Anyway, I found an interesting fund filing just messing around this morning after a long week. It's a form N-1A for an (expensive) fund from American Growth Fund Inc., located right here in Denver. The filing has some interesting risk disclosure and language about the cannabis industry and the fund's investment objectives within. Below are some excerpts from the filing in italics. See the filing here. And here is the fund co.'s website.
Their banking relationship must be an interesting one. I hope they have read Sundie Seefried's excellent book on her experiences being a cannabis banking pioneer in Colorado. I did and it's an eye opener alright! The industry is currently risky no doubt about that. That's in the Warren Buffett sense of not being able to see where the industry will be, and who will be the winners 10 years down the road. It would be interesting to hear the fund manager persepctives on that and actual long term fundamentals of the businesses. Not counting on finding that from many people these days though.
Enjoy all you nerdy ass ganjapreneur mofos!
Disclosure: I have no economic interest in any public firm or fund mentioned in this article. In fact, I have no economic interest in any public cannabis firm.
In attempting to achieve its principal investment objective, the Fund will attempt to invest at least 80% of its assets in securities involved at least some way in the legal cannabis business. Securities convertible into common stocks traded on national securities exchanges or over-the-counter or REITs may also be utilized. Examples of companies associated with the legal cannabis industry could include legally registered publicly traded companies in fields such as agriculture, pharmaceutical, hydroponic or tobacco companies or REITs. The legal cannabis business does not need to be the sole focus point of a company for Series Two to invest in it nor does it need to account for a majority of its overall revenues. For example, Series Two may invest in Company XYZ, a pharmaceutical company developing uses for medical cannabis, even if the revenues produced as a result of the sales of medical cannabis is responsible for less than 5% of XYZ’s overall revenue.
At the time of purchase, with respect to 75% of the Fund's total assets, we do not invest more than 5% in any one issuer nor do we invest more than 25% in any one industry. We also follow a rigorous selection process designed to identify undervalued securities before choosing securities for the portfolio.
The Fund may invest in companies of all sizes. Investment Research Corporation, the Fund’s investment adviser (the Adviser or IRC), will choose securities that it believes have a potential for capital appreciation because of existing or anticipated economic conditions or because the securities are considered undervalued or out of favor with investors or are expected to increase in price over time.
The Fund may invest in Real Estate Investment Trusts (“REITs”) if the investment committee believes that it could be advantageous to the stockholders. These REITs could be involved in the areas of the legal cannabis business such as property development and rental or other legal endeavors associated with the legal cannabis business.
Using the following approach, we look for companies having some of these characteristics:
~ Companies and/or securities involved legally in the cannabis business;
~ Large capitalization companies, although the Fund may invest in companies of all sizes, if the Adviser believes it is in the best interests of the Fund. Large cap companies are generally companies with market capitalization exceeding $5 billion at the date of acquisition;
~ growth that is faster than the market as a whole and sustainable over the long term;
~ strong management team;
~ leading market positions and growing brand identities;
~ financial, marketing, and operating strength.
When the Adviser believes the securities the Fund holds may decline in value, the Fund may sell them and, if the Adviser believes market conditions warrant the Fund may assume a temporary defensive position. While in a defensive position, the Fund may invest all or part of its assets in corporate bonds, debentures (both short and long term) or preferred stocks rated A or above by Moody Investors Service, Inc., Standard and Poor’s, or Fitch Ratings (or, if unrated, of comparable quality in the opinion of the Adviser), United States Government securities, repurchase agreements meeting approved credit worthiness standards (e.g., whereby the underlying security is issued by the United States Government or any agency thereof), or retain funds in cash or cash equivalents. There is no maximum limit on the amount of fixed income securities in which the Fund may invest for temporary defensive purposes. If the Fund takes a temporary defensive position in attempting to respond to adverse market, economic, political or other conditions, it may not achieve its investment objective. The Fund’s performance could be lower during periods when it retains or invests its assets in these more defensive holdings.
