Fund´s Audit Committee meets annually and
is responsible for reviewing the financial statements of the Fund. The following
information about the interested directors2 the Fund includes
their principal occupations for the past five years:
Name, Address, and Age | Position(s) Held with Fund | Term of Office1 and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director for the Past Five Years |
Timothy E. Taggart, 1636 N. Logan Street, Denver, CO DOB: October 18, 1953 | Chairman, President, Director and Treasurer | Since April 2004 | Principal executive, financial and accounting officer, employee of Advisor since 1983. See below for affiliation with Distributor. | 2 | Director of World Capital Brokerage, Inc. and Investment Research Corporation |
The
following information about the non-interested directors, officers and advisors
of the Fund includes their principal occupations for the past five years:
Name, Address, and Age | Position(s) Held with Fund | Term of Office1 and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held by Director for the Past Five Years |
Eddie R. Bush, 1400 W. 122nd Ave., Suite 100, Westminster, CO DOB: December 31, 1939 | Director, Audit Committee Chairman (financial expert), Lead Independent Director | Since September 1987 | Certified Public Accountant | 2 | None |
Darrell E. Bush, 2714 West 118th Ave, Westminster, CO DOB: February 19, 1971 | Director | Since September 2013 | Accountant | 2 | None |
Michael L. Gaughan, 315 W. 20th St., Scottsbluff, NE DOB: November 29, 1967 | Chief Compliance Officer and Secretary | Since September 2004 | Employee of the Fund since 1995. | N/A | World Capital Brokerage, Inc. and Investment Research Corporation |
Patricia A. Blum, 1636 N. Logan Street, Denver, CO DOB: June 27, 1959 | Vice President | Since June 2013 | Employee of the Fund since 2001. | N/A | World Capital Brokerage, Inc. |
1.
Trustees and officers of the fund serve until their resignation, removal or
retirement.
2. Timothy Taggart is an "interested person" of the Fund as
defined by the Investment Company Act of 1940 because of the following positions
which he holds.
Timothy E. Taggart is the President, Treasurer and a Director
of World Capital Brokerage, Inc. and is the President, Treasurer and a Director
of Investment Research Corporation.
Timothy E. Taggart is president and a
director of the Distributor and the president and a director of Investment
Research Corporation.
Eddie
R. Bush is the Fund’s Lead Independent Director. Mr. E. Bush is also the
chairman of the Audit Committee as well as serves on the Nominating Committee
and Qualified Legal Compliance Committee.
None of the above-named persons
received any retirement benefits or other form of deferred compensation from the
Fund. There are no other funds that together with the Fund constitute a Fund
Complex.
As of December 31, 2022, all officers and directors as a group
(a total of 3) owned directly 10,934 of its shares or 0.38% of shares
outstanding. Together, directly and indirectly, all the officers and directors
as a group owned 23,212 shares or 0.81% of all shares outstanding.
As of
December 31, 2022, officers, directors and members of the advisory board and
their relatives owned of record and beneficially Fund shares with net asset
value of approximately $521,093 representing approximately 3.22% of the total
net assets of the Fund.
BOARD OF
DIRECTORS
The management of the Fund believes that the business
experience and educational background of the Fund´s Directors and Officers set
forth above make these individuals well qualified to serve the Fund in the
positions that they hold.
Timothy E. Taggart, Chairman, President and
Director, has held his securities license since 1987. His knowledge of the
securities industry is vast as owner and president of World Capital Brokerage,
Inc., a registered Broker Dealer, and owner and president of Investment Research
Corporation, a registered investment advisor. Mr. Taggart is also a member of
the Investment Committee.
Eddie R. Bush is the Chairman of the Fund´s
Audit Committee and is the Fund’s Lead Independent Director. He reviews and
reports to the Board periodically on the validity of the accounting data
provided to the Board.
Darrell Bush, Fund Independent Director, Nominating Committee member and Qualified Legal Compliance Committee member is an accountant who offers the Fund, and the Audit Committee, his professional financial experience.
It is
the duty of the Fund Board to review in its oversight capacity, on a quarterly
basis, the actions taken by Fund Management, including how management addressed
any risk management issues confronting the Fund that arose during the previous
quarter. This includes, in part, trade, expense and performance issues and
data.
Under a standing item on the Agenda for each quarterly Fund Board
meeting the Information provided to the Board by the management and staff of the
Fund is used by the members of the Board to review and analyze risk(s)
confronting the Fund on a quarterly basis. Each Director´s opinions, views and
questions on risk management and any other issue concerning the Fund are
directly communicated to the management and staff of the Fund, both at the
quarterly Fund Board meetings and in necessary between board meetings, under the
current leadership structure of the Fund Board.
Mr. E. Bush is a member
of the Audit Committee whose main purpose is the review and oversight of the
Fund´s financials. During the past fiscal year there were a total of four
regular meetings held by the audit committee. Members of the Audit Committee are
nominated and voted upon by the Board of Directors.
On September 23,
2010, an Investment Advisory Committee was formed with the purpose of offering
investment advice to a senior portfolio manager of the Fund. The current members
of the Investment Advisory Committee are Timothy Taggart, Robert Fleck and
Matthew Taggart who met with the board 4 times this past fiscal year.
The Fund has a Nominating Committee comprised of all of its independent Directors. The purpose of the Nominating Committee is to nominate and interview individuals to serve on the Board of Directors. The Nominating Committee was formed in September of 2016 and did not hold any meetings in the fiscal year ended 2020. The Nominating Committee will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the board. Such suggestions must be sent in writing to the nominating committee of the fund, addressed to the fund’s secretary, and must be accompanied by complete biographical and occupational data on the prospective nominee, along with a written consent of the prospective nominee for consideration of his or her name by the committee.
The Fund has a Qualified Legal Compliance Committee. The Fund has designated its Audit Committee to serve as its Qualified Legal Compliance Committee. The Qualified Legal Compliance Committee reviews reports of evidence of a material violation of an applicable United States federal or state securities law, a material breach of fiduciary duty arising under United States federal or state law, or a similar material violation of any United States federal or state law (each, a “Material Violation”), determining whether an investigation is necessary with respect to any such report and, if deemed necessary or appropriate, investigating and recommending an appropriate response thereto. The Qualified Legal Compliance Committee was formed in September of 2016 and met one time, as part of the Audit Committee, during fiscal year end July 31, 2023.
Director Ownership of the Fund. The following table shows the amount of equity securities owned in the American Growth Fund family by the Directors as of the calendar year ended December 31, 2022.
Name of Director | Dollar Range of Equity Securities in the Fund | Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Director in Family of Investment Companies |
Interested Director | ||
Timothy E. Taggart | $10,001 - $50,000 | $10,001 - $50,000 |
Non-Interested Directors | ||
Eddie R. Bush | $10,001 - $50,000 | $10,001 - $50,000 |
Darrell Bush | $0 | $0 |
All
officers, directors and members of the Fund’s board in the aggregate (a total of
3 board members) received total compensation of $40,619, from the Fund in fiscal
year 2023. Directors of the Fund are compensated at the rate of $400 and $500
per meeting attended, and the board members who are members of the audit
committee receive an additional $100 per meeting.
Out-of-town directors
are also reimbursed for their travel expenses to meetings. Officers are not paid
by the Fund.
Name of Person, Position | Aggregate Compensation From Fund | Pension or Retirement Benefits Accrued As Part of Fund Expenses | Estimated Annual Benefits Upon Retirement | Total Compensation From Fund and Fund Complex Paid to Directors |
Eddie
R. Bush Independent Director |
$19,279 | $0 | $0 | $19,279 |
Darrell
Bush Independent Director |
$17,290 | $0 | $0 | $17,290 |
Timothy
Taggart Interested Director and President |
$0 | $0 | $0 | $0 |
In
addition to the amounts disclosed in the table, the Fund makes payments to Mr.
Taggart for other services, and if those amounts are included, the total
compensation paid to Mr. Taggart by the Fund and Fund Complex is
$83,766.
During the year ended July 31, 2023, Messrs. Taggart, E. Bush,
and D. Bush were the only directors serving during that year.
The Fund,
its Investment Advisor (Investment Research Corporation) and its underwriter
(World Capital Brokerage, Inc.) have adopted a Code of Ethics under rule 17j-1
of the Investment Company Act. These Code of Ethics contain guidelines for
purchasing securities that are held by the Fund and are available by contacting
the Fund at 800-525-2406.
PROXY VOTING
POLICIES
For proxy votes cast on behalf of American Growth
Fund:
Investment Research Corporation ("the Advisor"), the investment Advisor
of the Fund, has a fiduciary duty to act solely in the best interests of the
Fund. As it relates to proxy voting, the Advisor recognizes that it must vote
Fund securities in a timely manner and make voting decisions that are in the
best interests of the Fund.
The following are general policies of the Advisor
with respect to proxy voting but the Advisor does reserve the right to depart
from these policies, if such a departure is in the best interests of the Fund
and its shareholders.
Election of Directors: Unless we are aware of
extenuating circumstances, such as a proxy fight for board seats, the Advisor
will generally vote in favor of management´s slate of directors.
Appointment
of Auditors: The Advisor will generally vote in favor of the auditors
recommended by management.
Changes In Capital Structure: The Advisor will
generally vote in accordance with management´s recommendation unless other
information indicates that the Fund´s interests are better served by a vote
against the proposal.
Other
Proxy Issues: The Advisor will consider other proxy issues on a case by case
basis with the Fund´s interests determining the vote.
Conflicts of Interest:
The Advisor recognizes that there may be situations where a proxy issue presents
a conflict of interest between the interest of the Fund and the Advisor´s
representative casting the proxy vote. If a conflict exists, any votes
inconsistent with this policy will be submitted to the Fund´s Board of Directors
for review and approval.
