AMERICAN GROWTH FUND, INC.
410 17th Street, Suite 800, Denver, Colorado 80202-4418
(303) 623-6137
PROSPECTUS
December 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 December 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.
AMERICAN GROWTH FUND SPONSORS, INC.
410 17th Street, Suite 800, Denver, Colorado 80202-4418
303-623-6137
800-525-2406
<PAGE>
<TABLE>
<CAPTION>
FEE TABLE
CLASS A CLASS B CLASS C CLASS D
SHAREHOLDER TRANSACTION EXPENSES:
<S> <C> <C> <C> <C>
Maximum Sales Load Imposed on
Purchases(as a percentage of
offering price).. 5.75% None
None
5.75%
Sales Load Imposed on
Dividend Reinvestment None None None
None
Deferred Load (as a percentage of
original purchase price or
redemption proceeds, whichever
is lower) None(b) 5.0% during the first 2
1% None(b)
years,4% for the next
2 for
years, decreasing
1% one
annually thereafter to
0.0%year
the seventh year(a)
Exchange Fee None None None
None
ANNUAL FUND OPERATING EXPENSES (AS
A PERCENTAGE OF AVERAGE NET ASSETS)(a):
Investment Advisory Fees............ 0.82% 0.82%
0.82% 0.82%
12b-1 Fees.......................... 0.25% 0.98%
0.95% None
Other Expenses...................... 0.99% 1.01%
1.20% 0.81%
Total Fund Operating Expenses....... 2.06% 2.81%
2.97% 1.63%
</TABLE>
(a) Class B shares convert to Class A shares automatically
approximately seven
years after initial purchase. See 'Purchase of Shares--Deferred
Sales
Charge Alternatives--Class B and Class C Shares'.
(b) Purchases of Class A and Class D shares in amounts of
$1,000,000 or more
which are not subject to an initial sales charge generally will
be subject
to a contingent deferred sales charge of 1.0% of amounts
redeemed within
the first year of purchase.
<PAGE>
1 Year 3 Years 5 Years 10 Years
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE:
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 Total 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 $77 $118 $162 $283
Class B $78 $127 $178 $314*
Class C $40 $ 92 $156 $329
Class D $73 $106 $141 $240
An investor would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A $77 $118 $162 $283
Class B $28 $ 87 $148 $314*
Class C $30 $ 92 $156 $329
Class D $73 $106 $141 $240
</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 shares for an extended period of time may pay more in total
charges 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'.
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables present selected financial information
about the Fund, including per share data and expense ratios and
other data based on the Fund's average net assets. This
information, for the year ended July 31, 1996 has been audited by
KPMG Peat Marwick LLP, the Fund's independent auditors, whose
report on the Fund's financial statements for the fiscal year ended
July 31, 1996 is included in the Statement of Additional
Information. This information for each of the nine years ended July
31, 1995 has been audited by the Fund's previous Independent
Auditors.
<PAGE>
<TABLE>
<CAPTION>
Class D
Year Ended July 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
<C>
Per Share
Operating Data: 1996 1995 1994 1993 1992 1991 1990 1989
1988
1987 Net Asset Value,
Beginning of Period$8.75$9.34 $9.39$8.50 $8.02$7.59 $7.46$6.71
$9.62
$9.14
Income(loss) from
investment operations:
Net investment income .03 .21 .03 .11 .10 .16 .17
.38
.24 .16
Net realized and unrealized
gain (loss) .39 .88 1.00 1.51 .94 .53 .26 .71
(1.72)
1.70
Total income (loss)
from Investment
Operations .42 1.09 1.03 1.62 1.04 .69 .43 1.09
(1.48)
1.86 Dividends and distributions
to shareholders:
Dividends from net
investment income (.12)(.12) (.05)(.08) (.06)(.26) (.30)(.34)
(.16)
(.29)
Distributions from
net realized gain (.20)(1.56)(1.03)(.65)(.50)- - -
(1.27)
(1.09)
Total dividends and
distributions to
shareholders . (.32)(1.68)(1.08)(.73)(.56)(.26)
(.30)(.34)(1.43)
(1.38)
Net Asset Value,
End of Period.....$ 8.85$ 8.75$ 9.34$ 9.39$ 8.50$ 8.02$ 7.59$
7.46$ 6.71$
9.62
Total Return1 4.8%15.2% 11.1%20.2% 13.6% 9.6%
5.7%17.0%(14.4)%
23.1%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) $100,130 $90,538 $68,209 $62,180 $55,501 $55,710
$58,574 $63,935 $64,248 $81,321 Ratios to average net
assets:
Net investment income
(loss)....... 0.47%1.91% 0.35%0.59% 1.14%2.02% 2.01%5.15%
3.17%
1.99%
Expenses2..... 1.63%1.45% 1.34%1.44% 1.46%1.33% 1.33%1.32%
1.29%
1.28%
Portfolio Turnover
Rate3........ 163.1%173.0%87.2%48.8%
39.8%135.5%92.3%60.9%241.7%
197.0%
Average Brokerage
Commission Rate4 $0.0561 - - - - -
- -
- - -
</TABLE>
See notes to financial statements.
1 Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of
offering) with all dividends and distributions reinvested in
additional shares on the reinvestment date and redemption at the
net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
2 Beginning fiscal 1996, the expense ratio reflects the effect
of expenses paid indirectly by the Fund. Prior year expenses have
not been adjusted.
3 The lesser of purchases and sales of portfolio securites for
a period, divided by the monthy average of the market value of
securites owned during the period. Purchases and sales of
investment securities, other than U.S. Government and short-term
securities for the period ended July 31, 1996, aggregated
$149,865,511 and $180,516,815, respectively.
4 Total brokerage commissions paid on applicable purchases and
sales of investment securities for the period divided by the total
number of related shares purchased and sold.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Class A Class B Class C
Period Ended July 31,
<S> <C> <C> <C>
Per Share Operating Data: 19965 19965 19965
Net Asset Value,
Beginning of Period...... $9.21 $9.21 $9.21
Income(loss) from
investment operations:
Net investment income.... -7 (.01) -7
Net realized and unrealized
gain (loss)...............(.37) (.40) (.40)
Total income (loss) from
Investment Operations.....(.37) (.41) (.40)
Dividends and distributions
to shareholders:
Dividends from net
investment income ....... - - -
Distributions from net
realized gain............ - - -
Total dividends and
distributions to
shareholders............. - - -
Net Asset Value,
End of Period............$ 8.84 $ 8.80 $ 8.81
Total Return6.............(4.0)% (4.5)% (4.3)%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)...........$3,838 $3,417 $367
Ratios to average net
assets:
Net investment income
(loss)...................0.13% (0.52)% (0.63)%
Expenses2................. 2.06%6 2.81%6 2.97%6
Portfolio Turnover
Rate3................... 163.1% 163.1% 163.1%
Average Brokerage
Commission Rate4........ $0.0561 $0.0561 $0.0561
</TABLE>
See notes to financial statements.
1 Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of
offering) with all dividends and distributions reinvested in
additional shares on the reinvestment date and redemption at the
net asset value calculated on the last business day of the fiscal
period. Sales charges are not reflected in total returns. Total
returns are not annualized for periods of less than one full year.
2 Beginning in fiscal 1996, the expense ratio reflects the
effect of expenses paid indirectly by the Fund.
3 The lessor of purchases and sale of portfolio securities for
a period, divided by the monthly average of the market value of
securities owned during the period. Purchases and sale of
investment securities, other than U.S. Government and short-term
securities for the period ended July 31, 1996, aggregated
$149,865,511 and $180,516,815, respectively.
4 Total brokerage commissions paid on applicable purchases and
sales of investment securities for the period divided by the total
number of related shares purchased and sold.
5 For the period from March 1, 1996 (inception of offering) to
July 31, 1996.
6 Annualized
7 Less than $.005 per share.
<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.
In attempting 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. Investment
Research Corporation, the Fund's investment adviser (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
Services, a division of the McGraw Hill Companies, Inc. , 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.
<PAGE>
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 net 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 event, these
investments
<PAGE>
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 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.
<PAGE>
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, 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, 1996, this fee
amounted to 0.82% of the Fund's average net assets on each of the
four classes. The fees for Class A, Class B and Class C are
annualized. 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 1.63% of the Fund's
average net assets of the Class D shares, 2.06% for Class A, 2.81%
for Class B and 2.97% for Class C. Class A, Class B and Class C
expenses are annualized.
