<PAGE>
AMERICAN GROWTH FUND, INC.
410 17th Street, Suite 800, Denver, Colorado 80202-4418
(303) 623-6137
PROSPECTUS
March 1, 1996
AMERICAN GROWTH FUND, INC. is a professionally managed diversified
investment fund which primarily invests in common stocks and securities
convertible into common stock with the objectives of capital growth and,
secondarily, current income. In pursuing the Fund's objectives, the Fund's
Adviser intends to take a conservative approach to investments, balancing the
preservation of capital against potential gains.
This Fund offers four classes of shares, each with a different combination
of sales charges, distribution and service fees and other features. This permits
an investor to choose the method of purchasing shares that the investor believes
is most beneficial given the amount of the purchase, the length of time the
investor expects to hold the shares and other relevant circumstances. See
'Purchase of Shares.'
Shares may be purchased directly from American Growth Fund Sponsors, Inc.
(the 'Distributor'), 410 17th Street, Suite 800, Denver, CO 80202, (303)
623-6137, or from securities dealers which have entered into dealer agreements
with the Distributor.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before making an investment in the Fund. This
Prospectus should be read carefully and retained for future reference. A
statement containing additional information about the Fund dated March 1, 1996
(the 'Statement of Additional Information'), has been filed with the Securities
and Exchange Commission and is available, without charge, by calling or by
writing the Fund at the above telephone number or address. The Statement of
Additional Information is incorporated by reference into this Prospectus.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
AMERICAN GROWTH FUND SPONSORS, INC.
410 17th Street, Suite 800, Denver, Colorado 80202-4418
303-623-6137
800-525-2406
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------- --------------------------- ---------------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)........................ 5.75% None None 5.75%
Sales Load Imposed on Dividend Reinvestments........... 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% for one year None(b)
years, 4% for the next 2
years, decreasing 1%
annually thereafter to 0.0%
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............................... 0.83% 0.83% 0.83% 0.83%
12b-1 Fees............................................. 0.30% 1.00% 1.00% None
Other Expenses(c)...................................... 0.62% 0.62% 0.62% 0.62%
---- ---- ---- ----
Total Fund Operating Expenses.......................... 1.75% 2.45% 2.45% 1.45%
---- ---- ---- ----
---- ---- ---- ----
</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.
(c) Information under 'Other Expenses' for Class A, Class B and Class C shares
is estimated based on the expenses for Class D shares for the fiscal year
ended July 31, 1995. Information for Class D shares is based on expenses for
the fiscal year ended July 31, 1995.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<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................................................................ $74 $109 $147 $252
Class B................................................................ $75 $116 $181 $279*
Class C................................................................ $35 $ 76 $131 $279
Class D................................................................ $71 $101 $132 $221
An investor would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Class A................................................................ $74 $109 $147 $252
Class B................................................................ $25 $ 76 $131 $279*
Class C................................................................ $25 $ 76 $131 $279
Class D................................................................ $71 $101 $132 $221
</TABLE>
- ------------------------------------
* Assumes conversion to Class A shares approximately seven years after purchase.
The foregoing Fee Table is intended to assist investors in understanding the
costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The example should not be considered a representation of past or
future expenses or annual rate of return, and actual expenses or annual rates of
return may be more or less than those assumed for purposes of the Example. The
Example set forth above assumes reinvestment of all dividends and distributions
and utilizes a 5% annual rate of return as mandated by Securities and Exchange
Commission (the 'Commission') regulations. Class A, Class B and Class C
shareholders who own their own shares for an extended period of time may pay
more in Rule 12b-1 distribution fees than the economic equivalent of the maximum
front-end sales charge permitted under the Rules of Fair Practice of the
National Association of Securities Dealers, Inc. (the 'NASD'). See 'Purchase of
Shares' and 'Redemption of Shares'.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial information for the five years ended July 31, 1995
has been audited by Smith, Brock & Gwinn, independent accountants, whose report
with respect thereto accompanies the financial statements in the Statement of
Additional Information. The financial information for the six months ended
January 31, 1996 is unaudited. The per share data covers the period from August
1, 1985 through January 31, 1995. Only financial information for Class D is
presented in the following financial highlights table; Class A, Class B and
Class C shares had not commenced operations during the fiscal year ended July
31, 1995 and accordingly no information is presented for those classes.
(For a Class D share outstanding throughout the Fund's fiscal year)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED YEARS ENDED JULY 31
JANUARY 31, ----------------------------------------------------------------------------------------
INCOME AND EXPENSES 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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 $ 8.60
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income.... .006 .210 .034 .105 .097 .157 .174 .376 .236 .162 .307
Net Gains or Losses on
Securities (both
realized and
unrealized)............. .444 .88 .996 1.515 .943 .533 .256 .714 (1.716) 1.698 .623
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total from Investment
Operations.............. .450 1.090 1.030 1.620 1.040 .690 .430 1.090 (1.480) 1.860 .930
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less Distributions
Dividends
(from net investment
income)................. (.120) (.120) (.050) (.080) (.060) (.260) (.300) (.340) (.160) (.290) (.390)
Distributions
(from capital gains).... (.200) (1.560) (1.030) (.650) (.500) -- -- -- (1.270) (1.090) --
Returns of Capital....... -- -- -- -- -- -- -- -- -- -- --
Total Distributions...... (0.323) (1.680) (1.080) (.730) (.560) (.260) (.300) (.340) (1.430) (1.380) (.390)
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period.................. $8.88 $8.75 $9.34 $9.39 $8.50 $8.02 $7.59 $7.46 $6.71 $9.62 $9.14
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
----------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Return*............ 5.2%**** +15.2% +11.1% 20.2% +13.6% +9.6% +5.7% +17.0% -14.4% +23.1% +11.3%
Ratios/Supplemental Data
Net Assets,
End of Period
(millions).............. 107.2 90.05 68.2 62.2 55.7 55.5 55.7 63.9 64.2 81.3 69.3
Ratio of Expenses to
Average Net Assets***... 1.13% 1.45% 1.34% 1.44% 1.46% 1.33% 1.33% 1.32% 1.29% 1.28% 1.29%
Ratio of Net Income to
Average Net Assets...... .29% 1.91% 0.35% 0.59% 1.14% 2.02% 2.01% 5.15% 3.17% 1.99% 3.38%
Portfolio Turnover
Rate**.................. 2.438% 173.0% 87.2% 48.8% 39.8% 135.5% 92.3% 60.9% 241.7% 197.0% 165.6%
</TABLE>
- ------------------
* Sales load not reflected in total return.
** U.S. Government securities with a maturity date in excess of one year were
not included in the computation prior to the year ended July 31, 1986.
*** For the fiscal years ended July 31, 1994 and 1995, this amount does not
include transfer agent fees and certain other Fund expenses which were paid
on behalf of the Fund by broker-dealers that affected portfolio
transactions for the Fund. If the Fund had paid these expenses, this amount
would have been 1.46% and 1.76% respectively.
**** (1/31/96 return reflects six months, total return for twelve months ending
3/31/96 is 24%).
3
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
American Growth Fund, Inc., an open-end diversified investment company, is
a Maryland corporation organized July 16, 1958.
The primary investment objective of the Fund is growth of capital. Income,
while a factor in portfolio selection, is secondary to the Fund's principal
objective. These investment objectives can be changed by a vote of the board of
directors without a vote of the Fund's shareholders, which could cause the Fund
to have an investment objective different from that deemed appropriate by the
shareholder at the time of investment. The Fund will notify shareholders of any
change in investment objectives at least 30 days in advance of such change.
There can be no assurance that the Fund will attain its investment objectives.
To achieve its investment objective, the Fund will under normal conditions
invest at least 65% of its assets in common stocks and securities convertible
into common stocks traded on national securities exchanges or over-the-counter.
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 Group, or,
if unrated, will be of comparable quality in the opinion of the Adviser.
In pursuing the Fund's objectives, the Adviser intends to take a
conservative approach to investment, balancing the preservation of capital
against potential gains. When the Adviser believes the securities the Fund holds
may decline in value, the Fund may sell them and, until such time as the Adviser
believes market conditions warrant otherwise, invest all or part of the Fund's
assets in corporate bonds, debentures or preferred stocks rated A or above (or,
if unrated, of comparable quality in the opinion of the Adviser), United States
Government securities, repurchase agreements whereby the underlying security is
issued by the United States Government or an agency thereof, or retain funds in
cash or cash equivalents. There are market risks in all investments in
securities, and the value of the Fund's securities, and consequently the Fund's
share price, will fluctuate.
A repurchase agreement is a contract where the seller agrees to repurchase
the securities at a specified price within a specified time (generally one
business day). The Fund's repurchase agreements will at all times be fully
collateralized in an amount at least equal to the repurchase price, including
accrued interest earned on the underlying securities. The collateral will be
held by the Fund's Custodian, either physically or in a book-entry account.
4
<PAGE>
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 even, these investments are limited to utility or pipeline
companies. These and the other specific investment restrictions listed in the
Statement of Additional Information can be changed only by approval by a
majority of the outstanding shares as defined by the Investment Company Act of
1940.
As a 'diversified company' the Fund must meet the following requirements:
At least 75% of the value of its total assets is represented by cash and cash
items (including receivables), Government securities, securities of other
investment companies, and other 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.
5
<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, 1995, this fee amounted to .83% of the Fund's average net assets. The
Advisory fee paid by the Fund is higher than that paid by most other investment
companies. The Fund's aggregate expenses for the same period amounted to 1.45%
of the Fund's average net assets of the Class D shares (the current designation
of the only class of shares in existence at that time).
BROKERAGE
The Fund does not currently use the services of any affiliated brokers in
its portfolio transactions, and the Fund does not have any agreement or
arrangement to use any particular broker for portfolio transactions. The Fund
has a policy of considering sales of Fund shares in selecting brokers for
portfolio transactions provided that the Fund's experience with such brokers
indicates that they are capable of providing best execution. The Fund's
portfolio turnover rate in fiscal year 1995 was 173.0% and its portfolio
turnover rate in fiscal year 1994 was 87.2%. The turnover rate was greater in
fiscal year 1995 than in 1994 because the Adviser moved the portfolio from cash
or cash equivalents into equities to take advantage of the rising equity
markets. 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.