The Chief Compliance Officer of the Fund is
responsible for voting all proxies. Information regarding how the Fund voted
proxies relating to portfolio securities during the most recent 12-month period
ended June 30 is available without charge, upon request, by calling 800-525-2406
or through the Fund´s website at www.americangrowthfund.com and on the Security
and Exchange Commission´s website at http://www.sec.gov.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF
SECURITIES
Control Persons. No person controls more the 25% of the
Fund´s voting securities.
Management Ownership. All officers and directors
own a combined total of 0.38% of Fund shares.
INVESTMENT ADVISORY AGREEMENT
Since the
organization of the Fund in 1958, its investment advisor for Class A, Class B,
Class C and Class D shares, since share inception, has been Investment Research
Corporation ("IRC"), 1636 N. Logan Street, Denver, Colorado 80203.
Under
the terms of its advisory agreement with the Fund, the Advisor is paid an annual
fee of one percent of the Fund´s average net assets up to $30,000,000 of such
assets and three-fourths of one percent of such assets above $30,000,000. This
fee and all other expenses of the Fund are paid by the Fund. The fee is computed
daily based on the assets and paid on the fifth day of the ensuing month. For
this fee the Advisor manages the portfolio of the Fund and furnishes such
statistical and analytical information as the Fund may reasonably
require.
IRC will obtain assistance from employees of World Capital Advisors
("WCA"), who will be acting in the capacity of employees of IRC, in managing
Series One. In return for receiving such services IRC pays those employees up to
the full amount of its investment advisory fee.
The advisory agreements
require the Fund to pay its own expenses subject to the limitations set by the
securities laws in effect from time to time in the states in which the Fund´s
securities are then registered for sale or are exempt from registration and
offered for sale. The categories of expenses paid by the Fund are set forth in
detail in the Fund´s financial statements. At the time of this filing the Fund´s
securities are either registered for sale or are exempt from registration and
offered for sale in all fifty states, the District of Columbia and the
Commonwealth of Puerto Rico.
Total advisory fees paid by the Fund to the
Investment Research Corporation in fiscal years 2021, 2022 and 2023 were
$204,322 , $193,950, and $168,235 resulting in management fees of 1.00%, 1.00%
and 1.00% of average net assets, respectively.
The advisory agreement
will continue from year to year so long as such continuance is specifically
approved annually either by the vote of the entire Board of Directors of the
Fund or by the vote of a majority of the outstanding shares of the Fund, and in
either case by the vote of a majority of the directors who are not interested
persons of the Fund or the Advisor cast in person at a meeting called for the
purpose of voting on such approval. The advisory agreement may be canceled
without penalty by either party upon 60 days’ notice and automatically
terminates in the event of assignment.
PRINCIPAL UNDERWRITER
World Capital Brokerage,
Inc., at 1636 N. Logan Street, Denver, CO 80203, is the underwriter and
distributor for the Fund. Timothy E. Taggart is the President and a Director of
the Underwriter.
Total fees paid to the Underwriter/Distributor for the
fiscal years 2021, 2022 and 2023 were $6,806, $1,365, and $1,595,
respectively.
SERVICE AGREEMENTS
The Fund´s Transfer Agent is
Fund Services, Inc. and was paid, $97,048 for the 2021 fiscal year, $81,143 for
the 2022 fiscal year and $48,043 for the 2023 fiscal year.
UMB Bank is the
Fund´s Custodian. For the fiscal years 2021, 2022 and 2023 total fees paid to
the Custodian were $6,635, $12,421, and $10,510, respectively.
Tait, Weller
and Baker LLP was the Fund´s auditor for fiscal years 2021, 2022 and until the
resignation on April 21, 2023. For the fiscal years 2021, 2022, and 2023 total
fees paid to the Auditor were $43,571, and $48,722, $49,144,
respectively.
American Growth Fund, Inc has engaged Sanville & Company
CPA as the Fund’s auditor starting with the Annual Report ending July 31, 2023
who's fees will be paid in the 2024 fiscal year.
OTHER INVESTMENT ADVICE
No other person advises
the Fund.
DEALER REALLOWANCES
No
front-end sales loads were reallowed to dealers.
RULE 12b-1 PLANS
The Fund´s directors have
adopted separate 12b-1 plans for Class A, B and C that allow each class to pay
distribution fees for the sales and distribution of its shares. Class A shares
are subject to an annual 12b-1 fee no greater than 0.30% of average net assets.
For approximately seven years after you buy Class B shares, they are subject to
annual 12b-1 fees no greater than 1% of average daily net assets, of which 0.25%
are service fees paid to the Distributor, dealers or others for providing
services and maintaining accounts. Class C shares are subject to an annual 12b-1
fee which may not be greater than 1% of average daily net assets, of which 0.25%
is service fees and 0.75% is distribution fees paid to the distributor, dealers
or others for providing personal services and maintaining shareholder
accounts.
For the fiscal year ended July 31, 2023 principal types of
activities for which payments were made, including those amounts, are;
Type |
Amount |
|
Advertising | $0 | |
Printing and mailing of prospectuses to other than current shareholders | $0 | |
Compensation to the Underwriter | $1,595 | |
Compensation to the Broker-Dealer | $12,680* | |
Compensation to sales personnel | $0 | |
Interest, carrying, or other financial charges | $0 | |
Other (specify) | $0 |
*Of
which $114 was retained by the distributor.
In addition to the for
mentioned service fees, the 12b-1 plan allows for reimbursement to the
Distributor of expenses incurred. Expenses are reimbursed on an ongoing basis,
subject to review by the board of directors and do not carryover from year to
year.
The Fund does not participate in any joint distribution
activities.
No affiliated person of the Fund has a direct or indirect
financial interest in the operation of the 12b-1 plan or related
agreements.
The Fund anticipates the 12b-1 plan to provide the Fund and its
shareholders with a high level of service. The 12b-1 plan is subject to the
review of the board of directors quarterly.
OTHER SERVICE PROVIDERS
No other person provides
significant administrative or business affairs management services for the
Fund.
SECURITES LENDING
During the last fiscal year,
the Fund did not lend any securities and therefore does not have any revenue
from such activities to report.
PORTFOLIO
MANAGERS
The Fund is managed by IRC through an Investment Advisory
Committee, which is made up of; Timothy Taggart, the Advisor’s and the Fund’s
President who has been a member of the Investment Advisory Committee since
September of 2010 and is the President of the Fund’s principal underwriter and
distributor, World Capital Brokerage, Inc. ("WCB"); Robert Fleck, an employee of
the Advisor and Investment Advisory Committee member since September 2010; and
Matthew Taggart, an employee of the Advisor and Investment Committee member
since April of 2021. Messrs. Taggart and Mr. Fleck are jointly and primarily
responsible for the portfolio management of Series One (total net assets of
$18,057,676 as of close of business on 07/31/2023). As of 7/31/2023 there were
no conflicts of interest in connection with the portfolio manager’s management
of Series One. Messrs. Taggart receives a salary which is allocated between the
Fund, the Advisor, the Underwriter and other affiliated companies. Mr. Fleck
receives 85% of the management fee of assets raised directly by him and 15% of
the management fee of assets raised from other sources. None of the individuals’
compensation is based upon performance of the Fund. None of the individuals
manage any other funds. As of 12/31/2022 Mr. T. Taggart owned between
$10,001-$50,000 of Series One Fund shares and Mr. Fleck owned over $100,000 of
Series One Fund shares. As of the 10/31/2023, Mr. M. Taggart owned $1 - $10,000
of Series One Fund shares.
DISTRIBUTION OF SHARES
The Fund´s distributor is
World Capital Brokerage, Inc., (WCB or the Distributor) 1636 N. Logan Street,
Denver, Colorado 80203, which continuously sells the Funds shares to dealers and
directly to investors. The offering of the Funds shares is subject to withdrawal
or cancellation at any time. The Fund and the Distributor reserve the right to
reject any order for any reason.
The Fund offers four classes of shares
with a par value $.01 per share. The shares are fully paid and
non-assessable when issued. The Fund offers four classes of shares; Class A,
Class B, Class C and Class D shares of the Fund represent an identical interest
in the investment portfolio. All four classes of the Fund have the same rights,
except that Class A, Class B, and Class C shares bear the expenses of ongoing
service fees and distribution fees, Class B, and Class C may bear the additional
incremental transfer agency costs resulting from the deferred sales charge
arrangements, and Class B shares have a conversion feature. The fees that are
imposed on Class A, Class B, and Class C shares are imposed directly against
those classes and not against all assets of the Funds and, accordingly, such
charges do not affect the net asset value of any other class or have any impact
on investors choosing another sales charge option. Dividends paid by the Fund
for each class of shares are calculated in the same manner at the same time and
will differ only to the extent that distribution and service plan fees and any
incremental transfer agency or other costs relating to a particular class are
borne exclusively by that class. Class A, Class B, and Class C shares each have
exclusive voting rights with respect to the distribution and service plan
adopted with respect to such class pursuant to which distribution and service
plan fees are paid, except that because Class B and C shares convert
automatically to Class A shares approximately seven years after issuance. The
distribution and service plan for Class A shares is also subject to the right of
Class B and C shareholders to vote with respect to it.
The Fund has
entered into separate distribution agreements with the Distributor in connection
with the offering of each class of shares of the Fund (the "Distribution
Agreements"). The Distributor has made no firm commitment to take any Fund
shares from the Fund and is permitted to buy only sufficient shares to fill
unconditional orders placed with it by investors and selected investment
dealers. The Distribution Agreements obligate the Distributor to pay certain
expenses in connection with the offering of each class of shares of the Fund.
After the prospectuses, statements of additional information and periodic
reports have been prepared, set in type and mailed to shareholders, the
Distributor pays for the printing and
distribution
of copies thereof used in connection with the offering to dealers and investors.