BROKERAGE
The Fund does not have any agreement or arrangement to use any
particular broker for portfolio transactions. The Fund is
authorized to employ broker-dealers, including "affiliated"
brokers, as that term is defined in the Investment Company Act of
1940, as may, in its best judgment based on all relevant factors,
implement the policy of the Fund to obtain, at reasonable expense,
the "best execution" (prompt and reliable execution at the most
favorable price obtainable) of such transactions. The Manager need
not seek competitive commission bidding
<PAGE>
but is expected to minimize the commissions paid to the extent
consistent with the interest and policies of the fund as
established by its Board of Directors. Purchases of securities from
underwriters include a commission or concession paid by the issuer
to the underwriter, and purchases from dealers include a spread
between the bid and asked price. The Fund 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 1996 was 163.1% and
its portfolio turnover rate in fiscal year 1995 was 173.0%. High
portfolio turnover (over 100%) may involve corresponding greater
brokerage commissions and other transaction costs which will be
borne directly by the Fund. In addition, high portfolio turnover
may result in increased short-term capital gains which, when
distributed to shareholders, are treated as ordinary income.
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 Distributor.
The Fund offers its shares continuously to the public at their
net asset values 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 Distributor 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. All purchases made by check should be in U.S. dollars and
made payable to the American Growth Fund, or in the case of a
retirement account, the custodian or trustee. Third party checks
will not be accepted.
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 such investor's
individual circumstances. Shares
<PAGE>
of Class A and Class D are sold to investors choosing the initial
sales charge alternatives while 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.
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, you should consider
purchasing Class C shares over either Class A or Class B 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.
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, you should consider purchasing
Class A or Class B shares over Class C 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.
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.
<PAGE>
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 more than one year for 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 class. 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 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 locations will be awarded to
participating broker dealers achieving certain cumulative sales
levels in shares of the Fund. Participation in the incentive
programs is entirely optional on the part of the broker dealer.
Copies of the incentive program rules which contain more complete
information about the terms and condition 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.
<PAGE>
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 charges (i.e.,
sales loads), as set forth below.
<TABLE>
SALES CHARGES
Paid to
As % of Dealers as % As % of
Amount Invested Offering Price 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>
* Purchases of Class A and Class D in amounts of $1,000,000 or
more, which are
not subject to an initial sales charge, generally will be subject
to a CDSC of
1% of amounts redeemed within the first year of purchase.
The above scale applies to aggregate purchases by an
individual, a spouse and children under 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 and 403(b)
Plans, except for 401(k) and 403(b) Plans in which each 401(k) and
403(b) investor is considered separately for purposes of computing
sales charges. Provided, however, that the term 'any person' shall
not included a group of individuals whose funds are combined
directly or indirectly, for the purchase of shares of the Fund
jointly or through a trustee, agent, custodian or other
representative, nor shall it include a trustee, agent, custodian or
other representative of such a group of individuals.
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.
<PAGE>
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 owned Class D shares in a shareholder account, including
participants in the American Growth Fund Distribution Plan, as of
March 1, 1996, are entitled to purchase additional Class D shares
in that account. Class D shares are also available for sale to the
Fund's, the Adviser's and the Distributor's directors and officers
and their spouses and family members, to certain institutional
investors, including banks, corporations and accounts managed by
specified types of fiduciaries, and to or for retirement plans for
their employees or sold to employees of such dealers (and their
spouses or for accounts for their minor children) that have sales
agreements with the underwriter. Such persons must give written
assurance that their purchase is made for investment purposes and
that the securities will not be resold except through redemption or
repurchase by the issuer. The Distributor reserves the right to ask
for adequate documentation to ensure that shareholders are eligible
for the above shares.
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 D shares are
offered at net asset value only to certain eligible Class D
investors as set forth above under 'Eligible Class D Investors'.
The sales charge may vary 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 an Automatic
Cash Withdrawal Plan, and Automatic Monthly Investment Plan,
Individual Retirement Accounts, Simplified Employee Pension, Money
Purchase and Profit Sharing Pension
<PAGE>
Plans, and Teacher and Non-Profit Employee Retirement Plans.
Additional charges apply for some services or plans. For more
information, including fees and expenses contact the Distributor or
the Fund.
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.
Net Asset Value Purchases of Class A Shares. Class A shares
of the Fund may be purchased at net asset value through certain
organizations (which may be broker-dealers, banks or other
financial organizations)('Processing Organizations') which have
agreed with the Distributor to purchase and hold shares for their
customers 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.
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
<PAGE>
Plan, if certain conditions set forth in the Statement of
Additional Information are met.
The Fund also sells its Class A shares at net asset value in
connection with a qualified rollover of assets held in a previously
existing tax-exempt retirement plan (including an IRA, 401(k) plan
or 403(b) plan) through broker-dealers who have entered into an
agreement with the Underwriter relating to such rollovers.
Contingent Deferred Sales Charges--Class A and Class D Shares.
Class A and Class D shares which are sold in amounts of $1,000,000
at net asset value and 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 A or Class D CDSC
will be imposed on increases in net asset value above the initial
purchase price. In addition, no Class A or Class D CDSC will be
assessed on shares derived from reinvestment of dividends or
distributions.
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 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
<PAGE>
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 lower 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 and service 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. 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>
CLASS B CDSC AS A PERCENTAGE
OF
YEAR SINCE PAYMENT MADE OR OTHER DOLLAR
PURCHASE AMOUNT SUBJECT TO CHARGE
<S> <C>
0-2 5.00%
3-4 4.00
5 3.00
6 2.00
7 1.00
<PAGE>
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 on the amounts redeemed
pursuant to the Automatic Withdrawal Program as long as the total
annual amount withdrawn is less than 12% per year of the previous
years' value or of 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
<PAGE>
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 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 the Transfer Agent at
least one week prior to the Conversion Date, the related Class B
shares will convert to Class A 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
<PAGE>
provide that the Fund pays the Distributor a service fee relating
to the shares of the applicable class, accrued daily and paid
monthly, at the annual rate of 0.25% of the average daily net
assets of the 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
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 applicable class, accrued daily
and paid quarterly, 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 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 shares of the respective classes 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 A and Class D 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), (ii) in the
case of Class B and Class C
<PAGE>
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 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.
The Fund will repurchase shares through broker-dealers with
whom the Distributor has a sales agreement. The Fund will normally
accept orders to repurchase shares by wire or telephone from such
dealers for their customers at the net asset value (less any
applicable CDSC) 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
<PAGE>
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 due to redemptions. 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 the 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 Class A or Class D shares of the Fund, as
applicable, without a sales charge. The Money Market Fund is
separately managed from the Fund and is
<PAGE>
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 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
gains 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.
TAXES
The Fund is qualified and intends to continue to qualify as a
regulated investment company under the Internal Revenue Code, 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
<PAGE>
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,
securities or certain financial instruments 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.
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
<PAGE>
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 C and Class D shares in accordance with formulas
specified by the Commission.
The average annual total returns are a percentage expressed in
terms of the average annual compounded rate of return of a
hypothetical investment of $10,000 in the Fund over periods of 1,
5, and 10 years. The return 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
<PAGE>
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 than $10,000 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 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 & P 500), 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
<PAGE>
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 during the fiscal year ended July 31, 1996. The
discussion was provided by the Adviser.
During this year the Fund's two major industries, Petroleum
and Commercial Bank have increase 12.5% and 11.5%, respectively.
While the Standard & Poors broader index has increase 13.9%. The
airline industry gave the Fund an overall return of 39.5% to the
Shareholders but only increased 6.5% for the twelve months. Some
other stocks in the portfolio decreased in value during this period
of time. These are the major reasons for the Fund's performance in
the last twelve months.
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.
Cumulative total return at maximum offering price for the period
March 1, 1996 (inception of offering) to July 31, 1996 is (9.5%),
(9.5%) and (5.3%) for Class A, Class B and Class C, respectively.
</TABLE>
<TABLE>
Consumer Price Index American Growth Fund Class D S & P 500
<S> <C> <C>
<C>
07/86 10,000 9,423
10,000
07/87 10,393 11,599
13,919
07/88 10,822 9,927
12,281
07/89 11,366 11,613
16,201
07/90 11,914 12,274
17,255
07/91 12,272 13,449
19,455
07/92 12,665 15,272
21,944
07/93 13,019 18,357
23,860
07/94 13,345 20,386
25,091
07/95 13,692 23,481
31,642
07/96 14,089 24,614
36,027
</TABLE>
<PAGE>
<TABLE>
Consumer Price Index American Growth Fund Class A S
& P
500
<S> <C> <C>
<C>
03/96 10,000 9,425
10,000
07/96 10,080 9,048
9,932
</TABLE>
<TABLE>
Consumer Price Index American Growth Fund Class B S & P
500
<S> <C> <C>
<C>
03/96 10,000 10,000
10,000
07/96 10,080 9,077
9,932
</TABLE>
<TABLE>
Consumer Price Index American Growth Fund Class C S & P
500
<S> <C> <C>
<C>
03/96 10,000 10,000
10,000
07/96 10,080 9,470
9,932
</TABLE>
CHART [Camera Ready Copy to Follow]
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.