6
<PAGE>
PURCHASE OF SHARES
The Fund's underwriter is American Growth Fund Sponsors, Inc., (the
'Distributor'), 410 17th Street, Suite 800, Denver, Colorado 80202-4418. Robert
Brody, president and a director of the Fund, is also president and a director of
the Fund's Underwriter.
The Fund offers its shares continuously to the public at their net asset
value next computed after receipt of the order to purchase plus any applicable
sales charges as described below. Shares can be purchased through the
Distributor or through broker-dealers with whom the 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.
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 the 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.
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 investors individual circumstances. Shares of Class A and
Class D are sold to investors choosing the initial sales charge alternatives and
shares of Class B and Class C are sold to investors choosing the deferred sales
charge alternatives. Investors should determine whether under their particular
circumstances it is more advantageous to incur an initial sales charge or to
have the entire initial purchase price invested in the Fund, with the investment
thereafter being subject to a CDSC and higher distribution fees. (A discussion
of the factors that investors should consider in determining the method of
purchasing shares is set forth below.)
7
<PAGE>
In selecting a purchase alternative, an investor should consider, among
other things, (1) the length of time you expect to hold your investment, (2) the
amount of any applicable sales charge (whether imposed at the time of purchase
or redemption) and distribution-related fees, as noted below, (3) whether you
qualify for any reduction or waiver of any applicable sales charge; (4) the fact
that Class B shares automatically convert to Class A shares approximately seven
years after purchase (see 'Conversion Feature--Class B shares' below).
The following is provided to assist you in determining which method of
purchase best suits your individual circumstances and is based on current fees
and expenses being charged to the Fund.
If you intend to hold your investment in the Fund for less than 7 years and
do not qualify for a reduced sales charge on Class A shares or qualify to
purchase Class D shares, since Class A shares are subject to an initial sales
charge of 5.75% and Class B shares are subject to a CDSC of 5% which declines to
zero over a 7-year period, you should consider purchasing Class C shares over
either Class A or Class B shares.
If you intend to hold your investment for 7 years or more and do not
qualify for a reduced sales charge on Class A shares or qualify to purchase
Class D shares, since Class B shares convert to Class A shares approximately 7
years after purchase and because all of your money would be invested initially
in the case of Class B shares, you should consider purchasing Class A or Class B
shares over Class C shares.
If you qualify for a reduced sales charge on Class A shares but do not
qualify to purchase Class D shares, it may be more advantageous for you to
purchase Class A shares over either Class B or Class C shares regardless of how
long you intend to hold your investment. However, unlike Class B and Class C
shares, you would not have all of your money invested initially because the
sales charge on Class A shares is deducted at the time of purchase.
If you qualify to purchase Class D shares, it will be more advantageous to
purchase Class D shares instead of Class A shares (which, unlike Class D shares,
have a .30% 12b-1 fee), and may be more advantageous for you to purchase Class D
shares over either Class B or Class C shares depending on whether you are
eligible for reduced sales charges and how long you intend to hold your
investment.
If you do not qualify for a reduced sales charge on Class A or Class D
shares and you purchase Class B or Class C shares, you would have to hold your
investment for more than 6 years in the case of Class B shares and Class C
shares for the higher cumulative annual distribution-related fee on those shares
to exceed the initial sales charge (plus, for Class A shares, cumulative annual
distribution-related fees on Class A shares). This does not take into account
the time value of money, which further reduces the impact of the higher Class B
or Class C distribution-related
8
<PAGE>
fee on the investment, fluctuations in net asset value, the effect of the return
on the investment over this period of time or redemptions during which the CDSC
is applicable.
Investors should understand that the purpose and function of the initial
sales charges with respect to Class A and Class D shares are the same as those
of the deferred sales charges with respect to Class B and Class C shares in that
the sales charges applicable to each class provide for the financing of the
distribution of the shares of the Fund. The distribution-related revenues paid
with respect to a class will not be used to finance the distribution
expenditures of another class. Sales personnel may receive different
compensation for selling different classes of shares.
Commencing 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
specified 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 conditions of the programs, including qualifying levels and specific
awards, may be obtained by investment representatives by contacting the
Distributor.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES. Investors
choosing the initial sales charge alternatives who are eligible to purchase
Class D shares should purchase Class D shares rather than Class A shares because
there is a Rule 12b-1 fee imposed on Class A shares.
The public offering price of Class A and Class D shares for purchasers
choosing the initial sales charge alternatives is the next determined net asset
value plus varying sales charges (i.e., sales loads), as set forth below.
<TABLE>
<CAPTION>
SALES CHARGES
------------------------------------------------------
PAID TO
AS % OF DEALERS AS % AS % OF
AMOUNT INVESTED OFFERING PRICE OF OFFERING PRICE AMOUNT INVESTED
- ----------------------------------------------------------- -------------- ----------------- ---------------
<S> <C> <C> <C>
Less than $50,000.......................................... 5.75% 5.00% 6.10%
$50,000 but less than $100,000............................. 4.50 3.75 4.71
$100,000 but less than $250,000............................ 3.50 2.75 3.63
$250,000 but less than $500,000............................ 2.50 2.00 2.56
$500,000 but less than $1,000,000.......................... 2.00 1.60 2.04
$1,000,000 and over........................................ 0.00* 0.00 0.00
</TABLE>
- ------------------
* 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 reduced within the first year of purchase.
9
<PAGE>
The above scale applies to aggregate purchases by an individual, his 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.
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 (the current designation of all
shares existing prior to the creation of the Class A, Class B and Class C
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'.
10
<PAGE>
The sales charge may very with the amount of investment or the number of
Class A and/or Class D shares owned. The Fund makes available the following
investment plans and options which may involve reduced sales charges: Right of
Accumulation, Letter of Intent, and Retirement Plans. The Fund also offers and
Automatic Cash Withdrawal Plan, and Automatic Monthly Investment Plan,
Individual Retirement Accounts, Simplified Employee Pension, Money Purchase and
Profit Sharing Pension Plans, and Teacher and Non-Profit Employee Retirement
Plans. More information on this policy may be found in the Statement of
Additional Information. Additional charges apply for some services or plans. For
more information, including fees and expenses contact the Distributor or the
Fund.
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 Plan, if certain
conditions set forth in the Statement of Additional Information are met.
11
<PAGE>
The Fund also sells its Class A at net asset value in connection with a
qualified rollover of assets held in a previously existing tax-exempt retirement
plan (including an IRA, 401(k) plan or 403(b) plan) through broker-dealers who
have entered into an agreement with the Underwriter relating to such rollovers.
Contingent Deferred Sales Charges--Class A and Class D Shares. Class A and
Class D shares which 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 only to a one year 1.0% CDSC. On the other
hand, approximately seven years after Class B shares are issued, such Class B
shares, together with shares issued upon dividend and distribution reinvestment
with respect to those shares, are automatically converted into Class A shares of
the Fund and thereafter will be subject to lower continuing fees. See
'Conversion of Class B Shares to Class A Shares' below. Both Class B and Class C
shares are subject to a service fee of 0.25% of net assets and a distribution
fee of 0.75% of net assets as discussed below under 'Distribution Plans'.
Class B and Class C shares are sold without an initial sales charge so that
the Fund will receive the full amount of the investor's purchase payment. The
Distributor compensates broker, dealers and other financial consultants for
selling Class B and Class C shares at the time of purchase from its own funds.
See 'Distribution Plans' below.
Proceeds from the CDSC and the ongoing service and distribution fee are
paid to the Distributor and are used in whole or in part by the Distributor to
defray the expenses related to providing distribution services to the Fund in
connection with the sale of the Class B and Class C shares. The combination of
the CDSC and the ongoing distribution fee facilitates the ability of the Fund to
sell the Class B and Class C shares without a sales charge being deducted at the
time of purchase. Approximately seven years after issuance, Class B shares will
convert automatically into Class A shares of the Fund, which are subject to a
service fee and a distribution fee. The proceeds
12
<PAGE>
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>
<CAPTION>
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
</TABLE>
In determining whether a CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest possible
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over seven years or shares acquired pursuant to reinvestment
of dividends or distributions and then of shares held longest during the
seven-year period. The charge will not be applied to dollar amounts representing
an increase in the net asset value since the time of purchase. A transfer of
shares from a shareholder's account to another account will be assumed to be
made in the same order as a redemption.
To provide an example, assume an investor purchased 100 shares at $10 per
share (at a cost of $1,000) and in the third year after purchase, the net asset
value per share is $12 and, during such time, the investor has acquired 10
additional shares through dividend reinvestment. If at such time the investor
makes his or her first redemption of 50 shares (proceeds of $600), 10 shares
will not be subject to a CDSC because of dividend reinvestment. With respect to
the remaining 40 shares, the CDSC is applied only to the original cost of $10
per share and not to the increase in net asset value of $2 per share. Therefore,
$400 of the $600 redemption proceeds will be charged at a rate of 4.00% (the
applicable rate in the third year after purchase).
13
<PAGE>
If a Class B share account is set up on an Automatic Withdrawal program,
there will be no CDSC to the amounts redeemed pursuant to the Automatic
Withdrawal Program as long as the total annual amount withheld is less than 12%
per year of the previous years' value or the initial investment, whichever is
greater.
Contingent Deferred Sales Charges--Class C Shares. Class C shares which
are redeemed within one year of purchase may be subject to a 1.0% CDSC. The
charge will be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of the shares being redeemed. Accordingly, no Class C
CDSC will be imposed on increases in net asset value above the initial purchase
price. In addition, no Class C CDSC will be assessed on shares derived from
reinvestment of dividends or distributions.
In determining whether a Class C CDSC is applicable to a redemption, the
calculation will be determined in the manner that results in the lowest possible
rate being charged. Therefore, it will be assumed that the redemption is first
of shares held for over one year or shares acquired pursuant to reinvestment of
dividends or distributions and then of shares held longest during the one-year
period. The charge will not be applied to dollar amounts representing an
increase in the net asset value since the time of purchase.
Conversion of Class B Shares to Class A Shares. After approximately seven
years (the 'Conversion Period'), Class B shares will be converted automatically
into Class A shares of the Fund. Class A shares are subject to an ongoing
service fee of 0.25% of net assets and are subject to distribution fee of 0.05%.