Risks presented by the Fund’s Investing in Companies Involved in the Legal Cannabis Business
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest.
In addition, the legal cannabis business is a quickly growing and emerging business. As a result there are additional risks that you should consider. Some of these risks are;
The company may invest in companies of all sizes. The cannabis industry is a quickly growing and emerging business. As a result there are additional risks that you should consider. Some of these risks are;
~ Stock Market Risk - the value of an investment may fluctuate,
~ Industry and Security Risk - risks relating to an industry as a whole or a company’s prospects for business success,
~ Management Risk - risks that the Adviser’s assessment of a company’s growth prospects may not be accurate,
~ Political, Economic and Regulatory Risk - Changes in economic and tax policies, high inflation rates, government instability, and other political or economic actions or factors that may have an adverse effect on Series Two. Governmental and regulatory actions, including law changes, may have unexpected or adverse consequences on particular markets, strategies, or investments. Legislation or regulation may also change the way in which Series Two itself is regulated. Series Two cannot predict the effects of any new governmental regulation or law that may be implemented on the ability of Series Two to invest in certain assets, or the possible effect on our ability to access financial markets, and there can be no assurance that any new governmental regulation will not adversely affect Series Two’s ability to achieve its investment objectives,
~ REITs Risk – Under its modified fundamental investment policies, Series Two may invest in REITs (Real Estate Investment Trust), including Equity REITs and Mortgage REITs. Equity REITs invest directly in property while Mortgage REITs invest in mortgages on real property. REITs may be subject to certain risks associated with the direct ownership of real property including declines in the value of real estate, risks related to general and local economic conditions, over building and increased competition, increase in property taxes and operating expenses, and variations in rental income. REITS are dependent on management skills, are not diversified, and are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs (especially mortgage REITs) are also subject to interest rate risk. When interest rates decline, the value of a REIT’s investment in fixed-rate obligations can be expected to rise. Conversely, when interest rate rise, the value of a REIT’s investment in fixed-rate obligations can be expected to decline. Mortgage REITs may be affected by the quality of any credit extended to them,
~ Cannabis Industry Risk – The cannabis industry is a very young, fast evolving industry with possible increased exposure to rule changes, changes in laws, increasing regulations, increasing competition which may cause businesses to suddenly close or businesses to shrink as well as the possibility that a company currently operating legally may suddenly find itself exposed to illegal activities.
~ Mid Cap Risk - mid cap stocks tend to have a greater exposure to market fluctuations and failure,
~ Small Cap Risk - small cap stocks tend to have a high exposure to market fluctuations and failure,
~ Micro Cap Risk - low-priced stocks issued by the smallest of companies. Many microcap companies do not file financial reports with the SEC, so it's hard for investors to get the facts about the company's management, products, services, and finances. Microcap stocks historically have been more volatile and less liquid than the stock of larger companies,
~ Liquidity Risk - Series Two may face increased liquidity risk which is the risk that a given security or asset may not be readily marketable.
~ New Issuer Risk – New Issuers have been in the business less than 3 years, may face increased pressures from established companies, new unseasoned management, may be more volatile and may offer less liquidity then larger companies.
Loss of some or all of the money you invest is a risk of investing in Series Two.
Before you invest in the Fund you should carefully evaluate the risks associated with investing in companies involved in the legal cannabis business.
Please see the Statement of Additional Information for further discussion of risks associated with investing in companies involved in the legal cannabis business.
Portfolio Holdings
A description of the Fund’s policies and procedures with respect to the disclosure of the Fund’s portfolio securities is available in the Fund’s SAI which is available on the Fund’s website, www.americangrowthfund.com.
FUND HISTORY
American Growth Fund, Inc. was organized and incorporated in the State of Maryland in 1958. Series Two was established in February of 2011 as a diversified, open-end, mutual fund. In July of 2016 Series Two reorganized into a diversified mutual fund focused on the legal cannabis business.
CLASSIFICATION
The American Growth Fund Series Two is a diversified, open-end management mutual fund.
