<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 29, 1995
SECURITIES ACT FILE NO. 2-14543 INVESTMENT COMPANY ACT FILE NO. 811-825
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 50 [x]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 20 [x]
(CHECK APPROPRIATE BOX OR BOXES)
----------------
AMERICAN GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
410 17TH Street, Suite 800
Denver, Colorado 80202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (303) 623-6137
Robert Brody
410 17th Street, Suite 800
Denver, CO 80202
(Name and Address of Agent For Service)
Copies to:
Shereff, Friedman, Hoffman & Goodman, LLP
Attn: Joel H Goldberg, Esq.
919 Third Avenue
New York, New York 10022
---------------------------------
Approximate Date of Proposed Public Offering: as soon as practicable after the
effective date of the Registration Statement
---------------------------------
It is proposed that this filing will become effective (check appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[_] on (date) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a)(1)
[x] on (March 1, 1996) Pursuant to paragraph (a)(1)
[_] 75 days after filing pursuant to paragraph (a)(2)
[_] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
--------------------------------
Pursuant to Rule 24f-2(a)(1) under the investment company act of 1940, the
Fund has registered an indefinite number or amount of its securities under
the Securities Act of 1933. The fund filled its Rule 24f-2 Notice for the
fiscal year ended July 31, 1995 on September 21, 1995.
<PAGE>
CROSS REFERENCE SHEET PURSUANT TO RULE 481(A) UNDER THE SECURITIES ACT OF 1933
N-1A ITEM NO. LOCATION
PART A
Item 1. Cover Page................................... Cover Page
Item 2. Synopsis..................................... Fee Table
Item 3. Condensed Financial Information.............. Financial Highlights;
Performance Data
Item 4. General Description of Registrant............ Investment Objectives
and Policies; Additional Information
Item 5. Management of the Fund....................... Fee Table; Management
of the Fund; Inside Back Cover Page
Item 5A. Management's Discussion of Fund
Performance.................................. Performance Information
Item 6. Capital Stock and Other Securities........... Cover Page; Additional
Information
Item 7. Purchase of Securities Being Offered.......... Cover Page; Fee Table;
Purchase of Shares; Additional Information;
Inside Back Cover Page
Item 8. Redemption or Repurchase...................... Fee Table; Purchase of
Shares; Redemption of Shares
Item 9. Pending Legal Proceedings..................... Not Applicable
PART B
Item 10. Cover Page.................................... Cover Page
Item 11. Table of Contents............................. Back Cover Page
Item 12. General Information and History............... Not Applicable
Item 13. Investment Objectives and Policies............ Investment Objectives
and Policies
Item 14. Management of the Fund........................ Management of the Fund
Item 15. Control Persons and Principal Holders
of Securities................................. Management of the Fund
Item 16. Investment Advisory and Other Management
of the Fund; Purchase of Services........... Shares; General Information
Item 17. Brokerage Allocation..................... Portfolio Transactions and
Brokerage
Item 18. Capital Stock and Other Securities............ General Information
Item 19. Determination of Net Asset Value;
Purchase, Redemption and Pricing of
Securities Being Offered.................... Purchase of Shares;
Redemption of Shares; Determination of
Net Asset Value; Shareholder Services
Item 20. Tax Status................................ Dividends, Distributions
and Taxes
Item 21. Underwriters.................................. Purchase of Shares
Item 22. Calculation of Performance Data............... Performance Data
Item 23. Financial Statements.......................... Financial Statements
<PAGE>
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this post-effective amendment to the
Registration Statement.
AMERICAN GROWTH FUND, INC.
410 17TH STREET, SUITE 800, DENVER, CO 80202-4418. PHONE NO. (303) 623-6137
PROSPECTUS
March 1, 1996
AMERICAN GROWTH FUND, INC. is a professionally managed diversified
investment fund which primarily invests in common stocks and securities
convertible into common stock with the objectives of capital growth and,
secondarily, current income. In pursuing the Fund's objectives, the Fund's
Adviser intends to take a conservative approach to investments, balancing the
preservation of capital against potential gains.
-------------------------
This Fund offers four classes of shares, each with a different combination
of sales charges, distribution and service fees and other features. This permits
an investor to choose the method of purchasing shares that the investor believes
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. See
Purchase of Shares.
Shares may be purchased directly from American Growth Fund Sponsors, Inc.
(the "Distributor"), 410 17th Street, Suite 800, Denver, CO 80202, (303)
623-6137, or from securities dealers which have entered into dealer agreements
with the Distributor.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before making an investment in the Fund. This
Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Fund dated March 1, 1996
(the "Statement of Additional Information"), has been filed with the Securities
and Exchange Commission and is available, without charge, by calling or by
writing the Fund at the above telephone number or address. The Statement of
Additional Information is incorporated by reference into this Prospectus.
Shares of the Fund are not deposits or obligation of, or guaranteed or
endorsed by, any bank, and shares of the Fund are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
agency.
1
<PAGE>
AMERICAN GROWTH FUND SPONSORS, INC. -- DISTRIBUTOR
410 17th Street, Suite 800, Denver, Colorado 80202-4418
303-623-6137
800-525-2406
FEE TABLE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
---------- ---------------------- ----------- --------
<S> <C> <C> <C> <C>
SHAREHOLDER
TRANSACTION
EXPENSES:
Maximum Sales
Load Imposed
on Purchases
(as a per-
centage of
offering
price)....... 5.75% None None 5.75%
Sales Load
Imposed on
Dividend
Reinvestments. None None None None
Deferred Load
(as a None(b) 5.0% during the first 2 1% for one year None(b)
percentage of years, 4% for the next
original pur- 2 years, decreasing 1%
chase price annually thereafter to 0.0%
or redemption the seventh year (a)
proceeds,
whichever is
lower).......
Exchange Fee.. None None None None
ANNUAL FUND OP-
ERATING EX-
PENSES (AS A
PERCENTAGE OF
AVERAGE NET
ASSETS)(a)....
Investment Ad-
visory
Fees......... 0.83% 0.83% 0.83% 0.83%
12b-1 Fees...: 0.30% 1.00% 1.00% None
Other Expenses:(c) 0.62% 0.62% 0.62% 0.62%
----- ----- ----- -----
Total Fund Op-
erating Ex- 1.75% 2.45% 2.45% 1.45%
penses ........ ===== ===== ===== =====
</TABLE>
2
<PAGE>
(a) Class B shares convert to Class A shares automatically approximately eight
years after initial purchase. See "Purchase of Shares--Deferred Sales
Charge Alternatives--Class B and Class C Shares"--page 25.
(b) Class A and Class D shares are not subject to a contingent deferred sales
charge ("CDSC"), except that purchases of $1,000,000 or more which may not
be subject to an initial sales charge will instead be subject to a CDSC of
1.0% of amounts redeemed within the first year of purchase.
(c) Information under "Other Expenses" for Class A, Class B and Class C shares
is estimated based on the expenses for Class D shares for the fiscal year
ended July 31, 1995. Information for Class D shares is based on expenses
for the fiscal year ended July 31, 1995.
3
<PAGE>
<TABLE>
<CAPTION>
-------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE: ------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment including the maximum
$57.50 initial sales charge (Class A and
Class D shares only) and assuming (1) the To-
tal Fund Operating Expenses for each class
set forth above; (2) a 5% annual return
throughout the periods and (3) redemption at
the end of the period:
Class A...................................... $74.26 $109.44 $146.94 $251.89
Class B...................................... $74.81 $116.35 $180.55 $278.62*
Class C...................................... $24.81 $ 76.36 $130.56 $278.62
Class D...................................... $71.41 $100.72 $132.15 $221.05
An investor would pay the following expenses
on the same $1,000 investment assuming no re-
demption at the end of the period:
Class A...................................... $74.26 $109.44 $146.94 $251.89
Class B...................................... $24.81 $ 76.35 $130.55 $278.62*
Class C...................................... $24.81 $ 76.36 $130.56 $278.62
Class D...................................... $71.41 $100.72 $132.15 $221.05
</TABLE>
- - --------
* Assumes conversion to Class A shares approximately seven years after
purchase.
The foregoing Fee Table is intended to assist investors in understanding
the costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The example should not be considered a representation of past or
future expenses or annual rate of return, and actual expenses or annual rates of
return may be more or less than those assumed for purposes of the Example. The
Example set forth above assumes reinvestment of all dividends and distributions
and utilizes a 5% annual rate of return as mandated by Securities and Exchange
Commission (the "Commission") regulations. Class A, Class B and Class C
shareholders who own their own shares for an extended period of time may pay
more in Rule 12b-1 distribution fees than the economic equivalent of the maximum
front-end sales charge permitted under the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (the "NASD"). See "Purchase of
Shares" and "Redemption of Shares".
4
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial information for the five years ended July 31,
1995 has been audited by Smith, Brock & Gwinn, independent accountants, whose
report with respect thereto accompanies the financial statements in the
Statement of Additional Information. The information for the five years ended
July 31, 1990 was examined by other auditors. The per share data covers the
period from August 1, 1985 through July 31, 1995. Only financial information for
Class D is presented in the following financial highlights table; Class A, Class
B and Class C shares had not commenced operations during the fiscal year ended
July 31, 1995 and accordingly no information is presented for those classes.
(For a Class D share outstanding throughout the Fund's fiscal year)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31
INCOME AND EXPENSES 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period. . . . . . . . . . $ 9.34 $ 9.39 $ 8.50 $ 8.02 $ 7.59 $ 7.46 $ 6.71 $ 9.62 $ 9.14 $ 8.60
Income From Investment Operations
Net Investment Income. . . . . . . . . .210 .034 .105 .097 .157 .174 .376 .236 .162 .307
Net Gains or Losses on Securities
(both realized and unrealized) . . . .880 .996 1.515 .943 .533 .256 .714 (1.716) 1.698 .623
---- ---- ----- ---- ---- ---- ---- ------- ----- ----
Total from Investment Operations . . . 1.090 1.030 1.620 1.040 .690 .430 1.090 (1.480) 1.860 .930
----- ----- ----- ----- ---- ---- ----- ------- ----- ----
Less Distributions
Dividends
(from net investment income) . . . . . (.120) (.050) (.080) (.060) (.260) (.300) (.340) (.160) (.290) (.390)
Distributions
(from capital gains) . . . . . . . . . (1.560) (1.030) (.650) (.500) ..... ..... ..... (1.270) (1.090) .....
Returns of Capital . . . . . . . . . . ..... ..... ..... ..... ..... ..... ..... ..... ..... .....
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total Distributions. . . . . . . . . . (1.680) (1.080) (.730) (.560) (.260) (.300) (.340) (1.430) (1.380) (.390)
------- ------- ------ ------ ------ ------ ------ ------- ------- ------
Net Asset Value, End of Period . . . . $8.75 $9.34 $9.39 $8.50 $8.02 $7.59 $7.46 $6.71 $9.62 $9.14
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total Return*. . . . . . . . . . . . . +15.2% +11.1% +20.2% +13.6 % +9.6% +5.7% +17.0% -14.4% +23.1% +11.3%
Ratios/Supplemental Data
Net Assets, End of Period (millions) . 90.5 68.2 62.2 55.5 55.7 58.6 63.9 64.2 81.3 69.3
Ratio of Expenses to
Average Net Assets*** . . . . . . . . 1.45% 1.34% 1.44% 1.46% 1.33% 1.33% 1.32% 1.29% 1.28% 1.29%
Ratio of Net Income to
Average Net Assets. . . . . . . . . . 1.91% 0.35% 0.59% 1.14% 2.02% 2.01% 5.15% 3.17% 1.99% 3.38%
Portfolio Turnover Rate**. . . . . . . 173.0% 87.2% 48.8% 39.8% 135.5% 92.3% 60.9% 241.7% 197.0% 165.6%
</TABLE>
*Sales load not reflected in total return.
**U.S. Government securities with a maturity date in excess of one year were not
included in the computation prior to the year ended July 31, 1986.
***For the fiscal years ended July 31, 1994 and 1995, this amount does not
include transfer agent fees and certain other Fund expenses which were paid on
behalf of the Fund by broker-dealers that affected portfolio transactions for
the Fund. If the Fund had paid these expenses, this amount would have been
1.46% and 1.76% respectively.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
American Growth Fund, Inc. an open-end diversified investment company, is a
Maryland corporation organized July 16, 1958.
The primary investment objective of the Fund is growth of capital. Income,
while a factor in portfolio selection, is secondary to the Fund's principal
objective. These investment objectives can be changed by a vote of the board of
directors without a vote of the Fund's shareholders, which could cause the Fund
to have an investment objective different from that deemed appropriate by the
shareholder at the time of investment. The Fund will notify shareholders of any
change in investment objectives at least 30 days in advance of such change.
There can be no assurance that the Fund will attain its investment objectives.
To achieve its investment objective, the Fund will under normal conditions
invest at least 65% of its assets in common stocks and securities convertible
into common stocks traded on national securities exchanges or over-the-counter.
The Adviser will choose common stocks (or convertible securities) that the
Adviser believes have potential for capital appreciation because of existing or
anticipated economic conditions or because of other factors, including that 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 Investors Service or Standard & Poor's
Ratings Group, or, if unrated, will be of comparable quality in the opinion of
the Adviser.
In pursuing the Fund's objectives, the Adviser intends to take a
conservative approach to investment, balancing the preservation of capital
against potential gains. When the Adviser believes the securities the Fund
holds may decline in value, the Fund may sell them and, until such time as the
Adviser believes market conditions warrant otherwise, invest all or part of the
Fund's assets in corporate bonds, debentures or preferred stocks rated A or
above (or, if unrated, of comparable quality in the opinion of the Adviser),
United States Government securities, repurchase agreements whereby the
underlying security is issued by the United States Government or an agency
thereof, or retain funds in cash or cash equivalents. There are market risks in
all investments in securities, and the value of the Fund's securities, and
consequently the Fund's share price, will fluctuate.
A repurchase agreement is a contract where the seller agrees to repurchase
the securities at a specified price within a specified time (generally one
business day). The Fund's repurchase agreements will at all times be fully
collateralized in an amount at least equal to the repurchase price, including
accrued interest earned on the underlying securities. The collateral will be
held by the Fund's Custodian, either physically or in a book-entry account.
The Fund will enter into repurchase transactions only with parties who meet
creditworthiness standards approved by the Fund's board of directors. The
Fund's Adviser monitors the creditworthiness of such parties under the
directors' general supervision. In the event of a default or bankruptcy by a
seller, the Fund will promptly seek to liquidate the collateral. To the extent
that the proceeds from any sale of such collateral upon a default in the
obligation to repurchase are less than the repurchase price, the Fund will
suffer a loss. If the financial institution which is party to the repurchase
agreement petitions for bankruptcy or becomes subject to the United States
Bankruptcy code, the law regarding the rights of the Fund is unsettled. As a
result, under these extreme circumstances, there may be a restriction on the
Fund's ability to sell the collateral and the Fund could suffer a loss. 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 Statement of Additional Information contains a discussion of other
investment policies and a list of specific investment restrictions which govern
the Fund's investment policies. 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. Accordingly, the Fund will not borrow for leverage
purposes. 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 broker's 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 cannot invest more than 5% of its
assets in securities of issuers that have been in operation less than three
years, and, in any even, these investments are limited to utility or pipeline
companies. These and the other specific investment restrictions listed in the
Statement of Additional Information can be changed only by approval by a
majority of the outstanding shares as defined by the Investment Company Act of
1940.
As a "diversified company" the Fund must meet the following requirements:
At least 75% of the value of its total assets is represented by cash and cash
items (including receivables), Government securities, securities of other
investment companies, and other
6
<PAGE>
securities for the purposes of this calculation limited in respect of any one
issuer to an amount not greater in value than 5% of the value of the total
assets of such management company and to not more than 10% of the outstanding
voting securities of such issuer.
MANAGEMENT OF THE FUND
The daily operations of the Fund are managed by its officers subject to the
overall supervision and control of the board of directors. The Fund also has a
board of advisors which counsels the directors as to general economic conditions
and specific industries.
Since the organization of the Fund in 1958, its investment adviser has been
Investment Research Corporation, (the "Adviser"), 410 17th Street, Suite 800,
Denver, Colorado 80202-4418, a registered investment adviser. Robert Brody, the
sole shareholder, president and a director of the Adviser, is a control person
of the Adviser. Mr. Brody, as President of the Fund, has primary
responsibility for the selection of the Fund's investments and the day-to-day
management of the Fund's portfolio. Mr. Brody has acted in this capacity with
respect to the Fund since 1958. The Adviser provides investment advice and
recommendations concerning the purchases and sales of the Fund's portfolio of
securities, furnishes such statistical and analytical information as the Fund
may reasonably require, and provides certain administrative and clerical
services.
Pursuant to its agreement with the Adviser, the Fund pays an annual
advisory fee based upon a percentage of the Fund's average net assets, subject
to reduction if the Fund's expenses exceed specified levels. For the year
ended July 31, 1995, this fee amounted to .83% of the Fund's average net
assets. The Advisory fee paid by the Fund is higher than that paid by most
other investment companies. The Fund's aggregate expenses for the same period
amounted to 1.45% of the Fund's average net assets of the Class D shares (the
only class of shares in existence at that time).
BROKERAGE
The Fund does not currently use the services of any affiliated brokers in
its portfolio transactions, and the Fund does not have any agreement or
arrangement to use any particular broker for portfolio transactions. The Fund
has a policy of considering sales of Fund shares in selecting brokers for
portfolio transactions provided that the Fund's experience with such brokers
indicates that they are capable of providing best execution. The Fund's
portfolio turnover rate in fiscal year 1995 was 173.0%. The turnover rate was
greater in fiscal year 1995 than in 1994 because the Adviser moved the portfolio
from cash or cash equivalents into equities to take advantage of the rising
equity markets.
PURCHASE OF SHARES
The Fund's underwriter is American Growth Fund Sponsors, Inc., (the
"Distributor"), 410 17th Street, Suite 800, Denver, Colorado 80202-4418. Robert
Brody, president and a director of the Fund, is also president and a director of
the Fund's Underwriter.
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 charges as described below. Shares can be purchased through the
Distributor or through broker-dealers with whom the Underwriter has sales
agreements. Purchase orders received and properly time-stamped by dealers and
received by the Fund's 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 of the New York Stock Exchange ("NYSE") on that day. Orders received
after such times will be confirmed at the public offering price determined as of
the close of the NYSE on the next business day. A business day is any day the
NYSE is open for trading.
The Fund issues four classes of shares which permits each investor to
choose the method of purchasing shares that the investor believes is most
beneficial given the amount of the purchase, the length of time the investor
expects to hold the shares and other relevant circumstances. Shares of Class A
and Class D are sold to investors choosing the initial sales charge alternatives
and shares of Class B and Class C are sold to investors choosing the deferred
sales charge alternatives. Investors should determine whether under their
particular circumstances it is more advantageous to incur an initial sales
charge or to have the entire initial purchase price invested in the Fund, with
the investment thereafter being subject to a CDSC and higher distribution fees.
A discussion of the factors that investors should consider in determining the
method of purchasing shares is set forth below.
Each Class A, Class B, Class C and Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund
7
<PAGE>
and has the same rights, except that Class B and Class C shares bear the
expenses of the ongoing service fees, the expenses of the ongoing distribution
fees, and Class B and Class C may bear the additional incremental transfer
agency costs resulting from the deferred sales charge arrangements. 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 Fund 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 Rule 12b-1 fees and any incremental
transfer agency 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 Rule 12b-1 distribution plan adopted with respect to
such class pursuant to which Rule 12b-1 fees are paid.
In selecting a purchase alternative, an investor should consider, among
other things, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and distribution-related fees, as noted below, (3) whether you
qualify for any reduction or waiver of any applicable sales charge; (4) the fact
that Class B shares automatically convert to Class A shares approximately seven
years after purchase (see "Conversion Feature -- Class B shares" below:.
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund.
If you intend to hold your investment in the Fund for less than 7 years and
do not qualify for a reduced sales charge on Class A shares or qualify to
purchase Class D shares, since Class A shares are subject to an initial sales
charge of 5.75% and Class B shares are subject to a CDSC of 5% which declines to
zero over a 7-year period, you should consider purchasing Class C shares over
either Class A or Class B shares.
If you intend to hold your investment for 7 years or more and do not
qualify for a reduced sales charge on Class A shares or qualify to purchase
Class D shares, since Class B shares convert to Class A shares approximately 7
years after purchase and because all of ;your money would be invested initially
in the case of Class B shares, you should consider purchasing Class A or Class B
shares over Class C shares.
If you qualify for a reduced sales charge on Class A shares but do not
qualify to purchase Class D shares it may be more advantageous for you to
purchase Class A shares over either Class B or Class C shares regardless of how
long you intend to hold your investment. However, unlike Class B and Class C
shares, you would not have all of your money invested initially because the
sales charge on Class A shares is deducted at the time of purchase.
If you qualify to purchase Class D shares, it will be more advantageous to
purchase Class D shares instead of Class A shares (which, unlike Class D shares,
have a .30% 12b-1 fee), and may be more advantageous for you to purchase Class D
shares over either Class B or Class C. shares depending on whether you are
eligible for reduced sales charges and how long you intend to hold your
investment.
If you do not qualify for a reduced sales charge on Class A or Class D
shares and you purchase Class B or Class C shares, you would have to hold your
investment for more than 6 years in the case of Class B shares and Class C
shares for the higher cumulative annual distribution-related fee on those shares
to exceed the initial sales charge(plus, for Class A shares, cumulative annual
distribution-related fees on Class A shares). This does not take into account
the time value of money, which further reduces the impact of the higher Class B
or Class C distribution-related fee on the investment, fluctuations in net asset
value, the effect of the return on the investment over this period of time or
redemptions during which the CDSC is applicable.
Investors should understand that the purpose and function of the initial
sales charges with respect to Class A and Class D shares are the same as those
of the deferred sales charges with respect to Class B and Class C shares in that
the sales charges applicable to each class provide for the financing of the
distribution of the shares of the Fund. The distribution-related revenues paid
with respect to a class will not be used to finance the distribution
expenditures of another class. Sales personnel may receive different
compensation for selling different classes of shares.
Commencing November 14, 1994 through and including November 1, 1995, the
Distributor will conduct a sales incentive promotion in which non-cash
concessions in the form of all expenses paid promotional trips to resort
location will be awarded to participating broker-dealers achieving certain
specified sales levels in shares of the Fund. In addition, commencing June 20,
1995 and ending September 30, 2005, the Distributor will offer a long-term sales
incentive promotion in which non-cash concessions in the form of one or more all
expenses paid promotional trips to resort location will be awarded to
participating broker-dealers achieving certain specified cumulative sales levels
in
8
<PAGE>
shares of the Fund. Participation in the incentive programs is entirely
optional on the part of broker-dealer. Copies of the incentive program rules
which contain more complete information about the terms and conditions of the
programs, including qualifying levels and specific awards, may be obtained by
investment representatives by contacting the Distributor.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES. Investors
choosing the initial sales charge alternatives who are eligible to purchase
Class D shares should purchase Class D shares rather than Class A shares because
there is a Rule 12b-1 fee imposed on Class A shares.
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternatives is the next determined net asset
value plus varying sales loads (i.e., sales loads), as set forth below.
<TABLE>
<CAPTION>
SALES CHARGES PAID
SALES CHARGES AS % TO DEALERS AS % OF SALES CHARGES AS %
AMOUNT INVESTED OF OFFERING PRICE OFFERING PRICE OF AMOUNT INVESTED
<S> <C> <C> <C>
Less than $50,000................ 5.75% 5.00% 6.10%
$50,000 but less than $100,000... 4.50 3.75 4.71
$100,000 but less than $250,000.. 3.50 2.75 3.63
$250,000 but less than $500,000.. 2.50 2.00 2.56
$500,000 but less than $1,000,000. 2.00 1.60 2.04
$1,000,000 and over............... 0.00 0.00 0.00
</TABLE>
From time to time the Distributor will pay all of the sales charge to
dealers. In such instances, the dealers may be deemed to be underwriters as
that term is defined in the Securities Act of 1933.
The adviser will make payments to dealers in the amount of 0.25 of 1% per
year of the average daily net asset value of outstanding Class D shares acquired
after April 1, 1994 through such dealers (including shares acquired through
reinvestment of dividends and distributions on such shares). These payments are
made by the Adviser and not by the Class D shareholders of the Fund.
Eligible Class D Investors. Class D shares are offered to a limited group
of investors and also will be issued upon reinvestment of dividends on
outstanding Class D shares. Investors that currently own Class D shares in a
shareholder account, including participants in the American Growth Fund
Distribution Plan, are entitled to purchase additional Class D shares in that
account.
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 in a single account
for which the Processing Organization is the shareholder of record. 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 Adviser and the Distributor.
Class A shares of the Fund may also be purchased at net asset value by an
investment adviser 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 adviser is authorized to make
investment decisions. Such investment advisers may impose charges and fees on
their clients for their services, which charges and fees may vary from
investment adviser to investment adviser.
9
<PAGE>
Reduced Initial Sales Charges. No initial sales charges are imposed upon
Class A and Class D shares issued as a result of the automatic reinvestment of
dividends or capital gains distributions. Class A and Class D sales charges also
may be reduced under a Right of Accumulation and a Letter of Intention. Class
shares are offered at net asset value to certain eligible Class D investors as
set forth above under "Eligible Class D Investors".
The sales charge may very with the amount of investment or the number of
Class A and/or Class D shares owned. The Fund makes available the following
investment plans and options which may involve reduced sales charges: Right of
Accumulation, Letter of Intent, and Retirement Plans. The Fund also offers and
Automatic Cash Withdrawal Plan, and Automatic Monthly Investment Plan,
Individual Retirement Accounts, Simplified Employee Pension, Money Purchase and
Profit Sharing Pension Plans, and Teacher and Non-Profit Employee Retirement
Plans. The Fund makes available to directors, officers or partners of the Fund,
its Adviser, employees of its Distributor, the Fund's board of advisors or
employees of dealers (and their spouses) who have sales agreements with the
Distributor, the purchase of Class A shares at net asset value. The Fund also
sells its Class A 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. More information on
this policy may be found in the Statement of additional Information. Additional
charges apply for some services or plans. For more information, including fees
and expenses contact the Distributor or the Fund.
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 a American Growth Fund Distribution Plan, if certain
conditions set forth in the Statement of Additional Information are met.
Additional information concerning these reduced sales charges, including
information regarding investments by Employer Sponsored Retirement or Savings
Plans, is set forth in the Statement of Additional Information.
DEFERRED SALES CHARGE ALTERNATIVES--CLASS B AND CLASS C SHARES. Investors
choosing the deferred sales charge alternatives should consider Class B shares
if they intend to hold their shares for an extended period of time and Class C
shares if they are uncertain as to the length of time they intend to hold their
assets in the Fund.
