AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
OCTOBER 31, 1997
SECURITIES ACT FILE NO. 2-14543 INVESTMENT COMPANY ACT FILE NO.
811-825
- -----------------------------------------------------------------
- --------------------
- -------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 52
AND/OR
[x]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940
AMENDMENT NO. 22
[x]
(CHECK APPROPRIATE BOX OR BOXES)
- --------------------
AMERICAN GROWTH FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
110 16th Street, Suite 1400
Denver, Colorado 80202
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (303)
626-0600
Robert Brody
110 16th Street, Suite 1400
Denver, CO 80202
(Name and Address of Agent for Service)
- -------------------
Approximate Date of Proposed Public Offering: as soon as
practicable after the
effective date of the Registration Statement
- -------------------
It is proposed that this filing will become effective (check
appropriate box)
[_] immediately upon filing pursuant to paragraph (b)
[X] on (October 31, 1997) pursuant to paragraph (b)
[_] 60 days after filing pursuant to paragraph (a) (1)
[_] on (date) Pursuant to paragraph (a) (1)
[_] 75 days after filing pursuant to paragraph (a) (2)
[_] on (date) pursuant to paragraph (a) (2) of Rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new
effective
Date for a previously filed post-effective
amendment.
Pursuant to Rule 24f-2(a) (1) under the Investment Company Act of
1940, the Fund has
registered an indefinite number or amount of its securities under
the Securities Act of
1933. The Fund filed its Rule 24f-2 notice for the fiscal year
ended July 31, 1997 on
September 26, 1997.<PAGE>
<PAGE>
AMERICAN GROWTH FUND, INC.110 Sixteenth Street, Suite 1400, Denver,
Co
80202
(303) 626-0600
PROSPECTUS
October 31, 1997
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'), 110 Sixteenth Street, Suite 1400, Denver, CO 80202,
(303) 626-0600, 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 October 31,
1997 (the 'Statement
of Additional Information'), has been filed with the Securities and
Exchange Commission
and is available, without charge, by calling or by writing the Fund
at the above telephone
number or address. The Statement of Additional Information is
incorporated by reference
into this Prospectus.
AMERICAN GROWTH FUND SPONSORS, INC.
110 Sixteenth Street, Suite 1400, Denver, Co 80202
303-626-0600
800-525-2406
<PAGE>
<TABLE>
<CAPTION>
FEE TABLE
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 ReinvestmentNoneNoneNoneNone
Deferred Load (as a percentage of original purchase
price or redemption proceeds, whichever is lower)None(b)5.0%
during the first 1% for one year
None(b)
2 years, 4% for the
next 2 years, decreasing
1% annually thereafter to
0.0% the seventh year(a)
Exchange
Fee...........................................NoneNoneNoneNone
ANNUAL FUND OPERATING EXPENSES (AS
A PERCENTAGE OF AVERAGE NET ASSETS)(a):
Investment Advisory
Fees.............................................0.80%0.80%0.80%
0.80%
Distribution and Service
Fees.......................................0.30%1.00%1.00%
None
Other
Expenses.........................................................
.....0.66%0.66%0.70%
0.75%
Total Fund Operating
Expenses....................................1.76%2.46%2.50%
1.55%
</TABLE>
(a) Class B shares convert to Class A shares automatically
approximately seven years after initial purchase. See 'Purchase
of Shares--Deferred Sales Charge Alternatives--Class B and
Class C Shares'.
(b) Purchases of Class A and Class D shares in amounts of
$1,000,000 or more which are not subject to an initial sales
charge generally will be subject to a contingent deferred
sales charge of 1.0% of amounts redeemed within the first year
of purchase.
<PAGE>
<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 sharesonly) 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 $110 $147 $253
Class B $75 $117 $141 $254*
Class C $35 $ 78 $133 $284
Class D $72 $104 $137 $231
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 $110 $147 $253
Class B $25 $ 77 $131 $254*
Class C $25 $ 78 $133 $284
Class D $72 $104 $137 $231
</TABLE>
* Assumes conversion to Class A shares approximately seven years
after purchase.
The foregoing Fee Table is intended to assist investors in
understanding the costs and expenses that a shareholder in the
Fund will bear directly or indirectly. The example should not be
considered a representation of past or future expenses or annual
rate
of return, and actual expenses or annual rates of return may be
more or less than those assumed for purposes of the Example. The
Example set forth above assumes reinvestment of all dividends and
distributions and utilizes a 5% annual rate of return as mandated
by Securities and Exchange Commission (the 'Commission')
regulations. Class A, Class B and Class C shareholders who own
their
shares for an extended period of time may pay more in total charges
than the economic equivalent of the maximum front-end sales
charge permitted under the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the 'NASD'). See 'Purchase
of Shares' and 'Redemption of Shares'.
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables present selected financial information
about the Fund, including per share data and expense ratios and
other data based on the Fund's average net assets. This
information, for each of the two years ended July 31, 1997 has been
audited by
KPMG Peat Marwick LLP, the Fund's independent auditors, whose
report on the Fund's financial statements for the fiscal year ended
July 31, 1997 is included in the Statement of Additional
Information. This information for each of the eight years ended
July 31, 1995
has been audited by the Fund's previous independent auditors.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class D
Year Ended July 31,
Per Share Operating Data199719961995199419931992199119901989
1988
Net Asset Value,
Beginning of Period......$ 8.85 $ 8.75$ 9.34$ 9.39 $ 8.50$ 8.02$
7.59$ 7.46$ 6.71
$9.62
Income(loss) from
investment operations:
Net investment income.... .175 .035 .21 .03
.11
.10 .16 .17 .38 .24
Net realized and unrealized
gain (loss)............... 2.82 .39 .88 1.00 1.51
.94 .53 .26 .71(1.72)
Total income (loss) from
Investment Operations..... 2.99 .42 1.09 1.03 1.62
1.04 .69 .43 1.09(1.48)
Dividends and distributions
to shareholders:
Dividends from net
investment income ....... (.12)6 (.12)6 (.12) (.05)
(.08) (.06)
(.26) (.30) (.34) (.16)
Distributions from net
realized gain............ (.39) (.20) (1.56) (1.03)
(.65) (.50) --
- - (1.27)
Total dividends and
distributions to
shareholders............. (.51) (.32) (1.68) (1.08)
(.73) (.56)
(.26) (.30) (.34)(1.43)
Net Asset Value,
End of Period...........$11.33 $8.85 $8.75 $9.34 $9.39 $8.50
$8.02 $7.59 $7.46 $6.71
Total Return1..............35.1% 4.8% 15.2%11.1% 20.2% 13.6%
9.6% 5.7% 17.0%(14.4)%
Ratios/Supplemental Data:
Net assets, end of period
(in
thousands)...........$115,106$100,130$90,538$68,209$62,180$55,501
$55,710$58,574$63,935
$64,248
Ratios to average net
assets:
Net investment income
(loss)................... 1.71% 0.47% 1.91% 0.35% 0.59% 1.14%
2.02%
2.01% 5.15% 3.17%
Expenses2................. 1.55% 1.63% 1.45% 1.34% 1.44%1 .46%
1.33% 1.33% 1.32% 1.29%
Portfolio Turnover
Rate3....................106.2%163.1%173.0% 87.2% 48.8%
39.8%135.5% 92.3%
60.9%241.7%
Average Brokerage
Commission Rate4.....$0.0578$0.0561--- - - - - -
</TABLE>
1 Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period with all dividends
and distributions reinvested in additional shares on the
reinvestment date and redemption at the net asset value calculated
on the
last business day of the fiscal period. Sales charges are not
reflected in total returns. Total returns are not annualized for
periods of
less than one full year.
2 Beginning of fiscal 1996, the expense ratio reflects the
effect of expenses paid indirectly by the Fund. Prior year
expenses have not been adjusted.
3 The lesser of purchases and sales of portfolio securities for
a period, divided by the monthly average of the market
value of securities owned during the period. Securities with a
maturity or expiration date at the time of acquisition of one year
or
less are excluded from the calculation. Purchases and sales of
investment securities (other than short-term securities) for the
period
ended July 31, 1997, aggregated $132,035,122 and $85,312,030,
respectively.
4 Total brokerage commissions paid on applicable purchases and
sales of investment securities for the period divided by
the total number of related shares purchased and sold.
5 Net investment income per share is based upon relative daily
net asset values.
6 Distributions from net investment income per share are based
upon relative net asset values as of the business day
following the distribution record date.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
Class A Class B Class C
<S> <C> <C> <C>
Period Ended July 31,
Per Share Operating Data:199719961 1997 19961 1997
19961
Net Asset Value,
Beginning of Period......$8.84$9.21$8.80$9.21 $8.81$9.21
Income(loss) from
investment operations:
Net investment income.... .147-7 .075(.01)5 .075-7
Net realized and unrealized
gain (loss)............... 2.83(.37)2.79(.40) 2.79(.40)
Total income (loss) from
Investment Operations..... 2.97(.37)2.86(.41) 2.86(.40)
Dividends and distributions
to shareholders:
Dividends from net
investment income .......(.12)8- (.09)8- (.09)8-
Distributions from net
realized gain............(.39)- (.39)- (.39)
- -
Total dividends and
distributions to
shareholders.............(.51) - (.48)-
(.48)-
Net Asset Value,
End of Period............$11.30 $8.84$11.18 $8.80$11.19
$8.81
Total Return2.............34.6%(4.0)%33.5% (4.5)%33.6% (4.3)%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)...........$10,536$3,838$10,962 $3,417$3,023 $367
Ratios to average net
assets:
Net investment income
(loss)...................1.28%0.13%60.49% (0.52)%60.55%
(0.63)%6
Expenses3.................1.76%2.06%62.46% 2.81%62.50%
2.97%6
Portfolio Turnover
Rate4...................106.2%163.1%106.2% 163.1%106.2% 163.1%
Average Brokerage
Commission Rate5........$0.0578$0.0561 $0.0578 $0.0561$0.0578
$0.0561
</TABLE>
1 For the period March 1, 1996 (inception of offering) to July
31, 1996.
2 Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or
inception of offering) with all dividends and distributions
reinvested in additional shares on the reinvestment date
and redemption at the net asset value calculated on the last
business day of the fiscal period. Sales charges are not
reflected in total returns. Total returns are not annualized for
periods of less than one full year.
3 Beginning in fiscal 1996, the expense ratio reflects the
effect of expenses paid indirectly by the Fund.
Prior year expenses have not been adjusted.
4 The lesser of purchases and sales of portfolio securities for
a period, divided by the monthly average of
the market value of securities owned during the period. Securities
with a maturity or expiration date at the time of
acquisition of one year or less are excluded from the calculation.
Purchases and sales of investment securities (other
than short-term securities) for the period ended July 31, 1997,
aggregated $132,035,122 and $85,312,030,
respectively.
5 Total brokerage commissions paid on applicable purchases and
sales of investment securities for the
period divided by the total number of related shares purchased and
sold.
6 Annualized
7 Net investment income per share is based upon relative daily
net asset values.
8 Distributions from net investment income per share are based
upon relative net asset values as of the
business day following the distribution record date.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
American Growth Fund, Inc., an open-end diversified investment
company, is a
Maryland corporation organized July 16, 1958.
The primary investment objective of the Fund is growth of
capital. Income, while
a factor in portfolio selection, is secondary to the Fund's
principal objective. These
investment objectives can be changed by a vote of the board of
directors without a vote
of the Fund's shareholders, which could cause the Fund to have an
investment objective
different from that deemed appropriate by the shareholder at the
time of investment. The
Fund will notify shareholders of any change in investment
objectives at least 30 days in
advance of such change. There can be no assurance that the Fund
will attain its
investment objectives.
In attempting to achieve its investment objective, the Fund
will under normal
conditions invest at least 65% of its assets in common stocks and
securities convertible
into common stocks traded on national securities exchanges or
over-the-counter.
Investment Research Corporation, the Fund's investment adviser (the
Adviser) will
choose common stocks (or convertible securities) that the Adviser
believes have potential
for capital appreciation because of existing or anticipated
economic conditions or because
of other factors, including that the securities are considered
undervalued or out of favor
with investors or are expected to increase in price over the
short-term. Convertible debt
securities will be rated at least A by Moody's Investors Service or
Standard & Poor's
Ratings Services, a division of the McGraw Hill Companies, Inc.,
or, if unrated, will be
of comparable quality in the opinion of the Adviser.
In pursuing the Fund's objectives, the Adviser intends to take
a conservative
approach to investment, balancing the preservation of capital
against potential gains. When
the Adviser believes the securities the Fund holds may decline in
value, the Fund may sell
them and, until such time as the Adviser believes market conditions
warrant otherwise,
invest all or part of the Fund's assets in corporate bonds,
debentures or preferred stocks
rated A or above (or, if unrated, of comparable quality in the
opinion of the Adviser),
United States Government securities, repurchase agreements whereby
the underlying
security is issued by the United States Government or an agency
thereof, or retain funds
in cash or cash equivalents. There are market risks in all
investments in securities, and the
value of the Fund's securities, and consequently the Fund's share
price, will fluctuate.
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.
<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 event, 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.
<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, 110 Sixteenth Street, Suite 1400,
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, 1997, this fee
amounted to 0.80% of the Fund's average net assets on each of the
four classes. 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 1.55% of the
Fund's average net assets of the Class D shares, 1.76% for Class A,
2.46% for Class B
and 2.50% for Class C.
BROKERAGE
The Fund does not have any agreement or arrangement to use any
particular broker
for portfolio transactions. The Fund is authorized to employ
broker-dealers, including
"affiliated" brokers, as that term is defined in the Investment
Company Act of 1940, as
may, in its best judgment based on all relevant factors, implement
the policy of the Fund
to obtain, at reasonable expense, the "best execution" (prompt and
reliable execution at
the most favorable price obtainable) of such transactions. The
Manager need not seek
competitive commission bidding but is expected to minimize the
commissions paid to the
extent consistent with the interest and policies of the fund as
established by its Board of
Directors. Purchases of securities from underwriters include a
commission or concession
paid by the issuer to the underwriter, and purchases from dealers
include a spread between
the bid and asked price. The Fund has a policy of considering sales
of Fund shares in
selecting brokers for portfolio transactions provided that the
Fund's experience with such
brokers indicates that they are capable of providing best
execution. The Fund's portfolio
turnover rate in fiscal
<PAGE>
years 1997 and 1996 was 106.2% and 163.1%, respectively. High
portfolio turnover
(over 100%) may involve corresponding greater brokerage commissions
and other
transaction costs which will be borne directly by the Fund. In
addition, high portfolio
turnover may result in increased short-term capital gains which,
when distributed to
shareholders, are treated as ordinary income.
PURCHASE OF SHARES
The Fund's underwriter is American Growth Fund Sponsors, Inc.,
(the Distributor),
110 Sixteenth Street, Suite 1400, Denver, Colorado 80202-4418.
Robert Brody, president
and a director of the Fund, is also president and a director of the
Distributor.
The Fund offers its shares continuously to the public at their
net asset values next
computed after receipt of the order to purchase plus any applicable
sales charges as
described below. Shares can be purchased through the Distributor or
through
broker-dealers with whom the Distributor has sales agreements.
Purchase orders received
and properly time-stamped by dealers and received by the Fund's
Distributor prior to 2:00
p.m. Denver time on any business day will be confirmed at the
public offering price
effective at the close of the New York Stock Exchange ('NYSE') on
that day. Orders
received after such times will be confirmed at the public offering
price determined as of
the close of the NYSE on the next business day. A business day is
any day the NYSE is
open for trading. All purchases made by check should be in U.S.
dollars and made
payable to the American Growth Fund, or in the case of a
retirement account, the
custodian or trustee. Third party checks will not be accepted.
The Fund issues four classes of shares, which permits each
investor to choose the
method of purchasing shares that the investor believes is most
beneficial given such
investor's individual circumstances. Shares of Class A and Class D
are sold to investors
choosing the initial sales charge alternatives while shares of
Class B and Class C are sold
to investors choosing the deferred sales charge alternatives.