INVESTMENT STRATEGIES
In attempting to achieve its principal investment objective, the Fund will attempt to invest at least 80% of its assets in securities involved, at least some way, in the legal cannabis business, securities convertible into common stocks traded on national securities exchanges or over-the-counter or REITs.
At the time of purchase, with respect to 75% of the Fund's total assets, we do not invest more than 5% in any one issuer nor do we invest more than 25% in any one industry. We also follow a rigorous selection process designed to identify undervalued securities before choosing securities for the portfolio.
The Fund may invest in companies of all sizes. Investment Research Corporation, the Fund’s investment adviser (the Adviser or IRC), will choose securities that it believes have a potential for capital appreciation because of existing or anticipated economic conditions or because the securities are considered undervalued or out of favor with investors or are expected to increase in price over time.
The Fund may invest in Real Estate Investment Trusts (“REITs”) if the investment committee believes that it could be advantageous to the stockholders. These REITs could be involved in the areas of the legal cannabis business such as property development and rental or other legal endeavors associated with the cannabis business.
Using the following approach, we look for companies having some of these characteristics:
~ Companies and/or securities involved legally in the cannabis business;
~ Large capitalization companies, although the Fund may invest in companies of all sizes, if the Adviser believes it is in the best interests of the Fund. Large cap companies are generally companies with market capitalization exceeding $5 billion at the date of acquisition;
~ growth that is faster than the market as a whole and sustainable over the long term;
~ strong management team;
~ leading market positions and growing brand identities;
~ financial, marketing, and operating strength.
When the Adviser believes the securities the Fund holds may decline in value, the Fund may sell them and, if the Adviser believes market conditions warrant the Fund may assume a defensive position. While in a defensive position, the Fund may invest all or part of its assets in corporate bonds, debentures (both short and long term) or preferred stocks rated A or above by Moody Investors Service, Inc., Standard and Poor’s, or Fitch Ratings (or, if unrated, of comparable quality in the opinion of the Adviser), United States Government securities, repurchase agreements meeting approved credit worthiness standards (e.g., whereby the underlying security is issued by the United States Government or any agency thereof), or retain funds in cash or cash equivalents. There is no maximum limit on the amount of fixed income securities in which the Fund may invest for temporary defensive purposes. If the Fund takes a temporary defensive position in attempting to respond to adverse market, economic, political or other conditions, it may not achieve its investment objective. The Fund’s performance could be lower during periods when it retains or invests its assets in these more defensive holdings.
INVESTMENT RISKS
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest.
The company may invest in companies of all sizes. The legal cannabis business is a quickly growing and emerging business. As a result there are additional risks that you should consider. Some of these risks are;
General Risk - All investments are subject to inherent risk. Markets can trade in random or cyclical price patterns and prices can fall over time. The value of Series Two can fluctuate as markets fluctuate over long and short periods of time.