The public offering price of Class B and Class C shares for investors
choosing the deferred sales charge alternatives is the next determined net asset
value per share without the imposition of a sales charge at the time of
purchase. As discussed below, Class B shares are subject to a seven year CDSC,
while Class C shares are subject only to a one year 1.0% CDSC. On the other
hand, approximately seven years after Class B shares are issued, such Class B
shares, together with shares issued upon dividend and distribution reinvestment
with respect to those shares, are automatically converted into Class A shares of
the Fund and thereafter will be subject to lower continuing fees. See
"Conversion of Class B Shares to Class A Shares" below. Both Class B and Class C
shares are subject to a service fee of 0.25% of net assets and a distribution
fee of 0.75% of net assets as discussed below under "Distribution Plans".
Class B and Class C shares are sold without an initial sales charge so that
the Fund will receive the full amount of the investor's purchase payment. The
Distributor compensates broker, dealers and other financial consultants for
selling Class B and Class C shares at the time of purchase from its own funds.
See "Distribution Plans" below.
Proceeds from the CDSC and the ongoing service and distribution fee are
paid to the Distributor and are used in whole or in part by the Distributor to
defray the expenses related to providing distribution services to the Fund in
connection with the sale of the Class B and Class C shares. The combination of
the CDSC and the ongoing distribution fee facilitates the ability of the Fund to
sell the Class B and Class C shares without a sales charge being deducted at the
time of purchase. Approximately seven years after issuance, Class B shares will
convert automatically into Class A shares of the Fund, which are subject to a
service fee and a distribution fee. The proceeds from the ongoing service fee
are used to compensate the Distributor or dealers for providing continuing
account maintenance activities.
Imposition of the CDSC and the distribution fees on Class B and Class C
shares is limited by the NASD asset-based sales charge rule.
Contingent Deferred Sales Charges--Class B Shares. Class B shares which are
redeemed within seven years of purchase may be subject to a CDSC at the rates
set forth below. The charge will be assessed on an amount equal to the lesser of
the proceeds of redemption or the costs of the shares being redeemed.
Accordingly, no CDSC will be imposed on increases in net asset value above the
initial purchase price.
10
<PAGE>
In addition, no CDSC will be assessed on shares derived from reinvestment of
dividends or distributions.
The following table sets forth the rates of the Class B CDSC:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE CLASS B CDSC AS A PERCENTAGE OF PAYMENT MADE
OR OTHER DOLLAR AMOUNT SUBJECT TO CHARGE
<S> <C>
0-2.......................................... 5.00%
3-4.......................................... 4.00
5........................................... 3.00
6........................................... 2.00
7........................................... 1.00
</TABLE>
In determining whether a CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest possible
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over seven years or shares acquired pursuant to reinvestment
of dividends or distributions and then of shares held longest during the
seven-year period. The charge will not be applied to dollar amounts representing
an increase in the net asset value since the time of purchase. A transfer of
shares from a shareholder's account to another account will be assumed to be
made in the same order as a redemption.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the third year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares through dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to a CDSC because of dividend reinvestment. With respect to
the remaining 40 shares, the CDSC is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4.00% (the
applicable rate in the third year after purchase).
If a Class B share account is set up on an Automatic Withdrawal program,
there will be no CDSC to the amounts redeemed pursuant to the Automatic
Withdrawal Program as long as the total annual amount withheld is less than 12%
per year of the previous years' value or the initial investment, whichever is
greater.
Contingent Deferred Sales Charges--Class C Shares. Class C shares which
are redeemed within one year of purchase may be subject to a 1.0% CDSC. The
charge will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed. Accordingly, no Class C
CDSC will be imposed on increases in net asset value above the initial purchase
price. In addition, no Class C CDSC will be assessed on shares derived from
reinvestment of dividends or distributions.
In determining whether a Class C CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest possible
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over one year or shares acquired pursuant to reinvestment of
dividends or distributions and then of shares held longest during the one-year
period. The charge will not be applied to dollar amounts representing an
increase in the net asset value since the time of purchase.
Conversion of Class B Shares to Class A Shares. After approximately seven
years (the "Conversion Period"), Class B shares will be converted automatically
into Class A shares of the Fund. Class A shares are subject to an ongoing
service fee of 0.25% of net assets and are subject to distribution fee of 0.05%.
Automatic conversion of Class B shares into Class A shares will occur at least
once each month (on the "Conversion Date") on the basis of the relative net
asset values of the shares of the two classes on the Conversion Date, without
the imposition of any sales load, fee or other charge. Conversion of Class B
shares to Class A shares will not be deemed a purchase or sale of the shares for
Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends and
distributions on Class B shares also will convert automatically to Class A
shares. The Conversion Date for dividend reinvestment shares will be calculated
taking into account the length of time the shares underlying such reinvestment
shares were outstanding. If at a Conversion Date the conversion of Class B
shares to Class A shares of the Fund in a single account will result in less
than $50 worth of Class B shares being left in the account, all of the Class B
shares of the Fund held in
11
<PAGE>
the account on Conversion Date will be converted to Class A shares of the Fund.
Share certificates for Class B shares of the Fund to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event such certificates are not received by
theTransfer Agent at least one week prior to the Conversion Date, the related
Class B shares will convert to Class D shares on the next scheduled Conversion
Date after such certificates are delivered.
DISTRIBUTION PLANS
The Fund has adopted separate distribution plans for the Class A, Class B
and Class C shares pursuant to Rule 12b-1 under the Investment Company Act (each
a"Distribution Plan") with respect to the service and distribution fees paid by
the Fund to the Distributor with respect to such classes.
The Distribution Plans for Class A, Class B and Class C shares each provide
that the Fund pays the Distributor a service fee relating to the shares of the
relevant class, accrued daily and paid monthly, at the annual rate of 0.25% of
the average daily net assets of the Fund attributable to shares of the relevant
class in order to compensate the Distributor (who in turn may compensate
broker-dealers and other financial consultants) in connection with certain
services provided to shareholders of the applicable Class.
The Distribution Plans for Class A, Class B and Class C shares each provide
that the Fund also pays the Distributor a distribution fee relating to the
shares of the relevant class, accrued daily and paid monthly, at the annual rate
of 0.75% for Class B and Class C shares and 0.05% for Class A shares
respectively of the average daily net assets of the Fund attributable to the
shares of the class. These payments are intended to compensate the Distributor
for providing distribution services, and bearing certain distribution-related
expenses of the Fund, including payments to broker-dealer and other financial
consultants for selling Class B and Class C shares of the Fund. The Distribution
Plans relating to Class B and Class C shares are designed to permit an investor
to purchase Class B and Class C without the assessment of an initial sales
charge and at the same time permit the distributor to compensate broker-dealers
and other financial consultants in connection with the sale of the Class B and
Class C shares. In this regard, the purpose and function of the ongoing
distribution fees and the CDSC are the same as those of the initial sales charge
with respect to the Class A and Class D shares of the Fund in that the deferred
sales charges provide for the financing of the distribution of the Fund's Class
B and Class C shares.
The payments under the Distribution Plans are based on a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred and, accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses.
Information with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with their
deliberations as to the continuance of the Distribution Plans.
REDEMPTION OF SHARES
The Fund will redeem shares from a shareholder of record, (i) in the case
of Class D shares without any charge, (ii) in the case of Class A shares without
any charge (unless such shares are subject to the 1% CDSC on purchases of $1
million or more redeemed within 1 year of purchase), (iii) in the case of Class
B and Class C shares, subject to the applicable CDSC as described above under
"Deferred Sales Charge Alternative-Class B and Class C Shares". Payment
generally will be made within seven days after receipt of his written request
for redemption and a stock power with signature guaranteed by an "eligible
guarantor institution" as such term is defined in Rule 17Ad -15 under the
Securities Exchange Act of 1934 (including certain banks, brokers, dealers,
credit unions, securities exchanges and associations, clearing agencies and
savings associations) and the deposit of any share certificates. If no
certificates have been issued to the shareholder, redemption may be accomplished
by submitting a written request for redemption with the shareholder's signature
guaranteed if required as set forth below. Fiduciaries, corporations and other
entities may also be required to furnish supporting documents. The Fund will
waive the signature guarantee requirement if all of the following conditions
apply: (1) the redemption is for $5,000 or less; (2) the redemption check is
payable to the shareholder(s) of record; and (3) the redemption check is mailed
to the shareholder(s) at the address of record. The redemption price will be
the net asset value next determined after the receipt of a request in proper
form. Redemption of shares which were recently purchased may be delayed in
order to permit a determination to be made that the purchase check will be
honored. Such determination may be accomplished by the passage of a reasonable
period of time (approximately 15 days) or by written assurance to the Fund from
the bank upon which the purchase check was drawn, which must be arranged by the
shareholder requesting such redemption. An investor can avoid these potential
delays by paying for shares by certified check or wire transfer. The proceeds
from redemption may be more or less than the cost of the shares.
12
<PAGE>
The Fund will repurchase shares through broker-dealers with whom the
Distributor has a sales agreement. The Fund will normally accept orders to
repurchase (less any applicable CDSC) shares by wire or telephone from such
dealers for their customers at the net asset value next computed after receipt
of the order by the dealer, provided that the request for repurchase is
transmitted promptly to the Distributor by the dealer. Dealers have the
responsibility of submitting such repurchase requests to the Distributor
promptly in order to obtain that day's closing price. These repurchase
arrangements are for the convenience of shareholders and do not involve a charge
by the Fund. Certain securities firms may impose a transaction charge on the
shareholder for transmitting the notice of repurchase to the Fund. The Fund
reserves the right to reject any order for repurchase, which right of rejection
might adversely affect shareholders seeking redemption through the repurchase
procedure. A shareholder whose order for repurchase is rejected by the Fund,
however, may redeem shares as set forth above.
As a condition to the purchase of shares of the Fund, the purchaser agrees
that the Fund may, but is not required to, involuntarily redeem after written
notice the holdings of a shareholder the aggregate net asset value of which is
less than $250. The notice will fix a date not less than 30 days after the date
on which it is mailed, and the shares will be redeemed at net asset value as of
the close of business on that date, unless before then the investor purchases at
least sufficient additional shares to bring aggregate net asset value of his
holdings up to $250. A check for the proceeds of redemption, which may be less
or more than the purchase price of the shares, will be mailed to the investor at
his address of record.
REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES. Shareholders who
have redeemed their Class A or Class D shares have a one-time privilege to
reinstate their accounts by purchasing Class A or Class D shares, as the case
may be, of the Fund at net asset value without a sales charge up to the dollar
amount redeemed. The reinstatement privilege may be exercised by sending a
notice of exercise along with a check for the amount to be reinstated to the
Transfer Agent within 30 days after the date the request for redemption was
accepted by the Transfer Agent or the Distributor. The reinstatement will be
made at the net asset value per share next determined after the notice of
reinstatement is received and cannot exceed the amount of the redemption
proceeds. The reinstatement privilege is a one-time privilege and may be
exercised by the Class A or Class D shareholder only the first time such
shareholder makes a redemption.
EXCHANGE PRIVILEGE
The Distributor has arranged for shares of the portfolios of Cash Account
Trust, a no-load diversified open-end money market mutual fund (the "Money
Market Fund"), to be available in exchange for shares of Class A and Class D of
the Fund. Shares of the Money Market fund so acquired, plus any shares of the
Money Market fund acquired through reinvestment of dividends and distributions,
may be re-exchanged for shares of the Fund without a sales charge. The Money
Market Fund is separately managed from the Fund and is not affiliated with the
Fund. The Underwriter receives a fee from Kemper Financial Services, the
administrator of the Money Market Fund, of 0.06 of 1% per year of the average
daily net asset value of shares of the Money Market Fund established under this
program. For further information concerning the exchange privilege, and a copy
of the prospectus of the Money Market fund, contact the Distributor. The
exchange privilege does not constitute an offering or recommendation by the Fund
of the Money Market Fund, which is managed by an investment adviser that is not
affiliated with the Fund's Adviser. Shareholders should read the prospectus of
the Money Market Fund before entering into the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to declare income dividends and capital gains
distributions to its shareholders ordinarily in December and to pay them in
January of each calendar year unless the board of directors of the Fund
determines that it is to the shareholders' benefit to make distributions on a
different basis.
Unless the shareholder at his option on notice to the Fund previously
requests payments in cash, income dividends and capital gain distributions will
be reinvested in Fund shares, of the same class, at their relative net asset
values as of the business day next following the distribution record date. If
no instructions are given on the application form, all income dividends and
capital gains distributions will be reinvested.
AUTOMATED INVESTMENT PLAN
Regular additions of Class A, Class B, Class C or Class D shares may be
made to an investor's Investment Account by prearranged charges to such
investor's regular bank account. Contact the Distributor for further details
concerning this plan.
13
<PAGE>
TAXES
The Fund is qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code, of 1986, as amended ("the
Code"). As long as it is so qualified, the Fund will not be subject to U.S.
federal income tax on the portion of its investment company taxable income and
net capital gain distributed to its shareholders. 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 rather than the date on which the distributions are received. In
order to qualify as a regulated investment company for any taxable year, the
Fund must, among other things, (i) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or other income
derived with respect to its business of investing in such stock or securities,
and (ii) derive less than 30% of its gross income from the sales or other
disposition of stock or certain securities held for less than three months.
For U.S. federal income tax purposes, dividends of net ordinary income and
distributions of any net realized short-term capital gain, whether paid in cash
or reinvested in shares of the Fund, are taxable to shareholders as ordinary
income. The Fund expects to derive a portion of its gross income (exclusive of
capital gains) from dividends of other companies, and, therefore, a portion of
the Fund's dividends or distributions will qualify for the 70% deduction for
dividends-received for corporations. Distributions of net realized long-term
capital gains, whether paid in cash or reinvested in shares of the Fund, are
taxable to shareholders as long-term capital gains, irrespective of the length
of time the shareholder has held his Fund shares. If a shareholder holds shares
for six months or less and during that period receives a distribution taxable to
such shareholder as long-term capital gain, any loss realized on the sale of
such shares during such six-month period would be a long-term capital loss to
the extent of such distribution.
A dividend or capital gains distribution with respect to shares of the Fund
held by a tax-deferred or qualified plan, such as an IRA, 403(b)(7) retirement
plan or corporate pension or profit sharing plan, will not be taxable to the
plan. Distributions from such plans will be taxable to individual participants
under applicable tax rules without regard to the character of the income earned
by the qualified plan.
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares into Class A shares. A shareholder's basis in
the Class A shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class A shares
will include the holding period for the converted Class B shares.
A shareholder who holds shares as a capital asset generally will recognize
a capital gain or loss upon the sale of such shares, which will be a long-term
capital gain or loss if such shares were held for more than one year. However,
any loss realized by a shareholder who held shares for six months or less will
be treated 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.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The Fund is required to backup withhold U.S. federal income tax at the rate
of 31% of all taxable distributions (including redemption payments) payable to a
shareholder who fails to provide the Fund with its correct taxpayer
identification number and certify that such number is correct, or payable to a
shareholder who has been notified by the Internal Revenue Service that it is
subject to backup withholding.
Shareholders will be advised annually as to the tax status of dividends and
capital gains distributions. State laws vary with respect to the taxation of
distributions made by the Fund. Shareholders of the Fund are urged to consult
their tax advisers regarding their own tax situation.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return for
various specified time periods in advertisements or information furnished to
present or prospective shareholders. Average annual total return is computed
separately for Class A, Class B, Class
14
<PAGE>
C and Class D shares in accordance with formulas specified by the Commission.
The average annual total return is a percentage expressed in terms of the
average annual compounded rate of return of a hypothetical investment of $1,000
in the Fund over periods of 1, 5, and 10 years, will reflect the deduction for
the sales charge imposed upon an initial investment in the Fund and the
deduction of a proportional share of Fund expenses (on an annual basis) and will
assume that all dividends and distributions are reinvested when paid. If such
charges were excluded from the total return figures, the total return figures
would be greater than depicted.
In addition to the standardized calculation of annual total return, the
Fund may use other methods of calculating its performance. These calculations
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 1, 5, and 10 years up to the life of the Fund and
may reflect the deduction of the appropriate sales charge imposed upon an
initial investment of more then $1,000 in the Fund. Theses 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 and may include deduction for an annual custodian
fee. The Fund may calculate its total return or other performance information
prior to the deduction of a sales charge.
Performance information for the Fund may be compared in reports and
promotional literature to: (i) Standard & Poor's 500 Index (the S& P500 ), Dow
Jones Industrial Average or other unmanaged indices so that investors may
compare the Fund's results with those of a group of unmanaged securities
widely regarded by investors as representative of the securities markets in
general; (ii) other groups of mutual funds monitored by Lipper Analytical
Services, a widely used independent research firm which ranks mutual funds by
overall performance, investment objectives, and assets or monitored by other
services, companies, publications, or persons who rank mutual funds on an
overall performance or other criteria; and (iii) the Consumer Price Index (a
measure of inflation) to assess the effect of inflation on the return of an
investment. There are no administrative and management costs, expenses or sales
commissions associated with unmanaged indices, and therefore, such expenses are
not reflected in the return; however, the return does reflect reinvestment of
dividends.
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. All performance information is based on historical
results and may not be indicative of future results. Performance information
should be considered in light of the Fund's 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. The Statement of Additional Information further
describes the methods used to calculate annual total return.
Set forth below is a discussion of the specific factors, including relevant
market conditions and the investment strategies and techniques pursued by the
Adviser, that materially affected the Fund's performance (Class D shares) during
the fiscal year ended July 31, 1995. The discussion was provided by the
Adviser.
The first six months of our fiscal year the U.S. financial markets were in
a stealth bear market. The Dow Jones Industrial Average rose slightly but most
stocks declined. In the last six months of the fiscal year that market moved
from a stealth bear market into a rising market.
In the first part of the fiscal year the Adviser placed the portfolio in a
conservative position to preserve Fund shareholders money. When the market
started to rise the Adviser placed Fund assets into big company stocks that the
Adviser believed had the possibility of appreciating in value in a rising
market.
Set forth below is a graph comparing the Fund's performance (Class D
shares) as of the end of the ten most recently completed fiscal years, to the
performance of the S&P 500 and the Consumer Price Index for the same periods.
Comparison of Change in Value of $10,000 Investment in the Fund for Class D
shares, the S&P 500 and the Consumer Price Index. No history is available for
Class A, B and C shares.
15
<PAGE>
CHART
The following table set's forth the Class D shares of the Fund's average
annualized total return for the one, five, ten and fifteen year periods ended
July 31, 1995:
Relevant Average Annualized
Period Total Return
-------- ------------------
1 year 8.6%
5 year 12.5%
10 year 10.1%
15 year 10.9%
Past performance is not predictive of future performance. See "Performance
Information" in the Statement of Additional Information for a discussion of the
method of calculating total return and for a description of the S&P 500 and the
Consumer Price Index.
CALCULATION OF NET ASSET VALUE; GENERAL INFORMATION
Net asset value is determined as of the close of business on the NYSE each
day the NYSE is open for trading, and all purchase orders are executed at the
next price that is determined after the order is received. The NYSE is closed
on most customary national business holidays.
In determining net asset value, securities traded on the NYSE or other
stock exchange approved for this purpose by the board of directors will be
calculated 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 are 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. The board of directors in good faith
determines the manner of ascertaining the fair market value of other securities
and assets.
The per share net asset value of Class D shares generally will be higher
than the per share net asset value of shares of the other classes, reflecting
the daily expense accruals of the account maintenance, distribution and higher
transfer agency fees applicable with respect to Class A, Class B and Class C
shares. Moreover, the per share net asset value of Class A shares generally
will be higher than the per share net asset value of Class B and Class C shares,
reflecting the daily expense accruals of the distribution and higher transfer
agency fees applicable with respect to Class B and Class C shares. At the date
of this Prospectus, the shares of the Fund are divided into Class A, Class B,
Class C and Class D shares. Class A, Class B, Class C and Class D shares
represent interests in the same assets of the Fund and are identical in all
respects except that Class A, Class B and Class C shares bear certain expenses
related to the shareholder servicing, and bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights with respect
to matters relating to shareholder servicing and distribution expenditures, as
applicable. See "Purchase of Shares". The Directors of the Fund may classify
and reclassify the shares of the Fund into additional classes of shares at a
future date.
The Articles of Incorporation of the Fund do not require that the Fund hold
an annual meeting of shareholders. However, the Fund will be required to call
special meetings of shareholders in accordance with the requirements of the
Investment Company Act to seek approval of new management and advisory
arrangements, of a material increase in distribution fees or of a change in the
fundamental policies, objectives or restrictions of the Fund. The Fund also
would be required to hold a special shareholders' meeting to elect new Directors
at such time as less than a majority of the Directors holding office have been
elected by shareholders. The Declaration provides that a shareholders' meeting
may be called for any reason at the request of 10% of the outstanding shares of
the Fund or by majority of the Directors.
16
<PAGE>
ADVISER
Investment Research Corporation
Administrative Offices & Mailing Address:
410 17th Street, Suite 800
Denver, CO 80202
DISTRIBUTOR
American Growth Fund Sponsors, Inc.
Administrative Offices & Mailing Address:
410 17th Street, Suite 800
Denver, CO 80202
CUSTODIAN
State Street Bank and Trust Company
One Heritage Drive
North Quincy, Massachusetts 02171
TRANSFER AGENT
Boston Financial Data Services, Inc.
Administrative Offices:
Two Heritage Drive
North Quincy, Massachusetts 02172
INDEPENDENT AUDITORS
Smith Brock & Gwinn
650 South Cherry, Suite 425
Denver, CO 80222
17
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND, THE ADVISER OR DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-------------------
TABLE OF CONTENTS
PAGE
----
Fee Table..................................................................
Management and Advisory Arrangements.....................................
Code of Ethics...........................................................
Transfer Agency Services.................................................
Purchase of Shares.........................................................
Initial Sales Charge Alternatives--
Class A and Class D Shares.............................................
Deferred Sales Charge Alternatives-- Class B and Class C Shares..........
Distribution Plans.......................................................
Limitations on the Payment of Deferred Sales Charges.....................
Redemption of Shares.......................................................
Redemption...............................................................
Repurchase...............................................................
Reinstatement Privilege--Class A and Class D Shares......................
Shareholder Services.......................................................
Taxes......................................................................
Performance Data...........................................................
Additional Information.....................................................
Dividends and Distributions..............................................
Determination of Net Asset Value.........................................
Organization of the Fund.................................................
Shareholder Reports......................................................
Shareholder Inquiries....................................................
LOGO AMERICAN GROWTH FUND, INC.
American Growth Fund, Inc.
PROSPECTUS
March 1, 1996
Distributor:
American Growth
Funds Sponsors, Inc.
18
<PAGE>
AMERICAN GROWTH FUND
410 17th Street, Suite 800, Denver, CO 80202
303-623-6137
STATEMENT OF ADDITIONAL INFORMATION
MARCH 1, 1996
This Statement of Additional Information is not a prospectus.
Prospective investors should read the Statement of Additional Information
only in conjunction with the Prospectus dated March 1, 1996. A copy of the
Prospectus may be obtained by writing American Growth Fund Sponsors, Inc.
(the "Distributor"), 410 17th Street, Suite 800, Denver, Colorado 80202-
4418.
AMERICAN GROWTH FUND SPONSORS, INC.
410 17th Street, Suite 800, Denver, Colorado, 80202-4418
303-623-6137
800-525-2406
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ADDITIONAL INVESTMENT INFORMATION . . . . . . . . . . . . . . . . . . .
MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT ADVISORY AGREEMENT . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . .
INVESTMENT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
AUTOMATIC CASH WITHDRAWAL PLAN . . . . . . . . . . . . . . . . . . . .
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
DISTRIBUTION PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . .
REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . .
CUSTODIAN AND INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . .
BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CALCULATION OF NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . .
AUTOMATIC INVESTMENT PLANS. . . . . . . . . . . . . . . . . . . . . . .
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
DIVIDENDS, DISTRIBUTIONS AND TAXES. . . . . . . . . . . . . . . . . . .
PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . .
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .
DESCRIPTION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . .
</TABLE>
B-1
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
The following information supplements the information in the Fund's
Prospectus under the heading "Objectives and Investment Policy." The Fund
is subject to certain 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 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 issuers 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 invest 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 broker's 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.
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. 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.
When the Fund makes temporary investments in U.S. Government securities,
it ordinarily will purchase 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.
B-2
<PAGE>
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
also has a board of advisors which counsels the directors as to general
economic conditions and specific industries. The following information
about the directors, officers and advisors of the Fund includes their
principal occupations for the past five years:
<TABLE>
<S> <C> <C>
NAME, ADDRESS AND POSITION(S) HELD WITH PRINCIPAL OCCUPATIONS
AGE REGISTRANT DURING PAST 5 YEARS
Robert Brody*(70) President, Director See below for affiliations
410 17th St., Suite 800 with Adviser and
Denver, Colorado Distributor
Michael J. Baum, Jr. (78) Director Investor in securities and
1321 Bannock St. real estate; engaged in
Denver, Colorado mortgage financing;
president of Baum
Securities, M & N
Investment Company and
First Avenue Corporation
all of which are real
estate investment companies
Eddie R. Bush (55) Director Certified Public Accountant
1400 W. 122nd Ave.
Suite 220
Westminster, Colorado
Don S. Strauss (71) Director Retired President of
756 S. Glencoe St. Majestic Industries, Inc.,
Denver, Colorado a manufacturer of
janitorial supplies
Harold Rosen (68) Director Owner of Bi-Rite
#1 Middle Road Furniture Stores.
Englewood, CO 80110
Timothy E. Taggart (42) Treasurer Principal financial and
410 17th St., Sutie 800 accounting officer.
Denver, Colorado Employee of Adviser since
1983. See below for
affiliation with
Distributor
D. Leann Baird (47) Secretary Employee of Adviser since
410 17th St., Suite 800 1977. See below for
Denver, CO affiliations with Adviser
and Distributor
William D. Farr (85) Advisory Board President and Director of
P.O. Box 878 Member Farr Farms Company,
Greeley, Colorado Chairman of the Board of
Northern Colorado Water
Conservacy, Past President
of the National Cattlemen's
Association, Board Member
of Greeley Water Board
Frank J. Johns (92) Advisory Board Retired President of Denver
111 Emerson Street Member Dry Goods Company
Denver, Colorado
</TABLE>
B-3
<PAGE>
*Robert Brody is an "interested person" of the Fund as defined by the
Investment Company Act of 1940.
Robert Brody is the sole shareholder, president and a director of the
Adviser. He is also president and a director of the Distributor. Timothy
E. Taggart is a director and secretary of the Distributor and director of
the Adviser. D. Leann Baird is secretary and director of the Adviser.
All officers, directors and members of the Fund's advisory board in the
aggregate (a total of 8) received total compensation of $2,300, from the
Fund in fiscal year 1995. Directors of the Fund except Mr. Brody were
compensated at the rate of $300 per meeting attended, ($400 effective
September 1, 1995), Advisory Board members were compensated at the rate of
$200 per meeting attended. Out-of-town directors are also reimbursed for
their travel expenses to meetings. During the fiscal year ended July 31,
1995 Mr. Bush (Director) received $800 from the Fund, Mr. Baum (Director)
received $800 from the Fund, Mr. Strauss (Director) received $800 from the
Fund, Mr. Farr (Advisory Board Member) received $600 from the Fund, and Mr.