Investors should determine
whether under their particular circumstances it is more
advantageous to incur an initial
sales charge or to have the entire initial purchase price invested
in the Fund, with the
investment thereafter being subject to a CDSC and higher
distribution fees.
In selecting a purchase alternative, an investor should
consider, among other
things, (1) the length of time you expect to hold your investment,
(2) the amount of any
applicable sales charge (whether imposed at the time of purchase or
redemption) and
distribution-related fees, as noted below, (3) whether you qualify
for any reduction or
waiver of any applicable sales charge; (4) the fact that Class B
shares automatically
convert to Class
<PAGE>
A shares approximately seven years after purchase (see 'Conversion
Feature--Class B
shares' below).
The following is provided to assist you in determining which
method of purchase
best suits your individual circumstances and is based on current
fees and expenses being
charged to the Fund.
If you intend to hold your investment in the Fund for less
than 7 years and do not
qualify for a reduced sales charge on Class A shares or qualify to
purchase Class D
shares, you should consider purchasing Class C shares over either
Class A or Class B
shares, since Class A shares are subject to an initial sales charge
of 5.75% and Class B
shares are subject to a CDSC of 5% which declines to zero over a
7-year period.
If you intend to hold your investment for 7 years or more and
do not qualify for
a reduced sales charge on Class A shares or qualify to purchase
Class D shares, you
should consider purchasing Class A or Class B shares over Class C
shares since Class B
shares convert to Class A shares approximately 7 years after
purchase and because all of
your money would be invested initially in the case of Class B
shares.
If you qualify for a reduced sales charge on Class A shares
but do not qualify to
purchase Class D shares, it may be more advantageous for you to
purchase Class A shares
over either Class B or Class C shares regardless of how long you
intend to hold your
investment. However, unlike Class B and Class C shares, you would
not have all of your
money invested initially because the sales charge on Class A shares
is deducted at the
time of purchase.
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
0.30% distribution fee), and may be more advantageous for you to
purchase Class D
shares over either Class B or Class C shares depending on whether
you are eligible for
reduced sales charges and how long you intend to hold your
investment.
If you do not qualify for a reduced sales charge on Class A or
Class D shares and
you purchase Class B or Class C shares, you would have to hold your
investment for
more than 6 years in the case of Class B shares and more than one
year for Class C shares
for the higher cumulative annual distribution-related fee on those
shares to exceed the
initial sales charge (plus, for Class A shares, cumulative annual
distribution-related fees
on Class A shares). This does not take into account the time value
of money, which
further reduces the impact of the higher Class B or Class C
distribution-related fee on the
investment, fluctuations in net asset
<PAGE>
value, the effect of the return on the investment over this period
of time or redemptions
during which the CDSC is applicable.
Investors should understand that the purpose and function of
the initial sales
charges with respect to Class A and Class D shares are the same as
those of the deferred
sales charges with respect to Class B and Class C shares in that
the sales charges
applicable to each class provide for the financing of the
distribution of the shares of the
class. The distribution-related revenues paid with respect to a
class will not be used to
finance the distribution expenditures of another class. Sales
personnel may receive
different compensation for selling different classes of shares.
Commencing June 20, 1995 and ending September 30, 2005, the
Distributor will
offer a long term sales incentive promotion in which non-cash
concessions in the form of
one or more all expenses paid promotional trips to resort locations
will be awarded to
participating broker dealers achieving certain cumulative sales
levels in shares of the
Fund. Participation in the incentive programs is entirely optional
on the part of the broker
dealer. Copies of the incentive program rules which contain more
complete information
about the terms and condition of the programs, including qualifying
levels and specific
awards, may be obtained by investment representatives by contacting
the Distributor.
INITIAL SALES CHARGE ALTERNATIVES--CLASS A AND CLASS D SHARES.
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.
<PAGE>
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
<S> <C> <C> <C>
SALES CHARGES AS %TO DEALERS AS % OFSALES CHARGES AS
%
AMOUNT INVESTEDOF OFFERING PRICEOFFERING PRICEOF AMOUNT INVESTED
Less than $50,000..............................5.75%
5.00%6.10%
$50,000 but less than $100,000.........4.50 3.754.71
$100,000 but less than $250,000.......3.50 2.753.63
$250,000 but less than $500,000.......2.50 2.00 2.56
$500,000 but less than $1,000,000....2.00 1.602.04
$1,000,000 and over..........................0.00*
0.000.00
</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.
The above scale applies to aggregate purchases by an
individual, a spouse and
children under 21, a trustee or fiduciary of a single trust or
fiduciary account, tax exempt
organizations enumerated in Section 501(c)(3) of the Internal
Revenue Code, and
employees' trusts, profit sharing and other employee benefit plans
qualified under Section
401 of the Internal Revenue Code and 403(b) Plans, except for
401(k) and 403(b) Plans
in which each 401(k) and 403(b) investor is considered separately
for purposes of
computing sales charges. Provided, however, that the term 'any
person' shall not included
a group of individuals whose funds are combined directly or
indirectly, for the purchase
of shares of the Fund jointly or through a trustee, agent,
custodian or other representative,
nor shall it include a trustee, agent, custodian or other
representative of such a group of
individuals. From time to time the distributor may pay from the
dealer concession an
amount not to exceed the dealer concession to the Fund to reimburse
the shareholder for
any penalties they may incur while transferring assets from another
retirement plan.
<PAGE>
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. At its discretion, the Distributor may
also make payments
from its revenues to dealers that arrange purchases of Fund shares
in invested amounts
of $1,000,000 and over.
The adviser will make payments to dealers in the amount of
0.25 of 1% per year
of the average daily net asset value of outstanding Class D shares
acquired after April 1,
1994 through such dealers (including shares acquired through
reinvestment of dividends
and distributions on such shares). These payments are made by the
Adviser and not by
the Class D shareholders of the Fund.
Eligible Class D Investors. Class D shares are offered to a
limited group of
investors and also will be issued upon reinvestment of dividends on
outstanding Class D
shares. Investors that owned Class D shares in a shareholder
account, including
participants in the American Growth Fund Distribution Plan, as of
March 1, 1996, are
entitled to purchase additional Class D shares in that account.
Class D shares are also
available for sale to the Fund's, the Adviser's and the
Distributor's directors and officers
and their spouses and family members, to certain institutional
investors, including banks,
corporations and accounts managed by specified types of
fiduciaries, and to or for
retirement plans for their employees or sold to employees of such
dealers (and their
spouses or for accounts for their minor children) that have sales
agreements with the
underwriter. Such persons must give written assurance that their
purchase is made for
investment purposes and that the securities will not be resold
except through redemption
or repurchase by the issuer. The Distributor reserves the right to
ask for adequate
documentation to ensure that shareholders are eligible for the
above shares.
Reduced Initial Sales Charges. No initial sales charges are
imposed upon Class
A and Class D shares issued as a result of the automatic
reinvestment of dividends or
capital gains distributions. Class A and Class D sales charges also
may be reduced under
a Right of Accumulation and a Letter of Intention. Class D shares
are offered at net asset
value only to certain eligible Class D investors as set forth above
under 'Eligible Class
D Investors'.
The sales charge may vary with the amount of investment or the
number of Class
A and/or Class D shares owned. The Fund makes available the
following investment plans
and options which may involve reduced sales charges: Right of
Accumulation, Letter of
Intent, and Retirement Plans. The Fund also offers 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. Additional charges apply for
some services or
plans. For more
<PAGE>
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.
The Fund also sells its Class A shares at net asset value in
connection with a
qualified rollover of assets held in a previously existing
tax-exempt retirement plan
(including an IRA, 401(k) plan or 403(b) plan) through
broker-dealers who have entered
into an agreement with
<PAGE>
the Underwriter relating to such rollovers.
Contingent Deferred Sales Charges--Class A and Class D Shares.
Class A and
Class D shares which are sold in amounts of $1,000,000 at net asset
value and are
redeemed within one year of purchase may be subject to a 1.0% CDSC.
The charge will
be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of
the shares being redeemed. Accordingly, no Class A or Class D CDSC
will be imposed
on increases in net asset value above the initial purchase price.
In addition, no Class A
or Class D CDSC will be assessed on shares derived from
reinvestment of dividends or
distributions.
DEFERRED SALES CHARGE ALTERNATIVES--CLASS B AND CLASS C
SHARES. Investors choosing the deferred sales charge alternatives
should consider Class
B shares if they intend to hold their shares for an extended period
of time and Class C
shares if they are uncertain as to the length of time they intend
to hold their assets in the
Fund.
The public offering price of Class B and Class C shares for
investors choosing the
deferred sales charge alternatives is the next determined net asset
value per share without
the imposition of a sales charge at the time of purchase. As
discussed below, Class B
shares are subject to a seven year CDSC, while Class C shares are
subject to a one year
1.0% CDSC. On the other hand, approximately seven years after Class
B shares are
issued, such Class B shares, together with shares issued upon
dividend and distribution
reinvestment with respect to those shares, are automatically
converted into Class A shares
of the Fund and thereafter will be subject to lower continuing
fees. See 'Conversion of
Class B Shares to Class A Shares' below. Both Class B and Class C
shares are subject to
a service fee of 0.25% of net assets and a distribution fee of
0.75% of net assets as
discussed below under 'Distribution Plans'.
Class B and Class C shares are sold without an initial sales
charge so that the Fund
will receive the full amount of the investor's purchase payment.
The Distributor
compensates broker, dealers and other financial 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
<PAGE>
and a lower distribution fee. The proceeds from the ongoing service
fee are used to
compensate the Distributor or dealers for providing continuing
account maintenance
activities.
Imposition of the CDSC and the distribution and service fees
on Class B and Class
C shares is limited by the NASD asset-based sales charge rule.
Contingent Deferred Sales Charges--Class B Shares. Class B
shares which are
redeemed within seven years of purchase may be subject to a CDSC at
the rates set forth
below. The charge will be assessed on an amount equal to the lesser
of the proceeds of
redemption or the costs of the shares being redeemed. Accordingly,
no CDSC will be
imposed on increases in net asset value above the initial purchase
price. In addition, no
CDSC will be assessed on shares derived from reinvestment of
dividends or distributions.
<TABLE>
<CAPTION>
The following table sets forth the rates of the Class B CDSC:
<S> <C>
CLASS B CDSC AS A
PERCENTAGE OF
YEAR SINCE PAYMENT MADE OR OTHER
DOLLAR
PURCHASE AMOUNT SUBJECT TO CHARGE
0-2 5.00%
3-4 4.00
5 3.00
6 2.00
7 1.00
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.
<PAGE>
To provide an example, assume an investor purchased 100 shares
at $10 per share
(at a cost of $1,000) and in the third year after purchase, the net
asset value per share is
$12 and, during such time, the investor has acquired 10 additional
shares through dividend
reinvestment. If at such time the investor makes his or her first
redemption of 50 shares
(proceeds of $600), 10 shares will not be subject to a CDSC because
of dividend
reinvestment. With respect to the remaining 40 shares, the CDSC is
applied only to the
original cost of $10 per share and not to the increase in net asset
value of $2 per share.
Therefore, $400 of the $600 redemption proceeds will be charged at
a rate of 4.00% (the
applicable rate in the third year after purchase).
If a Class B share account is set up on an Automatic
Withdrawal Program, there
will be no CDSC on the amounts redeemed pursuant to the Automatic
Withdrawal
Program as long as the total annual amount withdrawn is less than
12% per year of the
previous years' value or of the initial investment, whichever is
greater.
Contingent Deferred Sales Charges--Class C Shares. Class C
shares which are
redeemed within one year of purchase may be subject to a 1.0% CDSC.
The charge will
be assessed on an amount equal to the lesser of the proceeds of
redemption or the cost of
the shares being redeemed. Accordingly, no Class C CDSC will be
imposed on increases
in net asset value above the initial purchase price. In addition,
no Class C CDSC will be
assessed on shares derived from reinvestment of dividends or
distributions.
In determining whether a Class C CDSC is applicable to a
redemption, the
calculation will be determined in the manner that results in the
lowest possible rate being
charged. Therefore, it will be assumed that the redemption is first
of shares held for over
one year or shares acquired pursuant to reinvestment of dividends
or distributions and then
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.
<PAGE>
In addition, shares purchased through reinvestment of
dividends and distributions
on Class B shares also will convert automatically to Class A
shares. The Conversion Date
for dividend reinvestment shares will be calculated taking into
account the length of time
the shares underlying such reinvestment shares were outstanding. If
at a Conversion Date
the conversion of Class B shares to Class A shares of the Fund in
a single account will
result in less than $50 worth of Class B shares being left in the
account, all of the Class
B shares of the Fund held in the account on Conversion Date will be
converted to Class
A shares of the Fund.
Share certificates for Class B shares of the Fund to be
converted must be delivered
to the Transfer Agent at least one week prior to the Conversion
Date applicable to those
shares. In the event such certificates are not received by the
Transfer Agent at least one
week prior to the Conversion Date, the related Class B shares will
convert to Class A
shares on the next scheduled Conversion Date after such
certificates are delivered.
DISTRIBUTION PLANS
The Fund has adopted separate distribution plans for the Class
A, Class B and
Class C shares pursuant to Rule 12b-1 under the Investment Company
Act (each a
'Distribution Plan') with respect to the service and distribution
fees paid by the Fund to
the Distributor with respect to such classes.
The Distribution Plans for Class A, Class B and Class C shares
each provide that
the Fund pays the Distributor a service fee relating to the shares
of the applicable class,
accrued daily and paid monthly, at the annual rate of 0.25% of the
average daily net
assets of the class in order to compensate the Distributor (who in
turn may compensate
broker-dealers and other financial consultants) in connection with
certain services provided
to shareholders of the Class.
The Distribution Plans for Class A, Class B and Class C shares
each provide that
the Fund also pays the Distributor a distribution fee relating to
the shares of the applicable
class, accrued daily and paid quarterly, at the annual rate of
0.75% for Class B and Class
C shares and 0.05% for Class A shares respectively of the average
daily net assets of the
class. These payments are intended to compensate the Distributor
for providing
distribution services, and bearing certain distribution-related
expenses of the Fund,
including payments to broker-dealer and other financial consultants
for selling shares of
the respective classes of the Fund. The Distribution Plans relating
to Class B and Class
C shares are designed to permit an investor to purchase Class B and
Class C without the
assessment of an initial sales charge and at the same time permit
the distributor to
compensate broker-dealers and other financial consultants in
connection with the sale of
the Class B and Class C shares. In this
<PAGE>
regard, the purpose and function of the ongoing distribution fees
and the CDSC are the
same as those of the initial sales charge with respect to the Class
A and Class D shares
of the Fund in that the deferred sales charges provide for the
financing of the distribution
of the Fund's Class B and Class C shares.
The payments under the Distribution Plans are based on a
percentage of average
daily net assets attributable to the shares regardless of the
amount of expenses incurred
and, accordingly, distribution-related revenues from the
Distribution Plans may be more
or less than distribution-related expenses. Information with
respect to the
distribution-related revenues and expenses is presented to the
Directors for their
consideration in connection with their deliberations as to the
continuance of the
Distribution Plans.
REDEMPTION OF SHARES
The Fund will redeem shares from a shareholder of record, (i)
in the case of Class
A and Class D shares without any charge (unless such shares are
subject to the 1% CDSC
on purchases of $1 million or more redeemed within 1 year of
purchase), (ii) in the case
of Class B and Class C shares, subject to the applicable CDSC as
described above under
'Deferred Sales Charge Alternative-Class B and Class C Shares'.
Payment generally will
be made within seven days after receipt of his written request for
redemption and a stock
power with signature guaranteed by an 'eligible guarantor
institution' as such term is
defined in Rule 17Ad-15 under the Securities Exchange Act of 1934
(including certain
banks, brokers, dealers, credit unions, securities exchanges and
associations, clearing
agencies and savings associations) and the deposit of any share
certificates. If no
certificates have been issued to the shareholder, redemption may be
accomplished by
submitting a written request for redemption with the shareholder's
signature guaranteed
if required as set forth below. Fiduciaries, corporations and other
entities may also be
required to furnish supporting documents. The Fund will waive the
signature guarantee
requirement if all of the following conditions apply: (1) the
redemption is for $5,000 or
less; (2) the redemption check is payable to the shareholder(s) of
record; and (3) the
redemption check is mailed to the shareholder(s) at the address of
record. The redemption
price will be the net asset value next determined after the receipt
of a request in proper
form. Redemption of shares which were recently purchased may be
delayed in order to
permit a determination that the purchase check will be honored.