Automatic conversion of Class B shares into Class A shares will occur at least
once each month (on the 'Conversion Date') on the basis of the relative net
asset values of the shares of the two classes on the Conversion Date, without
the imposition of any sales load, fee or other charge. Conversion of Class B
shares to Class A shares will not be deemed a purchase or sale of the shares for
Federal income tax purposes.
In addition, shares purchased through reinvestment of dividends and
distributions on Class B shares also will convert automatically to Class A
shares. The Conversion Date for dividend reinvestment shares will be calculated
taking into account the length of time the shares underlying such reinvestment
shares were outstanding. If at a Conversion Date the conversion of Class B
shares to Class A shares of the Fund in a single account will result in less
than $50 worth of Class B shares being left in the account, all of the Class B
shares of the Fund held in the account on Conversion Date will be converted to
Class A shares of the Fund.
Share certificates for Class B shares of the Fund to be converted must be
delivered to the Transfer Agent at least one week prior to the Conversion Date
applicable to those shares. In the event such certificates are not received by
theTransfer Agent at least one week prior to the Conversion Date, the related
Class B shares will convert to Class A shares on the next scheduled Conversion
Date after such certificates are delivered.
14
<PAGE>
DISTRIBUTION PLANS
The Fund has adopted separate distribution plans for the Class A, Class B
and Class C shares pursuant to Rule 12b-1 under the Investment Company Act (each
a 'Distribution Plan') with respect to the service and distribution fees paid by
the Fund to the Distributor with respect to such classes.
The Distribution Plans for Class A, Class B and Class C shares each provide
that the Fund pays the Distributor a service fee relating to the shares of the
relevant class, accrued daily and paid monthly, at the annual rate of 0.25% of
the average daily net assets of the Fund attributable to shares of the relevant
class in order to compensate the Distributor (who in turn may compensate
broker-dealers and other financial consultants) in connection with certain
services provided to shareholders of the applicable Class.
The Distribution Plans for Class A, Class B and Class C shares each provide
that the Fund also pays the Distributor a distribution fee relating to the
shares of the relevant class, accrued daily and paid 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 Fund attributable to the
shares of the class. These payments are intended to compensate the Distributor
for providing distribution services, and bearing certain distribution-related
expenses of the Fund, including payments to broker-dealer and other financial
consultants for selling Class C shares of the Fund. The Distribution Plans
relating to Class B and Class C shares are designed to permit an investor to
purchase Class B and Class C without the assessment of an initial sales charge
and at the same time permit the distributor to compensate broker-dealers and
other financial consultants in connection with the sale of the Class B and Class
C shares. In this regard, the purpose and function of the ongoing distribution
fees and the CDSC are the same as those of the initial sales charge with respect
to the Class A and Class D shares of the Fund in that the deferred sales charges
provide for the financing of the distribution of the Fund's Class B and Class C
shares.
The payments under the Distribution Plans are based on a percentage of
average daily net assets attributable to the shares regardless of the amount of
expenses incurred and, accordingly, distribution-related revenues from the
Distribution Plans may be more or less than distribution-related expenses.
Information with respect to the distribution-related revenues and expenses is
presented to the Directors for their consideration in connection with their
deliberations as to the continuance of the Distribution Plans.
15
<PAGE>
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 shares, subject to the
applicable CDSC as described above under 'Deferred Sales Charge
Alternative-Class B and Class C Shares'. Payment generally will be made within
seven days after receipt of his written request for redemption and a stock power
with signature guaranteed by an 'eligible guarantor institution' as such term is
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934 (including
certain banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing agencies and savings associations) and the deposit of any
share certificates. If no certificates have been issued to the shareholder,
redemption may be accomplished by submitting a written request for redemption
with the shareholder's signature guaranteed if required as set forth below.
Fiduciaries, corporations and other entities may also be required to furnish
supporting documents. The Fund will waive the signature guarantee requirement if
all of the following conditions apply: (1) the redemption is for $5,000 or less;
(2) the redemption check is payable to the shareholder(s) of record; and (3) the
redemption check is mailed to the shareholder(s) at the address of record. The
redemption price will be the net asset value next determined after the receipt
of a request in proper form. Redemption of shares which were recently purchased
may be delayed in order to permit a determination to be made that the purchase
check will be honored. Such determination may be accomplished by the passage of
a reasonable period of time (approximately 15 days) or by written assurance to
the Fund from the bank upon which the purchase check was drawn, which must be
arranged by the shareholder requesting such redemption. An investor can avoid
these potential delays by paying for shares by certified check or wire transfer.
The proceeds from redemption may be more or less than the cost of the shares.
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 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.
16
<PAGE>
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 his address of record.
REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES. Shareholders who have
redeemed their Class A or Class D shares have a one-time privilege to reinstate
their accounts by purchasing Class A or Class D shares, as the case may be, of
the Fund at net asset value without a sales charge up to the dollar amount
redeemed. The reinstatement privilege may be exercised by sending a notice of
exercise along with a check for the amount to be reinstated to the Transfer
Agent within 30 days after the date the request for redemption was accepted by
the Transfer Agent or the Distributor. The reinstatement will be made at the net
asset value per share next determined after the notice of reinstatement is
received and cannot exceed the amount of the redemption proceeds. The
reinstatement privilege is a one-time privilege and may be exercised by the
Class A or Class D shareholder only the first time such shareholder makes a
redemption.
EXCHANGE PRIVILEGE
The Distributor has arranged for shares of the portfolios of Cash Account
Trust, a no-load diversified open-end money market mutual fund (the 'Money
Market Fund'), to be available in exchange for shares of Class A and Class D of
the Fund. Shares of the Money Market fund so acquired, plus any shares of the
Money Market fund acquired through reinvestment of dividends and distributions,
may be re-exchanged for 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 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.
17
<PAGE>
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 gain distributions will
be reinvested in Fund shares, of the same class, at their relative net asset
values as of the business day next following the distribution record date. If no
instructions are given on the application form, all income dividends and capital
gains distributions will be reinvested.
AUTOMATED INVESTMENT PLAN
Regular additions of Class A, Class B, Class C or Class D shares may be
made to an investor's Investment Account by prearranged charges to such
investor's regular bank account. Contact the Distributor for further details
concerning this plan.
TAXES
The Fund is qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code, of 1986, as amended ('the
Code'). As long as it is so qualified, the Fund will not be subject to U.S.
federal income tax on the portion of its investment company taxable income and
net capital gain distributed to its shareholders. A distribution will be treated
as paid on December 31 of the calendar year if it is paid during the calendar
year or if declared by the Fund in October, November or December of such year,
payable to shareholders of record on a date in such month and paid by the Fund
during January of the following year. Any such distributions paid during January
of the following year will be taxable to shareholders as of December 31 rather
than the date on which the distributions are received. In order to qualify as a
regulated investment company for any taxable year, the Fund must, among other
things, (i) derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans and gains from the sale or
other disposition of stock or securities or other income derived with respect to
its business of investing in such stock or securities, and (ii) derive less than
30% of its gross income from the sales or other disposition of stock or certain
securities held for less than three months.
18
<PAGE>
For U.S. federal income tax purposes, dividends of net ordinary income and
distributions of any net realized short-term capital gain, whether paid in cash
or reinvested in shares of the Fund, are taxable to shareholders as ordinary
income. The Fund expects to derive a portion of its gross income (exclusive of
capital gains) from dividends of other companies, and, therefore, a portion of
the Fund's dividends or distributions will qualify for the 70% deduction for
dividends-received for corporations. Distributions of net realized long-term
capital gains, whether paid in cash or reinvested in shares of the Fund, are
taxable to shareholders as long-term capital gains, irrespective of the length
of time the shareholder has held his Fund shares. If a shareholder holds shares
for six months or less and during that period receives a distribution taxable to
such shareholder as long-term capital gain, any loss realized on the sale of
such shares during such six-month period would be a long-term capital loss to
the extent of such distribution.
A dividend or capital gains distribution with respect to shares of the Fund
held by a tax-deferred or qualified plan, such as an IRA, 403(b)(7) retirement
plan or corporate pension or profit sharing plan, will not be taxable to the
plan. Distributions from such plans will be taxable to individual participants
under applicable tax rules without regard to the character of the income earned
by the qualified plan.
No gain or loss will be recognized by Class B shareholders on the
conversion of their Class B shares into Class A shares. A shareholder's basis in
the Class A shares acquired will be the same as such shareholder's basis in the
Class B shares converted, and the holding period of the acquired Class A shares
will include the holding period for the converted Class B shares.
A shareholder who holds shares as a capital asset generally will recognize
a capital gain or loss upon the sale of such shares, which will be a long-term
capital gain or loss if such shares were held for more than one year. However,
any loss realized by a shareholder who held shares for six months or less will
be treated as a long-term capital loss to the extent of any distributions of net
capital gains received by the shareholder with respect to such shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
The Fund is required to backup withhold U.S. federal income tax at the rate
of 31% of all taxable distributions (including redemption payments) payable to a
shareholder who fails to provide the Fund with its correct taxpayer
identification number and certify that such number is correct, or payable to a
shareholder who has been notified by the Internal Revenue Service that it is
subject to backup withholding.
19
<PAGE>
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 return is a percentage expressed in terms of the
average annual compounded rate of return of a hypothetical investment of $1,000
in the Fund over periods of 1, 5, and 10 years, will reflect the deduction for
the sales charge imposed upon an initial investment in the Fund and the
deduction of a proportional share of Fund expenses (on an annual basis) and will
assume that all dividends and distributions are reinvested when paid. If such
charges were excluded from the total return figures, the total return figures
would be greater than depicted.
In addition to the standardized calculation of annual total return, the
Fund may use other methods of calculating its performance. These calculations
may be expressed in terms of the total return as well as the average annual
compounded rate of return of a hypothetical investment in the Fund over varying
periods of time in addition to 1, 5, and 10 years up to the life of the Fund and
may reflect the deduction of the appropriate sales charge imposed upon an
initial investment of more then $1,000 in the Fund. 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
20
<PAGE>
indices, and therefore, such expenses are not reflected in the return; however,
the return does reflect reinvestment of dividends.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. All performance information is based on historical
results and may not be indicative of future results. Performance information
should be considered in light of the Fund's investment objectives and policies,
characteristics and quality of the portfolio and the market conditions during
the given time period and should not be considered as a representation of what
may be achieved in the future. The Statement of Additional Information further
describes the methods used to calculate annual total return.