The Distributor also pays for other supplementary sales literature and
advertising costs.
Fund shares may be purchased at the public offering
price through the Distributor or through broker-dealers who are members of the
Financial Industry Regulatory Authority who have sales agreements with the
Distributor. The Prospectus contains information concerning how the public
offering price of the Funds shares is determined. The Distributor allows dealers
discounts or concessions from the applicable public offering price on Class A,
and Class D shares. Concessions are alike for all dealers in the United States
and its territories, but the Distributor may pay additional compensation for
special services. On direct sales to customers through its own sales
representatives, the Distributor pays to them such portion of the sales
commission as it deems appropriate.
Initial
Sales Alternatives - Class A and
Class D Shares. The gross sales charges for the sale of Class D shares for the
fiscal years ended July 31, 2021, 2022, and 2023 were $1,371 (of which $1,185
were paid for dealer commissions and $186 were paid to the underwriter), $218
(of which $189 were paid for dealer commissions and $29 were paid to the
underwriter), and $166 (of which $144 were paid for dealer commissions and $22
were paid to the underwriter) respectively. The gross sales charges for the sale
of Class A shares for the fiscal years ended July 31, 2021, 2022, and 2023 were
$20,622 (of which $17,541 were paid for dealer commissions and $3,081 were paid
to the underwriter), $9,473 (of which $8,137 were paid for dealer commissions
and $1,336 were paid to the underwriter), and $10,210 (of which $8,637 were paid
for dealer commissions and $1,573 were paid to the underwriter) respectively.
For the fiscal years ended July 31, 2021, 2022, and 2023, for the sale of Class
D shares the Distributor retained $325 (of which $139 were retained for the
dealer commission and $186 were retained for the underwriter), $118 (of which
$89 were retained for the dealer commission and $29 were retained for the
underwriter), and $111 (of which $89 were retained for the dealer commission and
$22 were retained for the underwriter) respectively, as its portion of
commissions paid by purchasers of the Fund´s shares after allowing as
concessions to other dealers $1,046, $99, and $55 respectively. For the fiscal
years ended July 31, 2021, 2022, and 2023, for the sale of Class A shares the
Distributor retained $3,081 (of which $0 were retained for dealer commissions
and $3,081 were retained for the underwriter), and $1,348 (of which $12 were
retained for dealer commissions and $1,336 were retained for the underwriter),
and $1,597 (of which $25 were retained for dealer commissions and $1,572 were
retained for the underwriter) respectively, as its portion of commissions paid
by purchasers of the Fund´s shares after allowing as concessions to other
dealers $17,541, $8,124, and $8,612 respectively.
The following sample
calculation of the public offering price of one Class A Class B, Class C and
Class D share of the Fund is based on the net asset value of one Class A and
Class D share as of July 31, 2023 and a transaction with an applicable sales
charge at the maximum rate of 5.75%.
Net asset value per share | Class D | Class A | Class B | Class C |
Total net assets/Total shares outstanding) | $ 7.07 | $ 6.51 | $ 4.81 | $ 5.28 |
(5.75% of offering price) | 0.43 | 0.40 | 0.00 | 0.00 |
Maximum offering price per share | $ 7.50 | $ 6.90 | $ 4.81 | $ 5.28 |
Investment
Plans. Investors have flexibility in the purchase of shares under the Fund´s
investment plans. They may make single, lump-sum investments and they may add to
their accounts on a regular basis, including through reinvestment of dividends
and capital gains distributions.
An investor may elect on his application
to have all dividends and capital gains distributions reinvested or take income
dividends in cash and have any capital gains distributions reinvested. An
investor may also
retain
the option of electing to take any year´s capital gains distribution in cash by
notifying the Fund of his choice to do so in writing.
The Internal
Revenue Code of 1986, as amended (the “Code”) contains limitations and
restrictions upon participation in all forms of qualified plans and for
contributions made to retirement plans for tax years beginning after December
31, 1986. Consultation with an attorney or a competent tax advisor regarding
retirement plans is recommended. A discussion of the various qualified plans
offered by the Fund is contained elsewhere in this Statement of Additional
Information.
Investor´s Right of
Accumulation. For Class A and Class D shareholders the value of all
assets held the day an order is received which qualifies for rights of
accumulation may be combined to determine the aggregate investment of any person
in ascertaining the sales charge applicable to each subsequent purchase. For
example, for any person who has previously purchased and still holds Class
A or Class D shares, respectively, with a value (at current offering price) of
$20,000 on which he paid a charge of 5.75% and subsequently purchases $80,000 of
additional Class A or Class D shares, respectively, the charge applicable to the
trade of $80,000 would be 3.50%.
The Distributor must be notified by the
shareholder when a purchase takes place if the shareholder wishes to qualify for
the reduced charge on the basis of previous purchases. The reduced sales charge
is inapplicable to income dividends and capital gain distributions which are
reinvested at net asset value. The reduced charge is subject to confirmation of
the investor’s holdings through a check of the Funds records.
Letter of Intent. For Class A and
Class D shareholders any person (as defined under Calculation of Net Asset
Value) may sign a letter of intent covering purchases to be made within a period
of thirteen months (which may include the preceding 90 days) and thereby become
eligible for the reduced sales charge applicable to the total amount purchased,
provided such amount is not less than $50,000. After a letter of intent is
established, each future purchase will be made at the reduced sales charge
applicable to the intended dollar amount noted on the application. Reinvestment
of income dividends and capital gains distributions is not considered a purchase
hereunder. If, within the 13-month period, ownership of the designated class of
Fund shares does not reach the intended dollar amount, the difference between
what you paid for such shares and the amount which would have been paid for them
must be promptly paid as if the normal sales commission applicable to such
purchases had been charged. The difference between the sales charge as applied
to a regular purchase and the sales charge as applied on the letter of intent
will be held in escrow in the form of shares (computed to the nearest full
share) and can be retained by the Fund. If during the 13-month period the
intended dollar amount is increased, a new or revised letter of intent must be
signed and complied with to receive a further sales charge reduction. This
reduction will apply retroactively to all shares theretofore purchased under
this letter.
Automatic
Investment Plan. After making an initial investment, a shareholder may
make additional purchases at any time either through the shareholder´s
securities dealer, or by mail directly to the transfer agent. Voluntary
accumulation also can be made through a service known as the Fund´s Automatic
Investment Plan whereby the Fund is authorized through pre-authorized checks or
automated clearing house debits to charge the regular bank account of the
shareholder on a regular basis to provide systematic additions to the account of
such shareholder.
Deferred Sales
Charges. As discussed in the Prospectuses, Class B shares redeemed within
seven years of purchase, Class C shares redeemed within one year of purchase,
and certain purchases of Class A and Class D shares at net asset value and
redeemed within one year of purchase, are each subject to a Contingent Deferred
Sales Charge. However, under most circumstances, the charge is waived on
redemptions in connection with certain post-retirement withdrawals from an IRA
or other retirement plan or following the death or disability of a shareholder.
Redemptions for which the waiver applies are: (a) any partial or complete
redemption in connection with a distribution following retirement under a
tax-deferred retirement plan or attaining age 59 1/2 in the case of an IRA or
other retirement plan, or part of a series of equal periodic payments (not less
frequently than annually) made for life (or life expectancy) or any redemption
resulting from the tax-free return of an excess contribution to an
IRA;
or (b) any partial or complete redemption following the death or disability (as
defined in the Internal Revenue Code) of a shareholder (including one who owns
the shares as joint tenant with his or her spouse), provided the redemption is
requested within one year of the death or initial determination of disability.
The contingent deferred sales charge (CDSC) is waived on redemption of shares in
connection with a Systematic Withdrawal Plan where the total withdrawal is less
than 12% of the previous year value or of the original purchase, whichever is
greater.
For the
fiscal year ended July 31, 2023, the Distributor received CDSCs of $550, with
respect to redemptions of Class B shares, all of which was paid to the
Distributor. For the fiscal year ended July 31, 2023 the Distributor received
CDSCs of $899 with respect to redemptions of Class C shares.
From time to
time the Distributor may pay a finder´s fee to Selling Group Members not to
exceed 1% of the purchase for net asset value trades over one million
dollars.
Intermediary-Defined
Sales Charge Waiver Policies
The availability of certain initial or deferred
sales charge waivers and discounts may depend on the particular financial
intermediary or type of account through which you purchase or hold Fund
shares.
Intermediaries may have different policies and procedures regarding
the availability of front-end sales load waivers or contingent deferred
(back-end) sales load (“CDSC”) waivers, which are discussed below. In all
instances, it is the purchaser’s responsibility to notify the fund or the
purchaser’s financial intermediary at the time of purchase of any relationship
or other facts qualifying the purchaser for sales charge waivers or discounts.
For waivers and discounts not available through a particular intermediary,
shareholders will have to purchase fund shares directly from the fund or through
another intermediary to receive these waivers or discounts.
Effective March
1, 2019, shareholders purchasing fund shares will be eligible only for the
following load waivers (front-end sales charge waivers and contingent deferred,
or back-end, sales charge waivers) and discounts, which may differ from those
disclosed elsewhere in this fund’s prospectus or SAI.
Front-end sales load waivers on Class A
shares available:
l Shares
purchased in an investment advisory program.
l Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family).
l Employees and
registered representatives of Broker Dealers or their affiliates and their
immediate family members.
l Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (known as Rights of
Reinstatement).
l A shareholder
in the Fund’s Class C shares will have their shares converted at net asset value
to Class A shares (or the appropriate share class) of the Fund if the shares are
no longer subject to a CDSC and the conversion is in line with the policies and
procedures of the Broker Dealer.