Johns received $600 from the Fund.
As of December 28, 1995, no person owned more than 5% of the Fund and all
officers and directors as a group (a total of 7) owned directly 265,972 of
its shares or 2.2% of shares outstanding. Together, directly and
indirectly, all the officers and directors as a group owned 280,140 shares
or 2.3% of all shares outstanding.
As of December 28, 1995, officers, directors and members of the advisory
board and their relatives owned of record and beneficially Fund shares with
net asset value of approximately $2,754,685, representing approximately
2.6% of the total net asset value of the Fund.
INVESTMENT ADVISORY AGREEMENT
Since the organization of the Fund in 1958, its investment adviser has
been Investment Research Corporation (the "Adviser"), 410 17th Street,
Denver, Colorado, a registered investment adviser. Robert Brody, the sole
shareholder, president and a director of the Adviser, is a control person
of the Adviser.
Under the terms of its advisory agreement with the Fund, the Adviser 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 is higher than that paid by most other mutual
funds, although many mutual funds with investment objectives similar to
those of the Fund pay the same or higher fees. The fee and all other
expenses of the Fund (subject to the limitations described below) 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 Adviser manages the
portfolio of the Fund and furnishes such statistical and analytical
information as the Fund may reasonably require.
The advisory agreement requires 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 category of
expenses paid by the Fund are set forth in detail in the Fund's financial
statements. Currently 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. Management
believes that the current limitation on expenses payable by the Fund which
would result from application of the most restrictive state laws is an
amount equal to two and one-half percent of the first $30 million of the
Fund's average net assets, two percent of the next $70 million and one and
one-half percent of the remaining average net assets. State laws governing
the limitation on expenses may change from time to time, and management of
the Fund will comply with the most restrictive state law.
The total advisory fees paid by the Fund to the Adviser in fiscal years
1993, 1994 and 1995 were $514,507 in fiscal year 1993, $579,209 in fiscal
year 1994, and $627,684 in fiscal year 1995 resulting in management fees of
0.88%, 0.86% and 0.83% of average net assets, respectively. In fiscal
years 1993, 1994 and 1995 there were no expense reimbursements made in
connection with the most restrictive state limitations.
The advisory agreement will continue from year to year so long as such
continuance is specifically approved
B-4
<PAGE>
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 Adviser 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.
DISTRIBUTION OF SHARES
The Fund's distributor is American Growth Fund Sponsors, Inc., 410 17th
Street, Suite 800, Denver, Colorado 80202-4418, which continuously sells
the Fund's shares to dealers and directly to investors.
The Fund offers four classes of shares. Class A and Class D shares are
sold to investors choosing the initial sales charge alternatives and Class
B and Class C shares are sold to investors choosing the deferred sales
charge alternatives. Each Class A, Class B, Class C and Class D share of
the Fund represents an identical interest in the investment portfolio of
the Fund, and has the same rights, except that Class A, Class B and Class C
shares bear the expenses of the ongoing service fees and distribution fees
and the additional incremental transfer agency costs resulting from the
deferred sales charge arrangements. Class A, Class B and Class C shares
each have exclusive voting rights with respect to the Rule 12b-1
distribution plan adopted with respect to such class pursuant to which the
shareholder services and distribution fees are paid.
The Fund has entered into separate distribution agreements with the
Distributor in connection with the continuous offering of each class of
shares of the Fund (the "Distribution Agreements"). 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.
Initial Sales Charge Alternative - Class A and Class D Shares. The
distribution contract between the Fund and American Growth Fund Sponsors,
Inc. provides that the Distributor shall sell Class A and Class D shares at
net asset value plus a sales charge from which the Distributor may allow a
commission to other dealers. The sales charge and amounts which may be
paid to dealers vary with the amount of investment (see "Investor's Right
of Accumulation" and "Letter of Intent" ), as follows:
<TABLE>
<CAPTION>
SALES CHARGE
Paid to
As % of Dealers As % As % of Net
Amount of Investment Offering Price of Offering Price Amount Invested
- -------------------- -------------- ----------------- ---------------
<S> <C> <C> <C>
Less than $50,000 . . . . . . . . 5.75% 5.00% 6.10%
$50,000 but less than $100,000 4.50% 3.75% 4.71%
$100,000 but less than $250,000 3.50% 2.75% 3.63%
$250,000 but less than $500,000 2.50% 2.00% 2.56%
$500,000 but less than $1,000,000 2.00% 1.60% 2.04%
$1,000,000 and over . . . . . . . 0.00% 0.00% 0.00%
</TABLE>
The Distributor allows dealers discounts from the applicable public
offering price on Class A and Class D shares and in the case of the maximum
sales charge the dealer retains 5.00% of the public offering price.
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.
B-5
<PAGE>
The following sample calculation of the public offering price of one
Class A and Class D share of the Fund is based on the net asset value of
one Class D share as of July 31, 1995 and a transaction with an applicable
sales charge at the maximum rate of 5.75%.
<TABLE>
<S> <C>
Net asset value per share
(Total net assets/Total shares outstanding) $ 8.75
Add selling commissions (5.75% of offering price) 0.53
------
Maximum offering price per share $ 9.28
======
</TABLE>
Based upon the net asset value of one Class D shares as of July 31,
1995, the public offering price of Class B and Class C shares of the Fund
would have been $9.28.
From time to time the Distributor will pay all of the sales charge
to dealers. In such instances, the dealers may be deemed to be
distributors as that term is defined in the Securities Act of 1933.
The Adviser will make payments to dealers in the amount of 0.25 of
1% per year of the average daily net asset value of outstanding Class D
shares acquired after April 1, 1994 through such dealers (including shares
acquired through reinvestment of dividends and distributions on such
shares. These payments are made by the Adviser and not by the shareholders
of the Fund.
In the fiscal years ended July 31, 1993, 1994 and 1995, the Underwriter on
sales of Class D shares retained $74,139, $112,733, and $267,974
respectively, as its portion of commissions paid by purchasers of the
Fund's shares after allowing as concessions to other dealers $39,212,
$152,242, and $685,894, respectively. During the same periods no
commissions were paid to the Underwriter on sales and purchases of
portfolio securities. The Underwriter 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 offering hereby made is subject to
withdrawal or cancellation at any time. The Fund and the Underwriter
reserve the right to reject any order for any reason.
In addition to purchase by a single person, the above scale applies
to aggregate purchases by an individual, his spouse and children under age
21, a trustee of fiduciary of a single trust or fiduciary account, tax
exempt organizations enumerated in Section 501(c)(3) of the Internal
Revenue Code, and employees' trust, profit sharing and other employee
benefit plans qualified under Section 401 of the Internal Revenue Code
except for 401(k) Plans, in which each 401(k) investor is considered
separately for purposes of computing sales charges. The scale is also
subject to the investor's right of accumulation and purchases under a
letter of intent described in this Statement of Additional Information (see
"Letter of Intent").
The Fund makes available Class A and Class D shares to its directors, officers
or partners of the Fund, its Adviser or Underwriter or to its bona fide
full-time employees or sales representatives, the Fund's board of advisors and
to dealers for their own account or for retirement plans for their employees or
sold for the account of employees of such dealers (and their spouses or for
accounts for their minor children) that have sales agreements with the
Underwriter, the purchase of Fund shares at net asset value. Shares are offered
to such persons at net asset value for the purpose of promoting good will with
employees and others with whom the Fund and the Underwriter have business
relationships. In addition, there are economies of selling efforts and
sales-related expenses with respect to offers to these investors. The Fund also
sells its Class A and Class D 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 Distributor relating to such rollovers.
There are efficiencies connected with the establishment and maintenance of
stable, long term accounts in the Fund.
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,
B-6
<PAGE>
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, respecatively, 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 Fund's 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 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 Fund purchase and the sales charge as applied on the
letter of intent will be held in escrow in the form of Fund 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 Fund shares theretofore purchased under this letter.
Deferred Sales Charges - Class B and Class C shares. As discussed in the
Prospectus under "Purchase of Shares--Deferred Sales Charge Alternatives--Class
B and Class C Shares", while Class B shares redeemed within seven years of
purchase are subject to a CDSC under most circumstances, the charge is waived on
redemptions of Class B shares in connection with certain post-retirement
withdrawals from an IRA or other retirement plan or following the death or
disability of a Class B 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 Class B
shareholder (including one who owns the Class B 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 CDSC charge is waived on
redemption of Class B shares in connection with a Systematic Withdrawal Plan
where the total withdrawal is less then 12% of the previous year value or the
original purchase, whichever is greater.
Additional Information - Sales of Fund Shares. Commencing June 30, 1995 and
ending September 30, 2005, the Distributor will offer a long-term sales
incentive promotion in which non-cash concessions in the form of one or more all
expenses paid promotional trips to resort locations will be awarded to
participating broker-dealers achieving certain specified cumulative sales levels
in shares of the fund. Participation in the incentive programs is entirely
optional on the part of broker-dealers. Copies of the incentive program rules
which contain more complete information about the terms and conditions of the
programs, including qualifying levels and specific awards, may be obtained by
investment representatives by contacting the Distributor.
In addition to purchase by a single person, the above scale applies to
aggregate purchases by an individual, his spouse and children under age 21, a
trustee or fiduciary of a single trust or fiduciary account, tax exempt
organizations enumerated in Section 501(c)(3) of the Internal Revenue Code,
and employees' trusts, profit sharing and other employee benefit plans
qualified under Section 401 of the Internal Revenue Code except for 401(k)
Plans, in which each 401(k) investor is considered separately for purposes of
computing sales charges. The scale is also subject to the investor's right of
accumulation and purchases under a letter of intent described in this Statement
of Additional Information (see "Letter of Intent").
B-7
<PAGE>
Fund shares may be purchased at the public offering price through the
Distributor or through broker-dealers who are members of the National
Association of Securities Dealers, Inc. who have sales agreements with the
Distributer.
From time to time, the Distributor sponsors seminars for special interest
groups in which matters of general interest to investors are discussed. As an
inducement to attend such seminars, attendees may receive modest cash amounts
(for example, $25, the opportunity to participate in a raffle, or both), but
there is no obligation to make any investment in the Fund with any such amount
given by the Distributor.
In addition to the dealer discount, the Distributor may pay incentive
compensation to qualifying dealers for their salesmen who sell a specified
amount of Fund shares. Such compensation may take the form of payment of travel
expenses, meals, and lodging for trips in or outside the United States; however,
in no event does such additional compensation when aggregated with the dealer
discount exceed the maximum sales charge. Dealers who receive bonuses or other
incentives could be deemed "underwriters" under the Securities Act of 1933.
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 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 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.
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
B-8
<PAGE>
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 Internal Revenue Code of 1986 (the
"Code") including the filing of reports with the Internal Revenue Service.
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.
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 planholder 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
employee's 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
Prospectus 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") with
respect to the shareholder service and distribution fees paid by the Fund
to the Distributor with respect to such classes.
Payments of the account maintenance fees and/or distribution fees
are subject to the provisions of Rule 12b-1 under the Investment Company
Act. 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
B-9
<PAGE>
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
concluded that there is reasonable likelihood that such Distribution Plan will
benefit the Fund and its applicable class of 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 thereuncer
without the approval of the applicable class of shareholders, and all material
amendments are required to be approved by the vote of Drectors, 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.
REDEMPTION OF SHARES
Redemption of shares or payment may be suspended for more than seven
days during any period when (a) the New York Stock Exchange is closed other
than for customary weekend or holiday closing or trading thereon is
restricted as determined by the Securities and Exchange Commission; (b) an
emergency as defined by the Securities and Exchange Commission exists,
making disposal of portfolio securities or valuation of net assets not
reasonably practicable; or (c) the Securities and Exchange Commission has
by order permitted such suspension.
CUSTODIAN AND INDEPENDENT ACCOUNTANTS
All securities and cash of the Fund are held by its custodian, State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts
02210. Smith, Brock & Gwinn, Certified Public Accountants, 650 S. Cherry
Street, Suite 425, Denver, Colorado 80222, provides auditing and tax
services to the Fund.
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 effected with the issuer or with a primary
market
B-10
<PAGE>
maker acting as principal for the securities on a net basis (without
commissions).
Any statistical or research information furnished to the Adviser 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
Adviser.
The Fund does not currently use the services of any affiliated
brokers in its portfolio transactions. However, the Fund's articles of
incorporation enable the Fund's Distributor to act as broker in the Fund
portfolio transactions in accordance with applicable securities law and the
regulations of the Securities and Exchange Commission. The Fund's
Distributor is not obligated to execute and effect portfolio transactions
for the Fund but may do so in accordance with Section 11(a) of the
Securities Exchange Act of 1934, as amended, provided that prior
authorization of such transactions is obtained and the Fund's Distributor
furnishes a statement to the Fund at least annually with respect to the
compensation it has retained in connection with such transactions. Any
such arrangement will be approved by a majority of the Fund's disinterested
directors.
The Fund paid total brokerage commissions of $162,297 in fiscal year
1993, $ 352,272 in fiscal year 1994, and $409,352 in fiscal year 1995.
The Fund did not purchase securities issued by any broker-dealer that
executed portfolio transactions during such fiscal year. None of these
commissions was paid to any person affiliated with the Fund.
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 the management's judgement 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 turn over
of the Fund for the fiscal years ended July 31, 1993, 1994 and 1995 was
48.8%, 87.2%, and 173.0%, respectively. The turnover rate was greater in
fiscal year 1995 than in 1994 because the Adviser moved the portfolio from
cash or cash equivalents into equities to take advantage of the rising
equity market.
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, 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.
B-11
<PAGE>
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.
AUTOMATIC INVESTMENT PLANS
A shareholder may make additions to an Investment Account at any time by
purchasing Class D shares (if an eligible Class D investor as described in the
Prospectus) or Class A, Class B or Class C shares at the applicable public
offering price either through the shareholder's securities dealer, or by mail
directly to the transfer agent, acting as agent for such securities dealer.
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
Investment Account of such shareholder.
RETIREMENT PLANS
Self-directed individual retirement accounts and other retirement plans are
available from American Growth Fund. Under these plans, investments may be made
in the Fund and in certain of the other mutual funds sponsored by American
Growth Fund Sponsors as well as in other securities. American Growth Fund
charges and an annual custodial fee for each account. Information with respect
to these plans is available on request from American Growth Fund.
Capital gains and income received in each of the plans referred to above are
exempt from Federal taxation until distributed from the plans. Investors
considering participation in any such plan should review specific tax laws
relating thereto and should consult their attorneys or tax advisers with respect
to the establishment and maintenance of any such plan.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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 qualification requirement.
The per share dividends and distributions on 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 account
maintenance fees applicable with respect to the Class A shares and a lower
distribution fee. See "Calculation of Net Asset Value".
B-12
<PAGE>
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 35%
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 35% 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 65% 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% 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, rather than the date on which the distributions are received.
Dividends of investment company taxable income (which includes interest 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. A
portion of the dividends paid by the Fund may qualify for the 70% deduction for
dividends received by corporations because the Fund's income will consist, in
part, of dividends paid by U.S. corporations. Distributions of net capital
gains (which consists of the excess of long-term capital gains over net
short-term capital losses), if any, 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 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 the shares are disposed of. 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
B-13
<PAGE>
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.
The Fund may be required to backup withhold U.S. federal income tax
at the rate of 31% of all taxable distributions (including redemption
proceeds) payable to shareholders who fail to provide the Fund with their
correct taxpayer identification number or fail to make required
certifications, or who have been notified by the Internal Revenue Service
that they are subject to backup withholding. Backup withholding is not an
additional tax. Any amounts withheld may be credited against a
shareholder's U.S. federal income tax liability.
U.S. federal income taxation of a shareholder who, as to the United
States, is a non-resident alien individual, a foreign trust or estate,
foreign corporation, or foreign partnership ("foreign shareholder") depends
on whether the income from the Fund is "effectively connected" with a U.S.
trade or business carried on by such shareholder. If the income from the
Fund is not "effectively connected" with a U.S. trade or business carried
on by the foreign shareholders, distributions of investment company taxable
income will be subject to a U.S. tax of 30% (or lower treaty rate), which
tax is generally withheld from such distributions. The tax consequences to
a foreign shareholder entitled to claim the benefits of an applicable tax
treaty may be different from those described herein. Foreign shareholders
are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in the shares of 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 advisers with respect to
the particular tax consequences to them of an investment in the shares of
the Fund.
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.
PERFORMANCE DATA
See the discussion of performance information in the Fund's prospectus 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, 1995, the average annual total
returns for the Fund were 8.6% for 1 year, 12.5% for 5 years, 10.1% for 10
years and 10.9% for 15 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. These 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.
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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, 1995. 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 $1,000 in order
to illustrate the effect of an investment plan and the sales load will
reflect the appropriate sales load for the initial and subsequent
investments as determined by the Fund's currently effective prospectus.
The sales load may be reduced pursuant to rights of accumulation and letter
of intent.
B-15
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<TABLE>
<CAPTION>
CUMULATIVE ACCEPTED
COST OF AS PURCHASED
SHARES ACQUIRED CAPITAL THROUGH
TOTAL OF DIVIDENDS BOUGHT WITH GAINS RE-
INITIAL FROM WITH TOTAL COST INITIAL DISTRI- INVESTMENT
& ANNUAL INVESTMENT INVESTMENT INCLUDING & ANNUAL BUTIONS OF INCOME
PERIOD INVEST- INCOME OF INCOME REINVESTED INVEST- (CUM- (CUM- ENDED
ENDED MENTS REINVESTED DIVIDENDS DIVIDENDS MENTS ULATIVE) ULATIVE) VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/59$ 2,000 $ 25 $ 25 $ 2,025 $ 2,129 $ 0 $ 27 $ 2,156
07/31/60 3,000 41 66 3,066 2,894 11 65 2,970
07/31/61 4,000 85 151 4,151 4,611 80 181 4,872
07/31/62 5,000 97 248 5,248 4,917 91 241 5,249
07/31/63 6,000 123 371 6,371 6,817 275 426 7,518
07/31/64 7,000 125 496 7,496 9,427 464 672 10,563
07/31/65 8,000 147 643 8,643 9,790 1,152 778 11,720
07/31/66 9,000 202 845 9,845 10,740 2,213 977 13,930
07/31/67 10,000 373 1,218 11,218 11,943 3,866 1,421 17,230
07/31/68 11,000 353 1,571 12,571 14,033 4,243 1,934 20,210
07/31/69 12,000 408 1,979 13,979 12,320 5,717 1,910 19,947
07/31/70 13,000 410 2,389 15,659 10,520 5,207 1,822 17,549
07/31/71 14,000 588 2,977 16,977 14,385 6,664 2,970 24,019
07/31/72 15,000 682 3,659 18,659 16,069 7,018 3,841 26,928
07/31/73 16,000 508 4,167 20,167 16,299 7,259 4,162 27,720
07/31/74 17,000 782 4,949 21,949 14,041 6,307 4,034 24,382
07/31/75 18,000 1,405 6,354 24,354 13,704 9,330 5,110 28,144
07/31/76 19,000 1,171 7,525 26,525 16,777 10,796 7,227 34,800
07/31/77 20,000 1,074 8,599 28,599 19,582 12,008 9,204 40,794
07/31/78 21,000 1,017 9,616 30,616 23,726 13,984 11,894 49,604
07/31/79 22,000 2,055 11,671 33,671 27,109 15,429 15,437 57,975
07/31/80 23,000 2,931 14,602 37,602 37,937 22,535 24,562 85,034
07/31/81 24,000 3,766 18,368 42,368 30,526 41,349 22,502 94,377
07/31/82 25,000 4,235 22,603 47,603 27,829 39,477 23,846 91,152
07/31/83 26,000 6,769 29,372 55,372 40,090 55,535 42,431 138,056
07/31/84 27,000 5,657 35,029 62,029 35,136 58,360 41,506 135,002
07/31/85 28,000 4,637 39,666 66,666 37,927 73,322 48,927 160,176
07/31/86 29,000 7,330 46,996 75,996 41,252 77,925 60,054 179,231
07/31/87 30,000 5,993 52,989 82,989 44,358 107,124 70,083 221,565
07/31/88 31,000 3,685 56,674 87,674 31,884 105,874 52,808 190,566
07/31/89 32,000 9,656 66,330 98,330 36,390 117,707 69,793 223,890
07/31/90 33,000 9,004 75,334 108,334 37,969 119,759 79,838 237,566
07/31/91 34,000 8,138 83,472 117,472 41,072 126,543 93,645 261,260
07/31/92 35,000 1,955 85,427 120,397 44,484 151,776 101,369 297,629
07/31/93 36,000 2,801 88,288 124,228 50,094 193,448 115,156 358,698
07/31/94 37,000 1,910 90,138 127,138 50,782 232,061 116,467 399,310
07/31/95 38,000 5,130 95,268 133,268 48,526 297,125 115,242 460,893
</TABLE>
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.
B-16
<TABLE>
<CAPTION>
WITHDRAWN VALUE ACCEPTED
WITHDRAWN FROM CUM- OF AS
FROM PRINCIPAL ANNUAL ULATIVE REMAIN- CAPITAL
INVESTMENT AND TOTAL TOTAL ING GAINS
PERIOD INCOME CAPITAL WITH- WITH- ORIGINAL DISTRI- TOTAL
ENDED DIVIDENDS GAINS DRAWN DRAWN SHARES BUTIONS VALUE
<S> <C> <C> <C> <C> <C> <C> <C>
07/31/59 $ 244 $ 556 $ 800 $ 800 $ 11,453 $ 0 $ 11,453
07/31/60 212 588 800 1,600 10,025 57 10,082
07/31/61 283 517 800 2,400 12,213 294 12,507
07/31/62 243 557 800 3,200 10,085 311 10,396
07/31/63 237 563 800 4,000 11,477 700 12,177
07/31/64 199 601 800 4,800 13,666 1,070 14,737
07/31/65 201 599 800 5,600 12,252 2,004 14,256
07/31/66 241 559 800 6,400 11,739 3,292 15,031
07/31/67 393 407 800 7,200 11,592 5,090 16,682
07/31/68 336 464 800 8,000 12,250 5,588 17,838
07/31/69 355 445 800 8,800 9,546 6,535 16,081
07/31/70 325 475 800 9,600 6,970 5,695 12,665
07/31/71 417 383 800 10,400 8,524 7,289 15,813
07/31/72 441 359 800 11,200 8,625 7,675 16,300
07/31/73 300 500 800 12,000 7,753 7,673 15,426
07/31/74 427 373 800 12,800 5,906 6,432 12,338
07/31/75 696 104 800 13,600 5,210 7,662 12,872
07/31/76 526 274 800 14,400 5,753 8,866 14,619
07/31/77 443 357 800 15,200 6,034 9,861 15,895
07/31/78 391 409 800 16,000 6,585 11,484 18,069
07/31/79 740 60 800 16,800 7,207 12,671 19,878
07/31/80 800 0 800 17,600 10,117 17,800 27,917
07/31/81 800 0 800 18,400 8,175 21,670 29,845
07/31/82 800 0 800 19,200 7,691 20,050 27,741
07/31/83 800 0 800 20,000 12,625 28,206 40,831
07/31/84 800 0 800 20,800 11,585 27,303 38,888
07/31/85 800 0 800 21,600 12,811 32,159 44,970
07/31/86 800 0 800 22,400 15,019 34,178 49,197
07/31/87 800 0 800 23,200 16,776 42,864 59,640
07/31/88 800 0 800 24,000 12,006 38,243 50,249
07/31/89 800 0 800 24,800 15,375 42,517 57,892
07/31/90 800 0 800 25,600 17,109 43,258 60,367
07/31/91 800 0 800 26,400 19,569 45,709 65,278
07/31/92 486 314 800 27,200 20,438 52,839 73,277
07/31/93 687 113 800 28,000 22,514 64,695 87,209
07/31/94 463 337 800 28,800 22,086 73,961 96,046
07/31/95 800 0 800 29,600 21,316 88,412 109,278
--- - ---
TOTAL $ 19,686 $ 9,914 $ 28,800
</TABLE>
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 Fund's 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.
GENERAL INFORMATION
DESCRIPTION OF SHARES
The shares of the Fund's capital stock, $.01 par value, are all of
one class, each share representing an equal ownership of the Fund.
Shareholders participate equally on a share-for-share basis in income
dividends and capital gains distributions. They are entitled at meetings
of shareholders to one vote for each share held, and, in the event of
liquidation of the Fund, are entitled to receive pro rata the net
distributable assets. The shares will be fully paid and non-assessable
when issued and will have no preference, preemptive, conversion or exchange
rights. The absence of cumulative voting means that the holders of more
than 50% of the outstanding shares can elect all the directors if they so
choose; in which case, the holders of the remaining shares could not elect
any directors. There are no options or other special rights outstanding
relating to any such shares. The Fund will not issue any senior
securities.
B-17
<PAGE>
If the directors determine that it is in the best interest of other
shareholders, payment upon redemption of shares may be made in whole or in
part in securities of the Fund selected in such manner as the directors
deem fair and equitable, in which case brokerage and other costs may be
incurred by the redeeming shareholder in the sale of securities received.
B-18
<PAGE>
To The Board of Directors and Shareholders
of American Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of American Growth Fund, Inc. as of July 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for the two years then ended and the selected per share
data and ratios in the financial highlights table for the five years ended July
31, 1995. These financial statements and selected per share data and ratios are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on the financial statements and selected per share data and ratios based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards,
including confirmation of securities owned as of July 31, 1995, by
correspondence with the custodian and brokers. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and selected per share data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of American Growth Fund, Inc. as of July 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for the two
years then ended and the selected per share data and ratios for the five years
then ended in conformity with generally accepted accounting principles.
SMITH, BROCK & GWINN
Denver, Colorado
August 18, 1995
B-19
<PAGE>
PORTFOLIO OF INVESTMENTS
How American Growth Fund Has Its Shareowners' Money Invested
July 31, 1995
<TABLE>
<CAPTION>
Market
Name of Security Shares Value
- ---------------- ------ ------
COMMON STOCKS
Semiconductor Industry 15.5%
<S> <C> <C>
Micron Technology, Inc............................................................ 70,000 $ 4,375,000
(Manufactures and markets semiconductor components.)
Motorola, Inc..................................................................... 45,000 3,448,125
(Leading manufacturer of electronic equipment and components.)
Texas Instruments Inc............................................................. 21,000 3,281,250
(Manufactures electronic products based principally on its semiconductor
technology.)
Intel Corporation................................................................. 30,000 1,950,000
(Leading manufacturer of integrated circuits.)
Cypress Semiconductor Corp.*...................................................... 10,000 527,500
(Designs, manufactures, and markets a broad line of high performance digital
integrated circuits used in telecommunications.)