Set forth below is a discussion of the specific factors, including relevant
market conditions and the investment strategies and techniques pursued by the
Adviser, that materially affected the Fund's performance (the then existing
shares, currently designated Class D shares) during the fiscal year ended July
31, 1995. The discussion was provided by the Adviser.
During the first six months of our fiscal year the U.S. financial markets
were in a stealth bear market. The Dow Jones Industrial Average rose slightly
but most stocks declined. In the last six months of the fiscal year that market
moved from a stealth bear market into a rising market.
In the first part of the fiscal year the Adviser placed the portfolio in a
conservative position to preserve Fund shareholders money. When the market
started to rise the Adviser placed Fund assets into big company stocks that the
Adviser believed had the possibility of appreciating in value in a rising
market.
Set forth below is a graph comparing the Fund's performance (Class D
shares) as of the end of the ten most recently completed fiscal years, to the
performance of the S&P 500 and the Consumer Price Index for the same periods.
Comparison of Change in Value of $10,000 Investment in the Fund for Class D
shares, the S&P 500 and the Consumer Price Index. No history is available for
Class A, B and C shares.
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.
21
<PAGE>
CHART [Camera Ready Copy to Follow]
The following table sets forth the Class D shares of the Fund's average
annualized total return for the one, five, ten and fifteen year periods ended
July 31, 1995:
<TABLE>
<CAPTION>
RELEVANT AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ------------------------------ ------------------
<S> <C>
1 year 8.6%
5 year 12.5%
10 year 10.1%
15 year 10.9%
</TABLE>
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.
22
<PAGE>
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 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.
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
23
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND, THE ADVISER OR DISTRIBUTOR. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
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TABLE OF CONTENTS
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PAGE
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Fee Table......................... 2
Financial Highlights.............. 3
Investment Objectives and
Policies........................ 4
Management of the Fund............ 6
Brokerage......................... 6
Purchase of Shares................ 7
Initial Sales Charge
Alternatives--Class A and
Class D Shares............... 9
Deferred Sales Charge
Alternatives--Class B and
Class C Shares............... 12
Distribution Plans................ 15
Redemption of Shares.............. 16
Reinstatement Privilege--Class
A and Class D Shares......... 17
Exchange Privilege................ 17
Dividends and Distributions....... 18
Automated Investment Plan......... 18
Taxes............................. 18
Performance Data.................. 20
Calculation of Net Asset
Value; General Information........ 21
PROSPECTUS
MARCH 1, 1996
DISTRIBUTOR
AMERICAN GROWTH FUND SPONSORS, INC.
410 SEVENTEENTH STREET, SUITE 800
DENVER, CO 80202-4418
(800) 525-2406
AMERICAN GROWTH FUND, INC.
410 17th Street, Suite 800, Denver, Colorado 80202
303-623-6137
STATEMENT OF ADDITIONAL INFORMATION
March 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
March 1, 1996. A copy of the Prospectus may be obtained by writing American
Growth Fund Sponsors, Inc. (the "Distributor"), 410 17th Street, Suite 800,
Denver, Colorado 80202-4418.
AMERICAN GROWTH FUND SPONSORS, INC.
410 17th Street, Suite 800, Denver, Colorado, 80202-4418
303-623-6137
800-525-2406
TABLE 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 AND TAXES . . . . . . . . . . . . . B-14
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . . . . . B-17
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . . . . . B-22
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . B-23
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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.
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
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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.
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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:
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POSITION(S) HELD PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH FUND DURING PAST 5 YEARS
- --------------------- ---------------- ---------------------
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Robert Brody* (70) President, Director See below for affiliations
410 17th St., Suite 800 with Adviser and
Denver, Colorado Distributor
Michael J. Baum, Jr. (78) Director Investor in securities and real
1321 Bannock St. estate; engaged in mortgage
Denver, Colorado financing; president of Baum
Securities, M & N Investment
Company and First Avenue
Corporation all of which are real
estate investment companies
Eddie R. Bush (55) Director Certified Public Accountant
1400 W. 122nd Ave.
Suite 220
Westminster, Colorado
Don S. Strauss (71) Director Retired President of Majestic
756 S. Glencoe St. Industries, Inc., a manufacturer of
Denver, Colorado janitorial supplies
Harold Rosen (68) Director Owner of Bi-Rite Furniture Stores
#1 Middle Road
Englewood, CO
Timothy E. Taggart (42) Treasurer Principal Financial and
410 17th St., Suite 800 Accounting Officer. Employee of
Denver, Colorado Adviser since 1983. See below
for affiliation with Distributor
D. Leann Baird (47) Secretary Employee of Adviser since 1977.
410 17th St., Suite 800 See below for affiliations with
Denver, CO Adviser and Distributor
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POSITION(S) HELD PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH FUND DURING PAST 5 YEARS
- --------------------- ---------------- ---------------------
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William D. Farr (85) Advisory Board Member President and Director of Farr
P.O. Box 878 Farms Company, Chairman of the
Greeley, Colorado 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 Member Retired President of Denver Dry
111 Emerson Street Goods Company
Denver, Colorado
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*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 $2,300, from the Fund in
fiscal year 1995. Directors of the Fund except Mr. Brody were compensated at the
rate of $300 per meeting attended, ($400 effective September 1, 1995), Advisory
Board members were compensated at the rate of $200 per meeting attended.
Out-of-town directors are also reimbursed for their travel expenses to meetings.
During the Fund's most recently completed fiscal year, Messrs. Baum, Bush and
Strauss, the only directors other than Mr. Brody serving during that year, were
each paid the following compensation by the Fund:
Aggregate Compensation Paid by the Fund
Name of Director During the Fiscal Year Ended July 31, 1995.
- ---------------- -------------------------------------------
Michael J. Baum, Jr. $800
Eddie R. Bush $800
Don S. Strauss $800
In addition, for the ficasl year ended July 31, 1995, Messrs. Farr and Johns as
advisory board members each received fees of $600 from the Fund.
None of the above named persons received any retirement benefits or other form
of deferred
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compensation from the Fund. There are no other funds that together with the
Fund constitute a Fund Complex.
As of December 28 1995, no person owned more than 5% of the Fund and all
officers and directors as a group (a total of 7) owned directly 265,972 of its
shares or 2.2% of shares outstanding. Together, directly and indirectly, all the
officers and directors as a group owned 280,140 shares or 2.3% of all shares
outstanding.
As of December 28, 1995, officers, directors and members of the advisory board
and their relatives owned of record and beneficially Fund shares with net asset
value of approximately $2,754,685 representing approximately 2.6% of the total
net asset value of the Fund.
INVESTMENT ADVISORY AGREEMENT
Since the organization of the Fund in 1958, its investment adviser has been
Investment Research Corporation (the "Adviser"), 410 17th Street, Denver,
Colorado 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 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 1993, 1994
and 1995 were $514,507 in 1993, $579,209 in 1994, and $627,684 in 1995,
resulting in management fees of 0.88%, 0.86% and 0.83% of average net assets,
respectively. In fiscal years 1993, 1994 and 1995 there were no expense
reimbursements made in connection with the most restrictive state limitations.
The advisory agreement will continue from year to year so long as such
continuance is
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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.
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
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
B-7
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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.
For the fiscal years ended July 31, 1993, 1994 and 1995, the Distributor
retained $74,139, $112,733, and $267,974 respectively, on sales of Class D
shares (the current designation of the only class of shares of the Fund existing
at that time) as its portion of commissions paid by purchasers of the Fund's
shares after allowing as concessions to other dealers $39,212, $152,242, and
$685,894, respectively. During the same periods no commissions were paid to the
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 asset value of one Class D
share as of July 31, 1995 and a transaction with an applicable sales charge at
the maximum rate of 5.75%.
Net asset value per share
(Total net assets/Total shares outstanding) $ 8.75
Add selling commissions (5.75% of offering price) 0.53
------
Maximum offering price per share $ 9.28
======
Based upon the net asset value of one Class D shares as of July 31, 1995, the
public offering price of Class B and Class C shares of the Fund would have been
$8.75.
Investment Plans. Investors have flexibility in the purchase of shares under
the Fund's investment plans. They may make single, lump-sum investments and they
may add to their accounts on a regular basis through reinvestment of dividends
and capital gains distributions.
An investor may elect on his application to have all dividends and capital
gains distributions reinvested or take income dividends in cash and have any
capital gains distributions reinvested. An investor may also retain the option
of electing to take any year's capital gains distribution in cash by notifying
the Fund of his choice to do so in writing.
The Internal Revenue Code of 1986 contains limitations and restrictions upon
participation in all forms of qualified plans and for contributions made to
retirement plans for tax years beginning after December 31, 1986. Consultation
with an attorney or a competent tax advisor regarding retirement plans is
recommended. A discussion of the various qualified plans offered by the Fund is
contained elsewhere in this Statement of Additional Information.
Investor's Right of Accumulation. For Class A and Class D shareholders the
value of all assets
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<PAGE>
held the day an order is received which qualifies for rights of accumulation
may be combined to determine the aggregate investment of "any person" in
ascertaining the sales charge applicable to each subsequent purchase. For
example, for any person who has previously purchased and still holds Class A
or Class D shares, respectively, with a value (at current offering price) of
$20,000 on which he paid a charge of 5.75% and subsequently purchases $80,000
of additional Class A or Class D shares, respectively, the charge applicable
to the trade of $80,000 would be 3.50%.
The Distributor must be notified by the shareholder when a purchase takes place
if the shareholder wishes to qualify for the reduced charge on the basis of
previous purchases. The reduced sales charge is inapplicable to income dividends
and capital gain distributions which are reinvested at net asset value. The
reduced charge is subject to confirmation of the investor's holdings through a
check of the 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.
Deferred Sales Charges - Class A, Class B and Class C Shares. 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 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
B-9
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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 the original purchase, whichever
is greater.