CDSC Waivers on Classes A, B and C shares
available:
l Death or
disability of the shareholder.
l Shares sold
as part of a systematic withdrawal plan as described in the fund’s
prospectus.
l Return of
excess contributions from an IRA Account.
l Shares sold
as part of a required minimum distribution for IRA and retirement accounts due
to the shareholder reaching age 70½ as described in the fund’s
prospectus.
l Shares sold
to pay Broker Dealer fees but only if the transaction is initiated by the Broker
Dealer.
l Shares
acquired through a right of reinstatement.
Front-end load discounts available:
breakpoints, and/or rights of accumulation
l Breakpoints
as described in this prospectus.
l Rights of
accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household. Eligible fund family assets
not held at the Broker Dealer may be included in the rights of
accumulation
calculation only if the shareholder notifies his or her financial Advisor about
such assets.
AUTOMATIC CASH WITHDRAWAL
PLAN
The Automatic Withdrawal Plan is designed as a convenience for
those shareholders wishing to receive a stated amount of money at regular
intervals from their investment in shares of the Fund. A Plan is opened by
completing an application for such Plan and surrendering to the Fund all
certificates issued to the investor for Fund shares. No minimum number of shares
or minimum withdrawal amount is required. Withdrawals are made from investment
income dividends paid on shares held under the Plan and, if these are not
sufficient, from the proceeds from redemption of such number of shares as may be
necessary to make periodic payments. As such redemptions involve the use of
capital, over a period of time they will very likely exhaust the share balance
of an account held under a Plan and may result in capital gains taxable to the
investor. Use of a Plan cannot assure realization of investment objectives,
including capital growth or protection against loss. Price determinations with
respect to share redemptions are generally made on the 23rd of each month or the
next business day thereafter. Proceeds from such transactions are generally
mailed three business days following such transaction date.
Withdrawals
concurrent with purchases of additional shares may be inadvisable because of
duplication of sales charges. Single payment purchases of shares in amounts less
than $5,000 in combination with a withdrawal plan will not ordinarily be
permitted. No withdrawal plan will be permitted if the investor is also a
purchaser under a continuous investment plan. Either the owner or the Fund may
terminate the Plan at any time, for any reason, by written notice to the
other.
Investment income dividends paid on shares held in a withdrawal
plan account will be credited to such account and reinvested in additional Fund
shares. Any optional capital gains distributions will be taken in shares, which
will be added to the share balance held in the Plan account. Dividends and
distributions paid into the Plan account are taxable for federal income tax
purposes.
RETIREMENT PLANS
The Fund
makes available retirement plan services to all classes of its shares. Investors
in the Fund can establish accounts in any one of the retirement plans offered by
the Fund. Each participant in a retirement plan account is charged a $20 annual
service fee to offset expenses incurred in servicing such accounts. Dividends
and capital gains distributions are automatically reinvested. Under each of the
plans, the Fund´s retirement plan custodian or successor custodian provides
custodial services required by the Code, including the filing of reports with
the Internal Revenue Service (“IRS”). Consultation with an attorney or competent
tax advisor is recommended before establishing any retirement plan. Brochures
which describe the following retirement plans and contain IRS model or prototype
plan documents may be obtained from the Distributor. The Distributor, in its
sole discretion, may reimburse a Fund shareholder for any penalties which the
shareholder may incur in transferring assets from a retirement plan established
with a third party to one or more of the retirement plans offered by the Fund.
No such reimbursement shall exceed the amount of the dealer concession which the
Distributor would otherwise pay to a dealer in conjunction with the investment
by the shareholders in the Funds retirement plan(s).
INDIVIDUAL RETIREMENT ACCOUNTS. The
Fund makes available a model Individual Retirement Account (IRA) under Section
408(a) of the Code on IRS Form 5305-A. A qualified individual may invest
annually in an IRA. Persons who are not eligible to make fully deductible
contributions will be able to make non-deductible contributions to their IRAs,
subject to limits specified in the Code, to the extent that deductible
contributions are not allowed. IRA earnings on non-deductible, as well as
deductible, contributions will accumulate tax deferred. An IRA account may also
be established in a tax-free roll-over transfer within 60 days of receipt of a
lump sum distribution from a qualified pension plan resulting from severance of
employment or termination by the employer of such a plan.
The Code
provides for penalties for violation of certain of its provisions including, but
not limited to,
contributions
in excess of the stipulated limitations, improper distributions and certain
prohibited transactions. To afford plan holders the right of revocation
described in the IRA disclosure statements, investments made in a newly
established IRA may be canceled within seven days of the date the plan holder
signed the Custodial Agreement by writing the Fund´s retirement plan
custodian.
SIMPLIFIED EMPLOYEE
PENSION PLANS. The Fund makes available model Simplified Employee
Pension Plans (SEPs) on IRS Form 5305-SEP and Salary Reduction Simplified
Employee Pension Plans (SARSEPs) on IRS Form 5305A-SEP. By adopting a SEP,
employers may contribute to each eligible employees own IRA. Commencing with tax
years beginning after December 31, 1986, salary reduction contributions may be
made to SEPs maintained by employers meeting certain qualifications
specified in the Code.
TEACHER
AND NON-PROFIT EMPLOYEE RETIREMENT PLAN. Employees of tax exempt,
charitable, religious and educational organizations described in Section
501(c)(3) of the Code, and employees of public school systems and state and
local educational institutions, may establish a retirement plan under Section
403(b) of the Code.
PROTOTYPE
MONEY PURCHASE AND PROFIT-SHARING PENSION PLANS. Available generally to
employers, including self-employed individuals, partnerships, subchapter S
corporations and corporations.
DISTRIBUTION
PLANS
Reference is made to Purchase of Shares--Distribution Plans in
the Prospectuses for certain information with respect to separate distribution
plans for Class A, Class B, and Class C shares pursuant to Rule 12b-1 under the
Investment Company Act of the Fund (each a "Distribution Plan") and with respect
to the shareholder service and distribution fees paid by the Fund to the
Distributor with respect to such classes.
Payments of the shareholder
service fees and/or distribution fees are subject to the provisions of Rule
12b-1 under the Investment Company Act of 1940. Among other things, each
Distribution Plan provides that the Distributor shall provide, and the Directors
shall review quarterly reports of the disbursement of the service fees and/or
distribution fees paid to the Distributor. In their consideration of each
Distribution Plan, the Directors must consider all factors they deem relevant,
including information as to the benefits of the Distribution Plan to the Fund
and its related class of shareholders. Each Distribution Plan further provides
that, so long as the Distribution Plan remains in effect, the selection and
nomination of Directors who are not interested persons of the Fund, as defined
in the Investment Company Act (the Independent Directors), shall be committed to
the discretion of the Independent Directors then in office. In approving each
Distribution Plan in accordance with Rule 12b-1, the Independent Directors
considered the potential benefits that the Distribution Plans could provide to
the Fund and the respective classes and their shareholders, and concluded that
there is reasonable likelihood that such Distribution Plan will benefit the Fund
and its shareholders. Each Distribution Plan can be terminated at any time,
without penalty, by the vote of a majority of the Independent Directors or by
the vote of the holders of a majority of the outstanding voting securities of
the applicable class. A Distribution Plan cannot be amended to increase
materially the amount to be spent there under without the approval of the
applicable class of shareholders, and all material amendments are required to be
approved by the vote of Directors, including a majority of the Independent
Directors who have no direct or indirect financial interest in such Distribution
Plan, cast in person at a meeting called for that purpose. Rule 12b-1 further
requires that the Fund preserve copies of each Distribution Plan and any report
made pursuant to such plan for a period of not less than six years from the date
of such Distribution Plan or such report, the first two years in an easily
accessible place.
For the fiscal year ended July 31, 2023, the Fund paid the Distributor $26,260 (based on an average net assets relating to the Class A shares of approximately $8,779,791) pursuant to the Class A Distribution
Plan,
$20,974 of which was paid to other broker-dealers for providing account
maintenance and distribution-related services in connection with the Class A
shares and $5,286 (of which $4,310 was for the certain distribution related
activities and $976 was for providing account maintenance and distribution
related services) was retained by the Distributor. For the fiscal year ended
July 31, 2023, the Fund paid the Distributor $2,663 (based on average net assets
relating to the Class B shares of approximately $263,992) pursuant to the Class
B Distribution Plan, $660 of which was paid to other broker-dealers for
providing account maintenance and distribution-related services in connection
with the Class B shares and $1,973 (of which $1,973 was for the certain
distribution-related activities and $0 was for providing account maintenance and
distribution-related services) was retained by the distributor. For the fiscal
year ended July 31, 2023, the Fund paid the Distributor $13,053 (based on
average net assets relating to the Class C shares of approximately $1,308,877)
pursuant to the Class C Distribution Plan, $11,222 of which was paid to other
broker-dealers for providing account maintenance and distribution-related
services in connection with the Class C shares and $1,831 (of which $1,831 was
for the certain distribution-related activities and $0 was for providing account
maintenance and distribution-related services) was retained by the Distributor.
For the fiscal year ended July 31, 2023, the Advisor paid $16,165 (based on
average net assets relating to the Class D shares of approximately $6,473,137)
pursuant to the Class D Distribution Plan, $5,996 of which was paid to other
broker-dealers for providing account maintenance and distribution-related
services in connection with the Class D shares and $10,169 (of which $0 was for
the certain distribution-related activities and $10,169 was for providing
account maintenance and distribution-related services) was retained by the
Distributor. At July 31, 2023, the net assets of the Fund subject to the Class B
Distribution Plan aggregated approximately $271,424. At this net asset level,
the annual fee payable pursuant to the Class B Distribution Plan would aggregate
approximately $2,714. At July 31, 2023, the net assets of the Fund subject to
Class C Distribution Plan approximated $1,298,836. At this asset level, the
annual fee payable pursuant to the Class C Distribution Plan would approximate
$12,988.