International Rectifier Corp.*.................................................... 12,000 480,000
----------
(Makes high power semiconductor devices for industrial, consumer, and military
applications.) 14,061,875
----------
Air Line Industry 15.3%
UAL Corporation*.................................................................. 35,000 5,228,125
(The second largest domestic carrier.)
Delta Air Lines, Inc.............................................................. 58,000 4,596,500
(The third largest domestic carrier.)
AMR Corporation*.................................................................. 54,000 4,050,000
----------
(One of the two largest domestic carriers.) 13,874,625
----------
Pharmaceuticals Products Industry 14.5%
Mylan Laboratories Inc............................................................ 130,000 3,916,250
(Manufactures prescription generic drugs and brand name dermatological products.)
Merck & Co., Inc.................................................................. 75,000 3,871,875
(Leading manufacturer of human and animal health care products.)
Schering-Plough Corp.............................................................. 57,800 2,687,700
(Worldwide manufacturer of prescription and over-the-counter drugs.)
AMGEN Inc.*....................................................................... 31,000 2,635,000
----------
(Utilizes biotechnology to develop human pharmaceutical products.) 13,110,825
----------
</TABLE>
B-20
<PAGE>
<TABLE>
<CAPTION>
Market
Name of Security Shares Value
- ---------------- ------ ------
Commercial Bank Industry 13.0%
<S> <C> <C>
Midlantic Corporation, Inc........................................................ 100,000 $ 4,762,500
(One of the largest bank holding companies operating branches in New Jersey and
southeastern Pennsylvania.)
First Interstate Bancorp.......................................................... 40,000 3,445,000
(Largest multistate bank branch network.)
City National Corp................................................................ 200,000 2,600,000
(Owns the sixth largest bank in California.)
SouthTrust Corp................................................................... 40,000 995,000
----------
(37th largest bank in the U.S. as of 12/31/94.)
............................................................................... 11,802,500
----------
Computer & Peripherals Industry 10.9%
International Business Machines Corporation....................................... 36,000 3,919,500
(World's largest supplier of advanced information processing technology and
communication systems.)
Cisco Systems, Inc.*.............................................................. 60,000 3,341,250
(Leading supplier of high-performance internetworking products for linking
computer networks.)
SCI Systems, Inc.*................................................................ 60,500 1,614,594
(Leading subcontractor to the computer industry.)
Hewlett-Packard Company........................................................... 13,000 1,012,375
---------
(Major designer & manufacturer of precision electronic products.) 9,887,719
---------
Metals & Mining Industry 7.5%
Reynolds Metals Co................................................................ 65,000 4,062,500
(Second largest aluminum producer in the United States.)
Phelps Dodge Corp................................................................. 43,000 2,762,750
---------
(The largest U.S. copper producer in terms of domestic output.) 6,825,250
---------
</TABLE>
See notes to financial statements.
*Non-income producing security.
B-21
<PAGE>
<TABLE>
<CAPTION>
Market
Name of Security Shares Value
- ---------------- ------ ------
Insurance Industry 6.3%
<S> <C> <C>
Aetna Life and Casualty Company................................................... 40,000 $ 2,475,000
(Largest stockholder-owned insurance organization in the U.S.)
American International Group, Inc.. .............................................. 28,125 2,109,375
(Domestic property and casualty insurance operations rank 4th in the U.S.
based on premiums written.)
Equitable Companies Inc. (The).................................................... 50,000 1,118,750
---------
(Parent holding company of The Equitable Life Assurance Society of the U.S.) 5,703,125
---------
Beverage Industry 3.7%
Coca Cola Company, (The).......................................................... 30,000 1,976,250
(World's largest soft drink company.)
PepsiCo, Inc...................................................................... 30,000 1,406,250
---------
(Operates three major businesses: restaurants, beverages and snack foods.) 3,382,500
---------
Chemical Industry 2.4%
Dow Chemical Co................................................................... 15,000 1,111,875
(Manufactures basic chemicals, plastics and specialty products.)
Union Carbide Corp................................................................ 30,000 1,042,500
---------
(Producer of ethylene glycol, polyethylene, ethylene oxide, solvents, coatings,
specialty chemicals and surfactants.) 2,154,375
---------
Aerospace/Defense Industry 1.1%
Boeing Company (The).............................................................. 15,000 1,005,000
---------
(Leading manufacturer of commercial jet aircraft.)
Financial Services Industry 1.0%
Travelers Group, Inc.............................................................. 20,000 947,500
--------
(Diversified financial services company.)
</TABLE>
See notes to financial statements.
B-22
<PAGE>
<TABLE>
<CAPTION>
Market
Name of Security Shares Value
- ---------------- ------ ------
Telecommunication Equipment Industry 0.6%
<S> <C> <C>
DSC Communications Corp.*......................................................... 10,000 $ 536,250
------------
(Designs, manufactures, markets, and services telecommunication systems and
products for long distance carriers.)
Total Common Stocks (cost $70,781,103)............................................ 91.8% 83,291,544
------------
Repurchase Agreement (cost $6,200,000) ........................................... 6.9% 6,200,000
------------
(State Street Bank & Trust, 5.67% dated 07/27/95, due 08/03/95, maturity value
$6,206,836, Collateral: U.S. Treasury Note)
Total Investments................................................................. 98.7% 89,491,544
------------
Cash and Receivables, Less Liabilities............................................ 1.3% 1,046,760
------------
Total Net Assets.................................................................. 100.0% $ 90,538,304
====== ============
</TABLE>
See notes to financial statements.
B-23
<PAGE>
Financial Statements
AMERICAN GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES, JULY 31, 1995
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at value (including repurchase agreements of
$6,200,000) (cost $76,981,013).............................................................. $ 89,491,544
Cash.......................................................................................... 3,181,880
Receivable from sale of Fund shares........................................................... 318,747
Interest receivable........................................................................... 4,882
Dividends receivable.......................................................................... 62,600
------------
Total Assets..................................................................................... 93,059,653
------------
LIABILITIES:
Payable for Investments Purchased............................................................. 2,448,922
Payable for redemption of Fund shares......................................................... 72,427
------------
Total Liabilities................................................................................ 2,521,349
------------
NET ASSETS....................................................................................... $ 90,538,304
============
NET ASSETS:
Paid in capital, 50,000,000 shares of $.01 par value capital stock authorized;
10,342,093 shares outstanding............................................................... $ 76,666,350
Undistributed net investment income........................................................... 990,914
Accumulated net realized gain................................................................. 370,510
Net unrealized appreciation of investments.................................................... 12,510,530
------------
Total net assets.............................................................................. $ 90,538,304
============
Net asset value per share
(Total net assets / Total shares outstanding)............................................... $8.75
Add selling commissions (5.75% of offering price)*............................................ 0.53
-----
Maximum offering price per share.............................................................. $9.28
=====
</TABLE>
*On sales of $50,000 or more the offering price
is reduced as set forth in the prospectus.
See notes to financial statements.
B-24
<PAGE>
Financial Statements
AMERICAN GROWTH FUND, INC.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1995
<TABLE>
<CAPTION>
INCOME FROM INVESTMENTS:
<S> <C>
Income:
Dividends................................................................................... $ 688,584
Interest.................................................................................... 1,850,014
-----------
Total income.................................................................................. 2,538,598
-----------
EXPENSES:
Investment advisory fee..................................................................... 627,684
Administrative expenses..................................................................... 337,534
Transfer agent fee.......................................................................... 135,744
Custodian fee............................................................................... 34,134
Other....................................................................................... 195,061
Expense reductions.......................................................................... (235,880)
-----------
Total expenses................................................................................ 1,094,277
-----------
Net investment income............................................................................ 1,444,321
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions................................................ 325,639
Increase in unrealized appreciation of investments............................................ 9,773,542
-----------
Net gain on investments....................................................................... 10,099,181
-----------
Net increase in net assets resulting from operations............................................. $11,543,502
===========
</TABLE>
See notes to financial statements.
B-25
<PAGE>
Financial Statements
AMERICAN GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income................................................... $ 1,444,321 $ 224,959
Net realized gain from investment transactions.......................... 325,639 12,986,192
Increase/Decrease in unrealized appreciation of investments............. 9,773,542 (6,357,715)
------------- --------------
Net increase in net assets resulting from operations.................. 11,543,502 6,853,436
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ($.12 and $.05 per share, respectively)........... (938,292) (327,794)
Net realized gain on investment transactions ($1.56 and $1.03 per
share, respectively).................................................... (12,215,279) (6,752,557)
------------- --------------
Net decrease from distributions......................................... (13,153,571) (7,080,351)
------------- --------------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares (2,352,448 and 597,586 shares)............. 19,867,517 5,660,536
Net asset value of shares issued in reinvestment of dividends
(1,701,369 and 737,076 shares)........................................ 12,454,018 6,869,050
Cost of shares redeemed (1,017,480 and 650,855 shares).................. (8,382,337) (6,273,633)
------------- --------------
Increase in net assets derived
from capital stock transactions......................................... 23,939,198 6,255,953
------------- --------------
Net increase in net assets.............................................. 22,329,129 6,029,038
NET ASSETS:
Beginning of period..................................................... 68,209,175 62,180,137
------------- --------------
End of period (including undistributed net investment income of
$990,914 and $40,781 respectively).................................... $ 90,538,304 $ 68,209,175
============= ==============
</TABLE>
See notes to financial statements.
B-26
<PAGE>
Notes to Financial Statements
1. Summary of Significant Accounting Policies
American Growth Fund, Inc. ("Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The following is a summary of significant accounting
policies consistently followed by the Fund. The policies are in accordance
with generally accepted accounting principles. Investment Valuation -
Investment securities are valued at the closing sales price as reported by
the principal securities exchange on which the security is traded. If no
sale is reported, or if the security is not traded on an exchange, value is
based on the average of the latest bid and asked prices. Short-term debt
securities are valued at amortized cost, which approximates value.
Federal Income Taxes - No provision for federal income taxes has been made
because it is the Fund's policy to comply with provisions of the Internal
Revenue Code available to regulated investment companies and to distribute
all of its taxable income to shareholders.
Other - Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Dividend income and
distributions to shareholders are recorded on the ex-dividend date. Interest
income is recorded on the accrual basis.
For Federal income tax purposes, the cost of investments owned as of July
31, 1995 was $77,093,930. Realized gains and losses from investment
transactions and unrealized appreciation and depreciation of investments are
reported on an identified cost basis which is the same basis used for
federal income tax purposes.
During the year ended July 31, 1995, the Fund adopted Statement of Position
93-2 Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain and Return of Capital Distributions of Investment
Companies. Accordingly, permanent book and tax basis differences relating to
shareholder distributions have been reclassified to paid-in-capital. The
cumulative effect of such differences totaling $444,103 and ($595,601) was
reclassified from undistributed net investment income and accumulated net
realized gains, respectively, to paid-in-capital. Net investment income, net
realized gains, and net assets were not affected by this change.
2. Federal Income Tax Matters
For federal income tax purposes, the Fund realized net capital gains of
$438,555 during the fiscal year ended July 31, 1995.
At July 31, 1995, the net unrealized appreciation of investments for federal
income tax purposes of $12,397,614 was comprised of gross appreciation of
$12,719,624 for those investments having an excess of value over cost, and
gross depreciation of $322,010 for those investments having an excess of
cost over value.
3. Dividends, Distributions and Fund Expenses
For the Fund's fiscal year ended July 31, 1995, it has been determined that
all ordinary income dividends qualify for the dividend received deduction
for corporate shareholders. Fund expenses in the amount of $235,880 relating
to transfer agent fees and certain other expenses were paid by broker
dealers.
4. Investment Security Transactions
Purchases and sales of investment securities, other than U.S. Government and
short-term securities, aggregated $142,104,882 and $88,175,447,
respectively.
5. Underwriting and Investment Advisory Contracts
Under the investment advisory contract with Investment Research Corporation
("IRC"), the advisor receives annual compensation for investment advice,
computed and paid monthly, equal to 1% of the average net assets of the Fund
up to $30 million of such
B-27
<PAGE>
Notes to Financial Statements
assets and 3/4 of 1% of such assets above $30 million. The Fund pays its
own operating expenses. The total of expenses of the Fund for any fiscal
year may not exceed the most restrictive limitation prescribed by any state
in which the shares of the Fund are sold.
For the year ended July 31, 1995 commissions and sales charges paid by
investors on the purchase of Fund shares totalled $953,868 of which $267,974
was retained by American Growth Fund Sponsors, Inc. ("Sponsors"), the
underwriter and distributor of the Fund.
Certain officers of the Fund are also officers of Sponsors and IRC. For the
year ended July 31, 1995 the Fund paid directors' fees and expenses of
$2,400.
For the year ended July 31, 1995, under an agreement with IRC, the Fund was
charged $267,364 for the costs and expenses related to employees of IRC who
provided administrative, clerical and accounting services to the Fund. In
addition, the Fund was charged by an affiliated company of IRC for the cost
of office space associated with the provision of such services, in the
amount of $61,170.
B-28
<PAGE>
Financial Highlights
(For a share outstanding throughout the Fund's fiscal year)
The following per share data covers the five years from August 1,
1990 through July 31, 1995.
The information contained in the table below for the five years ended July 31,
1995 has been examined by Smith, Brock and Gwinn, Independent Certified Public
Accountants, to the extent stated in their report.
<TABLE>
<CAPTION>
YEARS ENDED JULY 31
INCOME & EXPENSES 1995 1994 1993 1992 1991
------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period ......................... $ 9.34 $ 9.39 $ 8.50 $ 8.02 $ 7.59
Income From Investment Operations
- ---------------------------------
Net Investment Income ....................... .210 .034 .105 .097 .157
Net Gains or Losses on Securities
(both realized and unrealized) .............. .880 .996 1.515 .943 .533
------ ------- ------- ------ ------
Total From Investment Operations ............ 1.090 1.030 1.620 1.040 .690
------ ------- ------- ------ ------
Less Distributions
- ----------------
Dividends
(from net investment income) ................ (.120) (.050) (.080) (.060) (.260)
Distributions
(from capital gains) ........................ (1.560) (1.030) (.650) (.500) ......
Returns of Capital .......................... ...... ...... ...... ...... ......
------ ------ ------ ------ ------
Total Distributions ......................... (1.680) (1.080) (.730) (.560) (.260)
------ ------- ------- ------ ------
Net Asset Value, End of Period .............. $ 8.75 $ 9.34 $ 9.39 $ 8.50 $ 8.02
====== ====== ====== ====== ======
Total Return* ............................... 15.2% 11.1% 20.2% 13.6% 9.6%
- -------------
Ratios/Supplemental Data
- ------------------------
Net Assets, End of Period (millions) ........ 90.5 68.2 62.2 55.5 55.7
Ratio of Expenses to
Average Net Assets ........................ 1.45% 1.34% 1.44% 1.46% 1.33%
Ratio of Net Income
to Average Net Assets ..................... 1.91% .35% .59% 1.14% 2.02%
Portfolio Turnover Rate ..................... 173.0% 87.2% 48.8% 39.8% 135.5
</TABLE>
*Sales load not reflected in total return.
B-29
<PAGE>
AMERICAN GROWTH FUND, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements:
Included in Prospectus:
Financial Highlights
Included in Statement of Additional Information:
Report of Independent Accountants
Statement of assets and liabilities - July 31, 1995
Statement of operations - year ended July 31, 1995
Statements of changes in net assets - years ended July 31, 1995
and 1994
Notes to financial statements
Portfolio of investments (Schedule I - Investments in securities
of unaffiliated issuers) - July 31, 1995
(b) Exhibits
1. (a) Registrant's Articles of Incorporation, as amended.(1a)
(b) Form of Articles of Amendment and Restatement
2. Registrant's By-laws, as amended.(2)
3. Not applicable.
4. Instruments defining rights of shareholders:
See Article 4, 6 & 8 of Incorporation and Article 1,4, & 7 of the
Bylaws, filed as exhibits to this
Registration
Statement.
5. Investment advisory contract between Investment Research
Corporation and Registrant.(4)
6.a.Underwriting agreement, as restated and amended, between
American Growth Fund Sponsors, Inc. and Registrant.(5)
b.Selling group agreement between American Growth Fund Sponsors,
Inc. and dealers as amended.(5)
c.Form of Distribution Agreement for Class A Shares
d. Form of Distribution Agreement for Class B Shares
e. Form of Distribution Agreement for Class C Shares
f. Form of Distribution Agreement for Class D Shares
7. Not applicable.
8. Custodian agreement between State Street Bank and Trust Company
and Registrant.(1)
9. Transfer agent agreement between State Street Bank and Trust
Company and Registrant.(1)
10. Not applicable.
11. Consent of Smith, Brock & Gwinn.
<PAGE>
12. Not applicable.
13. Not applicable.
14.a.Registrant's Self-Employed Retirement Plan.(2)
b.Registrant's Simplified Employee Pension Plan Application and
Agreement.(1)
c.Registrant's Salary Reduction Simplified Employee Pension Plan
Application and Agreement.(4)
d.Registrant's Individual Retirement Account Plan and Agreement.(1)
e.Registrant's 403(b) Retirement Plan and Custody Agreement.(3)
f.Registrant's Prototype Paired Defined Contribution Plans.(4)
g.Registrant's Prototype Profit Sharing/401(k) Plan.(4)
15.a.Form of Distribution Plan for Class A Shares
b.Form of Distribution Plan for Class B Shares
c. Form of Distribution Plan for Class C Shares
16. Schedule for computation of each performance quotation.(1)
17. Financial Data Schedule filed as Exhibit 27 for electronic
purposes.
18. Form of Rule 18f-3 Plan
(1a) Incorporated by reference to identically numbered exhibit in
Post Effective Amendment No. 42 to the Registration Statement under the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of Registrant filed
on December 1, 1988.
(1a) Incorporated by reference to exhibit No. 1 in Post Effective
Amendment No. 40 and Post-Effective Amendment No. 42 to the Registration
Statement under the Securities Act of 1933 on Form N-1A (File No. 2-14543)
of Registrant filed on December 1, 1986 and December 1, 1988, respectively.
(2) Incorporated by reference to identically numbered exhibit in
Post-Effective Amendment No. 41 to the Registration Statement under the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of Registrant filed
on December 1, 1987.
(3) Incorporated by reference to identically numbered exhibit in
Post-Effective Amendment No. 39 to the Registration Statement under the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of Registrant filed
on October 1, 1985.
(4) Incorporated by reference to identically numbered exhibit in
Post-Effective Amendment No. 44 to the Registration Statement under the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of Registrant filed
on December 1, 1990.
(5) Incorporated by reference to identically numbered exhibit in
Post-Effective Amendment No. 46 to the Registration Statement under the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of Registrant filed
on December 1, 1992.
Item 25. Persons Controlled by or Under Common Control
None.
<PAGE>
Item 26. Number of Holders of Securities. The following table sets forth
the approximate number of record holders of the one cent par value common
stock of the Registrant as of December 28, 1995.
(1) (2)
Title of Class Number of Record Holders
One Cent Par Value Common Stock 6,676
<PAGE>
Item 27. Indemnification. Reference is made to Article IX of the
Registrant's By-Laws (Exhibit 2 to this Registration Statement) and Article
7(c) of the Registrant's Articles of Incorporation (Exhibit 1 to this
Registration Statement).
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection
with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provisions of its By-Laws in a manner consistent with Release No. 11330 of
the Securities and Exchange Commission under the Investment Company Act of
1940 so long as the interpretation of Sections 17(h) and 17(i) of such Act
expressed in that Release remain in effect.
Item 28. Business and Other Connections of Investment Adviser. The
following table sets forth the principal business of each director and
officer of the Investment Adviser of the Registrant for the two fiscal
years ended July 31, 1995.
Name & Position With Principal Business
Investment Adviser
Robert Brody Mr. Brody is also President and a director of
President, Treasurer and American Growth Fund, Inc., the Registrant;
Director Treasurer and a director of American Growth
Fund Sponsors, Inc., the Registrant's
underwriter; and President, Treasurer and a
director of American Growth Financial
Services, Inc., 410 17th Street, Denver,
Colorado.
Timothy E. Taggart, Mr. Taggart is also Vice President, secretary
Vice President, Director and a director of American Growth Fund
Sponsors, Inc., the Registrant's underwriter,
410 17th Street, Denver, Colorado; and
Vice President and Director of American Growth
Financial Services, Inc., 410 17th Street,
Denver, Colorado.
D. Leann Baird, Mrs. Baird is also secretary of American
Secretary, Director Growth Fund, Inc., the Registrant; and
secretary of American Growth Financial
Services, Inc., 410 17th Street,
Denver, Colorado.
<PAGE>
Item 29. Principal Underwriters.
(a) None.
(b)
(1) Name and Principal (2) Position and Offices (3)Position and Offices
Business Address With Underwriter With Registrant
Robert Brody President, Treasurer President, Director
410 17th Street Director
Suite 800
Denver, CO 80202
Timothy E. Taggart Vice President Treasurer
410 17th Street Secretary, Director
Suite 800
Denver, CO 80202
Otis R. Cutright Director
410 17th Street
Suite 800
Denver, CO 80202
(c) None.
Item 30. Location of Accounts and Records. All accounts and records
required to be maintained by Section 31(a) of the Investment Company Act,
and the rules and regulations promulgated thereunder, are located at the
offices of the Registrant, 410 17th Street, Suite 800, Denver, Colorado
80202, and at the offices of its custodian and transfer agent, State Street
Bank and Trust Company, 2 Heritage Drive, N. Quincy, MA 02171, and are
under the general custody and control of its Secretary, D. Leann Baird.
Item 31. Management Services.
None.
Item 32. Undertakings.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly
caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereto duly authorized, and its seal to be
hereunto affixed and attested, all in the City of Denver, State of Colorado
on the 29th day of December, 1995.
AMERICAN GROWTH FUND, INC.
By:/s/ Robert Brody
---------------------------
Robert Brody, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed by the following
persons in the capacities indicated and as of the date stated.
(a) Principal Executive Officer: Title Date
/s/ Robert Brody President
- ------------------------------------------ and Director 12/29/95
Robert Brody
(b) Principal Financial and Accounting Officer:
/s/ Timothy E. Taggart Treasurer 12/29/95
- ------------------------------------------
Timothy E. Taggart
(c) Majority of the Directors:
/s/ Michael J. Baum, Jr. 12/29/95
- ------------------------------------------
Michael J. Baum, Jr.
/s/ Eddie R. Bush 12/29/95
- ------------------------------------------
Eddie R. Bush
/s/ Don S. Strauss 12/29/95
- ------------------------------------------
Don S. Strauss
/s/ Harold Rosen 12/29/95
- ------------------------------------------
Harold Rosen
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
EX-99.1(b) Form of Articles of Amendment and Restatement
EX-99.6(c) Form of Distribution Agreement for Class A Shares
EX-99.6(d) Form of Distribution Agreement for Class B Shares
EX-99.6(e) Form of Distribution Agreement for Class C Shares
EX-99.6(f) Form of Distribution Agreement for Class D Shares
EX-99.11 Consent of Smith, Brock & Gwinn.
EX-99.15(a) Form of Distribution Plan for Class A Shares
EX-99.15(b) Form of Distribution Plan for Class B Shares
EX-99.15(c) Form of Distribution Plan for Class C Shares
EX-99.18(a) Form of Rule 18f-3 Plan
EX-27.3(b) Financial Data Schedule
<PAGE>
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
AMERICAN GROWTH FUND, INC.
AMERICAN GROWTH FUND, INC., a Maryland corporation (the Corporation"),
HEREBY CERTIFIES:
1. The name of the Corporation is AMERICAN GROWTH FUND, INC. The
Corporation desires to amend and restate its charter (the "Charter") as
currently in effect. The original Articles of Incorporation were approved
and received by the State Tax Commission of Maryland on July 16, 1958.
2. Pursuant to Section 2-609 of the Maryland Corporations and
Associations Code, these Articles of Amendment and Restatement restate and
integrate and further amend the provisions of the Articles of Incorporation
of the Corporation.
3. The text of the Charter of the Corporation as heretofore amended
or supplemented is hereby restated and further amended to read in its
entirety as follows:
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN GROWTH FUND, INC.
ARTICLE FIRST
The name of the corporation (hereinafter called the Corporation)
is American Growth Fund, Inc.
ARTICLE SECOND
The purpose or purposes for which the Corporation is formed and
the business or objects to be transacted, carried on and promoted by it,
are as follows:
(1) To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, assign,
negotiate, transfer, exchange or otherwise dispose of or turn to
account or realize upon, securities (which term "securities" shall for
the purposes of this Article, without limitation of the generality
thereof, be deemed to include any stocks, shares, bonds, debentures,
notes, mortgages or other obligations, and any certificates, receipts,
warrants or other instruments representing rights to receive, purchase
or
<PAGE>
subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets) created or
issued by any persons, firms, associations, corporations, syndicates,
combinations, organizations, governments, or subdivisions thereof; and
to exercise, as owner or holder of any securities, all rights, powers
and privileges in respect thereof; and to do any and all acts and
things for the preservation, protection, improvement and enhancement
in value of any and all such securities.
(2) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes and for
such amount or kind of consideration (including, without limitation
thereto, securities) now or hereafter permitted by the laws of
Maryland and by these Articles of Incorporation, as its Board of
Directors may determine; provided, however, that the consideration per
share to be received by the Corporation upon the sale of any shares of
its capital stock shall not be less than the net asset value per share
of such capital stock outstanding at the time as of which the
computation of such net asset value shall be made.
(3) To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
stockholders of the Corporation) shares of its capital stock, in any
manner and to the extent now or hereafter permitted by the laws of
Maryland and by these Articles of Incorporation.
(4) To conduct its business in all of its branches at one or
more offices in Maryland and elsewhere in any part of the world,
without restriction or limit as to extent.
(5) To carry out all or any of the foregoing objects and
purposes as principal or agent, and alone or with associates or, to
the extent now or hereafter permitted by the laws of Maryland, as a
member of, or as the owner or holder of any stock of, or shares of
interest in, any firm, association, corporation, trust or syndicate;
and in connection therewith to make or enter into such deeds or
contracts with any persons, firms, associations, corporations,
syndicates, governments or subdivisions thereof, and to do such acts
and things and to exercise such powers, as a natural person could
lawfully make, enter into, do or exercise.
(6) To do any and all such further acts and things and to
exercise any and all such further powers as may be necessary,
incidental, relative, conducive, appropriate or desirable for the
accomplishment, carrying out or attainment of all or any of the
foregoing purposes or objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of this or any other Article
of these Articles of Incorporation, and shall each be regarded as
independent, and construed as powers as well as objects and purposes, and
the enumeration of specific purposes, objects and powers shall not be
construed to limit or restrict in any manner the meaning of general terms
or the general powers of the Corporation now or hereafter conferred by
2
<PAGE>
the laws of the State of Maryland, nor shall the expression of one thing be
deemed to exclude another, though it be of like nature, not expressed;
provided, however, that the Corporation shall not have the power to carry
on within the State of Maryland any business whatsoever the carrying on to
which would preclude it from being classified as an ordinary business
corporation under the laws of said State; nor shall it carry on any
business, or exercise any powers, in any other state, territory, district
or country except to the extent that the same may lawfully be carried on or
exercised under the laws thereof.