Such determination may
be accomplished by the passage of a reasonable period of time
(approximately 15 days)
or by written assurance to the Fund from the bank upon which the
purchase check was
drawn, which must be arranged by the shareholder requesting such
redemption. An
investor can avoid these potential delays by paying for shares by
certified check or wire
transfer. The proceeds from redemption may be
<PAGE>
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.
As a condition to the purchase of shares of the Fund, the
purchaser agrees that the
Fund may, but is not required to, involuntarily redeem after
written notice the holdings
of a shareholder the aggregate net asset value of which is less
than $250 due to
redemptions. The notice will fix a date not less than 30 days after
the date on which it
is mailed, and the shares will be redeemed at net asset value as of
the close of business
on that date, unless before then the investor purchases at least
sufficient additional shares
to bring aggregate net asset value of his holdings up to $250. A
check for the proceeds
of redemption, which may be less or more than the purchase price of
the shares, will be
mailed to the investor at the address of record.
REINSTATEMENT PRIVILEGE--CLASS A AND CLASS D SHARES.
Shareholders
who have redeemed their Class A or Class D shares have a one-time
privilege to reinstate
their accounts by purchasing Class A or Class D shares, as the case
may be, of the Fund
at net asset value without a sales charge up to the dollar amount
redeemed. The
reinstatement privilege may be exercised by sending a notice of
exercise along with a
check for the amount to be reinstated to the Transfer Agent within
30 days after the date
the request for redemption was accepted by the Transfer Agent or
the Distributor. The
reinstatement will be made at the net asset value per share next
determined after the notice
of reinstatement is received and cannot exceed the amount of the
redemption proceeds.
The reinstatement privilege is a one-time privilege and may be
exercised by the Class A
or Class D shareholder only the first time such shareholder makes
a redemption.
<PAGE>
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.
DIVIDENDS AND DISTRIBUTIONS
The Fund's policy is to declare income dividends and capital
gains distributions
to its shareholders in December and to pay them in January of each
calendar year unless
the board of directors of the Fund determines that it is to the
shareholders' benefit to
make distributions on a different basis.
Unless the shareholder at his option on notice to the Fund
previously requests
payments in cash, income dividends and capital gains distributions
will be reinvested in
Fund shares, of the same class, at their relative net asset values
as of the business day
next following the distribution record date. If no instructions are
given on the application
form, all income dividends and capital gains distributions will be
reinvested.
AUTOMATED INVESTMENT PLAN
Regular additions of Class A, Class B, Class C or Class D
shares may be made to
an investor's Investment Account by prearranged charges to such
investor's regular bank
account. Contact the Distributor for further details concerning
this plan.
<PAGE>
TAXES
The Fund is qualified and intends to continue to qualify as a
regulated investment
company under the Internal Revenue Code, as amended ('the Code').
As long as it is so
qualified, the Fund will not be subject to U.S. federal income tax
on the portion of its
investment company taxable income and net capital gain distributed
to its shareholders.
A distribution will be treated as paid on December 31 of the
calendar year if it is paid
during the calendar year or if declared by the Fund in October,
November or December
of such year, payable to shareholders of record on a date in such
month and paid by the
Fund during January of the following year. Any such distributions
paid during January
of the following year will be taxable to shareholders as of
December 31 rather than the
date on which the distributions are received. In order to qualify
as a regulated investment
company for any taxable year, the Fund must, among other things,
(I) derive at least 90%
of its gross income from dividends, interest, certain payments with
respect to securities
loans and gains from the sale or other disposition of stock or
securities or other income
derived with respect to its business of investing in such stock or
securities, and (ii) derive
less than 30% of its gross income from the sales or other
disposition of stock, securities
or certain financial instruments held for less than three months.
For U.S. federal income tax purposes, dividends of net
ordinary income and
distributions of any net realized short-term capital gain, whether
paid in cash or reinvested
in shares of the Fund, are taxable to shareholders as ordinary
income. The Fund expects
to derive a portion of its gross income (exclusive of capital
gains) from dividends of other
companies, and, therefore, a portion of the Fund's dividends or
distributions will qualify
for the 70% deduction for dividends-received for corporations.
Distributions of net
realized long-term capital gains, whether paid in cash or
reinvested in shares of the Fund,
are taxable to shareholders as long-term capital gains,
irrespective of the length of time
the shareholder has held his Fund shares.
A dividend or capital gains distribution with respect to
shares of the Fund held by
a tax-deferred or qualified plan, such as an IRA, 403(b)(7)
retirement plan or corporate
pension or profit sharing plan, will not be taxable to the plan.
Distributions from such
plans will be taxable to individual participants under applicable
tax rules without regard
to the character of the income earned by the qualified plan.
No gain or loss will be recognized by Class B shareholders on
the conversion of
their Class B shares into Class A shares. A shareholder's basis in
the Class A shares
acquired will be the same as such shareholder's basis in the Class
B shares converted, and
the holding period of the acquired Class A shares will include the
holding period for the
converted Class B shares.
<PAGE>
The Fund is required to backup withhold U.S. federal income
tax at the rate of
31% of all taxable distributions (including redemption payments)
payable to a shareholder
who fails to provide the Fund with its correct taxpayer
identification number and certify
that such number is correct, or payable to a shareholder who has
been notified by the
Internal Revenue Service that it is subject to backup withholding.
Shareholders will be advised annually as to the tax status of
dividends and capital
gains distributions. This information is only a summary of certain
federal tax information
about your investment. More information is contained in the
Statement of Additional
Information, and in addition you should consult with your tax
adviser about the effect of
an investment in the Fund on your particular tax situation.
PERFORMANCE DATA
From time to time the Fund may include its average annual
total return for various
specified time periods in advertisements or information furnished
to present or prospective
shareholders. Average annual total return is computed separately
for Class A, Class B,
Class C and Class D shares in accordance with formulas specified by
the Commission.
The average annual total returns are a percentage expressed in
terms of the average
annual compounded rate of return of a hypothetical investment of
$10,000 in the Fund
over periods of 1, 5, and 10 years. The return will reflect the
deduction for the sales
charge imposed upon an initial investment in the Fund and the
deduction of a proportional
share of Fund expenses (on an annual basis) and will assume that
all dividends and
distributions are reinvested when paid. If such charges were
excluded 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 cumulative total return as well as the average annual
compounded rate of
return of a hypothetical investment in the Fund over varying
periods of time in addition
to 1, 5, and 10 years up to the life of the Fund and may reflect
the deduction of the
appropriate sales charge imposed upon an initial investment of more
than $10,000 in the
Fund. These performance calculations will reflect the deduction of
a proportional share
of Fund expenses (on an annual basis), will assume that all
dividends and distributions are
reinvested when paid, may include periodic investments or
withdrawals from the account
and may include deduction for an annual custodian fee. The Fund may
calculate its total
return or other performance information prior to the deduction of
a sales charge.
<PAGE>
Performance information for the Fund may be compared in
reports and
promotional literature to: (i) Standard & Poor's 500 Index (the S
& P 500), Dow Jones
Industrial Average or other unmanaged indices so that investors may
compare the Fund's
results with those of a group of unmanaged securities widely
regarded by investors as
representative of the securities markets in general; (ii) other
groups of mutual funds
monitored by Lipper Analytical Services, a widely used independent
research firm which
ranks mutual funds by overall performance, investment objectives,
and assets or monitored
by other services, companies, publications, or persons who rank
mutual funds on an
overall performance or other criteria; and (iii) the Consumer Price
Index (a measure of
inflation) to assess the effect of inflation on the return of an
investment. There are no
administrative and management costs, expenses or sales commissions
associated with
unmanaged indices, and therefore, such expenses are not reflected
in the return; however,
the return does reflect reinvestment of dividends.
Performance information for the Fund reflects only the
performance of a
hypothetical investment in the Fund during the particular time
period on which the
calculations are based. All performance information is based on
historical results and may
not be indicative of future results. Performance information should
be considered in light
of the Fund's investment objectives and policies, characteristics
and quality of the
portfolio and the market conditions during the given time period
and should not be
considered as a representation of what may be achieved in the
future. The Statement of
Additional Information further describes the methods used to
calculate annual total return.
Set forth below is a discussion of the specific factors,
including relevant market
conditions and the investment strategies and techniques pursued by
the Adviser, that
materially affected the Fund's performance during the fiscal year
ended July 31, 1997.
The discussion was provided by the Adviser.
The Fund's holdings in two major industries during the twelve
months ended July
31, 1997, Oilfield Services and Commercial Bank, increased 31% and
51% respectively.
The Fund's portfolio within the Aerospace industry had another
outstanding year
increasing by 32.9%. The Standard & Poors 500 index increased 49.1%
during the twelve
months ended July 31, 1997. Three new industries to the Fund during
the past year also
contributed in particular to the Fund's performance: Steel (11.5%),
Paper & Forest
(19.2%), Computer & Peripherals (19.8%).
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
<PAGE>
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: Average annual
total returns at
maximum offering price for the one year ending 7/31/97, 26.9%
28.5%, 28.6% and 27.3%
for Class A, Class B, Class C and Class D, respectively.
</TABLE>
<TABLE>
Consumer Price Index American Growth Fund Class D S & P 500
<S> <C> <C> <C>
07/87 10,000 9,425
10,000
07/88 10,413 8,068
8,823
07/89 10,936 9,439
11,639
07/90 11,464 9,977
12,397
07/91 11,808 10,935
13,978
07/92 12,186 12,422
15,765
07/93 12,527 14,931
17,142
07/94 12,840 16,589
18,026
07/95 13,174 19,110
22,733
07/96 13,556 20,028
25,884
07/97 13,854 27,057
35,079
</TABLE>
<TABLE>
<CAPTION>
Consumer Price Index American Growth Fund Class A S & P 500
<S> <C> <C> <C>
03/96 10,000 9,425
10,000
07/96 - 9,048 -
07/97 10,220 12,179
14,065
</TABLE>
<TABLE>
<CAPTION>
Consumer Price Index American Growth Fund Class B S & P 500
<S> <C> <C> <C>
03/96 10,000 10,000
10,000
07/96 - 9,550 -
07/97 10,220 12,249
14,065
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Consumer Price Index American Growth Fund Class C S & P 500
<S> <C> <C>
03/96 10,000 10,000
<C>
10,000
07/96 - 9,570 -
07/97 10,220 12,786
14,065
</TABLE>
<PAGE>
CALCULATION OF NET ASSET VALUE; GENERAL INFORMATION
Net asset value is determined as of the close of business on
the NYSE each day the NYSE is open for trading, and
all purchase orders are executed at the next price that is
determined after the order is received. The NYSE is closed on
most customary national business holidays.
The following table sets forth the Fund's average annualized total
returns at maximum offering price for the one, five,
ten and fifteen year periods ended July 31, 1997 for the Fund's
Class D shares. Returns for the Fund's Class A, Class
B and Class C shares are for the one year ended July 31, 1997, and
period since inception on March 1, 1996.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Class D
RELEVANT AVERAGE ANNUALIZED
PERIOD TOTAL RETURN Class A Class B
Class C
- -----------------------------------------------------------------
- --------------
1 year 27.3% One year 21.9% 27.7%
27.8%
5 year 15.5% since
10 year 10.5% inception
15 year 13.1%
</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.
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.<PAGE>
<PAGE>
ADVISER
Investment Research Corporation
Administrative Offices & Mailing Address:
110 Sixteenth Street, Suite 1400
Denver, CO 80202
DISTRIBUTOR
American Growth Fund Sponsors, Inc.
Administrative Offices & Mailing Address:
110 Sixteenth Street, Suite 1400
Denver, CO 80202
TRANSFER AGENT
Boston Financial Data Services, Inc.
Administrative Offices:
Two Heritage Drive
North Quincy, Massachusetts 02172
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
707 17th Street, Suite 2300
Denver, Colorado 80202
CUSTODIAN
State Street Bank and Trust Company
One Heritage Drive
North Quincy, Massachusetts 02171
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN 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 BE LAWFULLY MADE.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
TABLE OF CONTENTS
<S> <C>
PAGE
Fee
Table............................................................
.................................................................
.................2
Financial
Highlights.......................................................
.................................................................
.....3
Investment Objectives and
Policies.........................................................
.............................................5
Management of the
Fund.............................................................
.........................................................6
Brokerage........................................................
.................................................................
.....................7
Purchases of
Shares...........................................................
.................................................................
...7
Initial Sales Charge
Alternatives--Class A and Class D
Shares...........................................................
.................................9
Deferred Sales Charges
Alternatives--Class B and Class C
Shares...........................................................
.................................11
Distribution
Plans............................................................
.................................................................
....13
Redemption of
Shares...........................................................
...............................................................14
Reinstatement Privilege--Class A and Class D
Shares...........................................................
.................................................................
.......................15
Exchange
Privilege........................................................
.................................................................
......15
Dividends and
Distributions....................................................
.............................................................15
Automated Investment
Plan.............................................................
....................................................15
Taxes............................................................
.................................................................
.......................16
Performance
data.............................................................
.................................................................
....17
Calculation of Net Asset Value; General
Information......................................................
....................20
</TABLE>
PROSPECTUS
October 31, 1997
DISTRIBUTOR
AMERICAN GROWTH FUND
SPONSORS, INC.
110 SIXTEENTH STREET, SUITE 1400
DENVER, CO 80202
(800) 525-2406
<PAGE>
AMERICAN GROWTH FUND, INC.
110 16th Street, Suite 1400, Denver, Colorado 80202
303-626-0600
STATEMENT OF ADDITIONAL INFORMATION
October 31, 1997
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 October 1, 1997. A
copy of the
Prospectus may be obtained by writing American Growth Fund
Sponsors, Inc. (the
"Distributor"), 110 16th Street, Suite 1400, Denver, Colorado
80202.
AMERICAN GROWTH FUND SPONSORS, INC.
110 16th Street, Suite 1400, Denver, Colorado, 80202
303-626-0600
800-525-2406
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S>
<C>
ADDITIONAL INVESTMENT INFORMATION. . . . . . . . . . .
. . . . . .B-2
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . .
. . . . . .B-3
INVESTMENT ADVISORY AGREEMENT. . . . . . . . . . . . .
. . . . . .B-5
DISTRIBUTION OF SHARES . . . . . . . . . . . . . . . .
. . . . . .B-5
AUTOMATIC CASH WITHDRAWAL PLAN . . . . . . . . . . . .
. . . . . B-8
RETIREMENT PLANS . . . . . . . . . . . . . . . . . . .
. . . . . .B-9
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . .
. . . . . .B-9
CUSTODIAN AND INDEPENDENT ACCOUNTANTS. . . . . . . . .
. . . . . B-10
BROKERAGE. . . . . . . . . . . . . . . . . . . . . . .
. . . . . B-10
CALCULATION OF NET ASSET VALUE . . . . . . . . . . . .
. . . . . B-11
DIVIDENDS, DISTRIBUTIONS AN TAXES. . . . . . . . . . .
. . . . . B-12
PERFORMANCE DATA . . . . . . . . . . . . . . . . . . .
. . . . . B-14
REPORT OF INDEPENDENT AUDITORS . . . . . . . . . . . .
. . . . . B-18
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .
. . . . . B-19
</TABLE>
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
The following information supplements the information in the Fund's
Prospectus under the heading
"Objectives and Investment Policy."
The Fund is subject to certain restrictions on its investment
policies, including the
following:
1. No securities may be purchased on margin, the Fund may
not sell securities
short, and will not participate in a joint or joint and several
basis with others in any securities
trading account.
2. Not more than 5% of the value of the assets of the Fund
may be invested in
securities of any one issuer other than securities issued by the
United States government.
3. Not more than 10% of any class of voting securities or
other securities of any
one issuer may be held in the portfolio of the Fund.
4. The Fund cannot act as an underwriter of securities of
other issuers.