Net Asset
Value Purchases of Class A Shares. Class A shares of the Fund may be purchased
at net asset value through certain organizations (which may be broker-dealers,
banks or other financial organizations)(Processing Organizations) which have
agreed with the Distributor to purchase and hold shares for their customers. A
Processing Organization may require persons purchasing through it to meet the
minimum initial or subsequent investments, which may be higher or lower than the
Fund´s minimum investments, and may impose other restrictions, charges and fees
in addition to or different from those applicable to other purchasers of shares
of the Fund. Investors contemplating a purchase of Fund shares through a
Processing Organization should consult the materials provided by the Processing
Organization for further information concerning purchases, redemptions and
transfers of Fund shares as well as applicable fees and expenses and other
procedures and restrictions. Certain Processing Organizations may receive
compensation from the Advisor and the Distributor.
Class A shares of the
Fund may also be purchased at net asset value by an investment Advisor
registered with the Securities and Exchange Commission or appropriate state
authorities who clears such Fund transactions through a broker-dealer, bank or
trust company (each of which may impose transaction fees with respect to such
transactions) and who either purchases shares for its own account or for
accounts for which the investment Advisor is authorized to make investment
decisions. Such investment Advisors may impose charges and fees on their clients
for their services, which charges and fees may vary from investment Advisor to
investment Advisor.
Class A shares may be offered at net asset value in
connection with the acquisition of assets of other investment companies. Class A
shares also are offered at net asset value, without sales charge, to an investor
who has a business relationship with an American Growth Fund Distribution
Plan, if certain conditions set forth in the Statement of Additional Information
are met.
The Fund also sells its Class A shares at net asset value in
connection with a qualified rollover of assets held in a previously existing
tax-exempt retirement plan (including an IRA, 401(k) plan or 403(b) plan)
through broker-dealers who have entered into an agreement with the Underwriter
relating to such rollovers.
BROKERAGE
Decisions
to buy and sell securities for the Fund, assignment of its portfolio business,
and negotiation of its commission rates, where applicable, are made by the
Fund´s securities order department. The Fund does not have any agreement or
arrangement to use any particular broker for its portfolio transactions. The
Fund´s primary consideration in effecting a security transaction will be
execution at the most favorable price. When selecting a broker-dealer to execute
a particular transaction, the Fund will take the following into consideration:
the best net price available; the reliability, integrity and financial condition
of the broker-dealer; the size of and difficulty in executing the order; the
value of the expected contribution of the broker-dealer to the investment
performance of the Fund on a continuing basis; sales of Fund shares; and the
value of brokerage, research and other services provided by the broker-dealer.
The commission charged by a broker may be greater than the amount another firm
might charge if the management of the Fund determines in good faith that the
amount of such commissions is reasonable in relation to the value of the
brokerage and research services provided by such broker.
Portfolio
transactions placed through dealers serving as primary market makers are
effected at net prices, without commission as such, but which include
compensation to the dealer in the form of mark up or mark down. In certain
instances, the Fund may make purchases of underwritten issues at prices which
include underwriting fees. When making purchases of underwritten issues with
fixed underwriting fees, the Fund may designate broker-dealers who have agreed
to provide the Fund with certain statistical, research, and other information,
or services which are deemed by the Fund to be beneficial to the Fund´s
investment program. With respect to money market instruments, the Fund
anticipates the portfolio securities transactions will be affected with the
issuer or with a primary market maker acting as principal for the securities on
a net basis (without commissions).
Any statistical or research
information furnished to the Advisor may be used in advising its other clients.
Generally, no specific value can be determined for research and statistical
services furnished without cost to the Fund by a broker-dealer. The Fund is of
the opinion that the material is beneficial in supplementing research and
analysis provided by the Fund´s Advisor.
The Fund may use affiliated
brokers, as that term is defined in the Investment Company Act, if in the
Advisor´s best judgment based on all relevant factors, the affiliated broker is
able to implement the policy of the Fund to obtain, at reasonable expense, the
best execution (prompt and reliable execution at the most favorable price
obtainable) of such transactions. The Advisor need not seek competitive
commission bidding but is expected to minimize the commissions paid to the
extent consistent with the interest and policies of the Fund as established by
its Board of Directors. Purchases of securities from underwriters include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers include a spread between the bid and asked price.
The Fund
paid total brokerage commissions of $0, $0, and $0 in fiscal years 2021, 2022,
and 2023, respectively. The Fund did not purchase securities offered by any
broker-dealer that executed portfolio transactions during such fiscal years. The
Fund paid brokerage commissions of $0, $0, and $0 in fiscal years 2021, 2022 and
2023 to World Capital Brokerage, the distributor and an affiliate of the Fund.
Commissions and sales charges paid by investors on the purchase of Fund shares
totaled $21,992, $14,726, and $14,271 in fiscal years 2021, 2022, and 2023
respectively, of which $3,406, $1,467, and $1,709 were retained by World Capital
Brokerage. The aggregate dollar amount of transactions effected through World
Capital Brokerage involving the payment of commissions represented 100% of the
aggregate dollar amount of all transactions involving the payment of commissions
during fiscal year 2023.
While some stocks considered in the opinion of
management to be least sensitive to business declines will be maintained as long
term holdings, others considered most sensitive to such declines will be sold
whenever in management´s judgment economic conditions may be in for a major
decline. Resulting funds may be temporarily invested in United States Government
securities, high-grade bonds and high-grade preferred stocks, until management
believes business and market conditions indicate that reinvestment in common
stocks is desirable. The portfolio turnover rate of the Fund for the fiscal
years ended July 31, 2021, 2022, and 2023 was 4%, 3% and 3%,
respectively.
CALCULATION
OF NET ASSET VALUE
The Fund offers its shares continuously to the public at
their net asset value next computed after receipt of the order to purchase plus
any applicable sales charge. Net asset value is determined as of the close of
business on the New York Stock Exchange each day the Exchange is open for
trading, and all purchase orders are executed at the next price that is
determined after the order is received. Orders received and properly
time-stamped by dealers and received by the Distributor prior to 2:00 p.m.
Denver time on any business day will be confirmed at the public offering price
effective at the close on that day. Orders received after such time will be
confirmed at the public offering price determined as of the close of the
Exchange on the next business day. It is the responsibility of the dealers to
remit orders promptly to the Distributor. The New York Stock Exchange is closed
on the following holidays: New Year´s Day, Martin Luther King Day, Presidents
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
In determining net asset value, securities traded on
the New York Stock Exchange or other stock exchange approved for this purpose by
the board of directors will be valued on the basis of the closing sale thereof
on such stock exchange, or, if such sale is lacking, at the mean between
closing bid and asked prices on such day. If no bid and asked prices are quoted
for such day or information as to New York or other approved exchange
transactions is not readily available, the security will be valued by reference
to recognized composite quotations or such other method as the board of
directors in good faith deems will reflect its fair market value. Securities not
traded on any stock exchange but for which market quotations are readily
available are valued on the basis of the mean of the last bid and asked prices.
Short-term securities are valued at the mean between the closing bid and asked
prices or by such other method as the board of directors determines to reflect
their fair market value. The board of directors in good faith determines the
manner of ascertaining the fair market value of other securities and
assets.
The net asset price of Fund shares will be computed by deducting
total liabilities from total assets. The net asset value per share will be
ascertained by dividing the Fund´s net assets by the total number of shares
outstanding, exclusive of treasury shares and shares tendered for redemption the
redemption price of which has been determined. Adjustment for fractions will be
made to the nearest cent.
The per share net asset value of Class A, Class
B, and Class C shares generally will be lower than the per share net asset value
of the Class D shares reflecting the daily expense accruals of the service,
distribution and higher transfer agency fees applicable with respect to the
Class A, Class B, and Class C shares. The per share net asset value of the Class
B and Class C shares generally will be lower than the per share net asset value
of Class A shares reflecting the daily expense accruals of the service and
distribution fees and higher transfer agency fees applicable with respect to
Class B and Class C shares of the Fund. It is expected, however, that the per
share net asset value of the classes will tend to converge (although not
necessarily meet) immediately after the payment of dividends or distributions,
which will differ by approximately the amount of the expense accrual
differential between the classes.
DIVIDENDS,
DISTRIBUTIONS AND TAXES
As a “regulated investment company” under the
Code, the Fund is subject to three tests: the income test, the asset
diversification test, and the distribution test. In some circumstances, the
character and timing of income realized by the Fund for purposes of the income
test or the identification of the issuer for purposes of the asset
diversification test is uncertain under current law with respect to a particular
investment, and an adverse determination or future guidance by the IRS with
respect to such type of investment may adversely affect the Fund’s ability to
satisfy these tests. In other circumstances, the Fund may be required to sell
portfolio holdings in order to meet the income test, the asset diversification
test, or the distribution test, which may have a negative impact on the Fund’s
income and performance. In lieu of potential disqualification, the Fund is
permitted to pay a tax for certain failures to satisfy the asset diversification
test or the income test, which, in general, are limited to those due to
reasonable cause and not willful neglect.
If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) would be subject to tax at regular corporate rates without any deduction for dividends paid to shareholders, and the dividends would be taxable to the shareholders as
ordinary income (or possibly as qualified dividend income) to the extent of the Fund’s current and accumulated earnings and profits. Failure to qualify as a regulated investment company, subject to savings provisions for certain qualification failures, which, in general, are limited to those due to reasonable cause and not willful neglect, would thus have a negative impact on the Fund’s income and performance. In that case, the Fund would be liable for federal, and possibly state, corporate taxes on its taxable income and gains, and distributions to you would be taxed as dividend income to the extent of the Fund’s earnings and profits. Even if such savings provisions apply, the Fund may be subject to a monetary sanction of $50,000 or more. Moreover, the Board of Directors reserves the right not to maintain the qualification of the Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders.