ARTICLE THIRD
The post office address of the place at which the principal
office of the Corporation in the State of Maryland will be located is 32
South Street, Baltimore, Maryland 21202.
The Corporation's resident agent is The Corporation Trust
Incorporated, whose post office address is 32 South Street, Baltimore,
Maryland 21202. Said resident agent is a corporation of the State of
Maryland.
ARTICLE FOURTH
(1) The total number of shares which the Corporation has
authority to issue is fifty million (50,000,000) shares of capital stock of
the par value of one cent ($0.01) each, having an aggregate par value of
five hundred thousand dollars ($500,000). Until the name may be changed
pursuant to Paragraph 3 of this Article Fourth or any of such shares are
reclassified pursuant to Paragraph 2 hereof, all such shares shall be of
one series which shall bear the same name as that of the Fund. Until the
Board of Directors may reclassify any of such shares pursuant to Paragraph
2 of this Article Fourth, all shares of the Corporation's common stock
shall be of one class, designated "Class D Common Stock."
(2) The Board of Directors may classify and reclassify any
unissued shares of capital stock (whether or not such shares have been
previously classified) into one or more additional or other classes or
series as may be established from time to time by setting or changing in
any one or more respects the designations, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms or conditions of or rights to require redemption of
such shares of capital stock and pursuant to such classification or
reclassification to increase or decrease the number of authorized shares of
any existing class or series.
(3) The Board of Directors may change the name or other
designation of any series or class of shares of capital stock whether or
not shares of such series or class are issued and outstanding, provided
that such change in name or other designation does not change the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of such shares of stock.
3
<PAGE>
(4) Each series of stock of the Corporation shall relate to
a separate portfolio of investments. All shares of stock within each
series shall be identical except that there may be variations among the
different series, including, without limitation, as to the purchase price,
determination of net asset value, designations, preferences, conversion or
other rights, voting powers, restrictions, allocations of expenses, special
and relative rights and limitations as to dividends and on liquidation,
qualifications or terms or conditions of or rights to require redemption of
such shares of stock.
(a) Except as the Board of Directors otherwise may
provide when classifying or reclassifying any shares of stock into
separate series, all consideration received by the Corporation for the
issue or sale of shares of stock of a particular series, together with
all assets in which such consideration is invested or reinvested, all
income, earnings, profits, and proceeds received thereon, including
any proceeds derived from the sale, exchange or liquidation of such
assets, any funds or payments derived from any reinvestment of such
proceeds, and any assets, income, earnings, profits, and proceeds
thereof, funds or payments that are not readily identifiable as
belonging to any particular series ("General Assets") allocated to a
series, shall constitute assets of that series, in contrast to other
series (subject only to the rights of creditors) and are herein
referred to as assets "belonging to" that series. Except as herein
expressly provided, any General Assets shall be allocated by or under
the supervision of the Board of Directors to and among any one or more
of the series established and designated from time to time, in such
manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable. Such decisions by the Board of
Directors shall be final and conclusive.
(b) The assets belonging to each series of stock shall
be charged with the liabilities of the Corporation in respect of that
series and with all expenses, costs, charges, and reserves
attributable to that series. Such liabilities, expenses, costs,
charges, and reserves, together with any liabilities, expenses, costs,
charges, or reserves of the Corporation that are not readily
identifiable as belonging to any particular series ("General
Liabilities") allocated to that series, shall constitute the
liabilities of that series, in contrast to other series, and are
herein referred to as "belonging to" that series. Except as herein
expressly provided, any General Liabilities shall be allocated by or
under the supervision of the Board of Directors to and among any one
or more of the series established and designated from time to time, in
such manner and on such basis as the Board of Directors, in its sole
discretion, deems fair and equitable. Such decisions by the Board of
Directors shall be final and conclusive.
(5) Expenses related to the distribution of, and other
identified expenses that should properly be allocated to, the shares of a
particular class or series of capital stock may be charged to and borne
solely by such class or series and the bearing of expenses solely by a
class or series of capital stock may be appropriately reflected (in a
manner determined by the Board of Directors) and cause differences in the
net asset value attributable to, and the dividend, redemption and
liquidation rights of, the shares of each class or series of
4
<PAGE>
capital stock.
(6) Unless otherwise expressly provided in the charter of
the Corporation, including any Articles Supplementary thereto, the holders
of each class or series of capital stock shall be entitled to dividends and
distributions in such amounts and at such times as may be determined by the
Board of Directors, and the dividends and distributions paid with respect
to the various classes or series of capital stock may vary among such
classes and series. Dividends and distributions with respect to a series
may be declared or paid only out of the net assets belonging to that
series. Dividends on a class or series may be declared or paid only out of
the net assets of that class or series.
(7) Unless otherwise expressly provided in the charter of
the Corporation, including any Articles Supplementary thereto, on each
matter submitted to a vote of stockholders, each holder of a share of
capital stock of the Corporation shall be entitled to one vote for each
share standing in such holder's name on the books of the Corporation,
irrespective of the class or series thereof, and all shares of all classes
and series shall vote together as a single class; provided, however, that
(a) as to any matter with respect to which a separate vote of any class or
series is required by the Investment Company Act of 1940, or any rules,
regulations or orders issued thereunder, or by the Maryland General
Corporation Law, such requirements as to a separate vote by that class or
series shall apply in lieu of a general vote of all classes and series as
described above, (b) in the event that the separate vote requirements
referred to in (a) above apply with respect to one or more classes or
series, then, subject to clause (c) below, the shares of all other classes
and series not entitled to a separate class vote as a single class, and (c)
as to any matter which does not affect the interests of a particular class
or series, such class or series shall not be entitled to any vote and only
the holders of shares of the affected classes or series, if any, shall be
entitled to vote.
(8) Unless otherwise expressly provided in the charter of
the Corporation, including any Articles Supplementary thereto, subject to
compliance with the requirements of the Investment Company Act, the Board
of Directors shall have the authority to provide that holders of shares of
any class or series shall have the right to convert or exchange said shares
into shares of one or more other classes or series of shares in accordance
with such requirements and procedures as may be established by the Board of
Directors.
(9) Notwithstanding any provisions of the Maryland General
Corporation Law requiring a greater proportion than a majority of the votes
of all classes or series of capital stock of the Corporation (or any class
or series entitled to vote thereon as a separate class or series) to take
or authorize any action, the Corporation is hereby authorized (subject to
the requirements of the Investment Company Act of 1940, or any rules,
regulations and orders issued thereunder) to take such action upon the
concurrence of a majority of the aggregate number of shares of capital
stock of the Corporation entitled to vote thereon (or a majority of the
aggregate number of shares of a class or series entitled to vote thereon as
a separate class or series).
5
<PAGE>
(10) Unless otherwise expressly provided in the charter of
the Corporation, including any Articles Supplementary creating any class or
series of capital stock, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of all classes and series of capital stock of the Corporation shall
be entitled, after payment or provision for payment of the debts and other
liabilities of the Corporation, to share ratably in the remaining net
assets of the Corporation; provided, however, that in the event the capital
stock of the Corporation shall be classified or reclassified into series,
holders of any shares of capital stock within such series shall be entitled
to share ratably (after taking into account are expenses attributable to
any separate clauses of such series) out of the assets belonging to such
series.
(11) No holder of stock of the Corporation shall, as such
holder, have any right to purchase or subscribe for any shares of the
capital stock of the Corporation of any class which it may issue or sell
(whether out of the number of shares authorized by these Articles of
Incorporation, or out of any shares of the capital stock of the Corporation
acquired by it after the issue thereof, or otherwise) other than such
right, if any, as the Board of Directors, in its discretion, may determine.
Cumulative voting shall not be allowed at any meeting of the stockholders
of this Corporation.
(12) Any fractional share shall carry proportionately all
the rights of a whole share, including the right to vote and the right to
receive dividends.
(13) All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of these Articles of
Incorporation.
(14) Any reference to "shares," "stock" or "shares of stock"
in these Articles of Incorporation shall be deemed to refer, unless the
context otherwise requires, to the shares of each separate class and/or
series. As used in the charter of the Corporation, the terms "charter" and
"Articles of Incorporation" shall mean and include these Articles of
Incorporation as amended, supplemented and restated from time to time
whether by Articles of Amendment, Articles Supplementary, Articles of
Restatement or otherwise.
ARTICLE FIFTH
The number of Directors of the Corporation shall be five, and the
names of those who shall act as such until their successors are duly chosen
and qualified are as follows:
Robert D. Brody
Michael J. Baum, Jr.
Eddie R. Bush
Don S. Strauss
Harold Rosen
However, the By-Laws of the Corporation may fix the number of
Directors at a number greater or less than that named in these Articles of
Incorporation, provided that in no case shall the number of Directors be
less than three, and may authorize the Board of Directors,
6
<PAGE>
by the vote of a majority of the entire Board of Directors, to increase or
decrease the number of Directors fixed by these Articles of Incorporation or by
the By-Laws within a limit specified in the By-Laws and to fill the vacancies
created by any such increase in the number of Directors. Unless otherwise
provided by the By-Laws of the Corporation, the Directors of the Corporation
need not be stockholders therein.
ARTICLE SIXTH
The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
Directors and stockholders.
(1) The By-Laws of the Corporation may divide the
Directors of the Corporation into classes and prescribe the tenure of
office of the several classes, but no class shall be elected for a period
shorter than that from the time of the election following the division into
classes until the next annual meeting and thereafter for a period shorter
than the interval between annual meetings or for a longer period than five
years, and the term of office of at least one class shall expire each year.
Notwithstanding the foregoing, no such division into classes shall be made
prior to the first annual meeting of stockholders of the Corporation.
(2) The holders of shares of the capital stock of the
Corporation shall have the right to inspect the records, documents,
accounts and books of the Corporation, subject to reasonable regulations of
the Board of Directors, not contrary to Maryland law, as to whether and to
what extent, and at what times and places, and under what conditions and
regulations, such right shall be exercised.
(3) Any Director, or any officer elected or appointed by
the Board of Directors or by any committee of said Board or by the
stockholders or otherwise, may be removed at any time, with or without
cause, in such lawful manner as may be provided in the By-Laws of the
Corporation.
(4) If the By-Laws so provide, the Board of Directors of
the Corporation shall have the power to hold their meetings, to have an
office or offices and, subject to the provisions of the laws of Maryland,
to keep the books of the Corporation outside of said State at such places
as may from to time be designated by them.
(5) In addition to the powers and authority hereinbefore
or by statute expressly conferred upon them, the Board of Directors may
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the express
provisions of the laws of Maryland, of these Articles of Incorporation and
of the By-Laws of the Corporation.
(6) Shares of stock in other corporations shall be voted
by the President or a Vice-President, or such officer or officers of the
Corporation as the Board of
7
<PAGE>
Directors shall designate for the purpose, or by a proxy or proxies thereunto
duly authorized by the Board of Directors, except as otherwise ordered by vote
of the holders of a majority of the shares of the capital stock of the
Corporation outstanding and entitled to vote in respect thereto.
(7) Liability and Indemnification.
(a) A director and an officer, agent or employee of
the Corporation shall be indemnified by the Corporation to the fullest
extent allowed by the Maryland General Corporation Law (the "Maryland
Law") as it now exists and to such increased or expanded
indemnification as may be allowed, required or permitted by any future
amendment to the Maryland Law; and each director and officer, agent or
employee shall also be entitled to the fullest indemnification which
is now or hereafter permitted under any applicable law, rule,
regulation, contract, bylaw or otherwise; and such rights to
indemnification shall, except as otherwise provided in the Maryland
law, not be deemed exclusive of any other rights to which each
director, officer, agent or employee may be entitled apart from
Maryland Law. The bylaws may also limit or restrict the
indemnification to which any director, officer, agent or employee may
be entitled.
(b) Subject to any limitation imposed by the
Investment Company Act, to the maximum extent permitted by the General
Laws of the State of Maryland from time to time in effect, no director
or officer of the Corporation shall be liable to the Corporation or
its stockholders for money damages.
(c) Neither the amendment of these Articles of
Incorporation nor the repeal of any provision hereof, shall limit or
eliminate the benefits provided to directors and officers under [the
foregoing] provisions in connection with any act or omission that
occurred prior to such amendment or repeal.
(d) Nothing in these Articles of Incorporation shall
be construed to protect any director or officer of the Corporation
against any liability to the Corporation or its shareholders to which
such director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
(8) The Board of Directors of the Corporation is hereby
empowered to authorize, without shareholder approval, the issuance and sale
from time to time of shares of stock of the Corporation of any class or
series, whether now or hereafter authorized, in each case upon such terms
and conditions and for such consideration as such Board of Directors may
deem advisable, subject to such limitations as are contained in these
Articles of Incorporation, the by-laws of the Corporation, the laws of the
State of Maryland, and the Investment Company Act and the rules thereunder.
(9) Redemptions.
8
<PAGE>
(a) Each holder of shares of stock of the Corporation
shall be entitled to require the Corporation to redeem all or any
part of the shares of stock of the Corporation standing in the
name of such holder on the books of the Corporation, and all
shares of stock issued by the Corporation shall be subject to
redemption by the Corporation, at the redemption price of such
shares as in effect from time to time as may be determined by the
Board of Directors of the Corporation in accordance with the
provisions hereof, subject to the right of the Board of Directors
of the Corporation to suspend the right of redemption of shares
of stock of the Corporation or postpone the date of payment of
such redemption price in accordance with the provisions of
applicable law.
(b) All shares of stock of the Corporation shall be
redeemable at the option of the Corporation. The Board of
Directors may by resolution from time to time authorize the
Corporation to require the redemption of all or any part of the
outstanding shares of any class or series upon such terms and
conditions as the Board of Directors, in its discretion, shall
deem advisable, and upon the sending of written notice thereof to
each holder whose shares are to be redeemed.
(c) The redemption price of shares of stock of the
Corporation shall be the net asset value thereof as determined by
the Board of Directors of the Corporation or under its direction
from time to time in accordance with the provisions of applicable
law, less such redemption or other charge, if any, as may be
fixed by the Board of Directors of the Corporation. Payment of
the redemption price shall be made by the Corporation at such
time and in such manner as may be determined from time to time by
the Board of Directors of the Corporation in accordance with the
provisions of applicable law.
(10) Any determination made in good faith and, so far as
accounting matters are involved, in accordance with accepted accounting
practice by or pursuant to the direction of the Board of Directors, as to
the amount of the assets, debts, obligations or liabilities of the
Corporation (or of any class or series thereof), as to the amount of net
income from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation or
liability for which such reserves or charges shall have been created shall
have been paid or discharged or shall be then or thereafter required to be
paid or discharged), as to the price of any security or other asset owned
or held by the Corporation (or any series thereof), as to the number of
shares of the Corporation (or any class or series thereof) outstanding, as
to the estimated expense to the Corporation (or any class or series
thereof) in connection with purchases of its shares, as to the ability to
liquidate securities in an orderly fashion, or as to any other matters,
including, but not limited to those relating to the issue, sale, purchase
and/or other acquisition or disposition of securities or shares of the
Corporation (or any class or series thereof) shall be final and conclusive,
and shall be binding upon the Corporation and all holders of its shares,
past, present and future, and shares of
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the Corporation (and any class or series thereof) are issued and sold on the
condition and understanding, evidenced by acceptance of certificates for such
shares by, or confirmation of such shares being held for the account of, any
shareholder, that any and all determinations shall be binding as aforesaid.
(11) No provision of these Articles of Incorporation shall
be effective to require a waiver of compliance with any provision of the
Securities Act of 1933, as amended, or the Investment Company Act, or any
valid rule, regulation or order of the Securities and Exchange Commission
thereunder.
ARTICLE SEVENTH
The term of existence of this Corporation shall be perpetual.
ARTICLE EIGHTH
From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed (including amendments
altering contract rights and any amendment which changes the terms of any
of the outstanding stock by classification, reclassification or otherwise),
upon the vote of the holders of a majority of the shares of capital stock
of the Corporation at the time outstanding and entitled to vote, and other
provisions which might under the statutes of the State of Maryland at the
time in force be lawfully contained in articles of incorporation, may be
added or inserted upon the vote of the holders of a majority of the shares
of capital stock of the Corporation at the time outstanding and entitled to
vote, and all rights at any time conferred upon the stockholders of the
Corporation by these Articles of Incorporation are granted subject to the
provisions of this Article EIGHTH. The Corporation shall notify the
stockholders in its next subsequent regular report to the stockholders of
any amendment to these Articles of Incorporation.
1. The foregoing Articles of Amendment and Restatement have been
effected in the manner and by the vote required by the Corporation's
Charter and the laws of the State of Maryland. Pursuant to Section 2-604
of the Maryland Corporations and Associations Code, these Articles of
Amendment and Restatement were advised and approved by a majority of the
entire Board of Directors of the Corporation and approved by the
stockholders.
2. The current address of the principal office of the Corporation
and the name and address of the Corporation's current resident agent are as
set forth in Article THIRD of the Corporation's Charter as amended and
restated by these Articles of Amendment and Restatement.
3. The number of directors of the Corporation and the names of those
currently in office are as set forth in Article FIFTH of the Corporation's
Charter as amended and restated by the Articles of Amendment and
Restatement.
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The undersigned President acknowledges these Articles of Amendment and
Restatement to be the corporate act of the Corporation and as to all
matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that
this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be
signed in its name and on its behalf by its President and attested to by
its Secretary on this ___ day of February, 1996.
ATTEST: AMERICAN GROWTH FUND, INC.
- -------------- By:--------------------
Secretary President
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<PAGE>
DISTRIBUTION AGREEMENT
(Class A Shares)
AGREEMENT (the "Agreement"), dated as of February __, 1996, between
AMERICAN GROWTH FUND, INC., a Maryland corporation, (the "Fund") and
AMERICAN GROWTH FUND SPONSORS, INC., a Colorado corporation, (the
"Distributor").
RECITALS
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company;
WHEREAS, the Fund intends to offer its Class A shares to the public on
a continuous basis;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is in the
business of selling shares of the Fund and other registered investment
companies to the public, either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into this
Agreement with respect to the continuous offering of the Fund's Class A
shares from and after the date hereof in order to promote the growth of the
Fund and facilitate the distribution of its Class A shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant
to Rule 12b-1 under the 1940 Act (the "Plan") authorizing payments by the
Fund to the Distributor with respect to the distribution of Class A shares
of the Fund and the provision of services with respect to Class A
shareholder accounts.
NOW, THEREFORE, the parties agree as follows:
1. The Distributor shall be the distributor for the Class A shares of the
capital stock of the Fund as may from time to time be effectively
registered under the Securities Act of 1933, as amended (hereinafter
referred to as the "Act").
2. The Fund agrees to sell and deliver from time to time, upon the terms
hereinafter described, such number of its fully paid and nonassessable
Class A shares of capital stock as the Distributor shall order, but only to
the extent that the Distributor shall have received purchase orders
therefor. All orders from the Distributor hereunder shall be subject to
confirmation by the Fund.
3. The Distributor may sell and distribute any shares so purchased by it
through dealers or otherwise in such manner not inconsistent with the
provisions hereof as it may determine from time to time, and it agrees to
use its best efforts to effect such sale and distribution. The Distributor
shall not make any short sales of Fund shares. The Distributor shall in
addition, in so far as they concern
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it, comply with all applicable laws, rules and regulations including,
without limiting the generality of the foregoing, all rules or regulations
made or adopted pursuant to Section 22 of the 1940 Act by the Securities
and Exchange Commission or any securities association registered under
the 1934 Act.
4. Subject to the provisions of paragraph 5 hereof, all shares offered
for sale and sold by the Distributor shall be offered for sale and sold by
it at a price per share equal to the offering price per share (hereinafter
called the offering price) rounded to the nearest one cent and equal to (a)
the net asset value per share (determined as authorized from time to time
under the direction of the Board of Directors of the Fund in conformity
with the 1940 Act) plus (b) a sales charge or premium, if any, based upon
the schedule of such charges (including all exceptions therefrom) and
related terms and conditions as may be set forth from time to time in the
then current Prospectus or Statement of Additional Information of the Fund
pertaining to its Class A shares. The Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the Funds net asset
value and offering price as often and at such times as its Board of
Directors shall by resolution determine provided, however, that subject to
the provisions hereinafter contained in this paragraph numbered 4, the Fund
shall determine and furnish such offering price at least once on each
business day on which the New York Stock Exchange is open for trading.
Each such offering price shall become effective at such time, and shall
remain in effect during such period, as may be stated in the statement
thereof furnished to the Distributor as above provided. Every statement of
the offering price furnished to the Distributor as above provided shall
show the basis of its computation. The Fund shall also accept and confirm
at the offering price in effect before a price change such orders as are
entered by the Distributor to fill orders placed with it prior to such time
of price change, but only if such orders are received by the Fund within a
time deemed by the Fund to be reasonable after the time of receipt thereof
by the Distributor and if such orders are time-stamped or bear other
evidence to show that they were filed for transmission at the point of
origin prior to the time of such price change. Anything to the contrary
herein notwithstanding, however, whenever in its judgment such action is
warranted by market, economic or political conditions or by abnormal
circumstances of any kind, Fund officers may suspend the sale of Fund
shares, without incurring any liability under any of the provisions of this
Agreement, and decline to accept or confirm any orders for or make any
sales of any shares of stock to the Distributor under this Agreement until
such time as the Fund shall deem it advisable to accept and confirm such
orders and to make such sales, and during any such period, the Fund shall
be under no obligation to confirm or accept any such orders or make any
such sales at any price.
5. At or prior to the time of delivery by the Fund to the Distributor for
its accounts, of any shares of the Fund's capital stock the Distributor
will pay or cause to be paid to the Fund or its order an amount equal to
the offering price of such shares at which the Distributors order has been
confirmed by the Fund, less the applicable sales charge or premium, if any,
which charge or premium shall constitute the Distributors concession for
selling and distributing such shares and may be deducted by it from the
offering price in making payment to the Fund hereunder. The Distributor
may in its discretion allow concessions to dealers or other accounting to
it out of such concession.
6. (a) The Fund shall pay to the Distributor as compensation for
services under the Plan and under this Agreement, a fee of up to 0.30% of
average daily net assets attributable to Class A shares
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<PAGE>
of the Fund. Of such fee, (i) up to 0.25% of such average daily net assets may
be used to compensate the Distributor and broker-dealers and financial
institutions ("Securities Firms") for shareholder servicing related
to distribution of shares of the class (the "service fee") and (ii)
the balance may be used to compensate the Distributor and Securities Firms for
certain distribution-related activities (the "distribution fee"); provided, that
the sum of any service fee and distribution fee shall not exceed 0.30% of
such average daily net assets. Amounts payable under the Plan shall be
accrued daily and payable monthly or at such other intervals as the Board
of Directors shall determine. No fee shall be payable hereunder if it
would cause the Fund to fail to comply with the requirements of Article
III, Section 26 of the Rules of Fair Practice of the National Association
of Securities Dealers, Inc.
(b) So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions and
account servicing fees to be paid by the Distributor to Securities Firms
and at the request of the Fund will provide such information as may
reasonably be requested concerning the activities of the Distributor
hereunder and the costs incurred in performing such services.
(c) The distribution fee under paragraph (a) shall be used to
compensate the Distributor and/or Securities Firms having agreements with
the Distributor for providing distribution assistance to customers and to
pay for the preparation, printing and distribution of prospectuses,
statements of additional information and periodic financial reports to
persons other than current shareholders of the Fund, as well as to pay for
the preparation and distribution of sales literature and pay for other
promotional and distribution activities.
(d) The service fee payable under paragraph (a) above shall be used
to compensate the Distributor and/or Securities Firms for providing
personal services such as shareholder liaison services (responding to
customer inquiries and providing information on their investment) to Fund
shareholders and/or maintaining shareholder accounts.
(e) Payments to Securities Firms hereunder may take the form of sales
commissions or trailer commissions.
7. Delivery of certificates for shares of the Fund's capital stock, when
and if requested (subject to any determination by the Fund not to issue
certificates for shares), shall be made as soon as practicable after
confirmation by it or the Distributor's order therefor and against payment
therefor by the Distributor in Denver funds. The certificates for such
shares shall be registered in such names and amounts as the Distributor may
specify to the Fund in writing.
8. The Fund agrees to pay all costs and expenses in connection with
future registrations of its capital stock under the Act, and all expenses
in connection with maintaining facilities for the issue and transfer of its
shares, and for supplying information, prices and other data to be
furnished by it hereunder.
The Fund agrees to execute any and all documents and to furnish any
and all information
3
<PAGE>
which may be reasonable necessary, in the discretion of its Board
of Directors, in connection with the qualification of its shares
for sale in such states as the Distributor may designate to it. The
Distributor will pay all expenses connected with its own qualification as a
dealer or broker under State or federal laws.
9. The Fund shall furnish the Distributor from time to time, for use in
connection with the sale of its shares, such information with respect to
the Fund and its shares as the Distributor may reasonably request, all of
which, if so requested, shall be signed by one or more of its duly
authorized officers, warranting that the statements contained in any such
information, when so signed by its officers, shall be true and correct.
The Fund shall also furnish the Distributor with annual audits of its books
and accounts made by independent public accountants, who may also be the
independent public accountants regularly retained by it, with semi-annual
earnings statements prepared by its accountants, with balance sheets at
least on a semi-annual basis, and from time to time with such additional
information regarding its financial condition as the Distributor may
reasonably request.
10. As used in this agreement, the term "registration statement" shall
mean and include the registration statement with respect to shares of Fund
capital stock which became effective under the Act on April 28, 1959, and
also any other registration statement filed by it under the Act which shall
become effective, in each case including any amendment thereto filed after
the effective date thereof which amendment shall become effective. The Fund
represents that its registration statement under the Act, its Prospectus
and Statement of Additional Information, have been or will be, as the case
may be, prepared substantially in conformity with the requirements of said
Act and the rules and regulations of the Securities and Exchange Commission
thereunder. The Fund further represents and warrants that its registration
statement, Prospectus and Statement of Additional Information contain or
will contain all statements required to be stated therein in accordance
with the Act and the rules and regulations of said Commission, and that all
statements of fact contained or to be contained therein are or will be true
and correct; that none of its registration statement when it shall become
effective, or its Prospectus or its Statement of Additional Information
used, will include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of its shares. The Fund
may but shall not be obligated to propose from time to time such amendments
to its registration statement, or amendments or supplements to its
Prospectus and Statement of Additional Information, as, in the light of
future developments, may, in the opinion of its counsel, be necessary in
order to have such documents at all times contain all material facts
required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of its shares, but, if it shall not propose
such amendment or amendments within fifteen days after receipt by it of a
written request from the Distributor to do so, the Distributor may, at its
option, terminate this agreement immediately. The Fund shall not file any
amendment to its registration statement, or amendment or supplement to its
Prospectus or Statement of Additional Information, without giving the
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Fund's right
to file at any time such amendments to its registration statement, and/or
amendments or supplements to its Prospectus and Statement of Additional
Information, of whatever character, as it may deem advisable, such right
being in all respects absolute and unconditional. The Fund
4
<PAGE>
represents and warrants to the Distributor that any such amendments or
supplements hereafter filed by it will, when it becomes effective, contain all
statements required to be stated therein in accordance with the Act and the
rules and regulations of said Commission, that all statements of fact
contained therein will, when the same shall become effective, be true and
correct and that no such amendment, when it becomes effective, will include
an untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of its shares.