5. The Fund cannot borrow money except from a bank as a
temporary measure for
extraordinary or emergency purposes, and then only in an amount not
to exceed 10% of its total
assets taken at cost, or mortgage or pledge any of its assets.
6. The Fund cannot make or purchase loans to any person
including real estate
mortgage loans, other than through the purchase of a portion of
publicly distributed debt securities
pursuant to the investment
policy of the Fund.
7. The Fund cannot issue senior securities or purchase the
securities of another
investment company or investment trust except in the open market
where no profit to a sponsor
or dealer, other than the customary broker's commission, results
from such purchase (but the total
of such investment shall not exceed 10% of the net assets of the
Fund), or except when such
purchase is part of a plan of merger or consolidation. The Fund may
purchase securities of other
investment companies in the open market if the purchase involves
only customary brokers'
commissions and only if immediately thereafter (i) no more than 3%
of the voting securities of any
one investment company are owned by the Fund, (ii) no more than 5%
of the value of the total
assets of the Fund would be invested in any one investment company,
and (iii) no more than 10%
of the value of the total assets of the Fund would be invested in
the securities of such investment
companies. Should the Fund purchase Securities of other investment
companies, the Fund's
shareholders may incur additional management and distribution fees.
8. The Fund cannot invest in the securities of issuers which
have been in operation
for less than three years if such purchase at the time thereof
would cause more than 5% of the net
assets of the Fund to be so invested, and in any event, any such
investments must be limited to
utility or pipeline companies.
9. The Fund cannot invest in companies for the purpose of
exercising management
or control.
10. The Fund cannot deal in real estate, commodities or
commodity contracts.
11. In applying its restrictions on concentration of
investments in any one industry,
the Fund uses industry classification based, where applicable, on
Bridge Information Systems,
Reuters, the S&P Stock Guide published by Standard & Poor's, the
O'Neil Database published by
William O'Neil & Co., Inc., information obtained from Value Line,
Bloomberg L.P. and Moody's
International, and/or the prospectus of the issuing company, and/or
other recognized classification
resources. Selection of an appropriate industry classification
resource will be made by management
in the exercise of its reasonable disretion. The Fund will not
concentrate its investments in any
particular industry
<PAGE>
nor will it purchase a security if, as a result of such purchase,
more than 25% of its assets will be
invested in a particular industry.
12. The Fund cannot invest in puts, calls, straddles, spreads
or any combination
thereof.
The foregoing policies can be changed only by approval of a
majority of the outstanding
shares of the Fund, which means the lesser of (i) 67% of the shares
represented at a meeting at
which more than 50% of the outstanding shares are present in person
or by proxy, or (ii) more than
50% of the outstanding shares.
When the Fund makes temporary investments in U.S. Government
securities, it ordinarily
will purchase Treasury Bills, Notes, or Bonds. The Fund may make
temporary investments in
repurchase agreements where the underlying security is issued or
guaranteed by the U.S.
Government or an agency thereof. The Fund will not invest more than
10% of its assets in
repurchase agreements maturing in more than seven days, or
securities that are illiquid by virtue
of the absence of a readily available market or legal or
contractual restrictions on resale. The Fund
will not invest in real estate limited partnership interests, other
than interests in readily marketable
real estate investment trusts. The Fund will not invest in oil, gas
or mineral leases, or invest more
than 5% of its net assets in warrants or rights, valued at the
lower of cost or market, nor more than
2% of its net assets in warrants or rights (valued on the same
basis) which are not listed on the
New York or American Stock Exchanges.
MANAGEMENT OF THE FUND
The day-to-day operations of the Fund are managed by its
officers subject to the overall
supervision and control of the board of directors. The Fund also
has a board of advisors which
counsels the directors as to general economic conditions and
specific industries. The following
information about the directors, officers and advisors of the Fund
includes their principal
occupations for the past five years:
<TABLE>
<CAPTION>
<S> <C> <C>
POSITION(S) HELD PRINCIPAL
OCCUPATIONS
NAME, ADDRESS AND AGE WITH FUND DURING PAST 5
YEARS
Robert Brody* (72) President, Director See below for
affiliations
110 Sixteenth Street, Suite 1400 with Adviser and
Distributor
Denver, Colorado
Michael J. Baum, Jr. (80) Director
Investor in securities and
1321 Bannock St. real estate; engaged
in
Denver, Colorado mortgage financing;.
president of
Baum Securities, M & N
Investment Company and First
Ave. Corp. all of which are real
estate investment companies.
Eddie R. Bush (58) Director Certified
Public Accountant
1400 W. 122nd Ave.
Suite 220
Westminster, Colorado
Don S. Strauss (73) Director Retired
President of
56 S. Glencoe St. Majestic Industries,
Inc.,
Denver, Colorado a manufacturer of
janitorial supplies
Harold Rosen (70) Director Owner of
Bi-Rite Furniture
#1 Middle Road Stores.
Englewood, CO
Timothy E. Taggart (44) Treasurer Principal financial
and
110 Sixteenth Street, Suite 1400 accounting officer.
Denver, Colorado Employee of Adviser
since 1983.
See below for
affiliation with Distributor.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
POSITION(S) HELD PRINCIPAL
OCCUPATIONS
NAME, ADDRESS AND AGEWITH FUND DURING PAST 5
YEARS
D. Leann Baird (50) Secretary Employee of Adviser
since
110 Sixteenth Street, Suite 1400 1977. See below for
Denver, CO affiliations with
Adviser and
Distributor
William D. Farr (87)Advisory Board Member President and
Director
P.O. Box 878 of Farr Farms
Company,
Greeley, Colorado Chairman of the
Board of Northern Colorado
Water Conservancy, Past President of the
National Cattlemen's
Association, Board
Member of Greeley Water Board.
Frank J. Johns (95) Advisory Board Member Retired President
of Denver
111 Emerson Street Dry Goods Company
Denver, Colorado
</TABLE>
*Robert Brody is an "interested person" of the Fund as defined by
the Investment Company Act
of 1940.
Robert Brody is the sole shareholder, president and a director
of the Adviser. He is also
president and a director of the Distributor. Timothy E. Taggart is
a director and secretary of the
Distributor and director of the Adviser. D. Leann Baird is
secretary and director of the Adviser.
All officers, directors and members of the Fund's advisory
board in the aggregate (a total
of 9) received total compensation of $10,000, from the Fund in
fiscal year 1997. Directors of the
Fund except Mr. Brody were compensated at the rate of $400 per
meeting attended; 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 year ended July 31,1997, Messrs. Baum, Bush,
Strauss and Rosen, the only
directors other than Mr. Brody serving during that year, were each
paid the following compensation
by the Fund:
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Aggregate Compensation Paid by
the
Fund
Name of Director During the Fiscal Year Ended
July
31, 1997.
Michael J. Baum, Jr. $2,000
Eddie R. Bush $2,200
Don S. Strauss $2,200
Harold Rosen $2,000
</TABLE>
In addition, for the fiscal year ended July 31, 1997, Messrs.
Farr and Johns served as
advisory board members and each received fees of $1,600 from the
Fund.
None of the above named persons received any retirement
benefits or other form of
deferred compensation from the Fund. There are no other funds that
together with the Fund
constitute a Fund Complex.
As of September 12, 1997, no person owned more than 5% of the
Fund and all officers
and directors as a group (a total of 7) owned directly 263,974 of
its shares or 2.1% of shares
outstanding. Together, directly and indirectly, all the officers
and directors as a group owned
280,134 shares or 2.3% of all shares outstanding.
As of September 12, 1997, officers, directors and members of
the advisory board and their
relatives owned of record and beneficially Fund shares with net
asset value of approximately
$4,335,000 representing approximately 3.1% 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"), 110 16th Street, Suite 1400,
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.
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 1995, 1996 and 1997
were $627,684, $866,681 and $978,027, resulting in management fees
of 0.83%, 0.82% and
0.80% of average net assets. In fiscal years 1995, 1996 and 1997
there were no expense
reimbursements made in connection with the most restrictive state
limitations.
<PAGE>
The advisory agreement will continue from year to year so long
as such continuance is
specifically approved annually either by the vote of the entire
board of directors of the Fund or by
the vote of a majority of the outstanding shares of the Fund, and
in either case by the vote of a
majority of the directors who are not interested persons of the
Fund or the Adviser cast in person
at a meeting called for the purpose of voting on such approval. The
advisory agreement may be
canceled without penalty by either party upon 60 days' notice and
automatically terminates in the
event of assignment.
DISTRIBUTION OF SHARES
The Fund's distributor is American Growth Fund Sponsors, Inc.,
110 16th Street, Suite
1400, Denver, Colorado 80202, 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 at a 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 the Distributor or
through broker-dealers who are members of the National Association
of Securities Dealers, Inc.
who have sales agreements with the Distributer. The Prospectus
contains information concerning
how the public offering price of the Fund's shares is determined.
The Distributor allows dealers
discounts or concessions from the applicable public offering price
on Class A and Class D shares.
Concessions are alike for all dealers in the United States and its
territories, but the Distributor may
pay additional compensation for special services. On direct sales
to customers through its own sales
representatives, the Distributor pays to them such portion of the
sales commission as it deems
appropriate.
Initial Sales Alternatives - Class A and Class D Shares. The
gross sales charges for the
sale of Class D shares for the fiscal years ended July 31, 1995,
1996 and 1997 were $953,868,
$1,214,039 and $156,121, respectively. The gross sales charges for
the sale of Class A shares for
the period ended July 31, 1997 was $313,777. For the fiscal years
ended July 31, 1995 1996 and
1997, for the sale of Class D shares the Distributor retained
$267,974, $245,360 and $92,772
respectively, as its portion of commissions paid by purchasers of
the Fund's shares after allowing
as concessions to other dealers $685,894, $968,679 and $63,349,
respectively. For the period
ended July 31, 1997, for the sale of Class A shares the Distributor
retained $15,818 as its portion
of commissions paid by purchases of the Fund's shares after
allowing as concession to other dealers
$14,770. During the same periods no commissions were paid to the
Distributor on sales and
purchases of portfolio securities.
<PAGE>
The following sample calculation of the public offering price
of one Class A and Class
D share of the Fund is based on the net asset value of one Class A
and Class D share as of July
31, 1997 and a transaction with an applicable sales charge at the
maximum rate of 5.75%.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C>
Net asset value per share Class D Class A
Class B Class C
(Total net assets/
Total shares outstanding) $ 11.33 $11.30 $11.18
$ 11.19
Add selling commissions
(5.75% of offering price) 0.69 0.69
0.00 0.00
Maximum offering price per share$ 12.02$11.99 $11.18
$ 11.19
</TABLE>
Investment Plans. Investors have flexibility in the purchase
of shares under the Fund's
investment plans. They may make single, lump-sum investments and
they may add to their
accounts on a regular basis, including through reinvestment of
dividends and capital gains
distributions.
An investor may elect on his application to have all dividends
and capital gains
distributions reinvested or take income dividends in cash and have
any capital gains distributions
reinvested. An investor may also retain the option of electing to
take any year's capital gains
distribution in cash by notifying the Fund of his choice to do so
in writing.
The Internal Revenue Code contains limitations and
restrictions upon participation in all
forms of qualified plans and for contributions made to retirement
plans for tax years beginning
after December 31, 1986. Consultation with an attorney or a
competent tax advisor regarding
retirement plans is recommended. A discussion of the various
qualified plans offered by the Fund
is contained elsewhere in this Statement of Additional Information.
Investor's Right of Accumulation. For Class A and Class D
shareholders the value of all
assets held the day an order is received which qualifies for rights
of accumulation may be
combined to determine the aggregate investment of "any person" in
ascertaining the sales charge
applicable to each subsequent purchase. For example, for any person
who has previously purchased
and still holds Class A or Class D shares, respectively, with a
value (at current offering price) of
$20,000 on which he paid a charge of 5.75% and subsequently
purchases $80,000 of additional
Class A or Class D shares, respectively, the charge applicable to
the trade of $80,000 would be
3.50%.
The Distributor must be notified by the shareholder when a
purchase takes place if the
shareholder wishes to qualify for the reduced charge on the basis
of previous purchases. The
reduced sales charge is inapplicable to income dividends and
capital gain distributions which are
reinvested at net asset value. The reduced charge is subject to
confirmation of the investor's
holdings through a check of the 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.
<PAGE>
Automatic Investment Plan. After making an initial investment,
a shareholder may make
additional purchases at any time either through the shareholder's
securities dealer, or by mail
directly to the transfer agent. Voluntary accumulation also can be
made through a service known
as the Fund's Automatic Investment Plan whereby the Fund is
authorized through pre-authorized
checks or automated clearing house debits to charge the regular
bank account of the shareholder
on a regular basis to provide systematic additions to the account
of such shareholder.
Deferred Sales Charges. As discussed in the Prospectus while
Class B shares redeemed
within seven years of purchase, Class C shares redeemed within one
year or purchase, and certain
purchases of Class A and Class D shares at net asset value and
redeemed within one year of
purchase, are each subject to a CDSC under most circumstances, the
charge is waived on
redemptions in connection with certain post-retirement withdrawals
from an IRA or other
retirement plan or following the death or disability of a
shareholder. Redemptions for which the
waiver applies are: (a) any partial or complete redemption in
connection with a distribution
following retirement under a tax-deferred retirement plan or
attaining age 59 1/2 in the case of an
IRA or other retirement plan, or part of a series of equal periodic
payments (not less frequently
than annually) made for life (or life expectancy) or any redemption
resulting from the tax-free
return of an excess contribution to an IRA; or (b) any partial or
complete redemption following
the death or disability (as defined in the Internal Revenue Code)
of a shareholder (including one
who owns the shares as joint tenant with his or her spouse),
provided the redemption is requested
within one year of the death or initial determination of
disability. The CDSC charge is waived on
redemption of shares in connection with a Systematic Withdrawal
Plan where the total withdrawal
is less then 12% of the previous year value or of the original
purchase, whichever is greater.
For the fiscal year ended July 31, 1997, the Distributor
received CDSCs of $11,306, with
respect to redemptions of Class B shares, all of which was paid to
the Distributor. For the fiscal
year ended July 31, 1997 the Distributor received no CDSCs with
respect to redemptions of Class
C shares.
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.
From time to time the distributor may pay a finders fee to
Selling Group Members not
to exceed 1% of the purchase for net asset value trades over one
million dollars.
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
<PAGE>
make periodic payments. As such redemptions involve the use of
capital, over a period of time they
will very likely exhaust the share balance of an account held under
a Plan and may result in capital
gains taxable to the investor. Use of a Plan cannot assure
realization of investment objectives,
including capital growth or protection against loss. Price
determinations with respect to share
redemptions are generally made on the 23rd of each month or the
next business day thereafter.
Proceeds from such transactions are generally mailed three business
days following such transaction
date.
Withdrawals concurrent with purchases of additional shares may
be inadvisable because
of duplication of sales charges. Single payment purchases of shares
in amounts less than $5,000
in combination with a withdrawal plan will not ordinarily be
permitted. No withdrawal plan will
be permitted if the investor is also a purchaser under a continuous
investment plan.
Either the owner or the Fund may terminate the Plan at any time,
for any reason, by written notice
to the other.
Investment income dividends paid on shares held in a
withdrawal plan account will be
credited to such account and reinvested in additional Fund shares.
Any optional capital gains
distributions will be taken in shares, which will be added to the
share balance held in the Plan
account. Dividends and distributions paid into the Plan account are
taxable for federal income tax
purposes.
RETIREMENT PLANS
The Fund makes available retirement plan services to all
classes of its shares. Investors
in the Fund can establish accounts in any one of the retirement
plans offered by the Fund. Each
participant in a retirement plan account is charged a $20 annual
service fee to offset expenses
incurred in servicing such accounts. Dividends and capital gains
distributions are automatically
reinvested. Under each of the plans, the Fund's retirement plan
custodian or successor custodian
provides custodial services required by the Internal Revenue Code
(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. The Distributor, in its sole discretion, may
reimburse a Fund shareholder for
any penalties which the shareholder may incur in transferring
assets from a retirement plan
established with a third party to one or more of the retirement
plans offered by the Fund. No such
reimbursement shall exceed the amount of the dealer concession
which the Distributor would
otherwise pay to a dealer in conjunction with the investment by the
shareholders in the Fund's
retirement plan(s).