As a
regulated investment company, the Fund will not be subject to U.S. federal
income tax on its income and gains which it distributes as dividends or capital
gains distributions provided that it distributes to shareholders at least 90% of
its investment company taxable income for the taxable year. The Fund intends to
distribute sufficient income to meet this test.
The per share dividends
and distributions on Class A, Class B, and Class C shares will be lower than the
per share dividends and distributions on Class D shares as a result of the
account maintenance, distribution and higher transfer agency fees applicable
with respect to the Class A, Class B, and Class C shares; similarly, the per
share dividends and distributions on Class A shares will be higher than the per
share dividends and distributions on Class B and Class C shares as a result of
the lower account maintenance fees applicable with respect to the Class A shares
and a lower distribution fee. See Calculation of Net Asset Value.
Net
capital gains (which consist of the excess of net long-term capital gains over
net short-term capital losses) are not included in the definition of investment
company taxable income. The Board of Directors will determine at least once a
year whether to distribute any net capital gains. A determination by the Board
of Directors to retain net capital gains will not affect the ability of the Fund
to qualify as a regulated investment company. If the Fund retains for investment
its net capital gains, it will be subject to a tax of 21% of the amount
retained. In that event, the Fund expects to designate the retained amount of
undistributed capital gains in a notice to its shareholders who (i) if subject
to U.S. federal income tax on long-term capital gains, will be required to
include in income for tax purposes as long term-capital gain, their shares of
such undistributed amount, and (ii) will be entitled to credit their
proportionate shares of the 21% tax paid by the Fund against their U.S. federal
income tax liabilities and to claim refunds to the extent the credit exceeds
such liabilities. For U.S. federal income tax purposes, the tax basis of shares
owned by a shareholder of the Fund will be increased by an amount equal to 79%
of the amount of undistributed capital gains included in the shareholder´s gross
income.
Under the Code, amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement are subject to a
nondeductible 4% excise tax. To avoid the tax, the Fund must distribute during
each calendar year (1) at least 98.2% of its ordinary income (not taking into
account any capital gains or losses) for the calendar year, (2) at least 98% of
its capital gains in excess of its capital losses for the twelve-month period
ending on October 31 of the calendar year, and (3) all ordinary income and net
capital gains for previous years that were not distributed during such years. To
avoid application of the excise tax, the Fund intends to make distributions in
accordance with the calendar year distribution requirement. A distribution will
be treated as paid on December 31 of the calendar year if it is paid during the
calendar year or if declared by the Fund in October, November or December of
such year, payable to shareholders of record on a date in such month and paid by
the Fund during January of the following year. Any such distributions paid
during January of the following year will be taxable to shareholders as of
December 31 of the year such distributions were declared, rather than the date
on which the distributions are received.
Distributions of net investment
income (which includes interest, dividend income, other than qualified dividend
income, and the excess of net short-term capital gains over net long-term
capital losses) are taxable to a shareholder as ordinary income, whether paid in
cash or shares. Certain distributions made to you may be from qualified dividend
income and net capital gain (which consists of the excess of long-
term
capital gains over net short-term capital losses), if any, and are taxable as
long-term capital gains, whether paid in cash or in shares, regardless of how
long the shareholder has held the Fund shares, and are not eligible for the
dividends received deduction.
Upon a sale or exchange of its shares, a
shareholder will realize a taxable gain or loss depending upon its basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder´s hands and such capital gain or loss will
be long-term capital gain or loss if the shares have been held for more than one
year. Any loss realized on a sale or exchange will be disallowed to the extent
the shares disposed of are replaced within a period of 61 days, beginning 30
days before and ending 30 days after disposal of the shares. Any loss realized
by a shareholder on the sale of shares of the Fund held by the shareholder for
six months or less will be treated for tax purposes as a long-term capital loss
to the extent of any distributions of net capital gains received by the
shareholder with respect to such shares.
Shareholders receiving
distributions in the form of newly issued shares will have a cost basis in each
share received equal to the fair market value of a share of the Fund on the
distribution date. Shareholders will be notified annually as to the U.S. federal
income tax status of distributions and shareholders receiving distributions in
the form of newly issued shares will receive a report as to the fair market
value of the shares received. If the net asset value of shares is reduced below
a shareholder´s cost as a result of a distribution by the Fund, such
distribution will be taxable even though it represents a return of invested
capital. Investors should be careful to consider the tax implications of buying
shares just prior to a distribution. The price of shares purchased at this time
may reflect the amount of the forthcoming distribution. Those purchasing just
prior to a distribution will receive a distribution which will nevertheless be
taxable to them.
Income received by the Fund from sources within foreign
countries may be subject to withholding and other taxes imposed by such
countries. Income tax treaties between certain countries and the United States
may reduce or eliminate such taxes. It is impossible to determine in advance the
effective rate of foreign tax to which the Fund will be subject, since the
amount of the Fund assets to be invested in various countries is not known. It
is not anticipated that shareholders will be entitled to claim foreign tax
credits with respect to their share of foreign taxes paid by the
Fund.
Distributions may also be subject to additional state, local and
foreign taxes depending on each shareholder´s particular situation. Shareholders
are advised to consult their own tax advisors with respect to the particular tax
consequences to them of an investment in the shares of the Fund.
If a
shareholder has elected to receive dividends and/or capital gain distributions
in cash and the postal or other delivery service is unable to deliver checks to
the shareholder´s address of record, such shareholder´s distribution option will
automatically be converted to having all dividends and other distributions
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution or redemption checks.
The foregoing is a general
and abbreviated summary of the applicable provisions of the Code and Treasury
Regulations presently in effect. For the complete provisions, reference should
be made to the pertinent Code sections and the Treasury Regulations promulgated
thereunder. The Code and the Treasury Regulations are subject to change by
legislative or administrative action either prospectively or retroactively.
In some circumstances, the character and timing of income realized by the Fund for purposes of the income requirement or the identification of the issuer for purposes of the asset diversification test is uncertain under current law with respect to a particular investment, and an adverse determination or future guidance by the IRS with respect to such type of investment may adversely affect the Fund’s ability to satisfy these requirements. In other circumstances, the Fund may be required to sell portfolio holdings in order to meet the income requirement, distribution requirement, or asset diversification test, which may have a negative impact on the Fund’s income and performance. In lieu of potential disqualification, the
Fund is permitted to pay a tax for certain failures to satisfy the asset diversification test or income requirement, which, in general, are limited to those due to reasonable cause and not willful neglect.
If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income (including its net capital gain) would be subject to tax at regular corporate rates without any deduction for dividends paid to shareholders, and the dividends would be taxable to the shareholders as ordinary income (or possibly as qualified dividend income) to the extent of the Fund’s current and accumulated earnings and profits. Failure to qualify as a regulated investment company, subject to savings provisions for certain qualification failures, which, in general, are limited to those due to reasonable cause and not willful neglect, would thus have a negative impact on the Fund’s income and performance. In that case, the Fund would be liable for federal, and possibly state, corporate taxes on its taxable income and gains, and distributions to you would be taxed as dividend income to the extent of the Fund’s earnings and profits. Even if such savings provisions apply, the Fund may be subject to a monetary sanction of $50,000 or more. Moreover, the board reserves the right not to maintain the qualification of the Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders.
PERFORMANCE DATA
See the discussion of
performance information in the Fund´s prospectuses under the heading,
Performance Information. The average annual total returns are calculated
pursuant to the following formula: P(1 + T)n = ERV (where P = a hypothetical
initial payment of $1,000, T = the average annual total return, n = the number
of years, and ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period at the end of the 1, 5 or 10 year
periods).
For the periods ended July 31, 2023, the average annual total
returns at maximum offering price for the Class D shares of the Fund was 5.42%
for 1 year, 4.57% for 5 years, and 8.31% for 10 years. For the year ended July
31, 2023, the average annual total return at maximum offering price for the
Fund´s Class A shares was 5.02% for 1 year, 4.18% for 5 years, and 7.92% for 10
years, Class B shares was 9.69% for 1 year, 4.04% for 5 years, and 7.43% for 10
years, including the conversion from B shares to A shares after 7 years, and
Class C shares was 10.47% for 1 year, 5.23% for 5 years, 8.08% for 10 years,
including the conversion from C shares to A shares after 7 years.
In
addition to the standardized calculation of annual total return, the Fund may
from time to time use other methods of calculating its performance in order to
illustrate the effect of a hypothetical investment in a plan or the effect of
withdrawing funds from an account over a period of time. Any presentation of
non-standardized calculations will be accompanied by standardized performance
measures as well. Calculations of performance may be expressed in terms of the
total return as well as the average annual compounded rate of return of a
hypothetical investment in the Fund over varying periods of time in addition to
the 1, 5, and 10 year periods (up to the life of the Fund) and may reflect the
deduction of the appropriate sales charge imposed upon an initial investment of
more than $1,000 in the Fund. These performance calculations will reflect the
deduction of a proportional share of Fund expenses (on an annual basis), will
assume that all dividends and distributions are reinvested when paid, may
include periodic investments or withdrawals from the account in varying amounts
and/or percentages and may include deductions for an annual custodian fee. The
Fund may calculate its total return or other performance information prior to
the deduction of a sales charge.
The performance figures described above
may also be used to compare the performance of the Fund´s shares against certain
widely recognized standards or indices for stock and bond market performance.
The following are the indices against which the Portfolios may compare
performance:
The Standard & Poor´s Composite Index of 500 Stocks (the
S&P 500 Index) is a market value-weighted and unmanaged index showing the
changes in the aggregate market value of 500 stocks relative to the base period
1941-43. The S&P 500 Index is composed almost entirely of common stocks of
companies listed on the NYSE, although the common stocks of a few companies
listed on the American Stock Exchange or traded OTC are included. The 500
companies represented include 400 industrial, 60 transportation and 50 financial
services concerns. The S&P 500 Index represents about 80% of the
market
value of all issues traded on the NYSE.