The following table sets forth the Fund's average annualized
total return at maximum offering price for the one, five, ten and
fifteen year periods ended July 31, 1996 for the Fund's Class D
shares. Returns for the Fund's Class A, Class B and Class C shares
are from March 1, 1996 (inception of offering) to July 31, 1996:
<TABLE>
Class D
RELEVANT AVERAGE ANNUALIZED Class A, Class B & Class C
PERIOD TOTAL RETURN Total Return (five months)
- --------- ------------------ --------------------------
<S> <C> <C> <C>
1 year (1.1)% Class A (9.5)%
5 year 8.2% Class B (9.5)%
10 year 11.6% Class C (5.3)%
15 year 9.4%
</TABLE>
<PAGE>
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.
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 service 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 account maintenance, distribution and service, 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, bear certain
expenses related to the distribution of such shares, and the Class
B shares convert to Class A shares approximate seven years after
purchase. Each class has exclusive voting rights with respect to
matters relating to shareholder servicing and
<PAGE>
distribution expenditures, as applicable, except that Class B
shares are entitled to vote on certain matters relating to the
Class A Distribution Plan. See 'Purchase of Shares'. The Directors
of the Fund may classify and reclassify 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.
<PAGE>
<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
TRANSFER AGENT
Boston Financial Data Services, Inc.
Administrative Offices:
Two Heritage Drive
North Quincy, Massachusetts 02172
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
707 17th Street, Suite 2300
Denver, Colorado 80202
CUSTODIAN
State Street Bank and Trust Company
One Heritage Drive
North Quincy, Massachusetts 02171
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS,
IN CONNESTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS 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
Fee Table. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.2
Financial Highlights - Class D . . . . . . . . . . . . . . . . . .
.3
Financial Highlights - Class A,B & C . . . . . . . . . . . . . . .
.4
Investment Objectives and Policied . . . . . . . . . . . . . . . .
.5
Management of the Fund . . . . . . . . . . . . . . . . . . . . . .
.7
Brokerage. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
.8
Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . .
.8
Initial Sales Charge
Alternatives - Class A and Class D Shares . . . . . . . . . . . .
11
Deferred Sales Charge
Alternatives - Class B and Class D Shares . . . . . . . . . . . .
14
Distribution Plans . . . . . . . . . . . . . . . . . . . . . . . .
18
Redemption of Shares . . . . . . . . . . . . . . . . . . . . . . .
19
Reinstatement Privilege
Class A and Class D Shares. . . . . . . . . . . . . . . . . . . .
20
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . . . .
20
Dividends and Distributions. . . . . . . . . . . . . . . . . . . .
21
Automated Investment Plan. . . . . . . . . . . . . . . . . . . . .
21
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21
Performance Data . . . . . . . . . . . . . . . . . . . . . . . . .
23
Calculation of Net Asset Value; General Information. . . . . . . .
26
<PAGE>
<PAGE>
<PAGE>
AMERICAN GROWTH FUND, INC.
410 17th Street, Suite 800, Denver, Colorado 80202
303-623-6137
STATEMENT OF ADDITIONAL INFORMATION
December 1, 1996
This Statement of Additional Information is not a prospectus.
Prospective
investors should read this Statement of Additional Information only
in conjunction with the Prospectus of American Growth Fund, Inc.
(the "Fund") dated December 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 OF CONTENTS
ADDITIONAL INVESTMENT INFORMATION. . . . . . . . . . . . . . . .B-2
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . .B-4
INVESTMENT ADVISORY AGREEMENT. . . . . . . . . . . . . . . . . .B-6
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . . . . . . .B-7
AUTOMATIC CASH WITHDRAWAL PLAN . . . . . . . . . . . . . . . .B-10
RETIREMENT PLANS. . . . . . . . . . . . . . . . . . . . . . . .B-11
DISTRIBUTION PLANS. . . . . . . . . . . . . . . . . . . . . . .B-12
CUSTODIAN AND INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . .B-12
BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . .B-13
CALCULATION OF NET ASSET VALUE. . . . . . . . . . . . . . . . .B-14
DIVIDENDS, DISTRIBUTIONS AN TAXES. . . . . . . . . . . . . . . B-14
PERFORMANCE DATA. . . . . . . . . . . . . . . . . . . . . . . B-17
REPORT OF INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . B-22
FINANCIAL STATEMENTS .. . . . . . . . . . . . . . . . . . . .. B-23
PAGE
<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 issuer may be held in the portfolio of the Fund.
4.The Fund cannot act as an underwriter of securities of other
issuers.
5.The Fund cannot borrow money except from a bank as a temporary
measure for
extraordinary or emergency purposes, and then only in an amount not
to exceed 10% of its total assets taken at cost, or mortgage or
pledge any of its assets.
6.The Fund cannot make or purchase loans to any person including
real estate
mortgage loans, other than through the purchase of a portion of
publicly distributed debt securities pursuant to the investment
policy of the Fund.
7.The Fund cannot issue senior securities or purchase the
securities of
another investment company or investment trust except in the open
market where no profit to a sponsor or dealer, other than the
customary 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.
<PAGE>
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 are present in person or by proxy, or (ii)
more than 50% of the outstanding shares.
When the Fund makes temporary investments in U.S. Government
securities,
it ordinarily will purchase 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.
<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>
<CAPTION>
<C>. . . . . . . . . .<S>. . . . . . .<S>
POSITION(S) HELD PRINCIPAL
OCCUPATIONS
NAME, ADDRESS AND AGE WITH FUND DURING PAST
5 YEARS
- ---------------------- ----------------
- ---------------------
Robert Brody* (70) .President,DirectorSee 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 Ave. Corp. 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
56 S. Glencoe St.. . . . . . . . . . . . . .Majestic Industries,
Inc., Denver, Coloradoa
manufacturer of . . . . . . . . . . . . . . . . . . .janitorial
supplies
Harold Rosen (68). . . .Director . . .Owner of Bi-Rite Furniture
#1 Middle Road Stores.
Englewood, CO
Timothy E. Taggart (42) Treasurer Principal
financial and
410 17th St., Suite 800 accounting
officer.
Denver, Colorado . . . . . . . . . . . . . .Employee of Adviser
since
. . . . . . . . . . . . . . . . . . .1983. See below for
. . . . . . . . . . . . . . . . . . .affiliation with . . . . . .
. . . . . .
Distributor.
<PAGE>
. . . . . . . . . .POSITION(S) HELDPRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE. .WITH FUND. . .DURING PAST 5 YEARS
- ---------------------- ----------------
- ---------------------
D. Leann Baird (47). . . Secretary . .Employee of Adviser since 410
17th St., Suite 8001977. See below for
Denver, CO . . . . . . . . . . . . . . . . .affiliations with
Adviser. . . . . and
Distributor
William D. Farr (85) . .Advisory Board MemberPresident and Director
P.O. Box 878of Farr Farms Company, Greeley, Colorado
Chairman of the Board of . . . . . . . . . . . . . . . . . . .
.Northern Colorado Water
Conservancy, Past President . . . . . . . . . . . . . . . . . . .
.of the National Cattlemen's
Association, Board Member . . . . . . . . . . . . . . . . . . .of
Greeley Water Board
Frank J. Johns (92). . .Advisory Board MemberRetired President of
Denver 111 Emerson StreetDry Goods Company
Denver, Colorado
</TABLE>
*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 9) received total compensation of $7,300,
from the Fund in fiscal year 1996. Directors of the Fund except Mr.
Brody were compensated at the rate of $400 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 Fund's most recently completed fiscal year, Messrs.
Baum, Bush,
Strauss and Rosen, the only directors other than Mr. Brody serving
during that year, were each paid the following
<PAGE>
compensation by the Fund:
<TABLE>
<CAPTION>
<C>. . . . . . . . . .<S>
. . . . . . . . . .Aggregate Compensation Paid by the Fund
Name of Director . . . .During the Fiscal Year Ended July 31, 1996.
Michael J. Baum, Jr. $1,900
Eddie R. Bush $1,900
Don S. Strauss $1,900
Harold Rosen $ 800
</TABLE>
In addition, for the fiscal year ended July 31, 1996, Messrs. Farr
and
Johns as advisory board members each received fees of $800 from the
Fund.
None of the above named persons received any retirement benefits or
other
form of deferred compensation from the Fund. There are no other
funds that together with the Fund constitute a Fund Complex.
As of September 12, 1996, no person owned more than 5% of the Fund
and all
officers and directors as a group (a total of 7) owned directly
251,108 of its shares or 2.0% of shares outstanding. Together,
directly and indirectly, all the officers and directors as a group
owned 273,535 shares or 2.2% of all shares outstanding.
As of September 12, 1996, officers, directors and members of
the advisory board and their relatives owned of record and
beneficially Fund shares with net asset value of approximately
$2,773,792 representing approximately 2.4% 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 80202. 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
<PAGE>
one percent of such assets above $30,000,000. This 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 categories 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. Fund 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.
Total advisory fees paid by the Fund to the Adviser in fiscal years
1994,
1995 and 1996 were $579,209 in 1994, $627,684 in 1995, and $866,681
in 1996, resulting in management fees of 0.86%, 0.83% and 0.82% of
average net assets. In fiscal years 1994, 1995 and 1996 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 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.