11. The Fund agrees to prepare and furnish the Distributor from time to
time copies of its Prospectus and Statement of Additional Information in
the forms as then most recently filed with the Securities and Exchange
Commission, and authorizes the Distributor and dealers to use such
Prospectus and Statement of Additional Information, in the forms furnished,
from time to time, in connection with the sale of its shares. The Fund
agrees to indemnify, defend and hold the Distributor, its several officers
and directors, and any person who controls it within the meaning of Section
15 of the Act, free and harmless from and against any and all claims,
demands liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Distributor, its officers or directors,
or any such controlling person may incur, under the Act, or under common
law or otherwise, arising out of or based upon any alleged untrue statement
of a material fact contained in its registration statement or prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the statements
in either thereof not misleading; provided, however, that Fund's agreement
to indemnify the Distributor, its officers or directors, and any such
controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations
made by the Distributor or by its representatives or agents other than such
statements and representations as are contained in Fund's Prospectus of
Statement of Additional Information and in such financial and other
statements as are furnished the Distributor pursuant to paragraphs 9 and
10; and further provided, that in no event shall anything herein contained
be so construed as to protect the Distributor against any liability to the
Fund or its security holders to which the Distributor would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence,
in the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this agreement. The agreement to
indemnify the Distributor, its officers and directors, and any such
controlling person as aforesaid is expressly conditioned upon the Fund
being notified of any action brought against the Distributor, its officers
or directors, or any such controlling person, such notification to be given
by letter or by telegram addressed to the Fund at its principal office in
Denver, Colorado, and sent by the person against whom such action is
brought, within ten days after the summons or other first legal process
shall have been served. The failure so to notify the Fund of any such
action shall not relieve it from any liability which it may have to the
person against whom such action is brought by reason of any such alleged
untrue statement or omission otherwise than on account of the indemnity
agreement contained in this paragraph 11. The Fund will be entitled to
assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of
good standing chosen by it and approved by the Distributor. In the event
the Fund does elect to assume the defense of any such suit and retain
counsel of good standing approved by the Distributor, the defendant or
5
<PAGE>
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case it does not elect to assume
the defense of any such suit, or in case the Distributor does not approve
the counsel chosen by it, the Fund will reimburse the Distributor, its
officers and directors, or the controlling person or persons named as
defendant or defendants in such suit, for the fees and expenses of any
counsel retained by it or them. The Fund's indemnification agreement
contained in this paragraph 11 and its representations and warranties in
this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Distributor,
its officers and directors, or any controlling person, and shall survive
the delivery of any shares of its capital stock hereunder. This agreement
of indemnity will inure exclusively to the Distributor's benefit, and its
successors, and to the benefit of its officers and directors, and their
respective estates, and to the benefit of any controlling persons and their
successors. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any of its
capital stock.
12. The Distributor agrees to indemnify, defend and hold the Fund, its
several officers and directors, and any person who controls it within the
meaning of Section 15 of the Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims demands or liabilities and any
counsel fees incurred in connection therewith) which it, its officers or
directors, or any such controlling person may incur under the Act or under
common law or otherwise; but only to the extent that such liability or
expense incurred by the Fund, its officers or directors, or such
controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained
in information furnished in writing by the Distributor to the Fund for use
in its registration statement, Prospectus or Statement of Additional
Information or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information required to be
stated therein or necessary to make such information not misleading. The
Distributor's agreement to indemnify the Fund, its officers and directors,
and any such controlling person as aforesaid is expressly conditioned upon
the Distributor being notified of any action brought against the Fund, its
officers or directors, or any such controlling person, such notification to
be given by letter or telegram addressed to the Distributor at its
principal office in Denver, Colorado, and sent by the person against whom
such action is brought, within ten days after the summons or other first
legal process shall have been served. The Distributor shall have a right
to control the defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon such alleged
misstatement or omission on Distributor's part and in any other event, the
Distributor or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any such
action. The failure so to notify the Distributor of any such action shall
not relieve it from any liability which it may have to the Fund, its
officers or directors, or to such controlling person by reason by any such
untrue statement or omission on its part otherwise than on account of its
indemnity agreement contained in this paragraph 12.
13. No shares of the Fund's capital stock shall be bought or sold by
either the Distributor or the Fund under any of the provision of this
Agreement and no orders for the purchase or sale of such
6
<PAGE>
stock hereunder shall be confirmed or accepted by the Fund if and so long as the
effectiveness of its registration statement, or any necessary amendments
thereto, covering such stock, shall be suspended under any of the
provisions of the Act; provided, however, that nothing in this paragraph 13
contained shall in any way restrict or limit or have any application to or
bearing upon the Fund's obligation to repurchase shares of its capital
stock from any stockholder in accordance with the provisions of its
charter.
14. The Fund agrees to advise the Distributor immediately:
(a) of any request by the Securities and Exchange Commission for
amendments to the Fund's registration statement, Prospectus or
Statement of Additional Information or for additional information,
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of its
registration statement or the initiation of any proceedings for that
purpose,
(c) of the happening of any event which makes untrue any statement
made in its registration statement or prospectus or which requires the
making of a change in either thereof in order to make the statements
therein not misleading, and
(d) of all action of the Securities and Exchange Commission with
respect to any amendments to its registration statement which may from
time to time be filed with the Securities and Exchange Commission
under the Act.
15. The Distributor is authorized, as agent, to accept offers for resale
to the Fund and to repurchase shares of its capital stock upon such terms
and conditions as the Fund's Board of Directors by resolution shall
determine. At least once on each business day on which the New York Stock
Exchange is open for trading, the Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the price at which such
repurchases may be made during the period or periods specified in such
statement and, upon request, it shall advise the Distributor of the price
at which such repurchase may be made at other times. In so far as they
concern the Fund it agrees to comply with all applicable laws, rules and
regulations, including without limiting the generality of the foregoing,
all rules or regulations made or adopted pursuant to Section 22 of the 1940
Act by the Securities and Exchange Commission or any securities association
registered under the 1934 Act.
16. (a) Subject to the provisions of paragraph 10 hereof, this Agreement
shall continue in effect for a period more than two years from the date
hereof only so long as such continuance is specifically approved at least
annually (x) by the Fund's Board of Directors or by a vote of a majority of
its outstanding voting securities (as defined in the 1940 Act) and (y) by
the Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in
this or any other agreement relating hereto (the "12b-1 Directors"), cast
in person at a meeting called for the purpose of voting on such approval.
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<PAGE>
(b) This Agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Directors, or by vote of a
majority of the outstanding voting securities (as defined in the 1940 Act)
of Class A shares of the Fund, on not more than 60 days' written notice to
the other party to the Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
AMERICAN GROWTH FUND, INC.
By______________________
President
AMERICAN GROWTH FUND SPONSORS, INC.
By______________________
President
8
<PAGE>
DISTRIBUTION AGREEMENT
(Class B Shares)
AGREEMENT (the "Agreement"), dated as of February __, 1996, between
AMERICAN GROWTH FUND, INC., a Maryland corporation, (the "Fund") and
AMERICAN GROWTH FUND SPONSORS, INC., a Colorado corporation, (the
"Distributor").
RECITALS
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company;
WHEREAS, the Fund intends to offer its Class B shares to the public on
a continuous basis;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is in the
business of selling shares of the Fund and other registered investment
companies to the public, either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into this
Agreement with respect to the continuous offering of the Fund's Class B
shares from and after the date hereof in order to promote the growth of the
Fund and facilitate the distribution of its Class B shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant
to Rule 12b-1 under the 1940 Act (the "Plan") authorizing payments by the
Fund to the Distributor with respect to the distribution of Class B shares
of the Fund and the provision of services in respect of Class B shareholder
accounts.
NOW, THEREFORE, the parties agree as follows:
1. The Distributor shall be the distributor for the Class B shares of the
capital stock of the Fund as may from time to time be effectively
registered under the Securities Act of 1933, as amended (hereinafter
referred to as the "Act").
2. The Fund agrees to sell and deliver from time to time, upon the terms
hereinafter described, such number of its fully paid and nonassessable
Class B shares of capital stock as the Distributor shall order, but only to
the extent that the Distributor shall have received purchase orders
therefor. All orders from the Distributor hereunder shall be subject to
confirmation by the Fund.
3. The Distributor may sell and distribute any shares so purchased by it
through dealers or otherwise in such manner not inconsistent with the
provisions hereof as it may determine from time to time, and it agrees to
use its best efforts to effect such sale and distribution. The Distributor
shall not make any short sales of Fund shares. The Distributor shall in
addition, in so far as they concern
1
<PAGE>
it, comply with all applicable laws, rules and regulations including, without
limiting the generality of the foregoing, all rules or regulations made or
adopted pursuant to Section 22 of the 1940 Act by the Securities and Exchange
Commission or any securities association registered under the 1934 Act.
4. Subject to the provisions of paragraph 5 hereof, all shares offered
for sale and sold by the Distributor shall be offered for sale and sold by
it at a price per share equal to the offering price per share (hereinafter
called the offering price) rounded to the nearest one cent and equal to (a)
the net asset value per share (determined as authorized from time to time
under the direction of the Board of Directors of the Fund in conformity
with the 1940 Act) plus (b) a sales charge or premium, if any, based upon
the schedule of such charges (including all exceptions therefrom) and
related terms and conditions as may be set forth from time to time in the
then current Prospectus or Statement of Additional Information of the Fund
pertaining to its Class B shares. The Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the Fund's net asset
value and offering price as often and at such times as its Board of
Directors shall by resolution determine provided, however, that subject to
the provisions hereinafter contained in this paragraph 4, the Fund shall
determine and furnish such offering price at least once on each business
day on which the New York Stock Exchange is open for trading. Each such
offering price shall become effective at such time, and shall remain in
effect during such period, as may be stated in the statement thereof
furnished to the Distributor as above provided. Every statement of the
offering price furnished to the Distributor as above provided shall show
the basis of its computation. The Fund shall also accept and confirm at
the offering price in effect before a price change such orders as are
entered by the Distributor to fill orders placed with it prior to such time
of price change, but only if such orders are received by the Fund within a
time deemed by the Fund to be reasonable after the time of receipt thereof
by the Distributor and if such orders are time-stamped or bear other
evidence to show that they were filed for transmission at the point of
origin prior to the time of such price change. Anything to the contrary
herein notwithstanding, however, whenever in its judgment such action is
warranted by market, economic or political conditions or by abnormal
circumstances of any kind, Fund officers may suspend the sale of Fund
shares, without incurring any liability under any of the provisions of this
Agreement, and decline to accept or confirm any orders for or make any
sales of any shares of stock to the Distributor under this Agreement until
such time as the Fund shall deem it advisable to accept and confirm such
orders and to make such sales, and during any such period, the Fund shall
be under no obligation to confirm or accept any such orders or make any
such sales at any price.
5. At or prior to the time of delivery by the Fund to the Distributor for
its accounts of any shares of the Fund's capital stock, the Distributor
will pay or cause to be paid to the Fund or its order an amount equal to
the offering price of such shares at which the Distributor's order has been
confirmed by the Fund, less the applicable sales charge or premium, if any,
which charge or premium shall constitute the Distributor's concession for
selling and distributing such shares and may be deducted by it from the
offering price in making payment to the Fund hereunder. The Distributor
may in its discretion allow concessions or other accounting to dealers out
of such concession to it.
6. The Distributor shall receive and may retain any contingent deferred
sales charges which are imposed with respect to repurchases and redemptions
of Class B shares as set forth from time to time
2
<PAGE>
in the Fund's Prospectus and Statement of Additional Information current upon
the date of sale of any such shares. Payment of such amounts is not contingent
upon the adoption or continuation of the Plan.
7. (a) The Fund shall pay to the Distributor as compensation for
services under the Plan and under this Agreement, (i) a fee at the annual
rate of up to 0.75% of average daily net assets attributable to Class B
shares of the Fund to compensate the Distributor and broker-dealers and
financial institutions ("Securities Firms") for certain distribution-
related activities (a "distribution fee"), and (ii) a fee at the annual
rate of up to 0.25% of such average daily net assets to compensate the
Distributor and Securities Firms for shareholder servicing related to
distribution of such shares (a "service fee"). Amounts payable under the
Plan shall be accrued daily and payable monthly or at such other intervals
as the Board of Directors shall determine. No fee shall be payable
hereunder if it would cause the Fund to fail to comply with the
requirements of Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc.
(b) So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions and
account servicing fees to be paid by the Distributor to Securities Firms
and at the request of the Fund will provide such information as may
reasonably be requested concerning the activities of the Distributor
hereunder and the costs incurred in performing such services.
(c) The distribution fee under paragraph (a) shall be used to
compensate the Distributor and/or Securities Firms having agreements with
the Distributor for providing distribution assistance to customers and to
pay for the preparation, printing and distribution of prospectuses,
statements of additional information and periodic financial reports to
persons other than current shareholders of the Fund, as well as to pay for
the preparation and distribution of sales literature and pay for other
promotional and distribution activities.
(d) The service fee payable under paragraph (a) above shall be used
to compensate the Distributor and/or Securities Firms for providing
personal services such as shareholder liaison services (responding to
customer inquiries and providing information on their investment) to Fund
shareholders and/or maintaining shareholder accounts.
(e) Payments to Securities Firms hereunder may take the form of sales
commissions or trailer commissions.
8. Delivery of certificates for shares of the Fund's capital stock, when
and if requested (subject to any determination by the Fund not to issue
certificates for shares), shall be made as soon as practicable after
confirmation by it or the Distributor's order therefor and against payment
therefor by the Distributor in Denver funds. The certificates for such
shares shall be registered in such names and amounts as the Distributor may
specify to the Fund in writing.
9. The Fund agrees to pay all costs and expenses in connection with
future registrations of its
3
<PAGE>
capital stock under the Act, and all expenses in connection with maintaining
facilities for the issue and transfer of its shares, and for supplying
information, prices and other data to be furnished by it hereunder.
The Fund agrees to execute any and all documents and to furnish any
and all information which may be reasonable necessary, in the discretion of
its Board of Directors, in connection with the qualification of its shares
for sale in such states as the Distributor may designate to it. The
Distributor will pay all expenses connected with its own qualification as a
dealer or broker under State or federal laws.
10. The Fund shall furnish the Distributor from time to time, for use in
connection with the sale of its shares, such information with respect to
the Fund and its shares as the Distributor may reasonably request, all of
which, if so requested, shall be signed by one or more of its duly
authorized officers, warranting that the statements contained in any such
information, when so signed by its officers, shall be true and correct.
The Fund shall also furnish the Distributor with annual audits of its books
and accounts made by independent public accountants, who may also be the
independent public accountants regularly retained by it, with semi-annual
earnings statements prepared by its accountants, with balance sheets at
least on a semi-annual basis, and from time to time with such additional
information regarding its financial condition as the Distributor may
reasonably request.
11. As used in this agreement, the term "registration statement" shall
mean and include the registration statement with respect to shares of Fund
capital stock which became effective under the Act on April 28, 1959, and
also any other registration statement filed by it under the Act which shall
become effective, in each case including any amendment thereto filed after
the effective date thereof which amendment shall become effective. The Fund
represents that its registration statement under the Act, its Prospectus
and Statement of Additional Information, have been or will be, as the case
may be, prepared substantially in conformity with the requirements of said
Act and the rules and regulations of the Securities and Exchange Commission
thereunder. The Fund further represents and warrants that its registration
statement, Prospectus and Statement of Additional Information contain or
will contain all statements required to be stated therein in accordance
with the Act and the rules and regulations of said Commission, and that all
statements of fact contained or to be contained therein are or will be true
and correct, that none of its registration statement when it shall become
effective, or its Prospectus or its Statement of Additional Information
used, will include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of its shares. The Fund
may but shall not be obligated to propose from time to time such amendments
to its registration statement, or amendments or supplements to its
Prospectus and Statement of Additional Information, as, in the light of
future developments, may, in the opinion of its counsel, be necessary in
order to have such documents at all times contain all material facts
required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of its shares, but, if it shall not propose
such amendment or amendments within fifteen days after receipt by it of a
written request from the Distributor to do so, the Distributor may, at its
option, terminate this agreement immediately. The Fund shall not file any
amendment to its registration statement, or amendment or supplement to its
4
<PAGE>
Prospectus or Statement of Additional Information, without giving the
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Fund's right
to file at any time such amendments to its registration statement, and/or
amendments or supplements to its Prospectus and Statement of Additional
Information, of whatever character, as it may deem advisable, such right
being in all respects absolute and unconditional. The Fund represents and
warrants to the Distributor that any such amendments or supplements
hereafter filed by it will, when it becomes effective, contain all
statements required to be stated therein in accordance with the Act and the
rules and regulations of said Commission, that all statements of fact
contained therein will, when the same shall become effective, be true and
correct and that no such amendment, when it becomes effective, will include
an untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of its shares.
12. The Fund agrees to prepare and furnish the Distributor from time to
time copies of its Prospectus and Statement of Additional Information in
the forms as then most recently filed with the Securities and Exchange
Commission, and authorizes the Distributor and dealers to use such
Prospectus and Statement of Additional Information, in the forms furnished,
from time to time, in connection with the sale of its shares. The Fund
agrees to indemnify, defend and hold the Distributor, its several officers
and directors, and any person who controls it within the meaning of Section
15 of the Act, free and harmless from and against any and all claims,
demands liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Distributor, its officers or directors,
or any such controlling person may incur, under the Act, or under common
law or otherwise, arising out of or based upon any alleged untrue statement
of a material fact contained in its registration statement or prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the statements
in either thereof not misleading; provided, however, that Fund's agreement
to indemnify the Distributor, its officers or directors, and any such
controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations
made by the Distributor or by its representatives or agents other than such
statements and representations as are contained in Fund's Prospectus or
Statement of Additional Information and in such financial and other
statements as are furnished the Distributor pursuant to paragraphs 10 and
11; and further provided, that in no event shall anything herein contained
be so construed as to protect the Distributor against any liability to the
Fund or its security holders to which the Distributor would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence,
in the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this agreement. The agreement to
indemnify the Distributor, its officers and directors, and any such
controlling person as aforesaid is expressly conditioned upon the Fund
being notified of any action brought against the Distributor, its officers
or directors, or any such controlling person, such notification to be given
by letter or by telegram addressed to the Fund at its principal office in
Denver, Colorado, and sent by the person against whom such action is
brought, within ten days after the summons or other first legal process
shall have been served. The failure so to notify the Fund of any such
action shall not relieve it from any liability which it may have to the
person against whom such action is brought by reason of any such alleged
untrue statement or
5
<PAGE>
omission otherwise than on account of the indemnity agreement contained in
this paragraph 12. The Fund will be entitled to assume the defense of any
suit brought to enforce any such claim, demand or liability, but, in such
case, such defense shall be conducted by counsel of good standing chosen by it
and approved by the Distributor. In the event the Fund does elect to assume
the defense of any such suit and retain counsel of good standing approved by
the Distributor, the defendant or defendants in such suit shall bear the fees
and expenses of any additional counsel retained by any of them; but in case it
does not elect to assume the defense of any such suit, or in case the
Distributor does not approve the counsel chosen by it, the Fund will reimburse
the Distributor, its officers and directors, or the controlling person or
persons named as defendant or defendants in such suit, for the fees and
expenses of any counsel retained by it or them. The Fund's indemnification
agreement contained in this paragraph 12 and its representations and
warranties in this Agreement shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the
Distributor, its officers and directors, or any controlling person, and shall
survive the delivery of any shares of its capital stock hereunder. This
agreement of indemnity will inure exclusively to the Distributor's benefit,
and its successors, and to the benefit of its officers and directors, and
their respective estates, and to the benefit of any controlling persons and
their successors. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any of its
capital stock.
13. The Distributor agrees to indemnify, defend and hold the Fund, its
several officers and directors, and any person who controls it within the
meaning of Section 15 of the Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims demands or liabilities and any
counsel fees incurred in connection therewith) which it, its officers or
directors, or any such controlling person may incur under the Act or under
common law or otherwise; but only to the extent that such liability or
expense incurred by the Fund, its officers or directors, or such
controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained
in information furnished in writing by the Distributor to the Fund for use
in its registration statement, Prospectus or Statement of Additional
Information or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information required to be
stated therein or necessary to make such information not misleading. The
Distributor's agreement to indemnify the Fund, its officers and directors,
and any such controlling person as aforesaid is expressly conditioned upon
the Distributor being notified of any action brought against the Fund, its
officers or directors, or any such controlling person, such notification to
be given by letter or telegram addressed to the Distributor at its
principal office in Denver, Colorado, and sent by the person against whom
such action is brought, within ten days after the summons or other first
legal process shall have been served. The Distributor shall have a right
to control the defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon such alleged
misstatement or omission on Distributor's part and in any other event, the
Distributor or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any such
action. The failure so to notify the Distributor of any such action shall
not relieve it from any liability which it may have to the Fund, its
officers or directors, or to such controlling person by
6
<PAGE>
reason by any such untrue statement or omission on its part otherwise than on
account of its indemnity agreement contained in this paragraph 13.
14. No shares of the Fund's capital stock shall be bought or sold by
either the Distributor or the Fund under any of the provision of this
Agreement and no orders for the purchase or sale of such stock hereunder
shall be confirmed or accepted by the Fund if and so long as the
effectiveness of its registration statement, or any necessary amendments
thereto, covering such stock, shall be suspended under any of the
provisions of the Act; provided, however, that nothing in this paragraph 14
contained shall in any way restrict or limit or have any application to or
bearing upon the Fund's obligation to repurchase shares of its capital
stock from any stockholder in accordance with the provisions of its
charter.
15. The Fund agrees to advise the Distributor immediately:
(a) of any request by the Securities and Exchange Commission for
amendments to the Fund's registration statement, Prospectus or
Statement of Additional Information or for additional information,
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of its
registration statement or the initiation of any proceedings for that
purpose,
(c) of the happening of any event which makes untrue any statement
made in its registration statement or prospectus or which requires the
making of a change in either thereof in order to make the statements
therein not misleading, and
(d) of all action of the Securities and Exchange Commission with
respect to any amendments to its registration statement which may from
time to time be filed with the Securities and Exchange Commission
under the Act.
16. The Distributor is authorized, as agent, to accept offers for resale
to the Fund and to repurchase shares of its capital stock upon such terms
and conditions as the Fund's Board of Directors by resolution shall
determine. At least once on each business day on which the New York Stock
Exchange is open for trading, the Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the price at which such
repurchases may be made during the period or periods specified in such
statement and, upon request, it shall advise the Distributor of the price
at which such repurchase may be made at other times. In so far as they
concern the Fund it agrees to comply with all applicable laws, rules and
regulations, including without limiting the generality of the foregoing,
all rules or regulations made or adopted pursuant to Section 22 of the 1940
Act by the Securities and Exchange Commission or any securities association
registered under the 1934 Act.
17. (a) Subject to the provisions of paragraph 11 hereof, this Agreement
shall continue in effect for a period more than two years from the date
hereof only so long as such continuance is
7
<PAGE>
specifically approved at least annually (x) by the Fund's Board of Directors
or by a vote of a majority of its outstanding voting securities (as defined in
the 1940 Act) and (y) by the Directors who are not interested persons of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan or in this or any other agreement relating to the Plan (the "12b-1
Directors"), cast in person at a meeting called for the purpose of voting on
such approval.
(b) This Agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Directors, or by vote of a
majority of the outstanding voting securities (as defined in the 1940 Act)
of Class B shares of the Fund, on not more than 60 days' written notice to
the other party to the Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
AMERICAN GROWTH FUND, INC.
By_____________________
President
AMERICAN GROWTH FUND SPONSORS, INC.
By_____________________
President
8
<PAGE>
DISTRIBUTION AGREEMENT
(Class C Shares)
AGREEMENT (the "Agreement"), dated as of February __, 1996, between
AMERICAN GROWTH FUND, INC., a Maryland corporation, (the "Fund") and
AMERICAN GROWTH FUND SPONSORS, INC., a Colorado corporation, (the
"Distributor").
RECITALS
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company;
WHEREAS, the Fund intends to offer its Class C shares to the public on
a continuous basis;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is in the
business of selling shares of the Fund and other registered investment
companies to the public, either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into this
Agreement with respect to the continuous offering of the Fund's Class C
shares from and after the date hereof in order to promote the growth of the
Fund and facilitate the distribution of its Class C shares; and
WHEREAS, the Fund has adopted a distribution and service plan pursuant
to Rule 12b-1 under the 1940 Act (the "Plan") authorizing payments by the
Fund to the Distributor with respect to the distribution of Class C shares
of the Fund and the provision of services in respect of Class C shareholder
accounts.
NOW, THEREFORE, the parties agree as follows:
1. The Distributor shall be the distributor for the Class C shares of the
capital stock of the Fund as may from time to time be effectively
registered under the Securities Act of 1933, as amended (hereinafter
referred to as the "Act").
2. The Fund agrees to sell and deliver from time to time, upon the terms
hereinafter described, such number of its fully paid and nonassessable
Class C shares of capital stock as the Distributor shall order, but only to
the extent that the Distributor shall have received purchase orders
therefor. All orders from the Distributor hereunder shall be subject to
confirmation by the Fund.
3. The Distributor may sell and distribute any shares so purchased by it
through dealers or otherwise in such manner not inconsistent with the
provisions hereof as it may determine from time to time, and it agrees to
use its best efforts to effect such sale and distribution. The Distributor
shall not make any short sales of Fund shares. The Distributor shall in
addition, in so far as they concern
1
<PAGE>
it, comply with all applicable laws, rules and regulations including,
without limiting the generality of the foregoing, all rules or regulations
made or adopted pursuant to Section 22 of the 1940 Act by the Securities
and Exchange Commission or any securities association registered under
the 1934 Act.