Additional Information - Sales of Fund Shares. Commencing June 30, 1995 and
ending September 30, 2005, the Distributor will offer a long-term sales
incentive promotion in which non-cash concessions in the form of one or more all
expenses paid promotional trips to resort locations will be awarded to
participating broker-dealers achieving certain specified cumulative sales levels
in shares of the fund. Participation in the incentive programs is entirely
optional on the part of broker-dealers. Copies of the incentive program rules
which contain more complete information about the terms and conditions of the
programs, including qualifying levels and specific awards, may be obtained by
investment representatives by contacting the Distributor.
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
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loss. Price determinations with respect to share redemptions are generally
made on the 23rd of each month or the next business day thereafter. Proceeds
from such transactions are generally mailed three business days following such
transaction date.
Withdrawals concurrent with purchases of additional shares may be inadvisable
because of duplication of sales charges. Single payment purchases of shares in
amounts less than $5,000 in combination with a withdrawal plan will not
ordinarily be permitted. No withdrawal plan will be permitted if the investor is
also a purchaser under a continuous investment plan.
Either the owner or the Fund may terminate the Plan at any time, for any
reason, by written notice to the other.
Investment income dividends paid on shares held in a withdrawal plan account
will be credited to such account and reinvested in additional Fund shares. Any
optional capital gains distributions will be taken in shares, which will be
added to the share balance held in the Plan account. Dividends and distributions
paid into the Plan account are taxable for federal income tax purposes.
RETIREMENT PLANS
The Fund makes available retirement plan services to all classes of its shares.
Investors in the Fund can establish accounts in any one of the retirement plans
offered by the Fund. Each participant in a retirement plan account is charged a
$20 annual service fee to offset expenses incurred in servicing such accounts.
Dividends and capital gains distributions are automatically reinvested. Under
each of the plans, the Fund's retirement plan custodian or successor custodian
provides custodial services required by the Internal Revenue Code of 1986 (the
"Code") including the filing of reports with the Internal Revenue Service.
Consultation with an attorney or competent tax advisor is recommended before
establishing any retirement plan. Brochures which describe the following
retirement plans and contain IRS model or prototype plan documents may be
obtained from the Distributor.
INDIVIDUAL RETIREMENT ACCOUNTS. The Fund makes available a model Individual
Retirement Account ("IRA") under Section 408(a) of the Code on IRS Form 5305-A.
A qualified individual may invest annually in an IRA. Persons who are not
eligible to make fully deductible contributions will be able to make
non-deductible contributions to their IRAs, subject to limits specified in the
Code, to the extent that deductible contributions are not allowed. IRA earnings
on non-deductible, as well as deductible, contributions will accumulate tax
deferred. An IRA account may also be established in a tax-free "roll-over"
transfer within 60 days of receipt of a lump sum distribution from a qualified
pension plan resulting from severance of employment or termination by the
employer of such a plan.
The Code provides for penalties for violation of certain of its provisions
including, but not limited to, contributions in excess of the stipulated
limitations, improper distributions and certain prohibited transactions. To
afford plan holders the right of revocation described in the IRA disclosure
statements, investments made in a newly established IRA may be canceled within
seven days of the
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date the planholder signed the Custodial Agreement by writing the Fund's
retirement plan custodian.
SIMPLIFIED EMPLOYEE PENSION PLANS. The Fund makes available model Simplified
Employee Pension Plans ("SEPs") on IRS Form 5305-SEP and Salary Reduction
Simplified Employee Pension Plans ("SARSEPs") on IRS Form 5305A-SEP. By adopting
a SEP, employers may contribute to each eligible employee's own IRA. Commencing
with tax years beginning after December 31, 1986, salary reduction contributions
may be made to SEPs maintained by employers meeting certain qualifications
specified in the Code.
TEACHER AND NON-PROFIT EMPLOYEE RETIREMENT PLAN. Employees of tax exempt,
charitable, religious and educational organizations described in Section
501(c)(3) of the Code, and employees of public school systems and state and
local educational institutions, may establish a retirement plan under Section
403(b) of the Code.
PROTOTYPE MONEY PURCHASE AND PROFIT-SHARING PENSION PLANS. Available
generally to employers, including self-employed individuals, partnerships,
subchapter S corporations and corporations.
DISTRIBUTION PLANS
Reference is made to "Purchase of Shares--Distribution Plans" in the Prospectus
for certain information with respect to separate distribution plans for Class A,
Class B, and Class C shares pursuant to Rule 12b-1 under the Investment Company
Act of the Fund (each a "Distribution Plan") with respect to the shareholder
service and distribution fees paid by the Fund to the Distributor with respect
to such classes.
Payments of the account maintenance fees and/or distribution fees are subject
to the provisions of Rule 12b-1 under the Investment Company Act. Among other
things, each Distribution Plan provides that the Distributor shall provide and
the Directors shall review quarterly reports of the disbursement of the service
fees and/or distribution 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,
B-12
<PAGE>
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.
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 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.
B-13
<PAGE>
The Fund does not currently use the services of any affiliated brokers in its
portfolio transactions. However, the Fund's may use an affiliated broker in the
Fund portfolio transactions in accordance with applicable securities law and the
regulations of the Securities and Exchange Commission. The Fund's Distributor is
not obligated to execute and effect portfolio transactions for the Fund but may
do so in accordance with Section 11(a) of the Securities Exchange Act of 1934,
as amended, provided that prior authorization of such transactions is obtained
and the Fund's Distributor furnishes a statement to the Fund at least annually
with respect to the compensation it has retained in connection with such
transactions. Any such arrangement will be approved by a majority of the Fund's
disinterested directors.
The Fund paid total brokerage commissions of $162,297 in fiscal year 1993, $
352,272 in fiscal year 1994, and $409,352 in fiscal year 1995. The Fund did not
purchase securities issued by any broker-dealer that executed portfolio
transactions during such fiscal year. None of these commissions was paid to any
person affiliated with the Fund.
While some stocks considered in the opinion of management to be least sensitive
to business declines will be maintained as long term holdings, others considered
most sensitive to such declines will be sold whenever in the management's
judgement economic conditions may be in for a major decline. Resulting funds
may be temporarily invested in United States Government securities, high-grade
bonds and high-grade preferred stocks, until management believes business and
market conditions indicate that reinvestment in common stocks is desirable.
The portfolio turn over of the Fund for the fiscal years ended July 31, 1993,
1994 and 1995 was 48.8%, 87.2%, and 173.0%, respectively. The turnover rate
was greater in fiscal year 1995 than in 1994 because the Adviser moved the
portfolio from cash or cash equivalents into equities to take advantage of the
rising equity market.
CALCULATION OF NET ASSET VALUE
The Fund offers its shares continuously to the public at their net asset value
next computed after receipt of the order to purchase plus any applicable sales
charge. Net asset value is determined as of the close of business on the New
York Stock Exchange each day the Exchange is open for trading, and all purchase
orders are executed at the next price that is determined after the order is
received. Orders received and properly time-stamped by dealers and received by
the Distributor prior to 2:00 p.m. Denver time on any business day will be
confirmed at the public offering price effective at the close on that day.
Orders received after such time will be confirmed at the public offering price
determined as of the close of the Exchange on the next business day. It is the
responsibility of the dealers to remit orders promptly to the Distributor. The
New York Stock Exchange is closed on the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
In determining net asset value, securities traded on the New York Stock
Exchange or other stock exchange approved for this purpose by the board of
directors will be valued on the basis of the closing sale thereof on such stock
exchange, or, if such sale is lacking, at the mean between closing bid and asked
prices on such day. If no bid and asked prices are quoted for such day or
information
B-14
<PAGE>
as to New York or other approved exchange transactions is not readily
available, the security will be valued by reference to recognized composite
quotations or such other method as the board of directors in good faith deems
will reflect its fair market value. Securities not traded on any stock
exchange but for which market quotations are readily available are valued on
the basis of the mean of the last bid and asked prices. Short-term securities
are valued at the mean between the closing bid and asked prices or by such
other method as the board of directors determines to reflect their fair market
value. The board of directors in good faith determines the manner of
ascertaining the fair market value of other securities and assets.
The net asset price of Fund shares will be computed by deducting total
liabilities from total assets. The net asset value per share will be ascertained
by dividing the Fund's net assets by the total number of shares outstanding,
exclusive of treasury shares and shares tendered for redemption the redemption
price of which has been determined. Adjustment for fractions will be made to the
nearest cent.
The per share net asset value of Class A, Class B and Class C shares generally
will be lower than the per share net asset value of the Class D shares
reflecting the daily expense accruals of the service, distribution and higher
transfer agency fees applicable with respect to the Class A, Class B and Class C
shares The per share net asset value of the Class B and Class C shares generally
will be lower than the per share net asset value of Class A shares reflecting
the daily expense accruals of the service and distribution fees and higher
transfer agency fees applicable with respect to Class B and Class C shares of
the Fund. It is expected, however, that the per share net asset value of the
classes will tend to converge (although not necessarily meet) immediately after
the payment of dividends or distributions, which will differ by approximately
the amount of the expense accrual differential between the classes.
DIVIDENDS, DISTRIBUTIONS AND TAXES
As a regulated investment company, the Fund will not be subject to U.S. federal
income tax on its income and gains which it distributes as dividends or capital
gains distributions provided that it distributes to shareholders at least 90% of
its investment company taxable income for the taxable year. The Fund intends to
distribute sufficient income to meet this qualification requirement.
The per share dividends and distributions on Class B and Class C shares will be
lower than the per share dividends and distributions on Class D shares as a
result of the account maintenance, distribution and higher transfer agency fees
applicable with respect to the Class A, Class B and Class C shares; similarly,
the per share dividends and distributions on Class A shares will be higher than
the per share dividends and distributions on Class B and Class C shares as a
result of the account maintenance fees applicable with respect to the Class A
shares and a lower distribution fee. See "Calculation of Net Asset Value".
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
B-15
<PAGE>
determination by the Board of Directors to retain net capital gains will not
affect the ability of the Fund to qualify as a regulated investment company.
If the Fund retains for investment its net capital gains, it will be subject
to a tax of 35% of the amount retained. In that event, the Fund expects to
designate the retained amount of undistributed capital gains in a notice to
its shareholders who (i) if subject to U.S. federal income tax on long-term
capital gains, will be required to include in income for tax purposes as long
term-capital gain, their shares of such undistributed amount, and (ii) will be
entitled to credit their proportionate shares of the 35% tax paid by the Fund
against their U.S. federal income tax liabilities and to claim refunds to the
extent the credit exceeds such liabilities. For U.S. federal income tax
purposes, the tax basis of shares owned by a shareholder of the Fund will be
increased by an amount equal to 65% of the amount of undistributed capital
gains included in the shareholder's gross income.