INDIVIDUAL RETIREMENT ACCOUNTS. The Fund makes available a
model
Individual Retirement Account ("IRA") under Section 408(a) of the
Code on IRS Form 5305-A.
A qualified individual may invest annually in an IRA. Persons who
are not eligible to make fully
deductible contributions will be able to make non-deductible
contributions to their IRAs, subject
to limits specified in the Code, to the extent that deductible
contributions are not allowed. IRA
earnings on non-deductible, as well as deductible, contributions
will accumulate tax deferred. An
IRA account may also be established in a tax-free "roll-over"
transfer within 60 days of receipt of
a lump sum distribution from a qualified pension plan resulting
from severance of employment or
termination by the employer of such a plan.
The Code provides for penalties for violation of certain of
its provisions including, but
not limited to, contributions in excess of the stipulated
limitations, improper distributions and
certain prohibited transactions. To afford plan holders the right
of revocation described in the IRA
disclosure statements, investments made in a newly established IRA
may be canceled within seven
days of the date the plan holder signed the Custodial Agreement by
writing the Fund's retirement
plan custodian.
SIMPLIFIED EMPLOYEE PENSION PLANS. The Fund makes available
model
Simplified Employee Pension Plans ("SEPs") on IRS Form 5305-SEP and
Salary Reduction
Simplified Employee Pension Plans ("SARSEPs") on IRS Form
5305A-SEP. By adopting a SEP,
employers may contribute to each eligible 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
<PAGE>
local educational institutions, may establish a retirement plan
under Section 403(b) of the Code.
PROTOTYPE MONEY PURCHASE AND PROFIT-SHARING PENSION PLANS.
Available generally to employers, including self-employed
individuals, partnerships, subchapter S
corporations and corporations.
DISTRIBUTION PLANS
Reference is made to "Purchase of Shares--Distribution Plans"
in the Prospectus for certain
information with respect to separate distribution plans for Class
A, Class B, and Class C shares
pursuant to Rule 12b-1 under the Investment Company Act of the Fund
(each a "Distribution
Plan") and with respect to the shareholder service and distribution
fees paid by the Fund to the
Distributor with respect to such classes.
Payments of the shareholder service fees and/or distribution
fees are subject to the
provisions of Rule 12b-1 under the
Investment Company Act. Among other things, each Distribution Plan
provides that the Distributor
shall provide and the Directors shall review quarterly reports of
the disbursement of the service
fees and/or distribution fees paid to the Distributor. In their
consideration of each Distribution Plan,
the Directors must consider all factors they deem relevant,
including information as to the benefits
of the Distribution Plan to the Fund and its related class of
shareholders. Each Distribution Plan
further provides that, so long as the Distribution Plan remains in
effect, the selection and
nomination of Directors who are not "interested persons" of the
Fund, as defined in the Investment
Company Act (the "Independent Directors"), shall be committed to
the discretion of the
Independent Directors then in office. In approving each
Distribution Plan in accordance with Rule
12b-1, the Independent Directors considered the potential benefits
that the Distribution Plans could
provide to the Fund and the respective classes and
their shareholders, and concluded that there is reasonable
likelihood that such Distribution Plan will
benefit the Fund and its shareholders. Each Distribution Plan can
be terminated at any time,
without penalty, by the vote of a majority of the Independent
Directors or by the vote of the
holders of a majority of the outstanding voting securities of the
applicable class. A Distribution
Plan cannot be amended to increase materially the amount to be
spent thereunder without the
approval of the applicable class of shareholders, and all material
amendments are required to be
approved by the vote of Directors, including a majority of the
Independent Directors who have no
direct or indirect financial interest in such Distribution Plan,
cast in person at a meeting called for
that purpose. Rule 12b-1 further requires that the Fund preserve
copies of each Distribution Plan
and any report made pursuant to such plan for a period of not less
than six years from the date of
such Distribution Plan or such report, the first two years in an
easily accessible place.
For the fiscal year ended July 31, 1997, the Fund paid the
Distributor $17,911 (based on
average net assets relating to the Class A shares of approximately
$10,536,000) pursuant to the
Class A Distribution Plan, $14,770 of which was paid to other
Broker-Dealers for providing
account maintenance and distribution-related services in connection
with the Class A shares and
$3,141 was retained by the Distributor. For the fiscal year ended
July 31, 1997, the Fund paid
the Distributor $67,390 (based on average net assets relating to
the Class B shares of approximately
$10,963,000) pursuant to the Class B Distribution Plan, all of
which was paid to other Broker-
Dealers for providing account maintenance and distribution-related
services in connection with the
Class B shares. For the fiscal year ended July 31, 1997, the Fund
paid the Distributor $20,433
(based on average net assets relating to the Class C shares of
approximately $13,023,000) pursuant
to the class C Distribution Plan, all of which was paid to other
Broker-Dealers for providing
account maintenance and distribution-related services in connection
with the Class C shares. At
July 31, 1997, the net assets of the Fund subject to the Class B
Distribution Plan aggregated
approximately $10,692,000. At this net asset level, the annual fee
payable pursuant to the Class B
Distribution Plan would aggregate approximately $14,765. At July
31, 1997, the net assets of the
Fund subject to the Class C Distribution Plan aggregated
approximately $17,924. At this asset
level, the annual fee payable pursuant to the Class C Distribution
Plan would aggregate $20,433.
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.
<PAGE>
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.
The Fund may use "affiliated" brokers, as that term is defined
in the Investment Company
Act, if in the Adviser's best judgment based on all relevant
factors, the affiliated broker is able to
implement the policy of the Fund to obtain, at reasonable expense,
the "best execution" (prompt
and reliable execution at the most favorable price obtainable) of
such transactions. The Advisor
need not seek competitive commission bidding but is expected to
minimize the commissions paid
to the extent consistent with the interest and policies of the Fund
as established by its Board of
Directors. Purchases of securities from underwriters include a
commission or concession paid by
the issuer to the underwriter, and purchases from dealers include
a spread between the bid and
asked price.
The Fund paid total brokerage commissions of $409,481,
$462,481 and $306,385 in fiscal
years 1995, 1996 and 1997, respectively. The Fund did not purchase
securities issued by any
broker-dealer that executed portfolio transactions during such
fiscal year. The Fund paid brokerage
commissions of $234,855 for the 1997 fiscal year to American Growth
Fund Sponsors,the
underwriter and an affiliate of the Fund this represents 76.7% of
the total brokerage commissions
paid. The aggregate dollar amount of transactions effected through
American Growth Fund
Sponsors involving the payment of commissions represented 95.5% of
the aggregate dollar amount
of all transactions involving the payment of commissions during
1997.
While some stocks considered in the opinion of management to
be least sensitive to
business declines will be maintained as long term holdings, others
considered most sensitive to such
declines will be sold whenever in management's judgement economic
conditions may be in for a
major decline. Resulting funds may be temporarily invested in
United States Government securities,
high-grade bonds and high-grade preferred stocks, until management
believes business and market
conditions indicate that reinvestment in common stocks is
desirable. The portfolio turnover rate of
the Fund for the fiscal years ended July 31, 1995, 1996 and 1997
was 173.0%, 163.1% and
106.2%, respectively.
CALCULATION OF NET ASSET VALUE
The Fund offers its shares continuously to the public at their
net asset value next computed
after receipt of the order to
<PAGE>
purchase plus any applicable sales charge. Net asset value is
determined as of the close of business
on the New York Stock Exchange each day the Exchange is open for
trading, and all purchase
orders are executed at the next price that is determined after the
order is received. Orders received
and properly time-stamped by dealers and received by the
Distributor prior to 2:00 p.m. Denver
time on any business day will be confirmed at the public offering
price effective at the close on
that day. Orders received after such time will be confirmed at the
public offering price determined
as of the close of the Exchange on the next
business day. It is the responsibility of the dealers to remit
orders promptly to the Distributor. The
New York Stock Exchange is closed on the following holidays: New
Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas
Day.
In determining net asset value, securities traded on the New
York Stock Exchange or other
stock exchange approved for this purpose by the board of directors
will be valued on the basis of
the closing sale thereof on such stock exchange, or, if such sale
is lacking, at the mean between
closing bid and asked prices on such day. If no bid and asked
prices are quoted for such day or
information as to New York or other approved exchange transactions
is not readily available, the
security will be valued by reference to recognized composite
quotations or such other method as
the board of directors in good faith deems will reflect its fair
market value. Securities not traded
on any stock exchange but for which market quotations are readily
available are valued on the basis
of the mean of the last bid and asked prices. Short-term securities
are valued at the mean between
the closing bid and asked prices or by such other method as the
board of directors determines to
reflect their fair market value. The board of directors in good
faith determines the manner of
ascertaining the fair market value of other securities and assets.
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 A, Class B
and Class C shares will be
lower than the per share dividends and distributions on Class D
shares as a result of the account
maintenance, distribution and higher transfer agency fees
applicable with respect to the Class A,
Class B and Class C shares; similarly, the per share dividends and
distributions on Class A shares
will be higher than the per share dividends and distributions on
Class B and Class C shares as a
result of the lower account maintenance fees applicable with
respect to the Class A shares and a
lower distribution fee. See "Calculation of Net Asset Value".
Net capital gains (which consist of the excess of net
long-term capital gains over net
short-term capital losses) are not included in the definition of
investment company taxable income.
The Board of Directors will determine at least once a year whether
to distribute any net capital
gains. A determination by the Board of Directors to retain net
capital gains will not affect the
ability of the Fund to qualify as a regulated investment company.
If the Fund retains for investment
its net capital gains, it
<PAGE>
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 such
capital gain or loss will be
long-term capital gain or loss if the shares have been held for
more than one year. Any loss
realized on a sale or exchange will be disallowed to the extent the
shares disposed of are replaced
within a period of 61 days beginning 30 days before and ending 30
days after the shares are
disposed of. Any loss realized by a shareholder on the sale of
shares of the Fund held by the
shareholder for six months or less will be treated for tax purposes
as a long-term capital loss to
the extent of any distributions of net capital gains received by
the shareholder with respect to such
shares.
Shareholders receiving distributions in the form of newly
issued shares will have a cost
basis in each share received equal to the fair market value of a
share of the Fund on the
distribution date. Shareholders will be notified annually as to the
U.S. federal income tax status
of distributions and shareholders receiving distributions in the
form of newly issued shares will
receive a report as to the fair market value of the shares
received. If the net asset value of shares
is reduced below a shareholder's cost as a result of a distribution
by the Fund, such distribution
will be taxable even though it represents a return of invested
capital Investors should be careful
to consider the tax implications of buying shares just prior to a
distribution. The price of shares
purchased at this time may reflect the amount of the forthcoming
distribution. Those purchasing
just prior to a distribution will
receive a distribution which will nevertheless be taxable to them.
Income received by the Fund from sources within foreign
countries may be subject to
withholding and other taxes imposed by such countries. Income tax
treaties between certain
countries and the United States may reduce or eliminate such taxes.
It is impossible to determine
in advance the effective rate of foreign tax to which the Fund will
be subject, since the amount of
the Fund assets to be invested in various countries is not known.
It is not anticipated that
shareholders will be entitled to claim foreign tax credits with
respect to their share of foreign taxes
paid by the Fund.
Distributions may also be subject to additional state, local
and foreign taxes depending on
each shareholder's particular
<PAGE>
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.
If a shareholder has elected to receive dividends and/or
capital gain distributions in cash
and the postal or other delivery service is unable to deliver
checks to th shareholder's address of
record, such shareholders distribution option will automatically
be converted to having all
dividends and other distributions reinvested in additional
shares...No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
The foregoing is a general and abbreviated summary of the
applicable provisions of the
Code and Treasury Regulations presently in effect. For the complete
provisions, reference should
be made to the pertinent Code sections and the Treasury Regulations
promulgated thereunder. The
Code and the Treasury Regulations are subject to change by
legislative or administrative action
either prospectively or retroactively.
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, 1997, the average annual total
returns at maximum offering
price for the Class D shares of the Fund were 27.3% for 1 year,
15.5% for 5 years, 10.5% for 10
years and 13.1% for 15 years. For the year ended July 31, 1997 and
period since inception on
March 1, 1996, the average annual total return for the Fund's Class
A shares were 26.9% and
21.9%, Class B shares were 28.5% and 27.7%, and Class C shares were
33.6% and 27.8%,
respectively.
In addition to the standardized calculation of annual total
return, the Fund may from time
to time use other methods of calculating its performance in order
to illustrate the effect of a
hypothetical investment in a plan or the effect of withdrawing
funds from an account over a period
of time. Any presentation of non-standardized calculations will be
accompanied by standardized
performance measures as well. Calculations of performance may be
expressed in terms of the total
return as well as the average annual compounded rate of return of
a hypothetical investment in the
Fund over varying periods of time in addition to the 1, 5, and 10
year periods (up to the life of
the Fund) and may reflect the deduction of the appropriate sales
charge imposed upon an initial
investment of more than $1,000 in the Fund. These performance
calculations will reflect the
deduction of a proportional share of Fund expenses (on an annual
basis), will assume that all
dividends and distributions are reinvested when paid, may include
periodic investments or
withdrawals from the account in varying amounts and/or percentages
and may include deductions
for an annual custodian fee. The Fund may calculate its total
return or other performance
information prior to the deduction of a sales charge.
The performance figures described above may also be used to
compare the performance
of the Fund's shares against certain widely recognized standards or
indices for stock and bond
market performance. The following are the indices against which the
Portfolios may compare
performance:
The Standard & Poor's Composite Index of 500 Stocks (the S&P
500 Index) is a market
value-weighted and unmanaged index showing the changes in the
aggregate market value of 500
stocks relative to the base period 1941-43. The S&P 500 index is
composed almost entirely of
common stocks of companies listed on the NYSE, although the common
stocks of a few companies
listed on the American Stock Exchange or traded OTC are included.
The 500 companies
represented include 400 industrial, 60 transportation and 50
financial services concerns. The S&P
500 index represents about 80% of the market value of all issues
traded on the NYSE.
The Dow Jones Industrial Average is an unmanaged index
composed of 30 blue-chip
industrial corporation stocks.