<PAGE>
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
offering of the Fund's shares is subject to withdrawal or
cancellation at any time. The Fund and the Distributor reserve the
right to reject any order for any reason.
The Fund offers four classes of shares, par value $.01 per share.
The
shares are fully paid and non-assessable when issued. 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 ongoing service fees and distribution fees,
Class B and Class C may bear the additional incremental transfer
agency costs resulting from the deferred sales charge arrangements,
and Class B shares have a conversion feature. The fees that are
imposed on Class A, Class B and Class C shares are imposed directly
against those classes and not against all assets of the 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, except that because Class B shares
convert automatically to Class A shares approximately seven years
after issuance, the Rule 12b-1 distribution plan for Class A shares
is also subject to the right of Class B shareholders to vote with
respect to it.
The Fund has entered into separate distribution agreements with the
Distributor in connection with the offering of each class of shares
of the Fund (the "Distribution Agreements"). The Distributor has
made no firm commitment to take any Fund shares from the Fund and
is permitted to buy only sufficient shares to fill unconditional
orders placed with it by investors and selected
<PAGE>
investment dealers. The Distribution Agreements obligate the
Distributor to pay certain expenses in connection with the offering
of each class of shares of the Fund. After the prospectuses,
statements of additional information and periodic reports have been
prepared, set in type and mailed to shareholders, the Distributor
pays for the printing and distribution of copies thereof used in
connection with the offering to dealers and investors. The
Distributor also pays for other supplementary sales literature and
advertising costs.
Fund shares may be purchased at the public offering price through
the
Distributor or through broker-dealers who are members of the
National Association of Securities Dealers, Inc. who have sales
agreements with the Distributer. The Prospectus contains
information concerning how the public offering price of the Fund's
shares is determined. The Distributor allows dealers discounts or
concessions from the applicable public offering price on Class A
and Class D shares. Concessions are alike for all dealers in the
United States and its territories, but the Distributor may pay
additional compensation for special services. On direct sales to
customers through its own sales representatives, the Distributor
pays to them such portion of the sales commission as it deems
appropriate.
Initial Sales Alternatives - Class A and Class D Shares. The gross
sales
charges for the sale of Class D shares for the fiscal years ended
July 31, 1994, 1995 and 1996 were $264,975, $953,868 and
$1,214,039, respectively. The gross sales charges for the sale of
Class A shares for the period ended July 31, 1996 was $225,124. For
the fiscal years ended July 31, 1994, 1995 and 1996, for the sale
of Class D shares the Distributor retained $112,733, $267,974, and
$245,360 respectively, as its portion of commissions paid by
purchasers of the Fund's shares after allowing as concessions to
other dealers $152,242, $685,894, and $968,679, respectively. For
the period ended July 31, 1996, for the sale of Class A shares the
Distributor retained $194,833 as its portion of commissions paid by
purchases of the Fund's shares after allowing as concession to
other dealers $30,291. During the same periods no commissions were
paid to the Distributor on sales and purchases of portfolio
securities.
The following sample calculation of the public offering price of
one Class
A and Class D share of the Fund is based on the net
<PAGE>
asset value of one Class A and Class D share as of July 31, 1996
and a transaction with an applicable sales charge at the maximum
rate of 5.75%.
<TABLE>
<CAPTION>
<C>. . . . . . . . . . . . <S> . . .<S>. . . .<S>. . . .<S>
. .
Net asset value per share . .Class DClass AClass BClass C
(Total net assets/
Total shares outstanding) . . .$ 8.85$ 8.84$ 8.80$ 8.81
Add selling commissions
(5.75% of offering price). . 0.54 0.54 0.00 0.00
Maximum offering price per share$ 9.39$ 9.38$ 8.80$ 8.81
</TABLE>
Investment Plans. Investors have flexibility in the purchase of
shares
under the Fund's investment plans. They may make single, lump-sum
investments and they may add to their accounts on a regular basis,
including through reinvestment of dividends and capital gains
distributions.
An investor may elect on his application to have all dividends and
capital
gains distributions reinvested or take income dividends in cash and
have any capital gains distributions reinvested. An investor may
also retain the option of electing to take any year's capital gains
distribution in cash by notifying the Fund of his choice to do so
in writing.
The Internal Revenue Code of 1986 contains limitations and
restrictions
upon participation in all forms of qualified plans and for
contributions made to retirement plans for tax years beginning
after December 31, 1986. Consultation with an attorney or a
competent tax advisor regarding retirement plans is recommended. A
discussion of the various qualified plans offered by the Fund is
contained elsewhere in this Statement of Additional Information.
Investor's Right of Accumulation. For Class A and Class D
shareholders the
value of all assets held the day an order is received which
qualifies for rights of accumulation may be combined to determine
the aggregate investment of "any person" in ascertaining the sales
charge applicable to each subsequent purchase. For example, for any
person who has previously purchased and still holds Class A or
Class D shares, respectively, with a value (at current offering
price) of $20,000 on which he paid a charge of 5.75% and
subsequently purchases $80,000 of additional Class A or Class D
shares, respectively, the charge applicable to the trade of $80,000
would be 3.50%.
<PAGE>
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
the designated class of Fund shares does not reach the intended
dollar amount, the difference between what you paid for such shares
and the amount which would have been paid for them must be promptly
paid as if the normal sales commission applicable to such purchases
had been charged. The difference between the sales charge as
applied to a regular purchase and the sales charge as applied on
the letter of intent will be held in escrow in the form of shares
(computed to the nearest full share) and can be retained by the
Fund. If during the 13-month period the intended dollar amount is
increased, a new or revised letter of intent must be signed and
complied with to receive a further sales charge reduction. This
reduction will apply retroactively to all shares theretofore
purchased under this letter.
Automatic Investment Plan. After making an initial investment, a
shareholder may make additional purchases at any time either
through the shareholder's securities dealer, or by mail directly to
the transfer agent. Voluntary accumulation also can be made through
a service known as the Fund's Automatic Investment Plan whereby the
Fund is authorized through pre-authorized checks or automated
clearing house debits to charge the regular bank account of the
shareholder on a regular basis to provide systematic additions to
the account of such shareholder.
<PAGE>
Deferred Sales Charges. As discussed in the Prospectus while Class
B shares
redeemed within seven years of purchase, Class C shares redeemed
within one year or purchase, and certain purchases of Class A and
Class D shares at net asset value and redeemed within one year of
purchase, are each subject to a CDSC under most circumstances, the
charge is waived on redemptions in connection with certain
post-retirement withdrawals from an IRA or other retirement plan or
following the death or disability of a shareholder. Redemptions for
which the waiver applies are: (a) any partial or complete
redemption in connection with a distribution following retirement
under a tax-deferred retirement plan or attaining age 59 1/2 in the
case of an IRA or other retirement plan, or part of a series of
equal periodic payments (not less frequently than annually) made
for life (or life expectancy) or any redemption resulting from the
tax-free return of an excess contribution to an IRA; or (b) any
partial or complete redemption following the death or disability
(as defined in the Internal Revenue Code) of a shareholder
(including one who owns the shares as joint tenant with his or her
spouse), provided the redemption is requested within one year of
the death or initial determination of disability. The CDSC charge
is waived on redemption of shares in connection with a Systematic
Withdrawal Plan where the total withdrawal is less then 12% of the
previous year value or of the original purchase, whichever is
greater.
For the fiscal year ended July 31, 1996, the Distributor received
CDSCs of
$264,975, with respect to redemptions of Class B shares, all of
which was paid to the Distributor. For the fiscal year ended July
31, 1996 the Distributor received no CDSCs with respect to
redemptions of Class C shares all of which was paid to the
Distributor.
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
<PAGE>
terms and conditions of the programs, including qualifying levels
and specific awards, may be obtained by investment representatives
by contacting the Distributor.
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.
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.
<PAGE>
Withdrawals concurrent with purchases of additional shares may be
inadvisable because of duplication of sales charges. Single payment
purchases of shares in amounts less than $5,000 in combination with
a withdrawal plan will not ordinarily be permitted. No withdrawal
plan will be permitted if the investor is also a purchaser under a
continuous investment plan.
Either the owner or the Fund may terminate the Plan at any time,
for any
reason, by written notice to the other.
Investment income dividends paid on shares held in a withdrawal
plan
account will be credited to such account and reinvested in
additional Fund shares. Any optional capital gains distributions
will be taken in shares, which will be added to the share balance
held in the Plan account. Dividends and distributions paid into the
Plan account are taxable for federal income tax purposes.
RETIREMENT PLANS
The Fund makes available retirement plan services to all classes of
its
shares. Investors in the Fund can establish accounts in any one of
the retirement plans offered by the Fund. Each participant in a
retirement plan account is charged a $20 annual service fee to
offset expenses incurred in servicing such accounts. Dividends and
capital gains distributions are automatically reinvested. Under
each of the plans, the Fund's retirement plan custodian or
successor custodian provides custodial services required by the
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
<PAGE>
be established in a tax-free "roll-over" transfer within 60 days of
receipt of a lump sum distribution from a qualified pension plan
resulting from severance of employment or termination by the
employer of such a plan.