Political, Economic and Regulatory Risk - Changes in economic and tax policies, high inflation rates, government instability, and other political or economic actions or factors that may have an adverse effect on Series Two. Governmental and regulatory actions, including law changes, may have unexpected or adverse consequences on particular markets, strategies, or investments. Legislation or regulation may also change the way in which Series Two itself is regulated. Series Two cannot predict the effects of any new governmental regulation or law that may be implemented on the ability of Series Two to invest in certain assets, or the possible effect on our ability to access financial markets, and there can be no assurance that any new governmental regulation will not adversely affect Series Two’s ability to achieve its investment objectives,
REITs Risk - Under its modified fundamental investment policies, Series Two may invest in REITs (Real Estate Investment Trust), including Equity REITs and Mortgage REITs. Equity REITs invest directly in property while Mortgage REITs invest in mortgages on real property. REITs may be subject to certain risks associated with the direct ownership of real property including declines in the value of real estate, risks related to general and local economic conditions, over building and increased competition, increase in property taxes and operating expenses, and variations in rental income. REITS are dependent on management skills, are not diversified, and are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs (especially mortgage REITs) are also subject to interest rate risk. When interest rates decline, the value of a REIT’s investment in fixed-rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT’s investment in fixed-rate obligations can be expected to decline. Mortgage REITs may be affected by the quality of any credit extended to them,~ Stock Market Risk - the value of an investment may fluctuate,
Industry and Security Risk - risks relating to an industry as a whole or a company’s prospects for business success,
Management Risk - risks that the Adviser’s assessment of a company’s growth prospects may not be accurate,
Liquidity Risk - Series Two may face increased liquidity risk which is the risk that a given security or asset may not be readily marketable,
Small Cap Risk - small cap stocks tend to have a high exposure to market fluctuations and failure,
Mid Cap Risk - mid cap stocks tend to have a greater exposure to market fluctuations and failure,
Micro Cap Risk - low-priced stocks issued by the smallest of companies. Many microcap companies do not file financial reports with the SEC, so it's hard for investors to get the facts about the company's management, products, services, and finances. Microcap stocks historically have been more volatile and less liquid than the stock of larger companies,
Convertible Security Risk - risk of loss of principal at maturity,
New Issuer Risk - New Issuers have been in the business less than 3 years, may face increased pressures from established companies, new unseasoned management, may be more volatile and may offer less liquidity than larger companies.
Loss of some or all of the money you invest is a risk of investing in Series Two.
Before you invest in the Fund you should carefully evaluate the risks. Because of the nature of the Fund, you should consider the investment to be a long-term investment that typically provides the best results when held for a number of years.
Loss of some or all of the money you invest is a risk of investing in the Fund.
ADDITIONAL INVESTMENT INFORMATION
The following information supplements the information in Series Two’s Prospectus under the heading Principal Investment Strategy.
The Fund is subject to certain restrictions on its fundamental 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. Series Two cannot invest more than 5% of the value of its total assets at the time of investment in securities of any one issuer other than securities issued by the United States Government, or hold more than 10% of any class of voting securities or other securities of any one issuer in its securities portfolio. These diversification of investment limitations only apply to 75% of Series Two’s total assets.
3. The Fund cannot act as an underwriter of securities of other issuers.
4. 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.
5. 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.
6. Series Two cannot issue senior securities, but is able to invest in other investment companies or investment trusts under a different set of conditions which are set forth below. Series Two is able to invest in other investment companies or investment trusts under the following set of conditions:
(a) Other Investment Companies – Series Two is able to invest in other investment companies to the extent permitted by applicable law or SEC exemption. Under Section 12(d)(1) of the 1940 Act, a mutual fund generally is limited to investing only up to 10% of its assets in shares of other investment companies and up to 5% of its assets in any one investment company, and no such investment can represent more than 3% of the voting stock of an acquired investment company. In addition, no mutual funds for which IRC acts as an advisor may, in the aggregate, own more than 10% of the voting stock of a closed-end investment company. The 1940 Act and related rules provide certain exemptions from these restrictions.
(b) Real Estate Investment Trusts (REITs) – Series Two may invest in REITs as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over Series Two.
7. Series Two cannot invest in direct real estate, but may invest in REITs as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over Series Two.
American Growth Fund, Inc. was organized and incorporated in the State of Maryland in 1958. Series Two was established in February of 2011 as a diversified, open-end, mutual fund. In July of 2016 Series Two reorganized into a diversified mutual fund focused on the legal cannabis business.
CLASSIFICATION
The American Growth Fund Series Two is a diversified, open-end management mutual fund.
INVESTMENT STRATEGIES
In attempting to achieve its principal investment objective, the Fund will attempt to invest at least 80% of its assets in securities involved, at least some way, in the legal cannabis business, securities convertible into common stocks traded on national securities exchanges or over-the-counter or REITs.
At the time of purchase, with respect to 75% of the Fund's total assets, we do not invest more than 5% in any one issuer nor do we invest more than 25% in any one industry. We also follow a rigorous selection process designed to identify undervalued securities before choosing securities for the portfolio.