The Lipper Mutual Fund Performance Analysis and Mutual Fund
Indices measure total
return and average current yield
<PAGE>
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, 1997. The illustration
assumes that the investment was made in Class D shares, (the only
class existing at that time), and
a sales load of 5.75% has been deducted from the initial and
subsequent investments, a $20 annual
fee (representing the annual service fee charged to retirement plan
accounts) has been deducted
from the account annually, and that all dividend and capital gain
distributions have been reinvested
when paid. While the illustration uses an investment of $1,000 and
a 5.75% sales load, the Fund
may select any multiple of $1,000 in order to illustrate the effect
of an investment plan and the
sales load will reflect the appropriate sales load for the initial
and subsequent investments as
determined by the Fund's currently effective prospectus. Class A,
Class B and Class C shares are
subject to additional distribution charges as outlines in the
prospectus, which would have, if the
Class was in effect, produced a lower rate of return. The sales
load may be reduced pursuant to
rights of accumulation and letter of intent.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Cumulative
cost of
shares Accepted
Dividends purchased Acquired
as
Purchased
Total of from with Total cost
with capital through
initialinvestmentinvestmentincludinginitialgains
reinvestment
Year& annual income of incomereinvested & annualdistributionsof
income
Ended
EndedinvestmentsReinvesteddividendsdividendsinvestments(Cumulative)
(Cumulative)Value
08/01/58$ 1,000 - - $ 1,000 $1,000 --$1,000
07/31/592,000 $ 25 $ 25 2,025 2,129 $ 0$
272,156
07/31/603,000 41 66 3,066 2,894 11652,970
07/31/614,000 85 151 4,151 4,611
801814,872
07/31/625,000 97 248 5,248 4,917
912415,249
07/31/636,000 123 371 6,371 6,817
2754267,518
07/31/647,000 125 496 7,496 9,427
46467210,563
07/31/658,000 147 643 8,643 9,790
1,15277811,720
07/31/669,000 202 845 9,845 10,740
2,21397713,930
07/31/6710,000 373 1,218 11,218 11,943
3,8661,42117,230
07/31/6811,000 353 1,571 12,571 14,033
4,2431,93420,210
07/31/6912,000 408 1,979 13,979 12,320
5,7171,91019,947
07/31/7013,000 410 2,389 15,659 10,520
5,2071,82217,549
07/31/7114,000 588 2,977 16,977 14,385
6,6642,97024,019
07/31/7215,000 682 3,659 18,659 16,069
7,0183,84126,928
07/31/7316,000 508 4,167 20,167 16,299
7,2594,16227,720
07/31/7417,000 782 4,949 21,949 14,041
6,3074,03424,382
07/31/7518,000 1,405 6,354 24,354 13,704
9,3305,11028,144
07/31/7619,000 1,171 7,525 26,525 16,777
10,7967,22734,800
07/31/7720,000 1,074 8,599 28,599 19,582
12,0089,20440,794
07/31/7821,000 1,017 9,616 30,616 23,726
13,98411,89449,604
07/31/7922,000 2,055 11,671 33,671 27,109
15,42915,43757,975
07/31/8023,000 2,931 14,602 37,602 37,937
22,53524,56285,034
07/31/8124,000 3,766 18,368 42,368 30,526
41,34922,50294,377
07/31/8225,000 4,235 22,603 47,603 27,829
39,47723,84691,152
07/31/8326,000 6,769 29,372 55,372 40,090
55,53542,431138,056
07/31/8427,000 5,657 35,029 62,029 35,136
58,36041,506135,002
07/31/8528,000 4,637 39,666 66,666 37,927
73,32248,927160,176
07/31/8629,000 7,330 46,996 75,996 41,252
77,92560,054179,231
07/31/8730,000 5,993 52,989 82,989 44,358
107,12470,083221,565
07/31/8831,000 3,685 56,674 87,674 31,884
105,87452,808190,566
07/31/8932,000 9,656 66,330 98,330 36,390
117,70769,793223,890
07/31/9033,000 9,004 75,334 108,334 37,969
119,75979,838237,566
07/31/9134,000 8,138 83,472 117,472 41,072
126,54393,645261,260
07/31/9235,000 1,955 85,427 120,397 44,484 151,776101,369
297,629
07/31/9336,000 2,801 88,288 124,228 50,094 193,448115,156
358,698
07/31/9437,000 1,910 90,138 127,138 50,782 232,061116,467
399,310
07/31/9538,000 5,130 95,268 133,268 48,526 297,125115,242
460,893
07/31/9639,000 6,321 101,589 140,589 50,035 311,128122,923
484,086
07/31/9740,000 6,564 108,153 148,153 65,012 424,387165,392
654,791
</TABLE>
<PAGE>
The table below illustrates the effect of an automatic
withdrawal program on an initial hypothetical
investment of $10,000 on August 1, 1958 in the Fund for the life of
the Fund. The illustration assumes that a sales
load of 5.75% was deducted from the initial investment, that $800
was withdrawn annually and withdrawals were
made first from income for the year, then from principal.
Withdrawals from principal representing the sale of shares
were assumed to have been in the order shares were acquired.
Continued withdrawals in excess of current income
can eventually exhaust principal, particularly in a period of
declining market prices. That portion of the total amount
withdrawn designated "From Investment Income Dividends" should be
regarded as income; the remainder represents
a withdrawal of principal. While this illustration assumes that
$800 was withdrawn annually, the Fund may in other
illustrations select any percentage or dollar amount to be
withdrawn.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
With-
drawn Value Accepted
Withdrawn from Cum- of as
from Principal Annual ulative remain- Capital
investment and total total ing Gains
Periodincome Capital with- with- original distri-Total
EndedDividends Gains drawn drawn shares butionsValue
07/31/59$ 244 $ 556 $ 800 $ 800 $ 11,453 $ 0$
11,453
07/31/60212 588 800 1,600 10,025 5710,082
07/31/61283 517 800 2,400 12,213 29412,507
07/31/62243 557 800 3,200 10,085 31110,396
07/31/63237 563 800 4,000 11,477 70012,177
07/31/64199 601 800 4,800 13,666 1,07014,737
07/31/65201 599 800 5,600 12,252 2,00414,256
07/31/66241 559 800 6,400 11,739 3,29215,031
07/31/67393 407 800 7,200 11,592 5,09016,682
07/31/68336 464 800 8,000 12,250 5,58817,838
07/31/69355 445 800 8,800 9,546 6,53516,081
07/31/70325 475 800 9,600 6,970 5,69512,665
07/31/71417 383 800 10,400 8,524 7,28915,813
07/31/72441 359 800 11,200 8,625 7,67516,300
07/31/73300 500 800 12,000 7,753 7,67315,426
07/31/74427 373 800 12,800 5,906 6,43212,338
07/31/75696 104 800 13,600 5,210 7,66212,872
07/31/76526 274 800 14,400 5,753 8,86614,619
07/31/77443 357 800 15,200 6,034 9,86115,895
07/31/78391 409 800 16,000 6,585 11,48418,069
07/31/79740 60 800 16,800 7,207 12,67119,878
07/31/80800 0 800 17,600 10,117 17,80027,917
07/31/81800 0 800 18,400 8,175 21,67029,845
07/31/82800 0 800 19,200 7,691 20,05027,741
07/31/83800 0 800 20,000 12,625 28,20640,831
07/31/84800 0 800 20,800 11,585 27,30338,888
07/31/85800 0 800 21,600 12,811 32,15944,970
07/31/86800 0 800 22,400 15,019 34,17849,197
07/31/87800 0 800 23,200 16,776 42,86459,640
07/31/88800 0 800 24,000 12,006 38,24350,249
07/31/89800 0 800 24,800 15,375 42,51757,892
07/31/90800 0 800 25,600 17,109 43,25860,367
07/31/91800 0 800 26,400 19,569 45,70965,278
07/31/92486 314 800 27,200 20,438 52,83973,277
07/31/93687 113 800 28,000 22,514 64,69587,209
07/31/94463 337 800 28,800 22,086 73,96196,046
07/31/95800 0 800 29,600 21,316 88,412109,278
07/31/96800 0 800 30,400 22,293 91,941114,235
07/31/97800 0 800 31,200 29,491 123,845153,366
TOTAL$ 21,286$ 9,914 $ 30,400
</TABLE>
Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund
during the
particular time period on which the calculations are based.
Performance information should be considered in light of the Fund's
investment objectives and policies,
characteristics and quality of
the portfolio and the market conditions during the given time
period and should not be considered as a representation
of
what may be achieved in the future.
<PAGE>
<PAGE>
Independent Auditors' Report
To The Board of Directors and Shareholders
of American Growth Fund, Inc.:
We have audited the accompanying statements of investments and
assets and liabilities of American Growth Fund,
Inc. as of July 31, 1997, and the related statement of operations
for the year then ended, and the statement of
changes in net assets and the financial highlights for each of the
years in the two-year period then ended. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audits. The financial
highlights for each of the years in the three-year period ended
July 31, 1995 were audited by other auditors.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as
of July 31, 1997, by correspondence with the custodian and brokers;
and where confirmations were not received
from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audits provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material
respects, the financial position of American Growth Fund, Inc. as
of July 31, 1997, the results of its operations for
the year then ended, and the changes in its net assets and the
financial highlights for each of the years in the two-
year period then ended, in conformity with generally accepted
accounting principles.
Denver, Colorado
KPMG Peat Marwick LLP
August 29, 1997
<PAGE>
This is what American Growth Fund has done for its investors* over
the last 39 years.
$681,549** Total value on 07/31/97 with both dividends and capital
gains reinvested.
<TABLE>
<CAPTION>
<S> <C> <C>
Average Annual thru thru 07/31/97
Total Return** 07/31/97 without sales charge
1 year 27.3% 35.1%
5 years 15.5% 16.8%
10 years 10.5% 11.1%
15 years 11.0% 11.5%
39 years 11.4% 11.6%
</TABLE>
$10,000 investment on August 1, 1958
*A conservative, long-term growth mutual fund with income as a
secondary objective.
** The figures in this brochure reflects the performance of the
Fund's Class D shares. On 03/01/96, the
fund adopted a multi-class distribution arrangement to issue
additional classes of shares, designated as
Class A, Class B and Class C shares. Shares existing prior to
3/1/96 became Class D shares. Class A
and Class D shares are subject to a maximum front-end sales charge
of 5.75%, Class B shares are
subject to a maximum contingent deferred sales charge of 5% and
Class C shares are subject to a 1%
contingent deferred sales charge within the first year of purchase.
The Fund may incur 12b-1 expenses
up to an annual maximum of .30 of 1% on its average daily net
assets of its Class A shares, 1% of its
average daily net assets of its Class B shares, and 1% of its
average daily net assets of its Class C
shares. Class D shares have no 12b-1 fees. Performance figures for
Class D shares include the 5.75%
initial sales charge and assume the reinvestment of income
dividends and capital gain distributions.
Performance quoted represents past performance. The investment
return and principal value of an
investment will fluctuate so that the investor's shares, when
redeemed, may be worth more or less than
their original cost. This material must be preceded or accompanied
by a current prospectus. If you have
not received, or need a current prospectus, please feel free to
call for one. Please read the prospectus
carefully before investing.
In the thirty-eight years ended 06/30/97, the Fund's average annual
total return was 10.7%, over fifteen
years it was 12.3%, over ten years it was 9.7%, over five years it
was 13.3%, over one year it was 8.2%.
The total return figures assume the maximum sales load (5.75%). The
annual returns for the year ended
06/30/97 were: Class A; 7.8%, Class B; 8.6%, Class C; 12.6%. Annual
returns assume a front end sales
charge of 5.75% on Class A, a 5% contingent deferred sales charge
for the first year on Class B, and a
1% contingent deferred sales charge for a period of one year or
less on Class C. Class B and Class C
performance without the contingent deferred sales charge during the
first year would be 13.6% and 13.6%,
respectively. In the thirty-eight years ended 06/30/97, the Fund's
average annual total return calculated
without a sales load was 10.9%, for fifteen years it was 12.8%, for
ten years it was 10.3%, for five years
it was 14.6%, and for the one year it was 14.8%.
Distributor: American Growth Fund Sponsors, Inc. 110 Sixteenth
Street, Suite 1400, Denver, CO 80202.
<PAGE> <PAGE>
To Our Investors
Dear Shareholder:
As I write this message to you, our fund is up 35.10% for our
fiscal year ended 7/31/97. Our Fund's
portfolio has been positioned to take advantage of what we perceive
to be opportunities in the forthcoming
market. A large portion of your fund's investments have been placed
in the oil field services, commercial
bank and steel industries.
This may be a good time to remind our shareholders that we manage
the Fund with two objectives in
mind.... to make money and not lose the money we've made. That's
the way we have managed American
Growth Fund for over 39 years and plan to in the future.
Perhaps, all things considered, this might be an appropriate time
to consider adding to your American
Growth Fund Account. Our toll free number is (800) 525-2406 or
(303) 626-0600. I invite your
comments, questions and suggestions. Please feel free to call or
write me.
American Growth Fund wishes you A Good Future!
Sincerely,
Robert Brody
President & Shareholder
PAGE
<PAGE>
How American Growth Fund Has Its Shareowners' Money Invested
<TABLE> STATEMENT OF INVESTMENTS
July 31, 1997
<CAPTION>
Market
Description of Security
Shares Value
COMMON STOCKS
Oilfield Services Industry 24.22%
<S> . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<C> <C>
Schlumberger Limited. . . . . . . . . . . . . . . . . . . . .
112,000 $ 8,554,000
(The largest oilfield services company in the world; operates in
two segments: oilfield services and
measurement systems.)
Global Marine, Inc.*. . . . . . . . . . . . . . . . . . . . .
200,000 5,725,000
(The largest provider of turnkey drilling services in oilfield
services industry.)
ENSCO International, Inc.*. . . . . . . . . . . . . . . . . .
60,000 3,967,500
(The 4th largest contract drilling services in the world.)
BJ Services Company*. . . . . . . . . . . . . . . . . . . . .
60,000 3,900,000
(The 3rd largest oilfield services company in the world.)
Rowan Companies, Inc.*. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .100,000
3,287,500
(Operates in three segments: drilling, manufacturing and
aircraft.)
Transocean Offshore, Inc. . . . . . . . . . . . . . . . . . .
40,000 3,267,500
(Provides contract drilling services for offshore oil and gas
wells.)
Helmerich & Payne, Inc. . . . . . . . . . . . . . . . . . . .
37,800 2,544,413
(Explores and produces oil and natural gas and provides drilling
services.)
Tidewater, Inc. . . . . . . . . . . . . . . . . . . . . . . .
40,000 2,020,000
(The largest supplier of offshore transportation services for the
worldwide offshore energy industry.)
Petroleum Geo-Services Asa*, ADR. . . . . . . . . . . . . . .
10,000 544,375
(The ninth largest oilfield services company in the world;
creates images of the geology beneath the seabed.)
33,810,288
Commercial Bank Industry 13.72%
City National Corp. . . . . . . . . . . . . . . . . . . . . .
200,000 5,750,000
(Owns City National Bank, largest independent bank in southern
California.)
SouthTrust Corp.. . . . . . . . . . . . . . . . . . . . . . .
90,000 4,238,437
(The 33rd largest bank in the U.S.)
J.P. Morgan & Company, Inc. . . . . . . . . . . . . . . . . .
30,000 3,476,250
(One of the largest trust companies in the United States.)
Royal Bank of Canada. . . . . . . . . . . . . . . . . . . . .
70,000 3,364,375
(Canada's largest bank.)
NationsBank Corp. . . . . . . . . . . . . . . . . . . . . . .
32,624 2,322,421
(The 3rd largest bank in the United States.)
19,151,483
*Non-income producing security.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market
Description of Security
Shares Value
<S>
<C> <C>
Steel Industry 13.07%
Bethlehem Steel*. . . . . . . . . . . . . . . . . . . . . . .
600,000 $ 6,750,000
(The second largest United States integrated steel maker.)
USX-U.S. Steel Group. . . . . . . . . . . . . . . . . . . . .
175,000 6,398,438
(The largest United States steel maker.)
Nucor Corporation . . . . . . . . . . . . . . . . . . . . . .
60,000 3,723,750
(The second largest United States general steel maker.)
Inland Steel Industries, Inc. . . . . . . . . . . . . . . . .
60,000 1,376,250
(The fifth largest steel producer in the United States.)
18,248,438
Paper and Forest Industry 8.19%
International Paper Company . . . . . . . . . . . . . . . . .
105,000 5,880,000
(One of the largest manufacturers of paper products in the
world.)
James River Corp. . . . . . . . . . . . . . . . . . . . . . .
135,000 5,560,312
(The second largest paper goods producer in the United States.)
11,440,312
Computer & Peripherals Industry 8.06%
International Business Machines Corp. . . . . . . . . . . . .
60,000 6,345,000
(The world's largest supplier of advanced information processing
technology.)
Hewlett Packard Company . . . . . . . . . . . . . . . . . . .
70,000 4,904,375
(A designer and manufacturer of precision electronic products.)
11,249,375
Thrift Industry 5.30%
Golden West Financial Corp. . . . . . . . . . . . . . . . . .
88,000 7,403,000
(Third largest thrift in the United States.)
Aerospace/Defense Industry 5.22%
Boeing Company (The). . . . . . . . . . . . . . . . . . . . .
124,000 7,292,750
(The leading manufacturer of commercial jet aircraft.)
*Non-income producing security.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market
Description of Security
Shares Value
<S>
<C> <C>
Retail Store Industry 4.31%
Sears, Roebuck and Company. . . . . . . . . . . . . . . . . .
95,000 $ 6,014,687
(World's second largest retailer.)
Electronic Equipment Industry 4.02%
General Electric Company. . . . . . . . . . . . . . . . . . .
80,000 5,615,000
(One of the largest and most diversified industrial companies in
the world.)