The Code provides for penalties for violation of certain of its
provisions
including, but not limited to, contributions in excess of the
stipulated limitations, improper distributions and certain
prohibited transactions. To afford plan holders the right of
revocation described in the IRA disclosure statements, investments
made in a newly established IRA may be canceled within seven days
of the date the plan holder signed the Custodial Agreement by
writing the Fund's retirement plan custodian.
SIMPLIFIED EMPLOYEE PENSION PLANS. The Fund makes available model
Simplified Employee Pension Plans ("SEPs") on IRS Form 5305-SEP and
Salary Reduction Simplified Employee Pension Plans ("SARSEPs") on
IRS Form 5305A-SEP. By adopting a SEP, employers may contribute to
each eligible 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") and with respect to the shareholder
service and distribution fees paid by the Fund to the Distributor
with respect to such classes.
Payments of the shareholder service fees and/or distribution
<PAGE>
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 fees paid to the Distributor. In their
consideration of each Distribution Plan, the Directors must
consider all factors they deem relevant, including information as
to the benefits of the Distribution Plan to the Fund and its
related class of shareholders. Each Distribution Plan further
provides that, so long as the Distribution Plan remains in effect,
the selection and nomination of Directors who are not "interested
persons" of the Fund, as defined in the Investment Company Act (the
"Independent Directors"), shall be committed to the discretion of
the Independent Directors then in office. In approving each
Distribution Plan in accordance with Rule 12b-1, the Independent
Directors considered the potential benefits that the Distribution
Plans could provide to the Fund and the respective classes and
their shareholders, and concluded that there is reasonable
likelihood that such Distribution Plan will benefit the Fund and
its shareholders. Each Distribution Plan can be terminated at any
time, without penalty, by the vote of a majority of the Independent
Directors or by the vote of the holders of a majority of the
outstanding voting securities of the applicable class. A
Distribution Plan cannot be amended to increase materially the
amount to be spent thereunder without the approval of the
applicable class of shareholders, and all material amendments are
required to be approved by the vote of Directors, including a
majority of the Independent Directors who have no direct or
indirect financial interest in such Distribution Plan, cast in
person at a meeting called for that purpose. Rule 12b-1 further
requires that the Fund preserve copies of each Distribution Plan
and any report made pursuant to such plan for a period of not less
than six years from the date of such Distribution Plan or such
report, the first two years in an easily accessible place.
For the fiscal year ended July 31, 1996, the Fund paid the
Distributor
$1,997 (based on average net assets relating to the Class A shares
of approximately $3,837,948) pursuant to the Class A Distribution
Plan, $30,291 of which was paid to other Broker-Dealers for
providing account maintenance and distribution-related services in
connection with the Class A shares and $164,542 was retained by
the Distributor. For the
<PAGE>
fiscal year ended July 31, 1996, the Fund paid the Distributor
$7,040 (based on average net assets relating to the Class B shares
of approximately $3,416,453) pursuant to the Class B Distribution
Plan, all of which was paid to other Broker Dealers for providing
account maintenance and distribution-related services in connection
with the Class B shares. For the fiscal year ended July 31, 1996,
the Fund paid the Distributor $324 (based on average net assets
relating to the Class C shares of approximately $367,296) pursuant
to the class C Distribution Plan, All of which was paid to other
Broker-Dealers for providing account maintenance and
distribution-related services in connection with the Class C
shares. At July 31, 1996, the net assets of the Fund subject to
the Class B Distribution Plan aggregated approximately 3,416,453.
At this net asset level, the annual fee payable pursuant to the
Class B Distribution Plan would aggregate approximately $8,541. At
July 31, 1996, the net assets of the Fund subject to the Class C
Distribution Plan aggregated approximately $918. At this asset
level, the annual fee payable pursuant to the Class C Distribution
Plan would aggregate $324.
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. KPMG Peat Marwick LLP, Certified Public Accountants, 707
17th Street, Suite 2300 Denver, Colorado 80202, 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
<PAGE>
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 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 may use "affiliated" brokers, as that term is defined in
the
Investment Company Act, , it in the Advisor's best judgement based
on all relevant factors, implement the policy of the Fund to
obtain, at reasonable expense, the "best execution" (prompt and
<PAGE>
reliable execution at the most favorable price obtainable) of such
transactions. The Advisor need not seek competitive commission
bidding but is expected to minimize the commissions paid to the
extent consistent with the interest and policies of the Fund as
established by its Board of Directors. Purchases of securities from
underwriters include a commission or concession paid by the issuer
to the underwriter, and purchases from dealers include a spread
between the bid and asked price.
The Fund paid total brokerage commissions of $352,272 in fiscal
year 1994,
$409,352 in fiscal year 1995, and $462,481 in fiscal year 1996. 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 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, 1994, 1995 and 1996 was 87.2%, 173.0%, and 163.1%,
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
<PAGE>
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.
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
<PAGE>
distribution fees and higher transfer agency fees applicable with
respect to Class B and Class C shares of the Fund. It is expected,
however, that the per share net asset value of the classes will
tend to converge (although not necessarily meet) immediately after
the payment of dividends or distributions, which will differ by
approximately the amount of the expense accrual differential
between the classes.
DIVIDENDS, DISTRIBUTIONS AND TAXES
As a regulated investment company, 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 A, Class B and
Class C
shares will be lower than the per share dividends and distributions
on Class D shares as a result of the account maintenance,
distribution and higher transfer agency fees applicable with
respect to the Class A, Class B and Class C shares; similarly, the
per share dividends and distributions on Class A shares will be
higher than the per share dividends and distributions on Class B
and Class C shares as a result of the lower account maintenance
fees applicable with respect to the Class A shares and a lower
distribution fee. See "Calculation of Net Asset Value".
Net capital gains (which consist of the excess of net long-term
capital
gains over net short-term capital losses) are not included in the
definition of investment company taxable income. The Board of
Directors will determine at least once a year whether to distribute
any net capital gains. A determination by the Board of Directors to
retain net capital gains will not affect the ability of the Fund to
qualify as a regulated investment company. If the Fund retains for
investment its net capital gains, it will be subject to a tax of
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
<PAGE>
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.
<PAGE>
Upon a sale or exchange of its shares, a shareholder will realize
a taxable
gain or loss depending upon its basis in the shares. Such gain or
loss will be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands and such capital gain or
loss will be long-term capital gain or loss if the shares have been
held for more than one year. Any loss realized on a sale or
exchange will be disallowed to the extent the shares disposed of
are replaced within a period of 61 days beginning 30 days before
and ending 30 days after 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 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
<PAGE>
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."
<PAGE>
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, 1996, the average annual total
returns for
the Class D shares of the Fund were (1.1)% for 1 year, 11.6% for 5
years, 9.4% for 10 years and 10.6% for 15 years. For the period
March 1, 1996 (inception of offering) to July 31, 1996 the total
return for the Fund's Class A, Class B and Class C shares was
(10.5)%, (4.5)% and (4.3)% respectively.
In addition to the standardized calculation of annual total return,
the
Fund may from time to time use other methods of calculating its
performance in order to illustrate the effect of a hypothetical
investment in a plan or the effect of withdrawing funds from an
account over a period of time. Any presentation of non-standardized
calculations will be accompanied by standardized performance
measures as well. Calculations of performance may be expressed in
terms of the total return as well as the average annual compounded
rate of return of a hypothetical investment in the Fund over
varying periods of time in addition to the 1, 5, and 10 year
periods (up to the life of the Fund) and may reflect the deduction
of the appropriate sales charge imposed upon an initial investment
of more than $1,000 in the Fund. These performance calculations
will reflect the deduction of a proportional share of Fund expenses
(on an annual basis), will assume that all dividends and
distributions are reinvested when paid, may include periodic
investments or withdrawals from the account in varying amounts
and/or percentages and may include deductions for an annual
custodian fee. The Fund may calculate its total return or other
performance information prior to the deduction of a sales charge.
The performance figures described above may also be used to compare
the
performance of the Fund's shares against certain widely recognized
standards or indices for stock and bond market performance. The
following are the indices against which the Portfolios may compare
performance:
The Standard & Poor's Composite Index of 500 Stocks (the S&P 500
Index) is
a market value-weighted and unmanaged index showing
<PAGE>
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, 1996. 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. Class A, Class B and Class C shares are subject to
additional distribution charges as outlines in the prospectus,
which would have, if the Class was in effect, produced a lower rate
of return. The sales load may be reduced pursuant to rights of
accumulation and letter of intent.