4. Subject to the provisions of paragraph 5 hereof, all shares offered
for sale and sold by the Distributor shall be offered for sale and sold by
it at a price per share equal to the offering price per share (hereinafter
called the offering price) rounded to the nearest one cent and equal to (a)
the net asset value per share (determined as authorized from time to time
under the direction of the Board of Directors of the Fund in conformity
with the 1940 Act) plus (b) a sales charge or premium, if any, based upon
the schedule of such charges (including all exceptions therefrom) and
related terms and conditions as may be set forth from time to time in the
then current Prospectus or Statement of Additional Information of the Fund
pertaining to its Class C shares. The Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the Fund's net asset
value and offering price as often and at such times as its Board of
Directors shall by resolution determine provided, however, that subject to
the provisions hereinafter contained in this paragraph 4, the Fund shall
determine and furnish such offering price at least once on each business
day on which the New York Stock Exchange is open for trading. Each such
offering price shall become effective at such time, and shall remain in
effect during such period, as may be stated in the statement thereof
furnished to the Distributor as above provided. Every statement of the
offering price furnished to the Distributor as above provided shall show
the basis of its computation. The Fund shall also accept and confirm at
the offering price in effect before a price change such orders as are
entered by the Distributor to fill orders placed with it prior to such time
of price change, but only if such orders are received by the Fund within a
time deemed by the Fund to be reasonable after the time of receipt thereof
by the Distributor and if such orders are time-stamped or bear other
evidence to show that they were filed for transmission at the point of
origin prior to the time of such price change. Anything to the contrary
herein notwithstanding, however, whenever in its judgment such action is
warranted by market, economic or political conditions or by abnormal
circumstances of any kind, Fund officers may suspend the sale of Fund
shares, without incurring any liability under any of the provisions of this
Agreement, and decline to accept or confirm any orders for or make any
sales of any shares of stock to the Distributor under this Agreement until
such time as the Fund shall deem it advisable to accept and confirm such
orders and to make such sales, and during any such period, the Fund shall
be under no obligation to confirm or accept any such orders or make any
such sales at any price.
5. At or prior to the time of delivery by the Fund to the Distributor for
its accounts of any shares of the Fund's capital stock, the Distributor
will pay or cause to be paid to the Fund or its order an amount equal to
the offering price of such shares at which the Distributor's order has been
confirmed by the Fund, less the applicable sales charge or premium, if any,
which charge or premium shall constitute the Distributor's concession for
selling and distributing such shares and may be deducted by it from the
offering price in making payment to the Fund hereunder. The Distributor
may in its discretion allow concessions or other accounting to dealers out
of such concession to it.
6. The Distributor shall receive and may retain any contingent deferred
sales charges which are imposed with respect to repurchases and redemptions
of Class C shares as set forth from time to time
3
<PAGE>
in the Fund's Prospectus and Statement of Additional Information current
upon the date of sale of any such shares. Payment of such amounts is not
contingent upon the adoption or continuation of the Plan.
7. (a) The Fund shall pay to the Distributor as compensation for
services under the Plan and under this Agreement, (i) a fee at the annual
rate of up to 0.75% of average daily net assets attributable to Class C
shares of the Fund to compensate the Distributor and broker-dealers and
financial institutions ("Securities Firms") for certain distribution-
related activities (a "distribution fee"), and (ii) a fee at the annual
rate of up to 0.25% of such average daily net assets to compensate the
Distributor and Securities Firms for shareholder servicing related to
distribution of such shares (a "service fee"). Amounts payable under the
Plan shall be accrued daily and payable monthly or at such other intervals
as the Board of Directors shall determine. No fee shall be payable
hereunder if it would cause the Fund to fail to comply with the
requirements of Article III, Section 26 of the Rules of Fair Practice of
the National Association of Securities Dealers, Inc.
(b) So long as the Plan or any amendment thereto is in effect, the
Distributor shall inform the Board of Directors of the commissions and
account servicing fees to be paid by the Distributor to Securities Firms
and at the request of the Fund will provide such information as may
reasonably be requested concerning the activities of the Distributor
hereunder and the costs incurred in performing such services.
(c) The distribution fee under paragraph (a) shall be used to
compensate the Distributor and/or Securities Firms having agreements with
the Distributor for providing distribution assistance to customers and to
pay for the preparation, printing and distribution of prospectuses,
statements of additional information and periodic financial reports to
persons other than current shareholders of the Fund, as well as to pay for
the preparation and distribution of sales literature and pay for other
promotional and distribution activities.
(d) The service fee payable under paragraph (a) above shall be used
to compensate the Distributor and/or Securities Firms for providing
personal services such as shareholder liaison services (responding to
customer inquiries and providing information on their investment) to Fund
shareholders and/or maintaining shareholder accounts.
(e) Payments to Securities Firms hereunder may take the form of sales
commissions or trailer commissions.
8. Delivery of certificates for shares of the Fund's capital stock, when
and if requested (subject to any determination by the Fund not to issue
certificates for shares), shall be made as soon as practicable after
confirmation by it or the Distributor's order therefor and against payment
therefor by the Distributor in Denver funds. The certificates for such
shares shall be registered in such names and amounts as the Distributor may
specify to the Fund in writing.
9. The Fund agrees to pay all costs and expenses in connection with
future registrations of its
3
<PAGE>
capital stock under the Act, and all expenses in connection with maintaining
facilities for the issue and transfer of its shares, and for supplying
information, prices and other data to be furnished by it hereunder.
The Fund agrees to execute any and all documents and to furnish any
and all information which may be reasonable necessary, in the discretion of
its Board of Directors, in connection with the qualification of its shares
for sale in such states as the Distributor may designate to it. The
Distributor will pay all expenses connected with its own qualification as a
dealer or broker under State or federal laws.
10. The Fund shall furnish the Distributor from time to time, for use in
connection with the sale of its shares, such information with respect to
the Fund and its shares as the Distributor may reasonably request, all of
which, if so requested, shall be signed by one or more of its duly
authorized officers, warranting that the statements contained in any such
information, when so signed by its officers, shall be true and correct.
The Fund shall also furnish the Distributor with annual audits of its books
and accounts made by independent public accountants, who may also be the
independent public accountants regularly retained by it, with semi-annual
earnings statements prepared by its accountants, with balance sheets at
least on a semi-annual basis, and from time to time with such additional
information regarding its financial condition as the Distributor may
reasonably request.
11. As used in this agreement, the term "registration statement" shall
mean and include the registration statement with respect to shares of Fund
capital stock which became effective under the Act on April 28, 1959, and
also any other registration statement filed by it under the Act which shall
become effective, in each case including any amendment thereto filed after
the effective date thereof which amendment shall become effective. The Fund
represents that its registration statement under the Act, its Prospectus
and Statement of Additional Information, have been or will be, as the case
may be, prepared substantially in conformity with the requirements of said
Act and the rules and regulations of the Securities and Exchange Commission
thereunder. The Fund further represents and warrants that its registration
statement, Prospectus and Statement of Additional Information contain or
will contain all statements required to be stated therein in accordance
with the Act and the rules and regulations of said Commission, and that all
statements of fact contained or to be contained therein are or will be true
and correct, that none of its registration statement when it shall become
effective, or its Prospectus or its Statement of Additional Information
used, will include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of its shares. The Fund
may but shall not be obligated to propose from time to time such amendments
to its registration statement, or amendments or supplements to its
Prospectus and Statement of Additional Information, as, in the light of
future developments, may, in the opinion of its counsel, be necessary in
order to have such documents at all times contain all material facts
required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of its shares, but, if it shall not propose
such amendment or amendments within fifteen days after receipt by it of a
written request from the Distributor to do so, the Distributor may, at its
option, terminate this agreement immediately. The Fund shall not file any
amendment to its registration statement, or amendment or supplement to its
4
<PAGE>
Prospectus or Statement of Additional Information, without giving the
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Fund's right
to file at any time such amendments to its registration statement, and/or
amendments or supplements to its Prospectus and Statement of Additional
Information, of whatever character, as it may deem advisable, such right
being in all respects absolute and unconditional. The Fund represents and
warrants to the Distributor that any such amendments or supplements
hereafter filed by it will, when it becomes effective, contain all
statements required to be stated therein in accordance with the Act and the
rules and regulations of said Commission, that all statements of fact
contained therein will, when the same shall become effective, be true and
correct and that no such amendment, when it becomes effective, will include
an untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of its shares.
12. The Fund agrees to prepare and furnish the Distributor from time to
time copies of its Prospectus and Statement of Additional Information in
the forms as then most recently filed with the Securities and Exchange
Commission, and authorizes the Distributor and dealers to use such
Prospectus and Statement of Additional Information, in the forms furnished,
from time to time, in connection with the sale of its shares. The Fund
agrees to indemnify, defend and hold the Distributor, its several officers
and directors, and any person who controls it within the meaning of Section
15 of the Act, free and harmless from and against any and all claims,
demands liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Distributor, its officers or directors,
or any such controlling person may incur, under the Act, or under common
law or otherwise, arising out of or based upon any alleged untrue statement
of a material fact contained in its registration statement or prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the statements
in either thereof not misleading; provided, however, that Fund's agreement
to indemnify the Distributor, its officers or directors, and any such
controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations
made by the Distributor or by its representatives or agents other than such
statements and representations as are contained in Fund's Prospectus or
Statement of Additional Information and in such financial and other
statements as are furnished the Distributor pursuant to paragraphs 10 and
11; and further provided, that in no event shall anything herein contained
be so construed as to protect the Distributor against any liability to the
Fund or its security holders to which the Distributor would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence,
in the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this agreement. The agreement to
indemnify the Distributor, its officers and directors, and any such
controlling person as aforesaid is expressly conditioned upon the Fund
being notified of any action brought against the Distributor, its officers
or directors, or any such controlling person, such notification to be given
by letter or by telegram addressed to the Fund at its principal office in
Denver, Colorado, and sent by the person against whom such action is
brought, within ten days after the summons or other first legal process
shall have been served. The failure so to notify the Fund of any such
action shall not relieve it from any liability which it may have to the
person against whom such action is brought by reason of any such alleged
untrue statement or
5
<PAGE>
omission otherwise than on account of the indemnity agreement contained
in this paragraph 12. The Fund will be entitled to assume the
defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of
good standing chosen by it and approved by the Distributor. In the event
the Fund does elect to assume the defense of any such suit and retain
counsel of good standing approved by the Distributor, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case it does not elect to assume
the defense of any such suit, or in case the Distributor does not approve
the counsel chosen by it, the Fund will reimburse the Distributor, its
officers and directors, or the controlling person or persons named as
defendant or defendants in such suit, for the fees and expenses of any
counsel retained by it or them. The Fund's indemnification agreement
contained in this paragraph 12 and its representations and warranties in
this Agreement shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Distributor,
its officers and directors, or any controlling person, and shall survive
the delivery of any shares of its capital stock hereunder. This agreement
of indemnity will inure exclusively to the Distributor's benefit, and its
successors, and to the benefit of its officers and directors, and their
respective estates, and to the benefit of any controlling persons and their
successors. The Fund agrees promptly to notify the Distributor of the
commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issue and sale of any of its
capital stock.
13. The Distributor agrees to indemnify, defend and hold the Fund, its
several officers and directors, and any person who controls it within the
meaning of Section 15 of the Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims demands or liabilities and any
counsel fees incurred in connection therewith) which it, its officers or
directors, or any such controlling person may incur under the Act or under
common law or otherwise; but only to the extent that such liability or
expense incurred by the Fund, its officers or directors, or such
controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained
in information furnished in writing by the Distributor to the Fund for use
in its registration statement, Prospectus or Statement of Additional
Information or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information required to be
stated therein or necessary to make such information not misleading. The
Distributor's agreement to indemnify the Fund, its officers and directors,
and any such controlling person as aforesaid is expressly conditioned upon
the Distributor being notified of any action brought against the Fund, its
officers or directors, or any such controlling person, such notification to
be given by letter or telegram addressed to the Distributor at its
principal office in Denver, Colorado, and sent by the person against whom
such action is brought, within ten days after the summons or other first
legal process shall have been served. The Distributor shall have a right
to control the defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon such alleged
misstatement or omission on Distributor's part and in any other event, the
Distributor or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any such
action. The failure so to notify the Distributor of any such action shall
not relieve it from any liability which it may have to the Fund, its
officers or directors, or to such controlling person by
6
<PAGE>
reason by any such untrue statement or omission on its part otherwise
than on account of its indemnity agreement contained in this paragraph 13.
14. No shares of the Fund's capital stock shall be bought or sold by
either the Distributor or the Fund under any of the provision of this
Agreement and no orders for the purchase or sale of such stock hereunder
shall be confirmed or accepted by the Fund if and so long as the
effectiveness of its registration statement, or any necessary amendments
thereto, covering such stock, shall be suspended under any of the
provisions of the Act; provided, however, that nothing in this paragraph 14
contained shall in any way restrict or limit or have any application to or
bearing upon the Fund's obligation to repurchase shares of its capital
stock from any stockholder in accordance with the provisions of its
charter.
15. The Fund agrees to advise the Distributor immediately:
(a) of any request by the Securities and Exchange Commission for
amendments to the Fund's registration statement, Prospectus or
Statement of Additional Information or for additional information,
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of its
registration statement or the initiation of any proceedings for that
purpose,
(c) of the happening of any event which makes untrue any statement
made in its registration statement or prospectus or which requires the
making of a change in either thereof in order to make the statements
therein not misleading, and
(d) of all action of the Securities and Exchange Commission with
respect to any amendments to its registration statement which may from
time to time be filed with the Securities and Exchange Commission
under the Act.
16. The Distributor is authorized, as agent, to accept offers for resale
to the Fund and to repurchase shares of its capital stock upon such terms
and conditions as the Fund's Board of Directors by resolution shall
determine. At least once on each business day on which the New York Stock
Exchange is open for trading, the Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the price at which such
repurchases may be made during the period or periods specified in such
statement and, upon request, it shall advise the Distributor of the price
at which such repurchase may be made at other times. In so far as they
concern the Fund it agrees to comply with all applicable laws, rules and
regulations, including without limiting the generality of the foregoing,
all rules or regulations made or adopted pursuant to Section 22 of the 1940
Act by the Securities and Exchange Commission or any securities association
registered under the 1934 Act.
17. (a) Subject to the provisions of paragraph 11 hereof, this Agreement
shall continue in effect for a period more than two years from the
date hereof only so long as such continuance is
7
<PAGE>
specifically approved at least annually (x) by the Fund's Board of Directors
or by a vote of a majority of its outstanding voting securities (as
defined in the 1940 Act) and (y) by the Directors who are not interested
persons of the Fund and who have no direct or indirect financial interest
in the operation of the Plan or in this or any other agreement relating to
the Plan (the "12b-1 Directors"), cast in person at a meeting called for the
purpose of voting on such approval.
(b) This Agreement may be terminated at any time, without payment of
any penalty, by vote of a majority of the 12b-1 Directors, or by vote of a
majority of the outstanding voting securities (as defined in the 1940 Act)
of Class C shares of the Fund, on not more than 60 days' written notice to
the other party to the Agreement.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
AMERICAN GROWTH FUND, INC.
By________________________
President
AMERICAN GROWTH FUND SPONSORS, INC.
By_______________________
President
8
<PAGE>
DISTRIBUTION AGREEMENT
(Class D Shares)
AGREEMENT (the "Agreement"), dated as of February __, 1996, between
AMERICAN GROWTH FUND, INC., a Maryland corporation, (the "Fund") and
AMERICAN GROWTH FUND SPONSORS, INC., a Colorado corporation, (the
"Distributor").
RECITALS
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as a diversified, open-end management
investment company;
WHEREAS, the Fund intends to offer its Class D shares to the public on
a continuous basis;
WHEREAS, the Distributor is a broker-dealer registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is in the
business of selling shares of the Fund and other registered investment
companies to the public, either directly or through other broker-dealers;
WHEREAS, the Fund and the Distributor wish to enter into this
Agreement with respect to the continuous offering of the Fund's Class D
shares from and after the date hereof in order to promote the growth of the
Fund and facilitate the distribution of its Class D.
NOW, THEREFORE, the parties agree as follows:
1. The Distributor shall be the distributor for the Class D shares of the
capital stock of the Fund as may from time to time be effectively
registered under the Securities Act of 1933, as amended (hereinafter
referred to as the "Act").
2. The Fund agrees to sell and deliver from time to time, upon the terms
hereinafter described, such number of its fully paid and nonassessable
Class D shares of capital stock as the Distributor shall order, but only to
the extent that the Distributor shall have received purchase orders
therefor. All orders from the Distributor hereunder shall be subject to
confirmation by the Fund.
3. The Distributor may sell and distribute any shares so purchased by it
through dealers or otherwise in such manner not inconsistent with the
provisions hereof as it may determine from time to time, and it agrees to
use its best efforts to effect such sale and distribution. The Distributor
shall not make any short sales of Fund shares. The Distributor shall in
addition, in so far as they concern it, comply with all applicable laws,
rules and regulations including, without limiting the generality of the
foregoing, all rules or regulations made or adopted pursuant to Section 22
of the 1940 Act by the Securities and Exchange Commission or any securities
association registered under the 1934 Act.
4. Subject to the provisions of paragraph 5 hereof, all shares offered
for sale and sold by the
1
<PAGE>
Distributor shall be offered for sale and sold by it at a price per share
equal to the offering price per share (hereinafter called the offering
price) rounded to the nearest one cent and equal to (a) the net asset value
per share (determined as authorized from time to time under the direction of
the Board of Directors of the Fund in conformity with the 1940 Act) plus (b)
a sales charge or premium, if any, based upon the schedule of such charges
(including all exceptions therefrom) and related terms and conditions as may
be set forth from time to time in the then current Prospectus or Statement
of Additional Information of the Fund pertaining to its Class D shares. The
Fund shall determine and promptly thereupon furnish to the Distributor a
statement of the Fund's net asset value and offering price as often and at
such times as its Board of Directors shall by resolution determine provided,
however, that subject to the provisions hereinafter contained in this
paragraph numbered 4, the Fund shall determine and furnish such offering
price at least once on each business day on which the New York Stock
Exchange is open for trading. Each such offering price shall become
effective at such time, and shall remain in effect during such period, as
may be stated in the statement thereof furnished to the Distributor as above
provided. Every statement of the offering price furnished to the
Distributor as above provided shall show the basis of its computation. The
Fund shall also accept and confirm at the offering price in effect before a
price change such orders as are entered by the Distributor to fill orders
placed with it prior to such time of price change, but only if such orders
are received by the Fund within a time deemed by the Fund to be reasonable
after the time of receipt thereof by the Distributor and if such orders are
time-stamped or bear other evidence to show that they were filed for
transmission at the point of origin prior to the time of such price change.
Anything to the contrary herein notwithstanding, however, whenever in its
judgment such action is warranted by market, economic or political
conditions or by abnormal circumstances of any kind, Fund officers may
suspend the sale of Fund shares, without incurring any liability under any
of the provisions of this Agreement, and decline to accept or confirm any
orders for or make any sales of any shares of stock to the Distributor under
this Agreement until such time as the Fund shall deem it advisable to accept
and confirm such orders and to make such sales, and during any such period,
the Fund shall be under no obligation to confirm or accept any such orders
or make any such sales at any price.
5. At or prior to the time of delivery by the Fund to the Distributor for
its accounts, of any shares of the Fund's capital stock the Distributor
will pay or cause to be paid to the Fund or its order an amount equal to
the offering price of such shares at which the Distributor's order has been
confirmed by the Fund, less the applicable sales charge or premium, if any,
which charge or premium shall constitute the Distributor's concession for
selling and distributing such shares and may be deducted by it from the
offering price in making payment to the Fund hereunder. The Distributor
may in its discretion allow concessions to dealers or other accounting to
it out of such concession.
6. Delivery of certificates for shares of the Fund's capital stock, when
and if requested (subject to any determination by the Fund not to issue
certificates for shares), shall be made as soon as practicable after
confirmation by it or the Distributor's order therefor and against payment
therefor by the Distributor in Denver funds. The certificates for such
shares shall be registered in such names and amounts as the Distributor may
specify to the Fund in writing.
7. The Fund agrees to pay all costs and expenses in connection with
future registrations of its
2
<PAGE>
capital stock under the Act, and all expenses in connection with maintaining
facilities for the issue and transfer of its shares, and for supplying
information, prices and other data to be furnished by it hereunder.
The Fund agrees to execute any and all documents and to furnish any
and all information which may be reasonable necessary, in the discretion of
its Board of Directors, in connection with the qualification of its shares
for sale in such states as the Distributor may designate to it. The
Distributor will pay all expenses connected with its own qualification as a
dealer or broker under State or federal laws.
8. The Fund shall furnish the Distributor from time to time, for use in
connection with the sale of its shares, such information with respect to
the Fund and its shares as the Distributor may reasonably request, all of
which, if so requested, shall be signed by one or more of its duly
authorized officers, warranting that the statements contained in any such
information, when so signed by its officers, shall be true and correct.
The Fund shall also furnish the Distributor with annual audits of its books
and accounts made by independent public accountants, who may also be the
independent public accountants regularly retained by it, with semi-annual
earnings statements prepared by its accountants, with balance sheets at
least on a semi-annual basis, and from time to time with such additional
information regarding its financial condition as the Distributor may
reasonably request.
9. As used in this agreement, the term "registration statement" shall
mean and include the registration statement with respect to shares of Fund
capital stock which became effective under the Act on April 28, 1959, and
also any other registration statement filed by it under the Act which shall
become effective, in each case including any amendment thereto filed after
the effective date thereof which amendment shall become effective. The Fund
represents that its registration statement under the Act, its Prospectus
and Statement of Additional Information, have been or will be, as the case
may be, prepared substantially in conformity with the requirements of said
Act and the rules and regulations of the Securities and Exchange Commission
thereunder. The Fund further represents and warrants that its registration
statement, Prospectus and Statement of Additional Information contain or
will contain all statements required to be stated therein in accordance
with the Act and the rules and regulations of said Commission, and that all
statements of fact contained or to be contained therein are or will be true
and correct; that none of its registration statement when it shall become
effective, or its Prospectus or its Statement of Additional Information
used, will include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading to a purchaser of its shares. The Fund
may but shall not be obligated to propose from time to time such amendments
to its registration statement, or amendments or supplements to its
3
<PAGE>
Prospectus and Statement of Additional Information, as, in the light of
future developments, may, in the opinion of its counsel, be necessary in
order to have such documents at all times contain all material facts
required to be stated therein or necessary to make any statements therein
not misleading to a purchaser of its shares, but, if it shall not propose
such amendment or amendments within fifteen days after receipt by it of a
written request from the Distributor to do so, the Distributor may, at its
option, terminate this agreement immediately. The Fund shall not file any
amendment to its registration statement, or amendment or supplement to its
Prospectus or Statement of Additional Information, without giving the
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Fund's right
to file at any time such amendments to its registration statement, and/or
amendments or supplements to its Prospectus and Statement of Additional
Information, of whatever character, as it may deem advisable, such right
being in all respects absolute and unconditional. The Fund represents and
warrants to the Distributor that any such amendments or supplements
hereafter filed by it will, when it becomes effective, contain all
statements required to be stated therein in accordance with the Act and the
rules and regulations of said Commission, that all statements of fact
contained therein will, when the same shall become effective, be true and
correct and that no such amendment, when it becomes effective, will include
an untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading to a purchaser of its shares.
10. The Fund agrees to prepare and furnish the Distributor from time to
time copies of its Prospectus and Statement of Additional Information in
the forms as then most recently filed with the Securities and Exchange
Commission, and authorizes the Distributor and dealers to use such
Prospectus and Statement of Additional Information, in the forms furnished,
from time to time, in connection with the sale of its shares. The Fund
agrees to indemnify, defend and hold the Distributor, its several officers
and directors, and any person who controls it within the meaning of Section
15 of the Act, free and harmless from and against any and all claims,
demands liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) which the Distributor, its officers or directors,
or any such controlling person may incur, under the Act, or under common
law or otherwise, arising out of or based upon any alleged untrue statement
of a material fact contained in its registration statement or prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the statements
in either thereof not misleading; provided, however, that Fund's agreement
to indemnify the Distributor, its officers or directors, and any such
controlling person shall not be deemed to cover any claims, demands,
liabilities or expenses arising out of any statements or representations
made by the Distributor or by its representatives or agents other than such
statements and representations as are contained in Fund's Prospectus of
Statement of Additional Information and in such financial and other
statements as are furnished the Distributor pursuant to paragraphs 8 and 9;
and further provided, that in no event shall anything herein contained be
so construed as to protect the Distributor against any liability to the
Fund or its security holders to which the Distributor would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence,
in the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this agreement. The agreement to
indemnify the Distributor, its officers and directors, and any such
controlling person as aforesaid is expressly conditioned upon the Fund
being notified of any action brought against the Distributor, its officers
or directors, or any such controlling person, such notification to be given
by letter or by telegram addressed to the Fund at its principal office in
Denver, Colorado, and sent by the person against whom such action is
brought, within ten days after the summons or other first legal process
shall have been served. The failure so to notify the Fund of any such
action shall not relieve it from any liability which it may have to the
person against whom such action is brought by reason of any such alleged
untrue statement or
4
<PAGE>
omission otherwise than on account of the indemnity agreement contained in
this paragraph numbered 10. The Fund will be entitled to assume the defense
of any suit brought to enforce any such claim, demand or liability, but, in
such case, such defense shall be conducted by counsel of good standing
chosen by it and approved by the Distributor. In the event the Fund does
elect to assume the defense of any such suit and retain counsel of good
standing approved by the Distributor, the defendant or defendants in such
suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case it does not elect to assume the defense of any such
suit, or in case the Distributor does not approve the counsel chosen by it,
the Fund will reimburse the Distributor, its officers and directors, or the
controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by it or them. The Fund's
indemnification agreement contained in this paragraph numbered 10 and its
representations and warranties in this Agreement shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of the Distributor, its officers and directors, or any controlling
person, and shall survive the delivery of any shares of its capital stock
hereunder. This agreement of indemnity will inure exclusively to the
Distributor's benefit, and its successors, and to the benefit of its
officers and directors, and their respective estates, and to the benefit of
any controlling persons and their successors. The Fund agrees promptly to
notify the Distributor of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with the issue
and sale of any of its capital stock.
11. The Distributor agrees to indemnify, defend and hold the Fund, its
several officers and directors, and any person who controls it within the
meaning of Section 15 of the Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims demands or liabilities and any
counsel fees incurred in connection therewith) which it, its officers or
directors, or any such controlling person may incur under the Act or under
common law or otherwise; but only to the extent that such liability or
expense incurred by the Fund, its officers or directors, or such
controlling person resulting from such claims or demands shall arise out of
or be based upon any alleged untrue statement of a material fact contained
in information furnished in writing by the Distributor to the Fund for use
in its registration statement, Prospectus or Statement of Additional
Information or shall arise out of or be based upon any alleged omission to
state a material fact in connection with such information required to be
stated therein or necessary to make such information not misleading. The
Distributor's agreement to indemnify the Fund, its officers and directors,
and any such controlling person as aforesaid is expressly conditioned upon
the Distributor being notified of any action brought against the Fund, its
officers or directors, or any such controlling person, such notification to
be given by letter or telegram addressed to the Distributor at its
principal office in Denver, Colorado, and sent by the person against whom
such action is brought, within ten days after the summons or other first
legal process shall have been served. The Distributor shall have a right
to control the defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon such alleged
misstatement or omission on Distributor's part and in any other event, the
Distributor or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any such
action. The failure so to notify the Distributor of any such action shall
not relieve it from any liability which it may have to the Fund, its
officers or directors, or to such controlling person by
5
<PAGE>
reason by any such untrue statement or omission on its part otherwise than
on account of its indemnity agreement contained in this paragraph numbered
11.