The Dow Jones Industrial Average
is an unmanaged index composed of 30 blue-chip industrial corporation
stocks.
The Lipper Mutual Fund Performance Analysis and Mutual Fund
Indices measure total return and average current yield for the mutual fund
industry. Ranks individual mutual fund performance over specified time periods
assuming reinvestment of all distributions, exclusive of sales
charges.
The Consumer Price Index (or Cost of Living index), published by
the U.S. Bureau of Labor Statistics, is a statistical measure of periodic change
in the price of goods and services in major expenditure groups.
The
following table presents a hypothetical initial investment of $1,000 on August
1, 1958 with subsequent investments of $1,000 made annually through July 31,
2023. The illustration assumes that the investment was made in Class D shares,
(the only class existing at that time), and a sales load of 5.75% has been
deducted from the initial and subsequent investments, a $20 annual fee
(representing the annual service fee charged to retirement plan accounts) has
been deducted from the account annually, and that all dividend and capital gain
distributions have been reinvested when paid. While the illustration uses an
investment of $1,000 and a 5.75% sales load, the Fund may select any multiple of
$1,000 in order to illustrate the effect of an investment plan and the sales
load will reflect the appropriate sales load for the initial and subsequent
investments as determined by the Funds currently effective prospectuses. Class
A, Class B, and Class C shares are subject to additional distribution charges as
outlined in the prospectus, which would have, if the Class was in effect,
produced a lower rate of return. The sales load may be reduced pursuant to
rights of accumulation and letter of intent.
Year Ended | Total of initial & annual investments | Dividends from investment income reinvested | Cumulative reinvested dividends | Cumulative cost including reinvested dividends | Acquired with initial & annual investments | Accepted as capital gains distributions (Cumulative) | Purchased through reinvestment of income (Cumulative) | Ended Value |
08/01/58 | $ 1,000 | $ - | $ - | $ 1,000 | $ 943 | $ - | $ - | $ 943 |
07/31/59 | 2,000 | 0 | 0 | 2,000 | 2,049 | 0 | 0 | 2,049 |
07/31/60 | 3,000 | 28 | 28 | 3,028 | 2,800 | 0 | 28 | 2,850 |
07/31/61 | 4,000 | 82 | 110 | 4,110 | 4,521 | 62 | 130 | 4,713 |
07/31/62 | 5,000 | 94 | 204 | 5,204 | 4,838 | 76 | 194 | 5,108 |
07/31/63 | 6,000 | 120 | 324 | 6,324 | 6,723 | 251 | 366 | 7,340 |
07/31/64 | 7,000 | 122 | 446 | 7,446 | 9,310 | 432 | 594 | 10,336 |
07/31/65 | 8,000 | 146 | 592 | 8,592 | 9,680 | 1,107 | 699 | 11,486 |
07/31/66 | 9,000 | 198 | 790 | 9,790 | 10,630 | 2,148 | 894 | 13,672 |
07/31/67 | 10,000 | 364 | 1,154 | 11,154 | 11,832 | 3,694 | 1,320 | 16,846 |
07/31/68 | 11,000 | 345 | 1,499 | 12,499 | 13,910 | 4,055 | 1,814 | 19,779 |
07/31/69 | 12,000 | 399 | 1,898 | 13,898 | 12,220 | 5,516 | 1,806 | 19,542 |
07/31/70 | 13,000 | 522 | 2,420 | 15,420 | 10,441 | 5,038 | 1,836 | 17,315 |
07/31/71 | 14,000 | 585 | 3,005 | 17,005 | 14,285 | 6,448 | 2,985 | 23,718 |
07/31/72 | 15,000 | 675 | 3,680 | 18,680 | 15,964 | 6,789 | 3,850 | 26,603 |
07/31/73 | 16,000 | 693 | 4,373 | 20,373 | 16,197 | 6,853 | 4,346 | 27,396 |
07/31/74 | 17,000 | 773 | 5,146 | 22,146 | 13,960 | 5,975 | 4,176 | 24,111 |
07/31/75 | 18,000 | 1,389 | 6,535 | 24,535 | 13,635 | 8,985 | 5,210 | 27,830 |
07/31/76 | 19,000 | 1,158 | 7,693 | 26,693 | 16,700 | 10,397 | 7,325 | 34,422 |
07/31/77 | 20,000 | 1,062 | 8,755 | 28,755 | 19,497 | 11,564 | 9,300 | 40,361 |
07/31/78 | 21,000 | 1,006 | 9,761 | 30,761 | 23,628 | 13,467 | 11,993 | 49,088 |
07/31/79 | 22,000 | 2,034 | 11,795 | 33,795 | 27,002 | 14,859 | 15,520 | 57,381 |
07/31/80 | 23,000 | 2,899 | 14,694 | 37,694 | 37,792 | 21,740 | 24,526 | 84,058 |
07/31/81 | 24,000 | 3,723 | 18,417 | 42,417 | 30,413 | 40,456 | 22,436 | 93,305 |
07/31/82 | 25,000 | 4,187 | 22,604 | 47,604 | 27,728 | 38,656 | 23,742 | 90,126 |
07/31/83 | 26,000 | 6,693 | 29,297 | 55,297 | 39,951 | 54,379 | 42,184 | 136,514 |
07/31/84 | 27,000 | 5,594 | 34,891 | 61,891 | 35,017 | 57,252 | 41,236 | 133,505 |
07/31/85 | 28,000 | 4,585 | 39,476 | 67,476 | 37,804 | 72,022 | 48,584 | 158,410 |
07/31/86 | 29,000 | 7,249 | 46,725 | 75,725 | 41,121 | 76,544 | 59,601 | 177,266 |
07/31/87 | 30,000 | 5,927 | 52,652 | 82,652 | 44,221 | 105,396 | 69,542 | 219,159 |
07/31/88 | 31,000 | 3,645 | 56,297 | 87,297 | 31,790 | 104,330 | 52,388 | 188,508 |
07/31/89 | 32,000 | 9,552 | 65,849 | 97,849 | 36,285 | 115,991 | 69,190 | 221,466 |
07/31/90 | 33,000 | 8,906 | 74,755 | 107,755 | 37,861 | 118,013 | 79,129 | 235,003 |
07/31/91 | 34,000 | 8,050 | 82,805 | 116,805 | 40,959 | 124,699 | 92,848 | 258,506 |
07/31/92 | 35,000 | 1,934 | 84,739 | 119,739 | 44,364 | 149,635 | 100,502 | 294,501 |
07/31/93 | 36,000 | 2,772 | 87,511 | 123,511 | 49,965 | 190,689 | 114,149 | 354,803 |
07/31/94 | 37,000 | 1,889 | 89,400 | 126,400 | 50,655 | 228,509 | 115,427 | 394,591 |
07/31/95 | 38,000 | 5,070 | 94,470 | 132,470 | 48,408 | 292,747 | 114,187 | 455,342 |
07/31/96 | 39,000 | 6,245 | 100,715 | 139,715 | 49,971 | 306,882 | 121,896 | 478,749 |
07/31/97 | 40,000 | 6,484 | 107,199 | 147,199 | 64,858 | 417,972 | 163,735 | 646,565 |
07/31/98 | 41,000 | 4,565 | 111,764 | 152,764 | 55,514 | 402,146 | 142,269 | 599,929 |
07/31/99 | 42,000 | 6,295 | 118,059 | 160,059 | 56,941 | 405,522 | 150,017 | 612,480 |
07/31/2000 | 43,000 | 0 | 118,059 | 161,059 | 53,933 | 411,402 | 139,558 | 604,893 |
07/31/2001 | 44,000 | 0 | 118,059 | 162,059 | 25,214 | 257,139 | 62,754 | 345,107 |
07/31/2002 | 45,000 | 0 | 118,059 | 163,059 | 14,689 | 142,321 | 34,187 | 191,197 |
07/31/2003 | 46,000 | 0 | 118,059 | 164,059 | 19,047 | 175,465 | 42,149 | 236,661 |
07/31/2004 | 47,000 | 0 | 118,059 | 165,059 | 19,783 | 173,515 | 41,680 | 234,978 |
07/31/2005 | 48,000 | 0 | 118,059 | 166,059 | 23,625 | 198,860 | 47,768 | 270,253 |
07/31/2006 | 49,000 | 0 | 118,059 | 167,059 | 24,503 | 198,210 | 47,612 | 270,325 |
07/31/2007 | 50,000 | 0 | 118,059 | 168,059 | 29,396 | 230,053 | 55,261 | 314,710 |
07/31/2008 | 51,000 | 0 | 118,059 | 169,059 | 26,529 | 200,160 | 48,081 | 274,770 |
07/31/2009 | 52,000 | 0 | 118,059 | 170,059 | 23,079 | 167,016 | 40,119 | 230,214 |
07/31/2010 | 53,000 | 0 | 118,059 | 171,059 | 24,651 | 171,565 | 41,212 | 237,428 |
07/31/2011 | 54,000 | 0 | 118,059 | 172,059 | 26,343 | 176,764 | 42,461 | 245,568 |
07/31/2012 | 55,000 | 0 | 118,059 | 173,059 | 28,849 | 187,162 | 44,958 | 260,969 |
07/31/2013 | 56,000 | 0 | 118,059 | 174,059 | 37,916 | 239,801 | 57,603 | 335,320 |
07/31/2014 | 57,000 | 0 | 118,059 | 175,059 | 41,677 | 274,894 | 66,033 | 282,604 |
07/31/2015 | 58,000 | 0 | 118,059 | 176,059 | 47,983 | 308,038 | 73,994 | 430,015 |
07/31/2016 | 59,000 | 0 | 118,059 | 177,059 | 47,859 | 301,192 | 72,350 | 421,401 |
07/31/2017 | 60,000 | 0 | 118,059 | 178,059 | 58,857 | 336,252 | 79,567 | 474,676 |
07/31/2018 | 61,000 | 0 | 118,059 | 179,059 | 64,382 | 368,801 | 88,553 | 521,736 |
07/31/2019 | 62,000 | 0 | 118,059 | 180,059 | 74,595 | 422,050 | 101,339 | 597,984 |
07/31/2020 | 63,000 | 0 | 118,059 | 181,059 | 84,399 | 472,012 | 113,336 | 669,747 |
07/31/2021 | 64,000 | 17,507 | 135,566 | 199,566 | 85,342 | 593,157 | 137,803 | 834,500 |
07/31/2022 | 65,000 | 95,187 | 230,753 | 295,753 | 86,285 | 539,158 | 106,391 | 726,413 |
07/31/2023 | 66,000 | 50,930 | 281,503 | 347,503 | 87,228 | 622,893 | 111,600 | 820,293 |
The
table below illustrates the effect of an automatic withdrawal program on an
initial hypothetical investment of $10,000 on August 1, 1958 in the Fund for the
life of the Fund. The illustration assumes
that a sales load of 5.75% was deducted from the initial investment, that $800 was withdrawn annually and withdrawals were made first from income for the year, then from principal. Withdrawals from principal representing the sale of shares were assumed to have been in the order shares were acquired. Continued withdrawals in excess of current income can eventually exhaust principal, particularly in a period of declining market prices. That portion of the total amount withdrawn designated "From Investment Income Dividends" should be regarded as income; the remainder represents a withdrawal of principal. While this illustration assumes that $800 was withdrawn annually, the Fund may in other illustrations select any percentage or dollar amount to be withdrawn.