<TABLE>
<CAPTION>
. . . . . . . . . .CUMULATIVE . .ACCEPTED
. . . . . . . . . .COST OF. . . . . AS PURCHASED
. . . . . . . . . .SHARES ACQUIREDCAPITAL THROUGH
TOTAL OFDIVIDENDSBOUGHTWITHGAINS REINVESTMENT
INITIALFROM. .WITHTOTAL COST INITIALDIS- OF INCOME
AND ANNUALINVESTMENTINVEST-INCLUDING AND ANN- BUTIONS
(CUM-ENDED
INVESTMENTSINCOMEOF INC-REINVESTEDUAL-(CUM- ULATIVE)VALUE
. . . . .REINVESTEDONE DIV.DIVIDENDS INV. ULATIVE)
<C> <S> <S> <S> <S> <S> <S>
<S> <S>
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 9,7901,152
778
11,720
07/31/66 9,000 202 845 9,845 10,7402,213
977
13,930
07/31/67 10,000 373 1,218 11,218 11,9433,866
1,421
17,230
07/31/68 11,000 353 1,571 12,571 14,0334,243
1,934
20,210
07/31/69 12,000 408 1,979 13,979 12,3205,717
1,910
19,947
07/31/70 13,000 410 2,389 15,659 10,5205,207
1,822
17,549
07/31/71 14,000 588 2,977 16,977 14,3856,664
2,970
24,019
07/31/72 15,000 682 3,659 18,659 16,0697,018
3,841
26,928
07/31/73 16,000 508 4,167 20,167 16,2997,259
4,162
27,720
07/31/74 17,000 782 4,949 21,949 14,0416,307
4,034
24,382
07/31/75 18,000 1,405 6,354 24,354 13,7049,330
5,110
28,144
07/31/76 19,000 1,171 7,525 26,525 16,77710,796
7,227
34,800
07/31/77 20,000 1,074 8,599 28,599 19,58212,008
9,204
40,794
07/31/78 21,000 1,017 9,616 30,616 23,72613,984
11,894
49,604
07/31/79 22,000 2,055 11,671 33,671 27,10915,429
15,437
57,975
07/31/80 23,000 2,931 14,602 37,602 37,93722,535
24,562
85,034
07/31/81 24,000 3,766 18,368 42,368 30,52641,349
22,502
94,377
07/31/82 25,000 4,235 22,603 47,603 27,82939,477
23,846
91,152
07/31/83 26,000 6,769 29,372 55,372 40,09055,535
42,431
138,056
07/31/84 27,000 5,657 35,029 62,029 35,13658,360
41,506
135,002
07/31/85 28,000 4,637 39,666 66,666 37,92773,322
48,927
160,176
07/31/86 29,000 7,330 46,996 75,996 41,25277,925
60,054
179,231
07/31/87 30,000 5,993 52,989 82,989 44,358107,124
70,083
221,565
07/31/88 31,000 3,685 56,674 87,674 31,884105,874
52,808
190,566
07/31/89 32,000 9,656 66,330 98,330 36,390117,707
69,793
223,890
07/31/90 33,000 9,004 75,334 108,334 37,969119,759
79,838
237,566
07/31/91 34,000 8,138 83,472 117,472 41,072126,543
93,645
261,260
07/31/92 35,000 1,955 85,427 120,397 44,484151,776
101,369
297,629
07/31/93 36,000 2,801 88,288 124,228 50,094193,448
115,156
358,698
07/31/94 37,000 1,910 90,138 127,138 50,782232,061
116,467
399,310
07/31/95 38,000 5,130 95,268 133,268 48,526297,125
115,242
460,893
07/31/96 39,000 6,321 101,589 140,589 50,035311,128
122,923 484,086
</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.
<TABLE>
<CAPTION>
WITH-
DRAWN 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
<C> <S> <S> <S> <S> <S>
<S> <S>
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
6,58511,484 18,069
07/31/79 740 60 800 16,800
7,20712,671 19,878
07/31/80 800 0 800 17,600
10,11717,800 27,917
07/31/81 800 0 800 18,400
8,17521,670 29,845
07/31/82 800 0 800 19,200
7,69120,050 27,741
07/31/83 800 0 800 20,000
12,62528,206 40,831
07/31/84 800 0 800 20,800
11,58527,303 38,888
07/31/85 800 0 800 21,600
12,81132,159 44,970
07/31/86 800 0 800 22,400
15,01934,178 49,197
07/31/87 800 0 800 23,200
16,77642,864 59,640
07/31/88 800 0 800 24,000
12,00638,243 50,249
07/31/89 800 0 800 24,800
15,37542,517 57,892
07/31/90 800 0 800 25,600
17,10943,258 60,367
07/31/91 800 0 800 26,400
19,56945,709 65,278
07/31/92 486 314 800 27,200
20,43852,839 73,277
07/31/93 687 113 800 28,000
22,51464,695 87,209
07/31/94 463 337 800 28,800
22,08673,961 96,046
07/31/95 800 0 800 29,600
21,31688,412 109,278
07/31/96 800 0 800 30,400
22,29391,941 114,235
TOTAL $ 20,486 $ 9,914 $ 29,600
</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.
<PAGE>
<PAGE>
Independent Auditors' Report
To The Board of Directors and Shareholders
of American Growth Fund, Inc.:
We have audited the accompanying statements of investments and
assets and liabilities of American Growth Fund, Inc. as of July 31,
1996, and the related statement of operations, the statement of
changes in net assets and the financial highlights for the year
then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audit. The statement of changes in net
assets for the year ended July 31, 1995 and the financial
highlights for the four years then ended were audited by other
auditors whose report dated August 18, 1995 expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities
owned as of July 31, 1996, by correspondence with the custodian and
brokers; and where confirmations were not received from brokers, we
performed alternative procedures. 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 financial highlights
referred to above present fairly, in all material respects, the
financial position of American Growth Fund, Inc. as of July 31,
1996, and the results of its operations, the changes in its net
assets and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
Denver, Colorado
KPMG Peat Marwick LLP
August 30, 1996
<PAGE>
<PAGE>
STATEMENT OF INVESTMENTS
How American Growth Fund Has Its Shareowners' Money Invested
July 31, 1996
<TABLE>
<CAPTION>
Market
Description of Security Shares
Value
COMMON STOCKS
Petroleum Industry 14.1%
<S>. . . . . . . . . . . . . . . . . . . . . . <C>
<C>
Texaco Inc.. . . . . . . . . . . . . . . . . . . . . . . 70,000
$ 5,950,000
(A major integrated international oil company.)
British Petroleum Company P.L.C. . . . . . . . . . . . .
45,000 4,944,375
(One of the largest integrated oil enterprises in the world.)
Repsol S.A.. . . . . . . . . . . . . . . . . . . . . . .
66,000 2,202,750
(Explores/produces oil/gas in Spain, N. Sea, Africa, Latin
America, Indonesia and the Middle East.)
Ultramar Corporation . . . . . . . . . . . . . . . . . .
80,000 2,110,000
(Leading independent refiner/marketer of petroleum products in
California and Eastern Canada.)
15,207,125
Commercial Bank Industry 11.7%
PNC Bank Corp. . . . . . . . . . . . . . . . . . . . . .
145,000 4,223,125 (The nation's thirteenth largest bank
holding company.)
City National Corp.. . . . . . . . . . . . . . . . . . .
200,000 3,100,000 (Owns City National Bank, sixth largest bank
in California.)
SouthTrust Corp. . . . . . . . . . . . . . . . . . . . .
90,000 2,503,125
(The 33rd largest bank in the U.S.)
First Union Corp.. . . . . . . . . . . . . . . . . . . .
28,800 1,828,800
(The nation's sixth largest bank holding company.)
Boatmen's Bancshares, Inc. . . . . . . . . . . . . . . .
25,000 1,000,000
(Largest bank holding company based in Missouri.)
12,655,050
Thrift Industry 8.7%
Golden West Financial Corp.. . . . . . . . . . . . . . .
60,000 3,330,000
(Holding company for World S&L, third-largest thrift.)
Standard Federal Bancorp . . . . . . . . . . . . . . . .
80,000 3,120,000
(Holding company for Standard Federal Bank, 7th largest thrift in
the U.S.)
Washington Mutual, Inc.. . . . . . . . . . . . . . . . .
80,000 2,905,000
(Largest thrift in Washington and the fourth largest banking
company in the nation.)
9,355,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market
Description of Security Shares
Value
<S>. . . . . . . . . . . . . . . . . . . . . . . . . . . <C>
<C> Aerospace/Defense Industry 5.1%
Boeing Company (The) . . . . . . . . . . . . . . . . . . 62,000
$ 5,487,000
(The leading manufacturer of commercial jet aircraft.)
Insurance Industry 3.5%
American International Group, Inc. . . . . . . . . . . . 28,125
2,647,266 (Ranked fourth in the U.S. based on premiums
written in domestic
property & casualty insurance.)
Equitable Companies Inc. (The) . . . . . . . . . . . . . 50,000
1,150,000
(Parent holding company of The Equitable Life Assurance Society
of the U.S.)
3,797,266
Chemical Industry 3.5%
Union Carbide Corp.. . . . . . . . . . . . . . . . . . .90,000
3,780,000 (Producer of ethylene glycol, polyethylene,
ethylene oxide,
solvents, coatings, specialty chemicals, surfactants.)