Machine Industry 4.01%
Caterpillar, Inc. . . . . . . . . . . . . . . . . . . . . . .
100,000 5,600,000
(The world's largest producer of earthmoving equipment.)
Chemical Industry 3.03%
Monsanto Co.. . . . . . . . . . . . . . . . . . . . . . . . .
85,000 4,234,063
(Produces a variety of consumer products.)
Financial Services Industry 2.06%
Travelers Group, Inc. . . . . . . . . . . . . . . . . . . . .
40,000 2,877,500
(The largest non-bank financial services company.)
Insurance Industry 1.41%
Equitable Companies, Inc. (The) . . . . . . . . . . . . . . .
50,000 1,968,750
(Parent holding company of the Equitable Life Assurance Society
of the United States.)
Recreation Industry 1.25%
Callaway Golf Company . . . . . . . . . . . . . . . . . . . .
50,000 1,750,000
(The largest golf company in the United States; leading designer
and manufacturer of golf clubs.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Market
Description of Security
Shares Value
<S> <C>
<C>
Building Materials Industry 1.23%
Ameron International Corporation. . . . . . . . . . . . . . .
30,000 1,710,000
(The largest supplier of high-performance marine and offshore
coatings in the United States. )
Total Investments, at Value (cost $104,773,998) . . . . . . .
99.10% $138,365,646
Cash and Receivables, Less Liabilities. . . . . . . . . . . .
0.90% $1,261,924
Net Assets. . . . . . . . . . . . . . . . . . . . . . . . . .
100% $139,627,570
</TABLE>
<PAGE>
<PAGE>
Financial Statements
<TABLE>
<CAPTION>
AMERICAN GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES, JULY 31,
1997
<S> . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
<C>
ASSETS:
Investments, at value (cost $104,773,998)-see accompanying
statement . $138,365,646
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 2,458,534
Receivables:
Shares of beneficial interest sold . . . . . . . . . . . . . .
. . . 214,307
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 76,100
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 141,114,587
LIABILITIES:
Investments purchased. . . . . . . . . . . . . . . . . . . . . .
. . .
1,177,168
Shares of beneficial interest redeemed . . . . . . . . . . . . .
. . .
309,849
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . .
. . . 1,487,017
NET ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . $ 139,627,570
COMPOSITION OF NET ASSETS:
Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . .
. . . $94,243,498
Undistributed net investment income. . . . . . . . . . . . . . .
. . . 577,421
Accumulated net realized gain from investment transactions . . .
. . . 11,215,003
Net unrealized appreciation of investments . . . . . . . . . . .
. . .
33,591,648
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . $139,627,570
NET ASSET VALUE PER SHARE:
Class A Shares:
Net asset value and redemption price per share (based on net
assets
of $10,535,504 and 932,476 shares of beneficial interest
outstanding) $11.30
Maximum offering price per share (net asset value plus sales
charge of
5.75% of offering price) . . . . . . . . . . . . . . . . . . .
. . . $11.99
Class B Shares:
Net asset value, redemption price and offering price per share
(based
on net assets of $10,962,496 and 980,130 shares of beneficial
interest outstanding)$11.18
Class C Shares:
Net asset value, redemption price and offering price per share
(based
on net assets of $3,023,390 and 270,205 shares of beneficial
interest outstanding)$11.19
Class D Shares:
Net asset value and redemption price per share (based on net
assets of
$115,106,180 and 10,162,405 shares of beneficial interest
outstanding) $11.33
Maximum offering price per share (net asset value plus sales
charge of
5.75% of offering price) . . . . . . . . . . . . . . . . . . .
. . . $12.02
</TABLE>
<PAGE>Financial Statements
<TABLE>
<CAPTION> AMERICAN GROWTH FUND, INC.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED JULY 31,
1997
<S> . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . <C>
INVESTMENT INCOME:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . $2,129,649
Dividends (net of $22,602 foreign withholding tax) . . . . . .
. . . 1,382,014
Total income . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 3,511,663
EXPENSES:
Investment advisory fees (Note 5). . . . . . . . . . . . . . .
. . . 978,027
Administration expenses (Note 5) . . . . . . . . . . . . . . .
. . . 397,689
Transfer agent, shareholder servicing and data processing fees
(Note 4) 254,313
Custodian fees (Note 4). . . . . . . . . . . . . . . . . . . .
. . . 92,817
Professional fees. . . . . . . . . . . . . . . . . . . . . . .
. . . 31,570
Registration and filing fees:
Class A . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 2,928
Class B . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 2,686
Class C . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 869
Class D . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 47,907
Shareholder reports. . . . . . . . . . . . . . . . . . . . . .
. . . 10,825
Distribution and service fees:
Class A . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 17,911
Class B . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 67,390
Class C . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 20,433
Directors fees . . . . . . . . . . . . . . . . . . . . . . . .
. . . 8,400
Other expenses . . . . . . . . . . . . . . . . . . . . . . . .
. . . 49,569
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 1,983,334
Less expenses paid indirectly (Note 4) . . . . . . . . . . . .
. . .
(407,067)
Net expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . 1,576,267
Net Investment Income . . . . . . . . . . . . . . . . . . . . . .
. . . 1,935,396
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments . . . . . . . . . . . . . . .
. . . 10,854,048
Net change in unrealized appreciation or depreciation on
investments 24,155,373
Net realized and unrealized gain . . . . . . . . . . . . . . .
. . . 35,009,421
Net Increase in Net Assets Resulting From Operations. . . . . . .
. . . $36,944,817
</TABLE>
PAGE
<PAGE>
Financial Statements
<TABLE>
<CAPTION> AMERICAN GROWTH FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED JULY 31, 1997 AND 1996
1997
1996
<S> <C>
<C>
OPERATIONS:
Net investment income. . . . . . . . . . . . . . . . .
$1,935,396 $ 483,715
Net realized gain. . . . . . . . . . . . . . . . . . .
10,854,048 7,083,415
Net change in unrealized appreciation or depreciation.
24,155,373 (3,074,255)
Net increase in net assets resulting from operations
36,944,817 4,492,875
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
Dividends from net investment income:
Class A. . . . . . . . . . . . . . . . . . . . . . . .
(78,116) -
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .(60,893)-
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .(17,406)-
Class D. . . . . . . . . . . . . . . . . . . . . . . .
(1,288,377) (1,387,812)
Distributions from net realized gain:
Class A . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .(253,876)-
Class B . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .(263,868)-
Class C . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .(75,426)-
Class D. . . . . . . . . . . . . . . . . . . . . . . .
(4,187,225) (2,312,575)
BENEFICIAL INTEREST TRANSACTIONS:
Net increase (decrease) in net assets resulting from beneficial
interest transactions(Note 2):
Class A. . . . . . . . . . . . . . . . . . . . . . . . 4,705,260
4,048,441
Class B. . . . . . . . . . . . . . . . . . . . . . . . 5,694,054
3,603,382
Class C. . . . . . . . . . . . . . . . . . . . . . . . 2,104,311
383,952
Class D. . . . . . . . . . . . . . . . . . . . . . . .
(11,347,787) 8,385,535
NET ASSETS:
Total increase . . . . . . . . . . . . . . . . . . . .
31,875,468 17,213,798
Beginning of period. . . . . . . . . . . . . . . . . .
107,752,102 90,538,304
End of period (including undistributed net investment
income of $557,421 and $86,817 respectively) . . . . .
$139,627,570 $107,752,102
</TABLE>
PAGE
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Class D
<S> <C> <C>
<C> <C>
<C>
Year Ended July 31,
1997 1996 1995
1994 1993
Per Share Operating Data:
Net Asset Value, Beginning of Period. . $8.85 $ 8.75 $ 9.34 $
9.39 $ 8.50
Income from investment operations:
Net investment income . . . . . . . . . 0.175 0.035 0.21
0.03 0.11
Net realized and unrealized gain. . . . 2.82 0.39 0.88
1.00 1.51
Total income from investment operations 2.99 0.42 1.09
1.03 1.62
Dividends and distributions to shareholders:
Dividends from net investment income. .(0.12)6 (0.12)6 (0.12)
(0.05) (0.08)
Distributions from net realized gain. .(0.39) (0.20) (1.56)
(1.03) (0.65)
Total dividends and distributions
to shareholders . . . . . . . . . . . . (0.51) (0.32) (1.68)
(1.08) (0.73)
Net Asset Value, End of Period. . . . .$11.33 $ 8.85 $ 8.75 $
9.34 $ 9.39
Total Return at Net Asset Value1. . . . 35.1% 4.8% 15.2%
11.1% 20.2%
Ratios/Supplemental Data:
Net assets, end of period (in thousands)$115,106$100,130$90,538
$68,209 $62,180
Ratios to average net assets:
Net investment income.. . . . . . . . . 1.71% 0.47% 1.91%
0.35% 0.59%
Expenses2 . . . . . . . . . . . . . . . 1.55% 1.63% 1.45%
1.34% 1.44%
Portfolio turnover rate3. . . . . . . . 106.2% 163.1% 173.0%
87.2% 48.8%
Average brokerage commission rate4 $0.0578 $0.0561 -
- -
</TABLE>
1. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period with all dividends and
distributions reinvested in
additional
shares on the reinvestment date and redemption at the net
asset value calculated on the last business day of the fiscal
period. Sales charges
are not reflected in total returns. Total returns are not
annualized for periods of less than one full year.
2. Beginning in fiscal 1996, the expense ratio reflects the
effect of expenses paid indirectly by the Fund. Prior year expenses
have not been adjusted.
3. The lesser of purchases and sales of portfolio securities for
a period, divided by the monthly average of the market value of
securities owned during the
period. Securities with a maturity or expiration date
at the time of acquisition of one year or less are excluded from
the calculation. Purchases and
sales of investment
securities (other than short-term securities) for the period
ended July 31, 1997, aggregated $132,035,122 and $85,312,030,
respectively.
4. Total brokerage commissions paid on applicable purchases and
sales of investment securities for the period divided by the total
number of related shares
purchased and sold.
5. Net investment income per share is based upon relative daily
net asset values.
6. Distributions from net investment income per share are based
upon relative net asset values as of the business day following the
distribution record date.
<PAGE>
See accompanying notes to financial statements.<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C> <C> <C>
Class A Class A
Class B Class B Class C Class C
Period Ended July 31,
1997 19961 1997 19961
1997 19961
Per Share Operating Data:
Net Asset Value,
Beginning of Period . . . . . . . . . . .$8.84 $9.21 $8.80 $ 9.21$
8.81 $ 9.21
Income (loss) from investment operations:
Net investment income(loss) . . . . . . .0.147 -7 0.077(0.01)7
0.077 -7
Net realized and unrealized gain (loss) .2.83 (0.37) 2.79 (0.40)
2.79 (0.40)
Total income (loss) from investment operations2.97(0.37)2.86(0.41)
2.86 (0.40)
Dividends and distributions to shareholders:
Dividends from net investment income. .(0.12)8 -(0.09)8
- -(0.09)8 -
Distributions from net realized gain. .(0.39) -(0.39)
- -(0.39) -
Total dividends and distributions
to shareholders . . . . . . . . . . . .(0.51) -(0.48)
- -(0.48) -
Net Asset Value, End of Period. . . . .$11.30 $ 8.84 $11.18 $
8.80$11.19 $ 8.81
Total Return at Net Asset Value2. . . . .34.6%(4.0)% 33.5% (4.5)%
33.6% (4.3)%
Ratios/Supplemental Data:
Net assets, end of period (in
thousands)$10,536$3,838$10,962$3,417$3,023 $367
Ratio to average net assets:
Net investment income (loss). . . . . . .1.28%0.13%6
0.49%(0.52)%60.55%(0.63)%6
Expenses3 . . . . . . . . . . . . . . . .1.76%2.06%6 2.46% 2.81%6
2.50%2.97%6
Portfolio turnover rate4. . . . . . . . 106.2%163.1% 106.2%
163.1%106.2% 163.1%
Average brokerage commission rate5 .
.$0.0578$0.0561$0.0578$0.0561$0.0578$0.0561
</TABLE>
1. For the period from March 1, 1996 (inception of offering) to
July 31, 1996.
2. Assumes a hypothetical initial investment on the business day
before the first day of the fiscal period (or inception of
offering) with all dividends and
distributions reinvested in additional shares on the
reinvestment date and redemption at the net asset value calculated
on the last business day of the fiscal
period. Sales
charges are not reflected in total returns. Total returns are
not annualized for periods of less than one full year.
3. Beginning in fiscal 1996, the expense ratio reflects the
effect of expenses paid indirectly by the Fund. Prior year expenses
have not been adjusted.
4. The lesser of purchases and sales of portfolio securities for
a period, divided by the monthly average of the market value of
securities owned during the
period. Securities with a maturity or expiration date
at the time of acquisition of one year or less are excluded from
the calculation. Purchases and
sales of investment
securities (other than short-term securities) for the period
ended July 31, 1997, aggregated $132,035,122 and $85,312,030,
respectively.
5. Total brokerage commissions paid on applicable purchases and
sales of investment securities for the period divided by the total
number of related shares
purchased and sold.
6. Annualized.
7. Net investment income per share is based upon relative daily
net asset values.
8. Distributions from net investment income per share are based
upon relative net asset values as of the business day following the
distribution record date.
<PAGE>
See accompanying notes to financial statements.<PAGE>
Notes to Financial Statements
1.Summary of Significant Accounting Policies
American Growth Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The Fund's
primary investment objective is to seek capital
appreciation. The Fund's investment advisor is Investment
Research Corporation (IRC). The Fund offers Class A, Class B,
Class C and Class D shares. Class D shares are available to
shareholders in existence prior to 3/1/96. Class A and Class D
shares are sold with a front-end sales charge. Class B and Class
C shares may be subject to a contingent deferred sales
charge. All classes of shares have identical rights to earnings,
assets and voting privileges, except that each class has its
own distribution and/or service plan and expenses directly
attributable to that class and exclusive voting rights with respect
to matters affecting that class. Class B shares will
automatically convert to Class A shares seven years after date of
purchase. The following is a summary of significant accounting
policies consistently followed by the Fund.
Investment Valuation - Investment securities are valued at the
closing asked price as reported by the principal
securities exchange on which the security is traded. If no sale
is reported, or if the security is not traded on an exchange,
value is based on the average of the latest bid and asked prices.
Short-term debt securities having a remaining maturity of
60 days or less are valued at amortized cost, which approximates
market value.
Allocation of Income, Expenses, Gains and Losses - Income,
expenses (other than those attributable to a specific
class), gains and losses are allocated daily to each class of
shares based upon the relative proportion of net assets
represented by such class. Operating expenses directly
attributable to a specific class are charged against the operations
of
that class.
Federal Income Taxes - No provision for federal income or excise
taxes has been made because the Fund intends to
comply with provisions of the Internal Revenue Code applicable
to regulated investment companies and to distribute all of
its taxable income to shareholders.
Classification of Distributions to Shareholders - The character
of distributions made during the year from net
investment income or net realized gains may differ from its
ultimate characterization for federal income tax purposes. Also,
due to timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the fiscal year in
which the income or realized gain was recorded by the Fund.
Other - Investment transactions are accounted for on the date the
investments are purchased or sold (trade date).
Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Interest income is recorded on the
accrual basis. Realized gains and losses from investment
transactions and unrealized appreciation and depreciation of
investments are reportedon an identified cost basis which is the
same basis used for federal income tax purposes.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases
and decreases in net assets from operations during the reporting
period. Actual results could differ from those estimates.