Under the Code, amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To avoid the tax, the Fund must distribute during each calendar year (1) at
least 98% of its ordinary income (not taking into account any capital gains or
losses) for the calendar year, (2) at least 98% of its capital gains in excess
of its capital losses for the twelve-month period ending on October 31 of the
calendar year, and (3) all ordinary income and net capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, the Fund intends to make distributions in accordance with the
calendar year distribution requirement. A distribution will be treated as paid
on December 31 of the calendar year if it is paid during the calendar year or if
declared by the Fund in October, November or December of such year, payable to
shareholders of record on a date in such month and paid by the Fund during
January of the following year. Any such distributions paid during January of the
following year will be taxable to shareholders as of December 31, rather than
the date on which the distributions are received.
Dividends of investment company taxable income (which includes interest and the
excess of net short-term capital gains over net long-term capital losses) are
taxable to a shareholder as ordinary income, whether paid in cash or shares. A
portion of the dividends paid by the Fund may qualify for the 70% deduction for
dividends received by corporations because the Fund's income will consist, in
part, of dividends paid by U.S. corporations. Distributions of net capital gains
(which consists of the excess of long-term capital gains over net short-term
capital losses), if any, are taxable as long-term capital gains, whether paid
in cash or in shares, regardless of how long the shareholder has held the Fund
shares, and are not eligible for the dividends received deduction.
Upon a sale or exchange of its shares, a shareholder will realize a taxable
gain or loss depending upon its basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets in the
shareholder's hands and will be long-term capital gain or loss if the shares
have been held for more than one year. Any loss realized on a sale or exchange
will be disallowed to the extent the shares disposed of are replaced within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of. Any loss realized by a shareholder on the sale of shares of the
Fund held by the shareholder for six months or less will be treated for tax
purposes as a long-term capital loss to the extent of any distributions of net
capital gains received by the shareholder with respect to such shares.
B-16
<PAGE>
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 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
B-17
<PAGE>
prospectively or retroactively.
PERFORMANCE DATA
See the discussion of performance information in the Fund's prospectus under
the heading, "Performance Information."
The average annual total returns are calculated pursuant to the following
formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of $1,000, T=
the average annual total return, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period at the end of the 1, 5 or 10 year periods).
For the periods ended July 31, 1995, the average annual total returns for the
Fund were 8.6% for 1 year, 12.5% for 5 years, 10.1% for 10 years and 10.9% for
15 years.
In addition to the standardized calculation of annual total return, the Fund
may from time to time use other methods of calculating its performance in order
to illustrate the effect of a hypothetical investment in a plan or the effect of
withdrawing funds from an account over a period of time. Any presentation of
non-standardized calculations will be accompanied by standardized performance
measures as well. Calculations of performance may be expressed in terms of the
total return as well as the average annual compounded rate of return of a
hypothetical investment in the Fund over varying periods of time in addition to
the 1, 5, and 10 year periods (up to the life of the Fund) and may reflect the
deduction of the appropriate sales charge imposed upon an initial investment of
more than $1,000 in the Fund. These performance calculations will reflect the
deduction of a proportional share of Fund expenses (on an annual basis), will
assume that all dividends and distributions are reinvested when paid, may
include periodic investments or withdrawals from the account in varying amounts
and/or percentages and may include deductions for an annual custodian fee. The
Fund may calculate its total return or other performance information prior to
the deduction of a sales charge.
The performance figures described above may also be used to compare the
performance of the Fund's shares against certain widely recognized standards or
indices for stock and bond market performance. The following are the indices
against which the Portfolios may compare performance:
The Standard & Poor's Composite Index of 500 Stocks (the S&P 500 Index) is a
market value-weighted and unmanaged index showing the changes in the aggregate
market value of 500 stocks relative to the base period 1941-43. The S&P 500
index is composed almost entirely of common stocks of companies listed on the
NYSE, although the common stocks of a few companies listed on the American Stock
Exchange or traded OTC are included. The 500 companies represented include 400
industrial, 60 transportation and 50 financial services concerns. The S&P 500
index represents about 80% of the market value of all issues traded on the NYSE.
The Dow Jones Industrial Average is an unmanaged index composed of 30 blue-chip
industrial corporation stocks.
B-18
<PAGE>
The Lipper Mutual Fund Performance Analysis and Mutual Fund Indices measure
total return and average current yield for the mutual fund industry. Ranks
individual mutual fund performance over specified time periods assuming
reinvestment of all distributions, exclusive of sales charges.
The Consumer Price Index (or Cost of Living index), published by the U.S.
Bureau of Labor Statistics, is a statistical measure of periodic change in the
price of goods and services in major expenditure groups.
The following table presents a hypothetical initial investment of $1,000 on
August 1, 1958 with subsequent investments of $1,000 made annually through July
31, 1995. The illustration assumes that the investment was made in Class D
shares (the only class existing at that time), and a sales load of 5.75% has
been deducted from the initial and subsequent investments, a $20 annual fee
(representing the annual service fee charged to retirement plan accounts) has
been deducted from the account annually, and that all dividend and capital gain
distributions have been reinvested when paid. While the illustration uses an
investment of $1,000 and a 5.75% sales load, the Fund may select any multiple of
$1,000 in order to illustrate the effect of an investment plan and the sales
load will reflect the appropriate sales load for the initial and subsequent
investments as determined by the Fund's currently effective prospectus. The
sales load may be reduced pursuant to rights of accumulation and letter of
intent.
B-19
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE ACCEPTED
COST OF AS PURCHASED
SHARES ACQUIRED CAPITAL THROUGH
TOTAL OF DIVIDENDS BOUGHT WITH GAINS RE-
INITIAL FROM WITH TOTAL COST INITIAL DISTRI- INVESTMENT
& ANNUAL INVESTMENT INVESTMENT INCLUDING & ANNUAL BUTIONS OF INCOME
PERIOD INVEST- INCOME OF INCOME REINVESTED INVEST- (CUM- (CUM- ENDED
ENDED MENTS REINVESTED DIVIDENDS DIVIDENDS MENTS ULATIVE) ULATIVE) VALUE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
07/31/59 $ 2,000 $ 25 $ 25 $ 2,025 $ 2,129 $ 0 $ 27 $ 2,156
07/31/60 3,000 41 66 3,066 2,894 11 65 2,970
07/31/61 4,000 85 151 4,151 4,611 80 181 4,872
07/31/62 5,000 97 248 5,248 4,917 91 241 5,249
07/31/63 6,000 123 371 6,371 6,817 275 426 7,518
07/31/64 7,000 125 496 7,496 9,427 464 672 10,563
07/31/65 8,000 147 643 8,643 9,790 1,152 778 11,720
07/31/66 9,000 202 845 9,845 10,740 2,213 977 13,930
07/31/67 10,000 373 1,218 11,218 11,943 3,866 1,421 17,230
07/31/68 11,000 353 1,571 12,571 14,033 4,243 1,934 20,210
07/31/69 12,000 408 1,979 13,979 12,320 5,717 1,910 19,947
07/31/70 13,000 410 2,389 15,659 10,520 5,207 1,822 17,549
07/31/71 14,000 588 2,977 16,977 14,385 6,664 2,970 24,019
07/31/72 15,000 682 3,659 18,659 16,069 7,018 3,841 26,928
07/31/73 16,000 508 4,167 20,167 16,299 7,259 4,162 27,720
07/31/74 17,000 782 4,949 21,949 14,041 6,307 4,034 24,382
07/31/75 18,000 1,405 6,354 24,354 13,704 9,330 5,110 28,144
07/31/76 19,000 1,171 7,525 26,525 16,777 10,796 7,227 34,800
07/31/77 20,000 1,074 8,599 28,599 19,582 12,008 9,204 40,794
07/31/78 21,000 1,017 9,616 30,616 23,726 13,984 11,894 49,604
07/31/79 22,000 2,055 11,671 33,671 27,109 15,429 15,437 57,975
07/31/80 23,000 2,931 14,602 37,602 37,937 22,535 24,562 85,034
07/31/81 24,000 3,766 18,368 42,368 30,526 41,349 22,502 94,377
07/31/82 25,000 4,235 22,603 47,603 27,829 39,477 23,846 91,152
07/31/83 26,000 6,769 29,372 55,372 40,090 55,535 42,431 138,056
07/31/84 27,000 5,657 35,029 62,029 35,136 58,360 41,506 135,002
07/31/85 28,000 4,637 39,666 66,666 37,927 73,322 48,927 160,176
07/31/86 29,000 7,330 46,996 75,996 41,252 77,925 60,054 179,231
07/31/87 30,000 5,993 52,989 82,989 44,358 107,124 70,083 221,565
07/31/88 31,000 3,685 56,674 87,674 31,884 105,874 52,808 190,566
07/31/89 32,000 9,656 66,330 98,330 36,390 117,707 69,793 223,890
07/31/90 33,000 9,004 75,334 108,334 37,969 119,759 79,838 237,566
07/31/91 34,000 8,138 83,472 117,472 41,072 126,543 93,645 261,260
07/31/92 35,000 1,955 85,427 120,397 44,484 151,776 101,369 297,629
07/31/93 36,000 2,801 88,288 124,228 50,094 193,448 115,156 358,698
07/31/94 37,000 1,910 90,138 127,138 50,782 232,061 116,467 399,310
07/31/95 38,000 5,130 95,268 133,268 48,526 297,125 115,242 460,893
</TABLE>
The table below illustrates the effect of an automatic withdrawal program on an
initial hypothetical investment of $10,000 on August 1, 1958 in the Fund for the
life of the Fund. The illustration assumes that a sales load of 5.75% was
deducted from the initial investment, that $800 was withdrawn annually and
withdrawals were made first from income for the year, then from principal.
Withdrawals from principal representing the sale of shares were assumed to have
been in the order shares were acquired. Continued withdrawals in excess of
current income can eventually exhaust principal, particularly in a period of
declining market prices. That portion of the total amount withdrawn designated
"From Investment Income Dividends" should be regarded as income; the remainder
represents a withdrawal of principal. While this illustration assumes that $800
was withdrawn annually, the Fund may in other illustrations select any
percentage or dollar amount to be withdrawn.