Retail Store Industry 2.1%
Woolworth Corp.. . . . . . . . . . . . . . . . . . . 120,000
2,310,000
(One of the largest U.S.-based retail store chains.)
Financial Services Industry 1.2%
Travelers Group Inc. . . . . . . . . . . . . . . . . . .30,000
1,267,500
(A diversified financial services company.)
Building Materials Industry 1.0%
Ameron International Inc.. . . . . . . . . . . . . . . .30,000
1,050,000
(Multinational manufacturer of protective coatings for petroleum,
marine and industrial markets.)
Apparel Industry 1.0%
Jones Apparel Group Inc.*. . . . . . . . . . . . . . . .20,000
1,030,000
(Designs/markets a broad range of women's sportswear, suits and
dresses.)
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Market
Description of Security Shares
Value
<S>. . . . . . . . . . . . . . . . . . . . . . . . . . . <C>
<C>
Machinery Industry 0.7%
Deere & Company. . . . . . . . . . . . . . . . . . . . . 20,000
$ 715,000 (Largest manufacturer of farm equipment in the
world.)
Total Common Stocks (cost $47,213,124) . . . . . . . . . 52.6%
56,653,941
SHORT-TERM INVESTMENT
U.S. Treasury Bill, 5.125% due 10/24/96, principal amount
$25,000,000 (amortized cost $24,701,042) . . . . . . . . . . .
. . 22.9% 24,696,500
Total Investment Securities, at Value (cost $71,914,166) .75.5%
81,350,441
Cash and Receivables, Less Liabilities . . . . . . . . . 24.5%
26,401,661
Net Assets . . . . . . . . . . . . . . . . . . . . . . . 100.0%
$107,752,102
</TABLE>
<PAGE>
<PAGE>
Financial Statements
<TABLE>
<CAPTION> AMERICAN GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES, JULY 31, 1996 ASSETS:
<S>. . . . . . . . . . . . . . . . . . . . . . . . . . .
<C>
Investments at value (cost $71,914,166)-see accompanying statement.
$
81,350,441
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . .
8,382,693
Receivables:
Investments sold . . . . . . . . .
17,438,447
Shares of beneficial interest sold . . . . . . . . . .
535,327
Dividends. . . . . . . .
100,220
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,281
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
107,816,409
LIABILITIES:
Shares of beneficial interest purchased . . . . . . . . . . . .
64,307
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . .
64,307
NET ASSETS . . . . . . . . . . . . . . . . .. . . . . . . . . .
$
107,752,102
COMPOSITION OF NET ASSETS:
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . .
$
93,087,660
Undistributed net investment income . . . . . . . . . . . . . .
86,817
Accumulated net realized gain from investment transactions. . . .
. . . .
5,141,350
Net unrealized appreciation of investments. . . . . . . . . . .
9,436,275
Net assets. . . . . . . . . . . . . . . . . . . . . . . . . . .
$
107,752,102
NET ASSET VALUE PER SHARE:
Class A Shares:*
Net asset value and redemption price per share (based on net assets
of $3,837,948 and 433,973 shares of beneficial
interest
outstanding) . . . . $ 8.84
Maximum offering price per share (net asset value plus sales charge
of
5.75% of offering price.). . . . . . . . . . . . . . . . . . . . .
. . .
$ 9.38
Class B Shares:
Net asset value, redemption price and offering price per share
(based
on net assets of $3,416,453 and 388,056 shares of
beneficial
interest outstanding) $ 8.80
Class C Shares:
Net asset value, redemption price and offering price per share
(based
on net assets of $367,296 and 41,705 shares of beneficial interest
outstanding). . $ 8.81
Class D Shares:*
Net asset value and redemption price and offering price per share
(based on
net assets of $100,130,405 and 11,314,711 shares of beneficial
interest
outstanding)$ 8.85
Maximum offering price per share (net asset value plus sales charge
of 5.75%
of offering price). . . . . . . . . . . . . . . .
. . . . . .
. . . . . . . . . . $ 9.39
/TABLE
<PAGE>
<PAGE>
Financial Statements
<TABLE>
<CAPTION> AMERICAN GROWTH FUND, INC.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1996
<S>. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<C>
INVESTMENT INCOME:
Dividends. . . . . . . . $
1,664,695
Interest . . . . .
256,036
Total income. . . . . . . . . . . . . . . . . . . . . ..
1,920,731
EXPENSES:
Investment
advisory fees (Note 5). . . . . . . . . . .
866,681
Administration
expenses (Note 5) . . . . . . . . . . . 415,479
Transfer agent,
shareholder servicing and data
processing fees
(Note 4). . . . . . . 179,849
Custodian fees (Note 4). . . . . . 91,622
Professional fees. . . . . . . . . 56,583
Registration and
filing fees:
Class A. . . . . . 120
Class B. . . . . . 90
Class C. . . . . . 3
Class D. . . . . . 21,350
Shareholder reports. . . . . . . . 15,112
Distribution fees:
Class A. . . . . . 1,997
Class B. . . . . . 7,040
Class C. . . . . . 324
Class D. . . . . . -
Directors fees . . . . . . . . . . 6,500
Other expenses .. . . . . . . . . 66,510
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . .
1,729,260
Less expenses paid indirectly (Note 4) . . . . . . . .
(292,244)
Net expenses. . . . . . . . . . . . . . . . . . . . . . . . . .
1,437,016
Net Investment Income. . . . . . . . . . . . . . . . . . . . . .
483,715
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments . . . . . . . . . . .
7,083,415
Net change in unrealized appreciation or depreciation on
investments
(3,074,255) Net realized and unrealized gain . . .
. . . . . .
. . 4,009,160
Net Increase in Net Assets Resulting From Operations . . . . . .
$
4,492,875
</TABLE> <PAGE>
<PAGE>
Financial Statements
<TABLE>
<CAPTION> AMERICAN GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 1996 AND 1995
1996
1995
<S> <C>
<C>
OPERATIONS:
Net investment income . . . . . . . . . . . $
483,715 $
1,444,321
Net realized gain . . . . . . . . . . . . .
7,083,415
325,639
Net change in unrealized appreciation or depreciation . .
(3,074,255)
9,773,542 Net increase in net assets resulting from
operations. .
4,492,875 11,543,502
DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS:
Dividends from net investment
income:
Class D . . . . . . . . . . . . . . . . . . . . .
(1,387,812)
(938,292)
Distributions from net realized gain:
Class D . . . . . . . . . . . . . . . . . . . . .
(2,312,575)
(12,215,279)
BENEFICIAL INTEREST
TRANSACTIONS:
Net increase in net assets resulting from beneficial
interest transactions:
Class A . . . . . . . . . . . . . . . . . . . . .
4,048,441
- -
Class B . . . . . . . . . . . . . . . . . . . . .
3,603,382
- -
Class C . . . . . . . . . . . . . . . . . . . . .
383,952
- -
Class D . . . . . . . . . . . . . . . . . . . . .
8,385,535
23,939,198
NET ASSETS:
Total increase. . . . . . . . . . . . . . . . . .
17,213,798
22,329,129
Beginning of period . . . . . . . . . . . . . . .
90,538,304
68,209,175
End of period (including undistributed net investment income of
$86,817 and
$990,914 respectively). . . .. . . . $
107,752,102 $
90,538,304
</TABLE>
<PAGE>
<PAGE>
Financial Highlights
<TABLE>
Class D
<CAPTION>
Year Ended July 31,
1996 1995
1994
1993 1992
<S> <C> <C> <C>
<C> <C>
Per Share Operating Data:
Net Asset Value,
Beginning of Period. . . . . . . . . $ 8.75 $ 9.34 $
9.39 $
8.50 $ 8.02
Income (loss) from investment
operations:
Net investment income. . . . . . . . . .03 .21
.03
.11 .10
Net realized and unrealized gain (loss) .39 .88
1.00
1.51 .94
Total income (loss) from investment
operations . . . . . .42 1.09
1.03
1.62 1.04
Dividends and distributions to
shareholders:
Dividends from net investment
income . . . . . . . (.12) (.12)
(.05)
(.08) (.06)
Distributions from net realized gain (.20) (1.56)
(1.03)
(.65) (.50)
Total dividends and distributions to shareholders
. . . . . . . . . . . . (.32) (1.68)
(1.08)
(.73) (.56)
Net Asset Value, End of Period . . . . $ 8.85 $ 8.75 $ 9.34
$
9.39 $ 8.50
Total Return at Net Asset Value1 . . . 4.8% 15.2% 11.1%
20.2% 13.6%
Ratios/Supplemental Data: Net assets, end of period (in thousands)
. . . . . .
. .