PAGE
<PAGE>
Notes to Financial Statements
2.Shares of Beneficial Interest - The Fund has authorized an
unlimited number of no par value shares of beneficial
interest of each class. Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
Year Ended July 31, 1997
Year Ended July 31, 19961
<S> <C> <C>
<C> <C>
Shares Amount
SharesAmount
Class A:
Sold 794,548 $7,631,271 437,138
$4,077,847
Dividends and distributions reinvested33,407311,961
- - -
Redeemed (329,452)(3,237,972)
(3,165) (29,406)
Net increase 498,503 4,705,260 433,973
4,048,441
Class B:
Sold 700,555 6,739,509
388,712 3,609,424
Dividends and distributions reinvested 29,453 273,621
- - -
Redeemed (137,934)(1,319,076)
(656) (6,042)
Net increase 592,074 5,694,054 388,056
3,603,382
Class C:
Sold 247,873 2,292,548 41,705
383,955
Dividends and distributions reinvested8,63280,191
- - -
Redeemed (28,005) (268,428)
- - (3)
Net increase 228,500 2,104,311 41,705
383,952
Class D:
Sold 423,812 4,042,281
2,553,651 23,031,338
Dividends and distributions reinvested541,4175,060,925
375,550 3,300,334
Redeemed (2,117,535) (20,450,993)
(1,956,583)(17,946,137)
Net increase (decrease) (1,152,306)$ (11,347,787)
972,618$ 8,385,535
</TABLE>
1. For the period from March 1, 1996 (inception of offering) to
July 31, 1996 for Class A, Class B and Class C shares.
3.Unrealized Gains and Losses on Investments
The identified tax cost basis of investments at July 31, 1997 was
$105,324,757. Net unrealized appreciation on investments
of $33,040,889, based on identified tax cost as of July 31, 1997,
was comprised of gross appreciation of $33,246,961 and
gross depreciation of $206,072.
4.Fund Expenses Paid Indirectly
Fund expenses totaling $279,885 relating to certain operating
expenses were paid by broker/dealers under terms of
brokerage/service arrangements. Fees for transfer agent/data
processing services and custodian services totaling
$61,380 and $65,802, respectively, were offset by earnings on
cash balances maintained by the Fund at the custodian
financial institution. The Fund could have invested the
assets maintained at the institution in income-
producing assets if it had notagreed to a reduction in fees.
5.Underwriting, Investment Advisory Contracts and Service Fees
<PAGE>
Under the investment advisory contract with IRC, the advisor
receives annual compensation for investment advice,
computed and paid monthly, equal to 1% of the first $30 million
of the Fund's average annual net assets of the Fund <PAGE>
Notes to Financial
Statements
and 0.75% of such assets in excess of $30 million. The Fund pays
its own operating expenses. The advisor has agreed to
reimburse the Fund if total expenses exceed the most restrictive
limitation prescribed by any state in which the shares of the
Fund are sold.
Class B and Class C shares are subject to annual service and
distribution fees of 0.25% and 0.75% of average daily net assets,
respectively. Class A shares are subject to annual service and
distribution fees of 0.25% and 0.05% of average daily net assets,
respectively.
For the year ended July 31, 1997 commissions and sales charges
paid by investors on the purchase of Fund shares totaled
$472,212 of which $140,586 was retained by American Growth Fund
Sponsors, Inc. ("Sponsors"), an affiliated broker/dealer
which serves as the underwriter and distributor of the Fund.
Sales charges advanced to broker/dealers by Sponsors on sales
of the Fund's Class B and C shares totaled $206,299. For the year
ended July 31, 1997, Sponsors received contingent deferred
sales charges of $11,306 upon redemption of Class B and C shares,
as reimbursement for sales commissions advanced by
Sponsors upon the sale of such shares.
Certain officers of the Fund are also officers of Sponsors and
IRC. For the year ended July 31, 1997 the Fund paid directors'
fees and expenses of $8,400.
For the year ended July 31, 1997, under an agreement with IRC,
the Fund was charged $327,911 for the costs and expenses
related to employees of IRC who provide administrative, clerical
and accounting services to the Fund. In addition, the Fund was
charged $61,170 by an affiliated company of IRC for the rental of
office space.
6.Federal Income Tax Matters
On December 19, 1996, per share distributions were declared as
follows: Class A: $0.12, Class B: $0.09, Class C: $0.09 and
Class D: $0.12 from net investment income, respectively, and
$0.39 for each share class from realized gains. The dividends were
paid December 31, 1996. For the Fund's year ended July 31, 1997,
all ordinary income dividends have been determined to
qualify for the dividend received deduction for corporate
shareholders.
For federal income tax purposes, the Fund realized net capital
gains of $10,854,048 during the year ended July 31, 1997.
PAGE
<PAGE>
Independent Auditors' Report
To The Board of Directors and Shareholders
of American Growth Fund, Inc.:
We have audited the accompanying statements of investments and
assets and liabilities of American Growth Fund,
Inc. as of July 31, 1997, and the related statement of operations
for the year then ended, and the statement of changes
in net assets and the financial highlights for each of the years in
the two-year period then ended. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for
each of the years in the three-year period ended July 31,1995 were
audited by other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements and financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as
of July 31, 1997, by correspondence with the custodian and brokers;
and where confirmations were not received from
brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material
respects, the financial position of American Growth Fund, Inc. as
of July 31, 1997, the results of its operations for
the year then ended, and the changes in its net assets and the
financial highlights for each of the years in the two-year
period then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Denver, Colorado
August 29, 1997
<PAGE>
<PAGE>
AMERICAN GROWTH FUND, INC.
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
Included in Prospectus:
Financial Highlights
Included in Statement of Additional Information:
Report of Independent Accountants
Statement of assets and liabilities - July 31, 1997
Statement of operations - year ended July 31, 1997
Statement of changes in net assets -
years ended July 31, 1997 and 1996
Notes to financial statements
Portfolio of investments
(Schedule I - Investments in
securities of unaffiliated issuers) - July 31, 1997
(b) Exhibits
1.(a) Articles of Amendment and Restatement
(6)
(b) Articles Supplementary (6)
2.Registrant's By-laws, as amended. (2)
3.Not applicable
4.Instruments defining rights of
shareholders:
See Article 4, 6 & 8 of Incorporation
and Article 1, 4 & 7 of the Bylaws. (6)
5. Investment advisory contract between
Investment Research corporation and
registrant. (6)
a.Distribution Agreement for Class A
Shares (6)
b.Distribution Agreement for Class B
Shares (6)
c.Distribution Agreement for Class C
Shares (6)
d.Distribution Agreement for Class D
Shares (6)
e. Selling group agreement between
American Growth fund Sponsors, Inc. And
dealers as amended. (6)
6.Not applicable
7. Custodian agreement between state
Street Bank and Trust Company and registrant. (1)
8. Transfer agent agreement between
State Street Bank & Trust Company and
Registrant. (1)
9. Not applicable
10. Not applicable
11.Consent of KPMG Peat Marwick LLP.
12. Not applicable
13. Not applicable
14. a.Registrant's Self-Employed Retirement
Plan. (2)
b. Registrant's Simplified Employee
Pension Plan Application and
Agreement.(1)
c. Registrant's Salary Reduction
Simplified Employee Pension Plan Application
and Agreement. (4)
d.Registrant's Individual Retirement
Account Plan and Agreement.(6)
e.Registrant's 403(b) Retirement Plan
and Custody Agreement. (3)
f.Registrant's Prototype Paired Defined
Contribution Plans. (4)
g.Registrant's Prototype Profit
Sharing/401(k) Plan.(4)
15. a.Distribution Plan for Class A Shares
(6)
b.Distribution Plan for Class B Shares
(6)
<PAGE>
c.Distribution Plan for Class C Shares
(6)
16.Schedule for computation of each
performance quotation.
17. Financial Data Schedules filed as
Exhibit 27 for electronic purposes.
18.Rule 18f-3 Plan.
(1) Incorporation by reference to identically numbered exhibit in
Post Effective Amendment No. 42 to the Registration Statement under
the
securities Act of 1933 on Form NA (File No. 2-14543) of Registrant
filed on December 1, 1988.
(2) Incorporated by reference to identically numbered exhibit in
Post-Effective Amendment No. 41 to the Registration Statement under
the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of
Registrant filed on December 1, 1987.
(3) Incorporated by reference to identically numbered exhibit in
Post-Effective Amendment No. 39 to the Registration Statement under
the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of
Registrant filed on October 1, 1985.
(4) Incorporated by reference to identically numbered exhibit in
Post-Effective Amendment No. 44 to the Registration Statement under
the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of
Registrant filed on December 1, 1990.
(5) Incorporated by reference to identically numbered exhibit in
Post-Effective Amendment No. 46 to the Registration Statement under
the
Securities Act of 1933 on Form N-1A (File No. 2-14543) of
Registrant filed on December 1, 1992.
(6)Incorporated by reference to
identically numbered exhibit in Post Effective Amendment No. 51 to
the Registration Statement under the
Securities Act of 1933 on Form N-1A (File No.2-14543) of Registrant
filed on September 30, 1996.
Item 25.Person Controlled by or Under Common Control
None
Item 26.Number of Holders of Securities. The following table set
forth the approximate number of record holders of the one cent par
value
common stock of the Registrant as of September 30, 1997.
(1) (2)
Title of Class Number of Record Holders
One Cent Par Value Common Stock 7,220
Item 27. Indemnification.Reference is made to Article IX of the
registrant's By-Laws (Exhibit 2 to this registration Statement) and
Article 7 of the registrant's
Articles of Incorporation
(Exhibit 1 to this Registration Statement).
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling
persons of the registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of
the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid
by a director, officer, or controlling person of the Registrant in
connection with the successful defense of any action, suite or
proceeding)
is asserted against the Registrant by such director, officer or
controlling person in connection with the shares being registered,
the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the
final adjudication of such issue. The Registrant hereby
undertakes that it will apply the indemnification provisions of its
By-Laws in a
manner consistent with Release No. 11330 of the Securities and
Exchange Commission under the Investment Company Act of 1940 as
long as the interpretation of Section 17(h) and 17(I) of such Act
expressed in that Release remain in effect.
Item 28. Business and Other Connections of Investment Adviser. The
following table set forth the principal business of each director
and officer of
the Investment Adviser of the Registrant for the two fiscal years
ended July 31, 1997.
<PAGE>
Name & Position With
Principal Business
Investment Adviser
Robert Brody
President, Treasurer and
Director
Timothy E. Taggart
Executive Vice President, Director
D. Leann Baird,
Secretary, Director
Mr. Brody is also President and a director of American Growth Fund,
Inc., the Registrant; Treasurer and a director of American Growth
Fund Sponsors, Inc., the Registrant's underwriter; and President,
Treasurer and a director of American Growth Financial Services,
Inc.,
110 16th Street, Denver, Colorado Mr. Taggart is also Vice
President, secretary and a director of American Growth Fund
Sponsors, Inc.,
the Registrant's underwriter, 110 16th Street, Denver, Colorado;
and Vice President and Director of American Growth Financial
Services,
Inc., 110 16th Street, Denver, Colorado.
Mrs. Baird is also secretary of American Growth Fund, Inc., the
Registrant; and secretary of American Growth Financial Services,
Inc.,
110 16th Street, Denver, Colorado.<PAGE>
<PAGE>
Item 29.Principal Underwriters.
(a)None.
(b)
(1) Name and Principal (2) Position & Offices (3) Position &
Offices
Business AddressWith Underwriter With Registrant
Robert BrodyPresident, TreasurerPresident, Director
110 16th Street Director
Suite 1400
Denver, CO 80202
Timothy E. TaggartExecutive Vice PresidentTreasurer
110 16th StreetSecretary, Director
Suite 1400
Denver, CO 80202
None
Item 30. Location of Accounts and Records. All accounts and records
required to be maintained by Section 31(a) of the Investment
Company Act, and the rules and regulations promulgated thereunder,
are located at the offices of the Registrant, 110 16th Street,
Suite
1400, Denver, Colorado 80202, and at the offices of its custodian
and transfer agent, State Street Bank & Trust Company, 2 Heritage
Drive, N. Quincy, MA 02171, and are under the general custody and
control of its Secretary D. Leann Baird.
Item 31. Management Services.
None
Item 32. Undertakings.
None
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it
has
duly caused this amendment to the registration statement to be
signed on its behalf by the undersigned, thereto duly authorized,
and its
seal to be hereunto affixed and attested all in the City of Denver,
State of Colorado on the 30th day of September, 1997.
American Growth Fund, Inc.
By: /s/ Robert Brody
- ------------------------------
Robert Brody, President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this amendment to the registration statement has been
signed by
the following persons in the capacities indicated and as of the
date stated.
(a) Principal Executive Officer: Title
Date
/s/ Robert Brody President
- ---------------------------------- and Director
Robert Brody
(b) Principal Financial and Accounting Officer:
/s/ Timothy E. Taggart Treasurer
- ----------------------------------
Timothy E. Taggart
(c) Majority of the Directors:
/s/ Michael J. Baum, Jr.
- ----------------------------------
Michael J. Baum, Jr.
/s/ Eddie R. Bush
- ----------------------------------
Eddie R. Bush
/s/ Don S. Strauss
- ----------------------------------
Don S. Strauss
/s/ Harold Rosen
- ----------------------------------
Harold Rosen
<PAGE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
EX-99.11(a)Consent of KPMG Peat Marwick LLP
<PAGE>
<PAGE>
INDEPENDENT AUDITORS CONSENT
The Board of Directors
American Growth Fund, Inc.:
We consent to the use of our report dated August 29, 1997 and to
the references of our firm under the headings Financial
Highlights
and Custodian and Independent Accountants included in the
Registration Statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick
Denver, Colorado
October 31, 1997
<PAGE>
<PAGE>
Moye, Giles, O'Keefe, Vermeire & Gorrell LLP
29th Floor
1225 Seventeenth Street
Denver, Colorado 80202-5529
October 30, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:American Growth Fund, Inc.
Investment Company Act File No. 811-825
Securities Act File No. 2-14543
Form N-1A:1933 Act Post-Effective Amendment No.
52
1940 Act Post-effective Amendment No. 22
Ladies and Gentlemen:
This firm serves as counsel to American Growth Fund, Inc., a
registered, open-end diversified investment company (the Fund).
In furtherance of that representation, this firm has reviewed
disclosure changes made in the Funds post-effective amendment
number 52 to
its Registration Statement under the Securities Act of 1933, which
is being filed with the Commission pursuant to the provisions of
Rule
485(b) of the General Rules and Regulations under the Securities
Act of 1933, as amended.
In compliance with the provisions of Rule 485(e), we herewith
provide the Commission with this written representation that this
post-
effective amendment number 52 of American Growth Fund, Inc. does
not contain disclosures which would render the amendment
ineligible to become effective pursuant to paragraph (b) of the
Rule.
The Registration Statement includes new disclosure in the Funds
prospectus and statement of additional information with respect to
brokerage commissions paid by the Fund to an affiliated person of
the Fund. We consider this disclosure to constitute a non-material
amendment to the Funds Registration Statement for the following
reasons:
a.The Fund has previously disclosed in its
prospectus and in its statement of additional information that it
may use affiliated brokers to execute
Fund transactions so long as the Fund obtains, at reasonable
expense, the best execution (prompt and reliable execution at the
most
favorable price obtainable) of such transactions;
b.The total brokerage commissions paid by
the Fund to its affiliated broker in its fiscal year ended July 31,
1997 were $234,855, of total
brokerage commissions paid by the Fund of $306,385 (76.7%); the
aggregate dollar amount of transactions effected through the
affiliated
broker involving the payment of commissions represented 95.5% of
the aggregate dollar amount of all transactions involving the
payment
of commissions during 1997;
c.Aggregate brokerage commissions paid by
the Fund in fiscal years 1996 and 1995 were significantly higher
than those paid in 1997 ($462,481
and $409,481, respectively); and
d.The average brokerage commission rate per
share paid by the Fund in fiscal year 1997 was $0.0578, compared
with an average brokerage
commission rate per share paid by the Fund in its 1996 fiscal year
of $0.0561, a difference of $0.0017. The additional brokerage cost
to
the Fund which resulted from the increase in the average brokerage
commission rate per share in 1997 aggregated less than $10,000, and
was not attributable to use of an affiliated broker (see b. above).
<PAGE>
Very truly yours,
MOYE, GILES, O'KEEFE, VERMEIRE & GORRELL LLP
By: Edward F. O'Keefe, P.C.
/s/Edward F. O'Keefe, President
Edward F. O'Keefe, President
EFO/ljc
cc: American Growth Fund, Inc.
F:\A\AMGROWTH\LETTERS\485B.LTR
<PAGE>