B-20
<PAGE>
<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
<S> <C> <C> <C> <C> <C> <C> <C>
07/31/59 $ 244 $ 556 $ 800 $ 800 $ 11,453 $ 0 $ 11,453
07/31/60 212 588 800 1,600 10,025 57 10,082
07/31/61 283 517 800 2,400 12,213 294 12,507
07/31/62 243 557 800 3,200 10,085 311 10,396
07/31/63 237 563 800 4,000 11,477 700 12,177
07/31/64 199 601 800 4,800 13,666 1,070 14,737
07/31/65 201 599 800 5,600 12,252 2,004 14,256
07/31/66 241 559 800 6,400 11,739 3,292 15,031
07/31/67 393 407 800 7,200 11,592 5,090 16,682
07/31/68 336 464 800 8,000 12,250 5,588 17,838
07/31/69 355 445 800 8,800 9,546 6,535 16,081
07/31/70 325 475 800 9,600 6,970 5,695 12,665
07/31/71 417 383 800 10,400 8,524 7,289 15,813
07/31/72 441 359 800 11,200 8,625 7,675 16,300
07/31/73 300 500 800 12,000 7,753 7,673 15,426
07/31/74 427 373 800 12,800 5,906 6,432 12,338
07/31/75 696 104 800 13,600 5,210 7,662 12,872
07/31/76 526 274 800 14,400 5,753 8,866 14,619
07/31/77 443 357 800 15,200 6,034 9,861 15,895
07/31/78 391 409 800 16,000 6,585 11,484 18,069
07/31/79 740 60 800 16,800 7,207 12,671 19,878
07/31/80 800 0 800 17,600 10,117 17,800 27,917
07/31/81 800 0 800 18,400 8,175 21,670 29,845
07/31/82 800 0 800 19,200 7,691 20,050 27,741
07/31/83 800 0 800 20,000 12,625 28,206 40,831
07/31/84 800 0 800 20,800 11,585 27,303 38,888
07/31/85 800 0 800 21,600 12,811 32,159 44,970
07/31/86 800 0 800 22,400 15,019 34,178 49,197
07/31/87 800 0 800 23,200 16,776 42,864 59,640
07/31/88 800 0 800 24,000 12,006 38,243 50,249
07/31/89 800 0 800 24,800 15,375 42,517 57,892
07/31/90 800 0 800 25,600 17,109 43,258 60,367
07/31/91 800 0 800 26,400 19,569 45,709 65,278
07/31/92 486 314 800 27,200 20,438 52,839 73,277
07/31/93 687 113 800 28,000 22,514 64,695 87,209
07/31/94 463 337 800 28,800 22,086 73,961 96,046
07/31/95 800 0 800 29,600 21,316 88,412 109,278
--- - ---
TOTAL $ 19,686 $ 9,914 $ 28,800
</TABLE>
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objectives and policies, characteristics and
quality of the portfolio and the market conditions during the given time period
and should not be considered as a representation of what may be achieved in the
future.
B-21
To The Board of Directors and Shareholders
of American Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of American Growth Fund, Inc. as of July 31, 1995,
and the related statement of operations for the year then ended, the statement
of changes in net assets for the two years then ended and the selected per
share data and ratios in the financial highlights table for the five years
ended July 31, 1995. These financial statements and selected per share data
and ratios are the responsibility of the Fund's management. Our responsibility
is to express an opinion on the financial statements and selected per share
data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards, including confirmation of securities owned as of July 31, 1995, by
correspondence with the custodian and brokers. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements and selected per share data and ratios are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of American Growth Fund, Inc. as of July 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for the two
years then ended and the selected per share data and ratios for the five years
then ended in conformity with generally accepted accounting principles.
SMITH, BROCK & GWINN
Denver, Colorado
August 18, 1995
PORTFOLIO OF INVESTMENTS
July 31, 1995
How American Growth Fund Has Its Shareowners, Money Invested
Market
Name of Security Shares Value
COMMON STOCKS
Semiconductor Industry 15.5%
Micron Technology, Inc.. . . . . . . . . . . . 70,000 $4,375,000
(Manufactures and markets semiconductor
components.)
Motorola, Inc. . . . . . . . . . . . . . . . . 45,000 3,448,125
(Leading manufacturer of electronic equipment
and components.)
Texas Instruments Inc. . . . . . . . . . . . . 21,000 3,281,250
(Manufactures electronic products based
principally on its semiconductor
technology.)
Intel Corporation. . . . . . . . . . . . . . . 30,000 1,950,000
(Leading manufacturer of integrated
circuits.)
Cypress Semiconductor Corp.* . . . . . . . . . 10,000 527,500
(Designs, manufactures, and markets a broad
line of high performance digital integrated
circuits used in telecommunications.)
International Rectifier Corp.* . . . . . . . . 12,000 480,000
-----------
(Makes high power semiconductor devices for
industrial, consumer, and military
applications.)
14,061,875
-----------
Air Line Industry 15.3%
UAL Corporation* . . . . . . . . . . . . . . . 35,000 5,228,125
(The second largest domestic carrier.)
Delta Air Lines, Inc.. . . . . . . . . . . . . 58,000 4,596,500
(The third largest domestic carrier.)
AMR Corporation* . . . . . . . . . . . . . . . 54,000 4,050,000
-----------
(One of the two largest domestic carriers.)
13,874,625
-----------
Pharmaceuticals Products Industry 14.5%
Mylan Laboratories Inc.. . . . . . . . . . . . 130,000 3,916,250
(Manufactures prescription generic drugs
and brand name dermatological products.)
Merck & Co., Inc.. . . . . . . . . . . . . . . 75,000 3,871,875
(Leading manufacturer of human and animal
health care products.)
Schering-Plough Corp.. . . . . . . . . . . . . 57,800 2,687,700
(Worldwide manufacturer of prescription
and over-the-counter drugs.)
AMGEN Inc.*. . . . . . . . . . . . . . . . . . 31,000 2,635,000
-----------
(Utilizes biotechnology to develop human
pharmaceutical products.)
13,110,825
-----------
Market
Name of Security Shares Value
Commercial Bank Industry 13.0%
Midlantic Corporation, Inc.. . . . . . . . . . 100,000 $4,762,500
(One of the largest bank holding companies
operating branches in New Jersey
and southeastern Pennsylvania.)
First Interstate Bancorp . . . . . . . . . . . 40,000 3,445,000
(Largest multistate bank branch network.)
City National Corp.. . . . . . . . . . . . . . 200,000 2,600,000
(Owns the sixth largest bank in California.)
SouthTrust Corp. . . . . . . . . . . . . . . . 40,000 995,000
-----------
(37th largest bank in the U.S. as
of 12/31/94.)
11,802,500
-----------
Computer & Peripherals Industry 10.9%
International Business Machines Corporation. . 36,000 3,919,500
(World's largest supplier of advanced
information processing technology and
communication systems.)
Cisco Systems, Inc.* . . . . . . . . . . . . . 60,000 3,341,250
(Leading supplier of high-performance
internetworking products for linking
computer networks.)
SCI Systems, Inc.* . . . . . . . . . . . . . . 60,500 1,614,594
(Leading subcontractor to the computer
industry.)
Hewlett-Packard Company. . . . . . . . . . . . 13,000 1,012,375
-----------
(Major designer & manufacturer of precision
electronic products.)
9,887,719
-----------
Metals & Mining Industry 7.5%
Reynolds Metals Co.. . . . . . . . . . . . . . 65,000 4,062,500
(Second largest aluminum producer in the
United States.)
Phelps Dodge Corp. . . . . . . . . . . . . . . 43,000 2,762,750
-----------
(The largest U.S. copper producer in terms
of domestic output.)
6,825,250
-----------
Market
Name of Security Shares Value
Insurance Industry 6.3%
Aetna Life and Casualty Company. . . . . . . . 40,000 $2,475,000
(Largest stockholder-owned insurance
organization in the U.S.)
American International Group, Inc.. . . . . . 28,125 2,109,375
(Domestic property and casualty insurance
operations rank 4th in the U.S. based on
premiums written.)
Equitable Companies Inc. (The) . . . . . . . . 50,000 1,118,750
(Parent holding company of The Equitable
Life Assurance Society of the U.S.) 5,703,125
Beverage Industry 3.7%
Coca Cola Company, (The) . . . . . . . . . . . 30,000 1,976,250
(World's largest soft drink company.)
PepsiCo, Inc.. . . . . . . . . . . . . . . . . 30,000 1,406,250
(Operates three major businesses:
restaurants, beverages and snack foods.) . . 3,382,500
Chemical Industry 2.4%
Dow Chemical Co. . . . . . . . . . . . . . . . 15,000 1,111,875
(Manufactures basic chemicals, plastics
and specialty products.)
Union Carbide Corp.. . . . . . . . . . . . . . 30,000 1,042,500
(Producer of ethylene glycol, polyethylene,
ethylene oxide, solvents, coatings,
specialty chemicals and surfactants. . . . 2,154,375
Aerospace/Defense Industry 1.1%
Boeing Company (The) . . . . . . . . . . . . . 15,000 1,005,000
(Leading manufacturer of commercial
jet aircraft.)
Financial Services Industry 1.0%
Travelers Group, Inc.. . . . . . . . . . . . . 20,000 947,500
(Diversified financial services company.)
Market
Name of Security Shares Value
Telecommunication Equipment Industry 0.6%
DSC Communications Corp.*. . . . . . . . . . . 10,000 536,250
-----------
(Designs, manufactures, markets, and
services telecommunication systems and
products for long distance carriers.)
Total Common Stocks (cost $70,781,103) . . . . 91.8% 83,291,544
-----------
Repurchase Agreement (cost $6,200,000) . . . . 6.9% 6,200,000
-----------
(State Street Bank & Trust, 5.67% dated
07/27/95, due 08/03/95, maturity value
$6,206,836, Collateral: U.S. Treasury Note)
Total Investments. . . . . . . . . . . . . . . 98.7% 89,491,544
-----------
Cash and Receivables, Less Liabilities . . . . 1.3% 1,046,760
-----------
Total Net Assets . . . . . . . . . . . . . . . 100.0% $90,538,304
-----------
See Notes to financial statements.