$100,130 $90,538
$68,209
$62,180 $55,501
Ratios to average net assets:
Net investment income (loss) . . . . 0.47% 1.91% 0.35%
0.59%
1.14%
Expenses2. . . . . . . . . . . . . . . 1.63% 1.45% 1.34%
1.44%
1.46%
Portfolio Turnover Rate3 . . . . . . 163.1% 173.0% 87.2%
48.8%
39.8%
Average Brokerage Commission Rate4 $0.0561 - -
-
-
/TABLE
<PAGE>
<PAGE>
Financial Highlights
<TABLE>
<CAPTION> Class A Class B
Class C
Period Ended July 31,
1996* 1996*
1996*
<S> <C> <C>
<C>
Per Share Operating Data:
Net Asset Value,
Beginning of Period. . . . . . . . . . $ 9.21 $ 9.21
$
9.21
Income (loss) from investment
operations:
Net Investment income(loss). . . . . . -7 (.01)
- -7
Net realized and unrealized gain (loss). . . . . . (.37)
(.40) (.40)
Total income (loss) from investment operations .(.37) (.41)
(.40)
Dividends and distributions to
shareholders:
Dividends from net investment income . . . . . - -
-
Distributions from net realized gain . . . . . . . -
- - -
Total dividends and distributions
to shareholders. . . . . . . . . . . . - -
- -
Net Asset Value, End of Period . . . . . . . $ 8.84 $ 8.80
$
8.81
Total Return at Net Asset Value2 . . . . . (4.0)% (4.5)%
(4.3)%
Ratios/Supplemental Data:
Net assets, end of period (in thousands) . $3,838 $3,417
$367
Ratio to average net assets:
Net investment income. . . . . . . . . 0.13%3 (0.52)%3
(0.63)%3
Expenses . . . . . . . . . . . . . . . 2.06%3 2.81% 3
2.97%
3
Portfolio Turnover Rate. . . . . . . . 163.1% 163.1%
163.1%
Average Brokerage Commission Rate. . . . $0.0561 $0.0561
$0.0561
/TABLE
<PAGE>
<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 Fund's primary investment objective is to
seek capital
appreciation. The Fund offers Class A, Class B, Class C and Class
D shares.
Class D shares are available to shareholders in existence prior to
03/01/96.
Class A and Class D shares are sold with a front-end sales charge.
Class B and
Class C shares may be subject to a contingent deferred sales
charge. All
classes of shares have identical rights to earnings, assets and
voting
privileges, except that each class has its own distribution and/or
service plan and expenses directly attributable to a particular
class and
exclusive voting rights with respect to matters affecting a single
class.
Class B shares will automatically convert to Class A shares seven
years after
date of purchase. The following is a summary of significant
accounting
policies consistently followed by the Fund.
Investment Valuation - Investment securities are valued at
the closing
asked 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 having a remaining
maturity of
60 days or less are valued at amortized cost, which
approximates market
value.
Allocation of Income, Expenses, and Gains and Losses -
Income, expenses
(other than those attributable to a specific class) and gains
and losses
are allocated daily to each class of shares based upon the relative
proportion
of net assets represented by such class. Operating expenses
directly
attributable to a specific class are charged against the operations
of that
class.
Federal Income Taxes - No provision for federal income or
excise taxes
has been made because it is the Fund's policy to comply with
provisions
of the Internal Revenue Code applicable to regulated investment
companies and
to distribute all of its taxable income to shareholders.
Classification of Distributions to Shareholders - The
character of
distributions made during the year from net investment income
or net
realized gains may differ from its ultimate characterization for
federal
income tax purposes.
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.
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.
Use of estimates - The preparation of financial
statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts
of assets and liabilities and disclosure of contingent
assets and
liabilities at the date of the financial statements and the
reported amounts
of increases and decreases in net assets from operations
during the
reporting period. Actual results could differ from those estimates.
<PAGE>
<PAGE>
Notes to Financial Statements
2. Shares of Beneficial Interest - The Fund has authorized an
unlimited
number of no par value shares of beneficial interest of each
class.
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION> Year Ended July 31, 19961
Year
Ended July 31, 1995
Shares Amount Shares
Amount
<S> <C> <C> <C>
<C>
Class A:
Sold 437,138 $4,077,847 -
$
-
Dividends and distributions reinvested - -
- -
Redeemed (3,165) (29,406) -
-
Net increase 433,973 4,048,441 -
-
Class B:
Sold 388,712 3,609,425 -
-
Dividends and distributions reinvested - -
-
- - Redeemed (656) (6,042) -
-
Net increase 388,056 3,603,383 -
-
Class C:
Sold 41,705 383,954 -
- -
Dividends and distributions reinvested -
- Redeemed - -3
-
-
Net Increase 41,705 383,951 -
-
Class D:
Sold 2,553,651 23,031,338 2,352,448
19,867,517
Dividends and
distributions reinvested 375,550 3,300,334 1,701,369
12,454,018
Redeemed (1,956,583) (17,946,137) (1,017,480)
(8,382,337)
Net increase 972,618 $ 8,385,535 3,036,337
$
23,939,198
</TABLE>
1. For the period from March 1, 1996 (inception of offering)
to July 31,
1996 for Class A, Class B and Class C shares.
3. Unrealized Gains and Losses on Investments
At July 31, 1996, net unrealized appreciation on investments
of
$9,436,275 was comprised of gross appreciation of $9,728,691 and
gross
depreciation of $292,416.
4. Fund Expenses Paid Indirectly
Fund expenses totaling $99,405 relating to certain operating
expenses
were paid by broker dealers under terms of brokerage/service
arrangements. Fees for transfer agent and data processing services
and
custodian services totaling $107,376 and $85,463, respectively,
were
offset by earnings on cash balances maintained by the Fund at the
custodian
financial institution. The Fund could have invested the
assets
maintained at the institution in income-producing assets if it had
not agreed
to a reduction in fees.
5. Underwriting, Investment Advisory Contracts and Service Fees
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
first $30
million of average annual net assets of the Fund
<PAGE>
Notes to Financial Statements
and 0.75% of such assets above $30 million. The Fund pays
its own
operating expenses. The advisor has agreed to reimburse the Fund
if
total expenses exceed the most restrictive limitation prescribed by
any state
in which the shares of the Fund are sold.
Class B and Class C shares are subject to service and
distribution fees
of 0.25% and 0.75% of average daily net assets, respectively.
Class A shares are subject to service and distribution fees
of 0.25% and
0.05% of average daily net assets, respectively.
For the year ended July 31, 1996 commissions and sales
charges paid by
investors on the purchase of Fund shares totaled $1,439,562
of which
$275,651 was retained by American Growth Fund Sponsors, Inc.
("Sponsors"), an
affiliated broker/dealer which serves as the underwriter and
distributor
of the Fund. Sales charges advanced to broker/dealers by Sponsors
on sales of
the Fund's Class B and C shares totaled $ 142,171.
Certain officers of the Fund are also officers of Sponsors
and IRC. For
the year ended July 31, 1996 the Fund paid directors' fees and
expenses of $6,500.
For the year ended July 31, 1996, under an agreement with
IRC, the Fund
was charged $354,309 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 $ 61,170 by an affiliated
company of
IRC for the cost of office space.
6. Federal Income Tax Matters
On December 22, 1995, distributions of $0.12 and $0.20
aggregating
$1,387,812 and $2,312,575 were declared from net investment
income and
realized gains, respectively. The dividends were paid December 29,
1995. For
the Fund's fiscal year ended July 31, 1996, all ordinary
income
dividends have been determined to qualify for the dividend received
deduction
for corporate shareholders.
For federal income tax purposes, the Fund realized net
capital
gains of $7,083,415 during the fiscal year ended July 31, 1996. <PAGE>
<PAGE>
Independent Auditors' Report
To The Board of Directors and Shareholders
of American Growth Fund, Inc.:
We have audited the accompanying statements of investments and
assets and
liabilities of American Growth Fund, Inc. as of July 31, 1996, and
the related
statement of operations, the statement of changes in net assets and
the
financial highlights for the year then ended. These financial
statements and
financial highlights are the responsibility of the Fund's
management. Our
responsibility is to express an opinion on these financial
statements and
financial highlights based on our audit. The statement of changes
in net
assets for the year ended July 31, 1995 and the financial
highlights for the
four years then ended were audited by other auditors whose report
dated August
18, 1995 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing
standards. Those standards require that we plan and perform the
audit to
obtain reasonable assurance about whether the financial statements
and
financial highlights are free of material misstatement. An audit
includes
examining, on a test basis, evidence supporting the amounts and
disclosures in
the financial statements. Our procedures included confirmation of
securities
owned as of July 31, 1996, by correspondence with the custodian and
brokers;
and where confirmations were not received from brokers, we
performed
alternative procedures. 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 financial highlights
referred to
above present fairly, in all material respects, the financial
position of
American Growth Fund, Inc. as of July 31, 1996, and the results of
its
operations, the changes in its net assets and the financial
highlights for the
year then ended, in conformity with generally accepted accounting
principles.
Denver, Colorado
KPMG Peat
Marwick LLP
August 30, 1996
<PAGE>