12. No shares of the Fund's capital stock shall be bought or sold by
either the Distributor or the Fund under any of the provision of this
Agreement and no orders for the purchase or sale of such stock hereunder
shall be confirmed or accepted by the Fund if and so long as the
effectiveness of its registration statement, or any necessary amendments
thereto, covering such stock, shall be suspended under any of the
provisions of the Act; provided, however, that nothing in this paragraph
numbered 12 contained shall in any way restrict or limit or have any
application to or bearing upon the Fund's obligation to repurchase shares
of its capital stock from any stockholder in accordance with the provisions
of its charter.
13. The Fund agrees to advise the Distributor immediately:
(a) of any request by the Securities and Exchange Commission for
amendments to the Fund's registration statement, Prospectus or
Statement of Additional Information or for additional information,
(b) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of its
registration statement or the initiation of any proceedings for that
purpose,
(c) of the happening of any event which makes untrue any statement
made in its registration statement or prospectus or which requires the
making of a change in either thereof in order to make the statements
therein not misleading, and
(d) of all action of the Securities and Exchange Commission with
respect to any amendments to its registration statement which may from
time to time be filed with the Securities and Exchange Commission
under the Act.
14. The Distributor is authorized, as agent, to accept offers for resale
to the Fund and to repurchase shares of its capital stock upon such terms
and conditions as the Fund's Board of Directors by resolution shall
determine. At least once on each business day on which the New York Stock
Exchange is open for trading, the Fund shall determine and promptly
thereupon furnish to the Distributor a statement of the price at which such
repurchases may be made during the period or periods specified in such
statement and, upon request, it shall advise the Distributor of the price
at which such repurchase may be made at other times. In so far as they
concern the Fund it agrees to comply with all applicable laws, rules and
regulations, including without limiting the generality of the foregoing,
all rules or regulations made or adopted pursuant to Section 22 of the 1940
Act by the Securities and Exchange Commission or any securities association
registered under the 1934 Act.
15. Subject to the provisions of paragraph 9 hereof, this Agreement shall
continue in effect for a period more than two years from the date hereof
only so long as such continuance is specifically
6
<PAGE>
approved at least annually by the Fund's Board of Directors or by a vote of
a majority of its outstanding voting securities (as defined in the
Investment Company Act of 1940); and provided further that this agreement
shall automatically terminate in the event of its assignment (as defined in
said Act) by the Distributor.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
AMERICAN GROWTH FUND, INC.
By-------------------
President
AMERICAN GROWTH FUND SPONSORS,
INC.
By-------------------
President
7
<PAGE>
Accountant's Consent
American Growth Fund, Inc.
We hereby consent to your inclusion in Post-Effective Amendment No. 50 to
your Registration Statement, (File No. 2-14543) of our opinion dated August
18, 1995, covering financial statements of American Growth Fund, Inc. for
the year ended July 31, 1995, which statements are incorporated by
reference.
/s/ Smith, Brock & Gwinn
Denver Colorado
December 28, 1995
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS A SHARES)
PLAN OF DISTRIBUTION adopted as of the ____ day of ________, 1996, by
American Growth Fund, Inc., a Maryland corporation (the "Fund"), on behalf
of its Class A shares.
W I T N E S S T H:
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company;
and
WHEREAS, the Fund from time to time will offer Class A shares of
common stock, par value $.01 per share; and
WHEREAS, the Fund has entered into a Distribution Agreement with
American Growth Fund Sponsors, Inc. (the "Distributor"), pursuant to which
the Distributor acts as the exclusive distributor and representative of the
Fund in the offer and sale of the Class A shares to the public; and
WHEREAS, the Fund desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act, pursuant to which the Fund will pay
the Distributor for certain distribution-related expenses incurred, as well
as expenses incurred by it with respect to shareholder services, relating
to holders of Class A shares of the Fund; and
WHEREAS, the Board of Directors of the Fund (the "Directors") as a
whole, and the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of this Plan
or in any agreement relating hereto (the "12b-1 Directors"), having
determined, in the exercise of reasonable business judgment and in light of
their fiduciary duties under state law and under Sections 36(a) and (b) of
the Act, that there is a reasonable likelihood that this Plan will benefit
the Fund and its Class A shareholders, have approved this Plan by votes
cast in person at a meeting called for the purpose of voting hereon and on
any agreements related hereto;
NOW THEREFORE, the Fund hereby adopts this Plan on the following
terms:
1. Fees; Distribution-Related Activities; Shareholder Services.
(a) The Fund shall pay the Distributor a fee under the Plan at
the end of
1
<PAGE>
each month or at such other intervals as the Directors may
determine at the annual rate of up to 0.30% of average daily net
assets attributable to Class A shares of the Fund. Of such fee, (i)
up to 0.25% of such average daily net assets may be used to compensate
the Distributor and broker-dealers and other financial institutions
("Securities Firms") for shareholder servicing related to distribution
of shares of the class (a "service fee") and (ii) the balance may be
used to compensate the Distributor and Securities Firms for certain
distribution-related activities (a "distribution fee"); provided, that
the sum of any service fee and distribution fee shall not exceed 0.30%
of such average daily net assets. Notwithstanding the foregoing, no
fee shall be payable hereunder which would cause the Fund to fail to
comply with the requirements of Article III, Section 26 of the Rules
of Fair Practice of the National Association of Securities Dealers,
Inc.
(b) The distribution fee under paragraph (a) shall be used to
compensate the Distributor and/or Securities Firms having agreements
with the Distributor for providing distribution assistance to
customers and to pay for the preparation, printing and distribution of
prospectuses, statements of additional information and periodic
financial reports to persons other than current shareholders of the
Fund, as well as to pay for the preparation and distribution of sales
literature and pay for other promotional and distribution activities.
(c) The service fee payable under paragraph (a) above shall be
used to compensate the Distributor and/or Securities Firms for
providing personal services such as shareholder liaison services
(responding to customer inquiries and providing information on their
investment) to Fund shareholders and/or maintaining shareholder
accounts.
(d) Payments to Securities Firms hereunder may take the form of
sales commissions or trailer commissions.
2. Payments to Other Parties. The Fund hereby authorizes the
Distributor to enter into agreements with Securities Firms to provide
compensation to such Securities Firms for activities and services of the
type referred to in Section 1 hereof. The Distributor may reallocate all
or a portion of its fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such agreements shall provide
that the Securities Firms shall deliver to the Distributor such information
as is reasonably necessary to permit the Distributor to comply with the
reporting requirements set forth in Section 4 hereof.
3. Related Agreements. All agreements with any person relating to
implementation of this Plan shall be in writing, and any agreement related
to this Plan shall provide:
(a) that such agreement may be terminated at any time, without
payment of
2
<PAGE>
any penalty, by vote of a majority of the 12b-1 Directors,
or by vote of a majority of the outstanding voting securities
constituting Class A shares of the Fund, on not more than 60 days'
written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
4. Quarterly Reports. The Treasurer of the Fund shall provide to
the Directors and the Directors shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan with respect to Class
A shares of the Fund and any related agreement and the purposes for which
such expenditures were made.
5. Term and Termination.
(a) This Plan shall become effective as of the date hereof, and,
unless terminated as herein provided, shall continue from year to year
thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of both (i) the
Directors of the Fund, and (ii) the 12b-1 Directors.
(b) This Plan may be terminated at any time by vote of a
majority of the 12b-1 Directors or by vote of a majority of the
outstanding voting securities constituting Class A shares of the Fund.
6. Amendments; Shareholder Voting.
(a) This Plan may not be amended to increase materially the
maximum expenditures permitted by Section 1 hereof unless such
amendment is approved by a vote of a majority of the outstanding
voting securities (as defined in the Act) of Class A shares of the
Fund, and no material amendment to this Plan shall be made unless
approved in the manner provided for the annual renewal of this Plan in
Section 5(a) hereof.
(b) Any shareholder vote under this paragraph shall also require
the vote of any class of shares of the Fund that converts or is
exchanged automatically into Class A shares of the Fund.
7. Selection and Nomination of Directors. While this Plan is in
effect, the selection and nomination of those Directors of the Fund who are
not interested persons of the Fund shall be committed to the discretion of
such disinterested Directors.
8. Recordkeeping. The Fund shall preserve copies of this Plan and
any related
3
<PAGE>
agreement and all reports made pursuant to Section 4 hereof for
a period of not less than six years from the date of this Plan, any such
related agreement or such reports, as the case may be, the first two years
in an easily accessible place.
9. Definition of Certain Terms. For purposes of this Plan, the terms
"assignment," "interested person," "majority of the outstanding voting
securities" and "principal underwriter" shall have their respective
meanings defined in the Act and the rules and regulations thereunder,
subject, however, to such exemptions as may be granted to either the Fund
or the Distributor by the Securities and Exchange Commission, or its staff
under the Act.
4
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS B SHARES)
PLAN OF DISTRIBUTION adopted as of the ____ day of ________, 1996, by
American Growth Fund, Inc., a Maryland corporation (the "Fund"), on behalf
of its Class B shares.
W I T N E S S T H:
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company;
and
WHEREAS, the Fund from time to time will offer Class B shares of
common stock, par value $.01 per share, (the "Shares"); and
WHEREAS, the Fund has entered into a Distribution Agreement with
American Growth Fund Sponsors, Inc. (the "Distributor"), pursuant to which
the Distributor acts as the exclusive distributor and representative of the
Fund in the offer and sale of the Class B shares to the public; and
WHEREAS, the Fund desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act, pursuant to which the Fund will pay
the Distributor for certain distribution-related expenses incurred, as well
as expenses incurred by it with respect to shareholder services, relating
to holders of Class B shares of the Fund; and
WHEREAS, the Board of Directors of the Fund (the "Directors") as a
whole, and the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of this Plan
or in any agreement relating hereto (the "12b-1 Directors"), having
determined, in the exercise of reasonable business judgment and in light of
their fiduciary duties under state law and under Sections 36(a) and (b) of
the Act, that there is a reasonable likelihood that this Plan will benefit
the Fund and its Class B shareholders, have approved this Plan by votes
cast in person at a meeting called for the purpose of voting hereon and on
any agreements related hereto;
NOW THEREFORE, the Fund hereby adopts this Plan on the following
terms:
1. Fees; Distribution-Related Activities; Shareholders Services.
(a) The Fund shall pay the Distributor under this Plan at the
end of each
1
<PAGE>
month or at such other intervals as the Directors may determine (i)
a fee at the annual rate of up to 0.75% of average daily net assets
attributable to Class B shares of the Fund to compensate the
Distributor and broker-dealers and other financial institutions
("Securities Firms") for certain distribution-related activities (a
"distribution fee"), and (ii) a fee at the annual rate of up to 0.25%
of such average daily net assets to compensate the Distributor and
Securities Firms for shareholder servicing related to distribution of
such shares (a "service fee"). Notwithstanding the foregoing, no such
fees shall be payable hereunder which would cause the Fund to fail to
comply with the requirements of Article III, Section 26 of the Rules
of Fair Practice of the National Association of Securities Dealers,
Inc.
(b) The distribution fee under paragraph (a) shall be used to
compensate the Distributor and/or Securities Firms having agreements
with the Distributor for providing distribution assistance to
customers and to pay for the preparation, printing and distribution of
prospectuses, statements of additional information and periodic
financial reports to persons other than current shareholders of the
Fund, as well as to pay for the preparation and distribution of sales
literature and pay for other promotional and distribution activities.
(c) The service fee payable under paragraph (a) above shall be
used to compensate the Distributor and/or Securities Firms for
providing personal services such as shareholder liaison services
(responding to customer inquiries and providing information on their
investment) to Fund shareholders and/or maintaining shareholder
accounts.
(d) Payments to Securities Firms hereunder may take the form of
sales commissions or trailer commissions.
2. Payments to Other Parties. The Fund hereby authorizes the
Distributor to enter into agreements with Securities Firms to provide
compensation to such Securities Firms for activities and services of the
type referred to in Section 1 hereof. The Distributor may reallocate all
or a portion of its fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such agreements shall provide
that the Securities Firms shall deliver to the Distributor such information
as is reasonably necessary to permit the Distributor to comply with the
reporting requirements set forth in Section 4 hereof.
3. Related Agreements. All agreements with any person relating to
implementation of this Plan shall be in writing, and any agreement related
to this Plan shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the 12b-1 Directors,
or by vote of a majority of the outstanding voting securities
constituting Class B shares of the Fund, on not more
2
<PAGE>
than 60 days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
4. Quarterly Reports. The Treasurer of the Fund shall provide to
the Directors and the Directors shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan with respect to Class
B shares of the Fund and any related agreement and the purposes for which
such expenditures were made.
5. Term and Termination.
(a) This Plan shall become effective as of the date hereof, and,
unless terminated as herein provided, shall continue from year to year
thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of both (i) the
Directors of the Fund, and (ii) the 12b-1 Directors.
(b) This Plan may be terminated at any time by vote of a
majority of the 12b-1 Directors or by vote of a majority of the
outstanding voting securities constituting Class B shares of the Fund.
6. Amendments. This Plan may not be amended to increase materially
the maximum expenditures permitted by Section 1 hereof unless such
amendment is approved by a vote of a majority of the outstanding voting
securities constituting Class B shares of the Fund, and no material
amendment to this Plan shall be made unless approved in the manner provided
for the annual renewal of this Plan in Section 5(a) hereof.
7. Selection and Nomination of Directors. While this Plan is in
effect, the selection and nomination of those Directors of the Fund who are
not interested persons of the Fund shall be committed to the discretion of
such disinterested Directors.
8. Recordkeeping. The Fund shall preserve copies of this Plan and
any related agreement and all reports made pursuant to Section 4 hereof for
a period of not less than six years from the date of this Plan, any such
related agreement or such reports, as the case may be, the first two years
in an easily accessible place.
9. Definition of Certain Terms. For purposes of this Plan, the terms
"assignment," "interested person," "majority of the outstanding voting
securities" and "principal underwriter" shall have their respective
meanings defined in the Act and the rules and regulations thereunder,
subject, however, to such exemptions as may be granted to either the Fund
or the Distributor by the Securities and Exchange Commission, or its staff
under the Act.
3
<PAGE>
PLAN OF DISTRIBUTION PURSUANT
TO RULE 12b-1
(CLASS C SHARES)
PLAN OF DISTRIBUTION adopted as of the ____ day of ________, 1996, by
American Growth Fund, Inc., a Maryland corporation (the "Fund"), on behalf
of its Class C shares.
W I T N E S S T H:
WHEREAS, the Fund is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company;
and
WHEREAS, the Fund from time to time will offer Class C shares of
common stock, par value $.01 per share, (the "Shares"); and
WHEREAS, the Fund has entered into a Distribution Agreement with
American Growth Fund Sponsors, Inc. (the "Distributor"), pursuant to which
the Distributor acts as the exclusive distributor and representative of the
Fund in the offer and sale of the Class C shares to the public; and
WHEREAS, the Fund desires to adopt this Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act, pursuant to which the Fund will pay
the Distributor for certain distribution-related expenses incurred, as well
as expenses incurred by it with respect to shareholder services, relating
to holders of Class C shares of the Fund; and
WHEREAS, the Board of Directors of the Fund (the "Directors") as a
whole, and the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of this Plan
or in any agreement relating hereto (the "12b-1 Directors"), having
determined, in the exercise of reasonable business judgment and in light of
their fiduciary duties under state law and under Sections 36(a) and (b) of
the Act, that there is a reasonable likelihood that this Plan will benefit
the Fund and its Class C shareholders, have approved this Plan by votes
cast in person at a meeting called for the purpose of voting hereon and on
any agreements related hereto;
NOW THEREFORE, the Fund hereby adopts this Plan on the following
terms:
1. Fees; Distribution-Related Activities; Shareholders Services.
(a) The Fund shall pay the Distributor under this Plan at the
end of each
1
<PAGE>
month or at such other intervals as the Directors may determine (i) a fee
at the annual rate of up to 0.75% of average daily net assets attributable
to Class C shares of the Fund to compensate the Distributor and
broker-dealers and other financial institutions ("Securities Firms") for
certain distribution-related activities (a "distribution fee"), and (ii) a
fee at the annual rate of up to 0.25% of such average daily net assets to
compensate the Distributor and Securities Firms for shareholder servicing
related to distribution of such shares (a "service fee"). Notwithstanding
the foregoing, no such fees shall be payable hereunder which would cause
the Fund to fail to comply with the requirements of Article III, Section 26
of the Rules of Fair Practice of the National Association of Securities
Dealers, Inc.
(b) The distribution fee under paragraph (a) shall be used to
compensate the Distributor and/or Securities Firms having agreements
with the Distributor for providing distribution assistance to
customers and to pay for the preparation, printing and distribution of
prospectuses, statements of additional information and periodic
financial reports to persons other than current shareholders of the
Fund, as well as to pay for the preparation and distribution of sales
literature and pay for other promotional and distribution activities.
(c) The service fee payable under paragraph (a) above shall be
used to compensate the Distributor and/or Securities Firms for
providing personal services such as shareholder liaison services
(responding to customer inquiries and providing information on their
investment) to Fund shareholders and/or maintaining shareholder
accounts.
(d) Payments to Securities Firms hereunder may take the form of
sales commissions or trailer commissions.
2. Payments to Other Parties. The Fund hereby authorizes the
Distributor to enter into agreements with Securities Firms to provide
compensation to such Securities Firms for activities and services of the
type referred to in Section 1 hereof. The Distributor may reallocate all
or a portion of its fee to such Securities Firms as compensation for the
above-mentioned activities and services. Such agreements shall provide
that the Securities Firms shall deliver to the Distributor such information
as is reasonably necessary to permit the Distributor to comply with the
reporting requirements set forth in Section 4 hereof.
3. Related Agreements. All agreements with any person relating to
implementation of this Plan shall be in writing, and any agreement related
to this Plan shall provide:
(a) that such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the 12b-1 Directors,
or by vote of a majority of the outstanding voting securities
constituting Class C shares of the Fund, on not more
2
<PAGE>
than 60 days' written notice to any other party to the agreement; and
(b) that such agreement shall terminate automatically in the
event of its assignment.
4. Quarterly Reports. The Treasurer of the Fund shall provide to
the Directors and the Directors shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan with respect to Class
C shares of the Fund and any related agreement and the purposes for which
such expenditures were made.
5. Term and Termination.
(a) This Plan shall become effective as of the date hereof, and,
unless terminated as herein provided, shall continue from year to year
thereafter, so long as such continuance is specifically approved at
least annually by votes, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of both (i) the
Directors of the Fund, and (ii) the 12b-1 Directors.
(b) This Plan may be terminated at any time by vote of a
majority of the 12b-1 Directors or by vote of a majority of the
outstanding voting securities constituting Class C shares of the Fund.
6. Amendments. This Plan may not be amended to increase materially
the maximum expenditures permitted by Section 1 hereof unless such
amendment is approved by a vote of a majority of the outstanding voting
securities constituting Class C shares of the Fund, and no material
amendment to this Plan shall be made unless approved in the manner provided
for the annual renewal of this Plan in Section 5(a) hereof.
7. Selection and Nomination of Directors. While this Plan is in
effect, the selection and nomination of those Directors of the Fund who are
not interested persons of the Fund shall be committed to the discretion of
such disinterested Directors.
8. Recordkeeping. The Fund shall preserve copies of this Plan and
any related agreement and all reports made pursuant to Section 4 hereof for
a period of not less than six years from the date of this Plan, any such
related agreement or such reports, as the case may be, the first two years
in an easily accessible place.
9. Definition of Certain Terms. For purposes of this Plan, the terms
"assignment," "interested person," "majority of the outstanding voting
securities" and "principal underwriter" shall have their respective
meanings defined in the Act and the rules and regulations thereunder,
subject, however, to such exemptions as may be granted to either the Fund
or the Distributor by the Securities and Exchange Commission, or its staff
under the Act.
3
<PAGE>
AMERICAN GROWTH FUND, INC.
PLAN PURSUANT TO RULE 18f-3
American Growth Fund, Inc. (the "Fund"), by its board of Directors,
including by a majority of the Fund's Directors who are not interested
persons of the Fund (the "independent Directors"), hereby adopts this plan
(the "Plan") pursuant to Rule 18f-3 under the Investment Company Act of
1940 (the 1940 Act). This Plan sets forth the separate arrangements and
expense allocation of each class of shares of the Fund.
CLASS CHARACTERISTICS
The Board of Directors of the Fund has designated four classes of shares of
the Fund, to be known as Class A shares, Class B shares, Class C shares and
Class D shares (collectively, the "Classes"). The following is a
description of the characteristics of the different Classes:
CLASS A SHARES: Class A shares will be sold to investors subject
to a charge at the time of sale of such shares,
which charge may be reduced or waived for
particular investors, subject to the conditions of
sale described from time to time in the Fund's
Prospectus and Statement of Additional Information
pertaining to Class A shares. Class A shares also
will be subject to ongoing distribution fees and
service fees pursuant to Rule 12b-1 under the 1940
Act (Rule 12b-1 fees), which shall not exceed in
the aggregate .30 of 1% per annum of the average
daily net assets attributable to the Class A
shares of the Fund.
CLASS B SHARES: Class B shares will be sold to investors without
any charge at the time of sale of such shares.
Class B shares will be subject to a contingent
deferred sales charge which will be imposed on
certain redemptions of such shares, which charge
may be reduced or waived for particular investors,
subject to the conditions of redemption described
from time to time in the Fund's Prospectus and
Statement of Additional Information pertaining to
Class B shares. Class B shares also will be
subject to ongoing Rule 12b-1 fees, which shall
not exceed in the aggregate 1% per annum of the
average daily net assets attributable to the Class
B shares of the Fund. Class B shares will
automatically convert to Class A shares
approximately seven years after purchase.
<PAGE>
CLASS C SHARES: Class C shares will be sold to investors without
any charge at the time of sale of such shares.
Class C shares will be subject to a contingent
deferred sales charge which will be imposed on
certain redemptions of such shares, which charge
may be reduced or waived for particular investors,
subject to the conditions of redemption described
from time to time in the Fund's Prospectus and
Statement of Additional Information pertaining to
Class C shares. Class C shares also will be
subject to ongoing Rule 12b-1 fees, which shall
not exceed in the aggregate 1% per annum of the
average daily net assets attributable to the Class
C shares of the Fund. Class C shares will not
automatically convert to shares of any other class
of the Fund.
CLASS D SHARES: Class D shares will be sold to investors subject
to a charge at the time of sale of such shares,
which charge may be reduced or waived for
particular investors, subject to the conditions of
sale described from time to time in the Fund's
Prospectus and Statement of Additional Information
pertaining to Class D shares. Class D shares will
not be subject to any ongoing Rule 12b-1 fees.
INCOME AND EXPENSE ALLOCATIONS
Income, any realized and unrealized capital gains and losses, and
expenses not allocated to a particular Class, will be allocated to each
Class on the basis of the net asset value of that Class in relation to the
net asset value of the Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions paid by the Fund to each Class, to the
extent paid will be paid on the same day and at the same time, and will be
determined in the same manner and will be in the same amount, except that
the amount of the dividends and other distributions declared and paid by a
particular Class may be different from that paid by another Class because
of any Rule 12b-1 fees and other expenses borne exclusively by that Class.
CONVERSION FEATURES
Class B shares will automatically convert to Class A shares on at
least a quarterly basis approximately seven years after purchase, except
that Class B shares attributable to the reinvestment of dividends and
distributions will convert to Class A shares at the same time that the
Class B shares to which the such dividends and distributions were
attributable convert to Class A shares. Conversions will be effected at
relative net asset values of the Class B shares
2
<PAGE>
and the Class A shares without the imposition of any sales charge or
other fee at the time of conversion.
GENERAL
A. Each Class shall have exclusive voting rights on any matter submitted
to shareholders that relates solely to its arrangement and shall have
separate voting rights on any matter submitted to shareholders in
which the interests of one Class differ from the interests of any
other Class.
B. On an ongoing basis, the Directors, pursuant to their fiduciary
responsibilities under the 1940 Act and otherwise, will monitor the
Fund for the existence of any material conflicts among the interests
of the Classes. The Directors, including a majority of the
independent Directors, shall take such action as is reasonably
necessary to eliminate any such conflicts that may develop.
Investment Research Corporation, Inc., the Fund's Adviser, will be
responsible for reporting any potential or existing conflicts to the
Directors.
C. For purposes of expressing an opinion on the financial statements of
the Fund, the methodology and procedures for calculating the net asset
value and dividends/distributions of the Classes and the proper
allocation of income and expenses among the Classes will be examined
annually by the Fund's independent auditors who, in performing such
examination, shall consider the factors set forth in the relevant
auditing standards adopted, from time to time, by the American
Institute of Certified Public Accountants.
D. Any material amendment to this Plan is subject to prior approval of
the Fund's Board of Directors, including a majority of the independent
Directors.
Dated: ___________, 1996
3
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-START> AUG-01-1994
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<INVESTMENTS-AT-COST> 76,981,013
<INVESTMENTS-AT-VALUE> 89,491,544
<RECEIVABLES> 386,229
<ASSETS-OTHER> 3,181,880
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 93,059,653
<PAYABLE-FOR-SECURITIES> 2,448,922
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,427
<TOTAL-LIABILITIES> 2,521,349
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76,666,353
<SHARES-COMMON-STOCK> 10,342,095
<SHARES-COMMON-PRIOR> 7,305,756
<ACCUMULATED-NII-CURRENT> 990,914
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 370,510
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12,510,530
<NET-ASSETS> 90,538,304
<DIVIDEND-INCOME> 688,584
<INTEREST-INCOME> 1,850,014
<OTHER-INCOME> 0
<EXPENSES-NET> 1,094,277
<NET-INVESTMENT-INCOME> 1,444,321
<REALIZED-GAINS-CURRENT> 325,639
<APPREC-INCREASE-CURRENT> 9,773,542
<NET-CHANGE-FROM-OPS> 11,543,502
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (938,292)
<DISTRIBUTIONS-OF-GAINS> (12,215,279)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,352,448
<NUMBER-OF-SHARES-REDEEMED> 1,017,480
<SHARES-REINVESTED> 1,701,369
<NET-CHANGE-IN-ASSETS> 22,329,129
<ACCUMULATED-NII-PRIOR> 40,781
<ACCUMULATED-GAINS-PRIOR> 12,855,751
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 627,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,330,157
<AVERAGE-NET-ASSETS> 75,554,349
<PER-SHARE-NAV-BEGIN> 9.34
<PER-SHARE-NII> .210
<PER-SHARE-GAIN-APPREC> .880
<PER-SHARE-DIVIDEND> (.120)
<PER-SHARE-DISTRIBUTIONS> (1.560)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.75
<EXPENSE-RATIO> 1.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