* Non-income producing security.
See Nnotes to financial statements.
Financial Statements
AMERICAN GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES, JULY 31, 1995
ASSETS:
Investments at value (including repurchase agreements of
$6,200,000) (cost $76,981,013) . . . . . . . . . . . $ 89,491,544
Cash. . . . . . . . . . . . . . . . . . . . . . . . . 3,181,880
Receivable from sale of Fund shares . . . . . . . . . 318,747
Interest receivable . . . . . . . . . . . . . . . . . 4,882
Dividends receivable. . . . . . . . . . . . . . . . . 62,600
-------------
Total Assets . . . . . . . . . . . . . . . . . . . . . 93,059,653
-------------
LIABILITIES:
Payable for Investments Purchased . . . . . . . . . . 2,448,922
Payable for redemption of Fund shares . . . . . . . . 72,427
Total Liabilities. . . . . . . . . . . . . . . . . . . 2,521,349
-------------
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . $ 90,538,304
-------------
-------------
NET ASSETS:
Paid in capital, 50,000,000 shares of $.01 par
value capital stock authorized; 10,342,093
shares outstanding. . . . . . . . . . . . . . . . . . $ 76,666,350
Undistributed net investment income . . . . . . . . . 990,914
Accumulated net realized gain . . . . . . . . . . . . 370,510
Net unrealized appreciation of investments. . . . . . 12,510,530
-------------
Total net assets. . . . . . . . . . . . . . . . . . . $ 90,538,304
-------------
-------------
Net asset value per share
(Total net assets / Total shares outstanding). . . $8.75
Add selling commissions (5.75% of offering price)*. . 0.53
-----
Maximum offering price per share. . . . . . . . . . . $9.28
-----
-----
* On sales of $50,000 or more the offering
price is reduced as set forth in the
prospectus.
See notes to financial statements.
Financial Statements
AMERICAN GROWTH FUND, INC.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31, 1995
INCOME FROM INVESTMENTS:
Income:
Dividends . . . . . . . . . . $ 688,584
Interest . . . . . . . . . . 1,850,014
Total income. . . . . . . . . . 2,538,598
EXPENSES:
Investment advisory fee. . . . 627,684
Administrative expenses. . . . 337,534
Transfer agent fee . 135,744
Custodian fee. 34,134
Other. . 195,061
Expense reductions . (235,880)
----------
Total expenses. . . . . . . . . 1,094,277
----------
Net investment income. . . . . . 1,444,321
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions. . . . 325,639
Increase in unrealized appreciation of investments. . 9,773,542
-----------
Net gain on investments . . . . . . . . . . . . . . . 10,099,181
-----------
Net increase in net assets resulting from operations . $11,543,502
-----------
-----------
See notes to financial statements.
Financial Statements
AMERICAN GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 1995 AND 1994
1995 1994
OPERATIONS:
Net investment income . . . . . . . . . $1,444,321 $ 224,959
Net realized gain from investment
transactions. . . . . . . . . . . . . . 325,639 12,986,192
Increase/Decrease in unrealized
appreciation of investments . . . . . . 9,773,542 (6,357,715)
----------- -----------
Net increase in net assets resulting
from operations. . . . . . . . . . . 11,543,502 6,853,436
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ($.12 and $.05
per share, respectively). . . . . . . . (938,292) (327,794)
Net realized gain on investment
transactions ($1.56 and $1.03 per
share, respectively). . . . . . . . . . (12,215,279) (6,752,557)
----------- -----------
Net decrease from distributions . . . . (13,153,571) (7,080,351)
----------- -----------
CAPITAL STOCK TRANSACTIONS:
Proceeds from sale of shares
(2,352,448 and 597,586 shares). . . . . 19,867,517 5,660,536
Net asset value of shares issued
in reinvestment of dividends (1,701,369
and 737,076 shares) . . . . . . . . . . 12,454,018 6,869,050
Cost of shares redeemed (1,017,480 and
650,855 shares) . . . . . . . . . . . . (8,382,337) (6,273,633)
----------- -----------
Increase in net assets derived
from capital stock transactions . . . . 23,939,198 6,255,953
----------- -----------
Net increase in net assets. . . . . . . 22,329,129 6,029,038
NET ASSETS:
Beginning of period . . . . . . . . . . 68,209,175 62,180,137
End of period (including undistributed
net investment income of $990,914 and
$40,781 respectively) . . . . . . . . . $90,538,304 $68,209,175
----------- -----------
----------- -----------
See notes to financial statements.
Notes to Financial Statements
1. Summary of Significant Accounting Policies
American Growth Fund, Inc. ("Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The following is a summary of significant accounting
policies consistently followed by the Fund. The policies are in accordance
with generally accepted accounting principles.
Investment Valuation - Investment securities are valued at the closing
sales price as reported by the principal securities exchange on which the
security is traded. If no sale is reported, or if the security is not
traded on an exchange, value is based on the average of the latest bid and
asked prices. Short-term debt securities are valued at amortized cost,
which approximates value.
Federal Income Taxes - No provision for federal income taxes has been made
because it is the Fund's policy to comply with provisions of the Internal
Revenue Code available to regulated investment companies and to distribute
all of its taxable income to shareholders.
Other - Investment transactions are accounted for on the date the
investments are purchased or sold (trade date). Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis.
For Federal income tax purposes, the cost of investments owned as of July
31, 1995 was $77,093,930. Realized gains and losses from investment
transactions and unrealized appreciation and depreciation of investments
are reported on an identified cost basis which is the same basis used for
federal income tax purposes.
During the year ended July 31, 1995, the Fund adopted Statement of
Position 93-2 Determination, Disclosure and Financial Statement
Presentation of Income, Capital Gain and Return of Capital Distributions
of Investment Companies. Accordingly, permanent book and tax basis
differences relating to shareholder distributions have been reclassified
to paid-in-capital. The cumulative effect of such differences totaling
$444,103 and ($595,601) was reclassified from undistributed net investment
income and accumulated net realized gains, respectively, to
paid-in-capital. Net investment income, net realized gains, and net assets
were not affected by this change.
2. Federal Income Tax Matters
For federal income tax purposes, the Fund realized net capital gains of
$438,555 during the fiscal year ended July 31, 1995.
At July 31, 1995, the net unrealized appreciation of investments for
federal income tax purposes of $12,397,614 was comprised of gross
appreciation of $12,719,624 for those investments having an excess of
value over cost, and gross depreciation of $322,010 for those investments
having an excess of cost over value.
3. Dividends, Distributions and Fund Expenses
For the Fund's fiscal year ended July 31, 1995, it has been determined
that all ordinary income dividends qualify for the dividend received
deduction for corporate shareholders. Fund expenses in the amount of
$235,880 relating to transfer agent fees and certain other expenses were
paid by broker dealers.
4. Investment Security Transactions
Purchases and sales of investment securities, other than U.S. Government
and short-term securities, aggregated $142,104,882 and $88,175,447,
respectively.
5. Underwriting and Investment Advisory Contracts
Under the investment advisory contract with Investment Research
Corporation ("IRC"), the advisor receives annual compensation for
investment advice, computed and paid monthly, equal to 1% of the average
net assets of the Fund up to $30 million of such
Notes to Financial Statements
assets and 3 /4 of 1% of such assets above $30 million. The Fund pays its
own operating expenses. The total of expenses of the Fund for any fiscal
year may not exceed the most restrictive limitation prescribed by any
state in which the shares of the Fund are sold.
For the year ended July 31, 1995 commissions and sales charges paid by
investors on the purchase of Fund shares totalled $953,868 of which
$267,974 was retained by American Growth Fund Sponsors, Inc. ("Sponsors"),
the underwriter and distributor of the Fund.
Certain officers of the Fund are also officers of Sponsors and IRC. For
the year ended July 31, 1995 the Fund paid directors' fees and expenses of
$2,400.
For the year ended July 31, 1995, under an agreement with IRC, the Fund
was charged $267,364 for the costs and expenses related to employees of
IRC who provided administrative, clerical and accounting services to the
Fund. In addition, the Fund was charged by an affiliated company of IRC
for the cost of office space associated with the provision of such
services, in the amount of $61,170.
Financial Highlights
(For a share outstanding throughout the Fund's fiscal year)
The following per share data covers the five years from August 1, 1990
through July 31, 1995.
The information contained in the table below for the five years ended July
31, 1995 has been examined by Smith, Brock and Gwinn, Independent
Certified Public Accountants, to the extent stated in their report.
YEARS ENDED JULY 31
INCOME & EXPENSES 1995 1994 1993 1992 1991
Net Asset Value,
Beginning of Period . . . . . . . . $ 9.34 $ 9.39 $ 8.50 $ 8.02 $ 7.59
Income From Investment Operations
Net Investment Income . . . . . . . .210 .034 .105 .097 .157
Net Gains or Losses on Securities
(both realized and unrealized). . . .880 .996 1.515 .943 .533
------ ------ ------ ------ ------
Total From Investment Operations. . 1.090 1.030 1.620 1.040 .690
------ ------ ------ ------ ------
Less Distributions
Dividends
(from net investment income). . . . (.120) (.050) (.080) (.060) (.260)
Distributions
(from capital gains). . . . . . . . (1.560) (1.030) (.650) (.500) ....
Returns of Capital. . . . . . . . . .... .... .... .... ....
------ ------ ------ ------ ------
Total Distributions . . . . . . . . (1.680) (1.080) (.730) (.560) (.260)
------ ------ ------ ------ ------
Net Asset Value, End of Period. . . $ 8.75 $ 9.34 $ 9.39 $ 8.50 $ 8.02
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return* . . . . . . . . . . . 15.2% 11.1% 20.2% 13.6% 9.6%
Ratios/Supplemental Data
Net Assets, End of Period
(millions). . . . . . . . . . . . . 90.5 68.2 62.2 55.5 55.7
Ratio of Expenses to
Average Net Assets. . . . . . . . 1.45% 1.34% 1.44% 1.46% 1.33%
Ratio of Net Income
to Average Net Assets . . . . . . 1.91% .35% .59% 1.14% 2.02%
Portfolio Turnover Rate . . . . . . 173.0% 87.2% 48.8% 39.8% 135.5
* Sales load not reflected in total return.