Period Ended | Withdrawn from investment income dividends | Withdrawn from principal and capital gains | Annual total withdrawn | Cumulative total withdrawn | Value of remaining original shares | Accepted as Capital Gains distributions | Total Value |
07/31/59 | $ 0 | $ 800 | $ 800 | $ 800 | $ 10,490 | $ 0 | $ 10,490 |
07/31/60 | 147 | 653 | 800 | 1,600 | 9,073 | 0 | 9,073 |
07/31/61 | 262 | 538 | 800 | 2,400 | 11,078 | 198 | 11,276 |
07/31/62 | 224 | 576 | 800 | 3,200 | 8,984 | 223 | 9,207 |
07/31/63 | 216 | 584 | 800 | 4,000 | 10,211 | 556 | 10,767 |
07/31/64 | 180 | 620 | 800 | 4,800 | 12,144 | 868 | 13,012 |
07/31/65 | 187 | 616 | 800 | 5,600 | 10,805 | 1,695 | 12,500 |
07/31/66 | 215 | 585 | 800 | 6,400 | 10,252 | 2,822 | 13,074 |
07/31/67 | 349 | 451 | 800 | 7,200 | 10,118 | 4,312 | 14,430 |
07/31/68 | 295 | 505 | 800 | 8,000 | 10,620 | 4,733 | 15,353 |
07/31/69 | 310 | 490 | 800 | 8,800 | 8,094 | 5,556 | 13,650 |
07/31/70 | 364 | 436 | 800 | 9,600 | 5,807 | 4,843 | 10,650 |
07/31/71 | 360 | 440 | 800 | 10,400 | 7,023 | 6,198 | 13,221 |
07/31/72 | 376 | 424 | 800 | 11,200 | 6,990 | 6,526 | 13,516 |
07/31/73 | 352 | 448 | 800 | 12,000 | 6,225 | 6,425 | 12,650 |
07/31/74 | 357 | 443 | 800 | 12,800 | 4,526 | 5,380 | 9,906 |
07/31/75 | 571 | 229 | 800 | 13,600 | 3,933 | 6,323 | 10,256 |
07/31/76 | 427 | 373 | 800 | 14,400 | 4,228 | 7,317 | 11,545 |
07/31/77 | 356 | 444 | 800 | 15,200 | 4,290 | 8,138 | 12,428 |
07/31/78 | 310 | 490 | 800 | 16,000 | 4,554 | 9,478 | 14,032 |
07/31/79 | 582 | 218 | 800 | 16,800 | 4,879 | 10,457 | 15,336 |
07/31/80 | 775 | 25 | 800 | 17,600 | 6,763 | 14,653 | 21,416 |
07/31/81 | 800 | 0 | 800 | 18,400 | 5,498 | 17,236 | 22,734 |
07/31/82 | 800 | 0 | 800 | 19,200 | 5,035 | 15,896 | 20,931 |
07/31/83 | 800 | 0 | 800 | 20,000 | 8,324 | 22,362 | 30,686 |
07/31/84 | 800 | 0 | 800 | 20,800 | 7,482 | 21,515 | 28,997 |
07/31/85 | 800 | 0 | 800 | 21,600 | 8,201 | 25,201 | 33,402 |
07/31/86 | 800 | 0 | 800 | 22,400 | 9,595 | 26,784 | 36,379 |
07/31/87 | 800 | 0 | 800 | 23,200 | 10,697 | 33,286 | 43,983 |
07/31/88 | 732 | 68 | 800 | 24,000 | 7,440 | 29,402 | 36,842 |
07/31/89 | 800 | 0 | 800 | 24,800 | 9,611 | 32,688 | 42,299 |
07/31/90 | 800 | 0 | 800 | 25,600 | 10,647 | 33,257 | 43,904 |
07/31/91 | 800 | 0 | 800 | 26,400 | 12,175 | 35,142 | 47,317 |
07/31/92 | 354 | 446 | 800 | 27,200 | 12,488 | 40,443 | 52,931 |
07/31/93 | 498 | 302 | 800 | 28,000 | 13,557 | 49,240 | 62,797 |
07/31/94 | 334 | 466 | 800 | 28,800 | 13,018 | 55,852 | 68,870 |
07/31/95 | 800 | 0 | 800 | 29,600 | 12,451 | 66,056 | 78,507 |
07/31/96 | 800 | 0 | 800 | 30,400 | 12,889 | 68,689 | 81,578 |
07/31/97 | 800 | 0 | 800 | 31,200 | 17,022 | 92,189 | 109,211 |
07/31/98 | 771 | 29 | 800 | 32,000 | 14,285 | 86,086 | 100,371 |
07/31/99 | 800 | 0 | 800 | 32,800 | 14,702 | 86,809 | 101,511 |
07/31/2000 | 0 | 800 | 800 | 33,600 | 12,877 | 86,417 | 99,294 |
07/31/2001 | 0 | 800 | 800 | 34,400 | 4,990 | 50,702 | 55,692 |
07/31/2002 | 0 | 800 | 800 | 35,200 | 1,919 | 27,982 | 29,901 |
07/31/2003 | 0 | 800 | 800 | 36,000 | 1,565 | 34,499 | 36,064 |
07/31/2004 | 0 | 800 | 800 | 36,800 | 748 | 34,115 | 34,863 |
07/31/2005 | 0 | 800 | 800 | 37,600 | 57 | 39,099 | 39,156 |
07/31/2006 | 0 | 800 | 800 | 38,400 | 0 | 38,971 | 38,228 |
07/31/2007 | 0 | 800 | 800 | 39,200 | 0 | 45,232 | 43,569 |
07/31/2008 | 0 | 800 | 800 | 40,000 | 0 | 39,354 | 37,108 |
07/31/2009 | 0 | 800 | 800 | 40,800 | 0 | 32,838 | 30,163 |
07/31/2010 | 0 | 800 | 800 | 41,600 | 0 | 33,732 | 30,185 |
07/31/2011 | 0 | 800 | 800 | 42,400 | 0 | 34,754 | 30,299 |
07/31/2012 | 0 | 800 | 800 | 43,200 | 0 | 36,799 | 31,282 |
07/31/2013 | 0 | 800 | 800 | 44,000 | 0 | 47,148 | 39,280 |
07/31/2014 | 0 | 800 | 800 | 44,800 | 0 | 54,048 | 44,228 |
07/31/2015 | 0 | 800 | 800 | 45,600 | 0 | 60,564 | 48,760 |
07/31/2016 | 0 | 800 | 800 | 46,400 | 0 | 58,418 | 46,876 |
07/31/2017 | 0 | 800 | 800 | 47,200 | 0 | 64,653 | 51,721 |
07/31/2018 | 0 | 800 | 800 | 48,000 | 0 | 68,817 | 54,892 |
07/31/2019 | 0 | 800 | 800 | 48,800 | 0 | 77,953 | 62,018 |
07/31/2020 | 0 | 800 | 800 | 49,600 | 0 | 86,381 | 68,560 |
07/31/2021 | 800 | 0 | 800 | 50,400 | 0 | 107,511 | 84,531 |
07/31/2022 | 800 | 0 | 800 | 51,200 | 0 | 84,976 | 72,688 |
07/31/2023 | 800 | 0 | 800 | 52,000 | 0 | 91,800 | 81,184 |
TOTAL | $ 23,501 | $ 28,499 | $ 52,000 |
Performance
information for the Fund reflects only the performance of a hypothetical
investment in the Fund during the particular time period on which the
calculations are based. Performance information should be considered in light of
the Funds investment objectives and policies, characteristics and quality of the
portfolio and the market conditions during the given time period and should not
be considered as a representation of what may be achieved in the
future.
CUSTODIAN AND INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
All securities and cash of the Fund are held by
its custodian, UMB Bank NA Investment Services Group, 928 Grand Blvd, Fifth
Floor, Kansas City, MO 64106. The Fund’s registered public accounting firm is
Sanville & Company CPA, 1514 Old York Road, Abington, PA 19001 provides
auditing and tax services to the Fund.
TRANSFER AGENT
The Fund´s transfer agent is Fund
Services, Inc. 8730 Stony Point Parkway, Stony Point Bldg. III, Suite 205,
Richmond, VA 23235.