The Fund may invest in companies of all sizes. Investment Research Corporation, the Fund’s investment adviser (the Adviser or IRC), will choose securities that it believes have a potential for capital appreciation because of existing or anticipated economic conditions or because the securities are considered undervalued or out of favor with investors or are expected to increase in price over time.
The Fund may invest in Real Estate Investment Trusts (“REITs”) if the investment committee believes that it could be advantageous to the stockholders. These REITs could be involved in the areas of the legal cannabis business such as property development and rental or other legal endeavors associated with the cannabis business.
Using the following approach, we look for companies having some of these characteristics:
~ Companies and/or securities involved legally in the cannabis business;
~ Large capitalization companies, although the Fund may invest in companies of all sizes, if the Adviser believes it is in the best interests of the Fund. Large cap companies are generally companies with market capitalization exceeding $5 billion at the date of acquisition;
~ growth that is faster than the market as a whole and sustainable over the long term;
~ strong management team;
~ leading market positions and growing brand identities;
~ financial, marketing, and operating strength.
When the Adviser believes the securities the Fund holds may decline in value, the Fund may sell them and, if the Adviser believes market conditions warrant the Fund may assume a defensive position. While in a defensive position, the Fund may invest all or part of its assets in corporate bonds, debentures (both short and long term) or preferred stocks rated A or above by Moody Investors Service, Inc., Standard and Poor’s, or Fitch Ratings (or, if unrated, of comparable quality in the opinion of the Adviser), United States Government securities, repurchase agreements meeting approved credit worthiness standards (e.g., whereby the underlying security is issued by the United States Government or any agency thereof), or retain funds in cash or cash equivalents. There is no maximum limit on the amount of fixed income securities in which the Fund may invest for temporary defensive purposes. If the Fund takes a temporary defensive position in attempting to respond to adverse market, economic, political or other conditions, it may not achieve its investment objective. The Fund’s performance could be lower during periods when it retains or invests its assets in these more defensive holdings.
INVESTMENT RISKS
Investing in any mutual fund involves risk, including the risk that you may receive little or no return on your investment, and the risk that you may lose part or all of the money you invest.
The company may invest in companies of all sizes. The legal cannabis business is a quickly growing and emerging business. As a result there are additional risks that you should consider. Some of these risks are;
General Risk - All investments are subject to inherent risk. Markets can trade in random or cyclical price patterns and prices can fall over time. The value of Series Two can fluctuate as markets fluctuate over long and short periods of time.
Political, Economic and Regulatory Risk - Changes in economic and tax policies, high inflation rates, government instability, and other political or economic actions or factors that may have an adverse effect on Series Two. Governmental and regulatory actions, including law changes, may have unexpected or adverse consequences on particular markets, strategies, or investments. Legislation or regulation may also change the way in which Series Two itself is regulated. Series Two cannot predict the effects of any new governmental regulation or law that may be implemented on the ability of Series Two to invest in certain assets, or the possible effect on our ability to access financial markets, and there can be no assurance that any new governmental regulation will not adversely affect Series Two’s ability to achieve its investment objectives,
REITs Risk - Under its modified fundamental investment policies, Series Two may invest in REITs (Real Estate Investment Trust), including Equity REITs and Mortgage REITs. Equity REITs invest directly in property while Mortgage REITs invest in mortgages on real property. REITs may be subject to certain risks associated with the direct ownership of real property including declines in the value of real estate, risks related to general and local economic conditions, over building and increased competition, increase in property taxes and operating expenses, and variations in rental income. REITS are dependent on management skills, are not diversified, and are subject to heavy cash flow dependency, default by borrowers and self-liquidation. REITs (especially mortgage REITs) are also subject to interest rate risk. When interest rates decline, the value of a REIT’s investment in fixed-rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT’s investment in fixed-rate obligations can be expected to decline. Mortgage REITs may be affected by the quality of any credit extended to them,~ Stock Market Risk - the value of an investment may fluctuate,
Industry and Security Risk - risks relating to an industry as a whole or a company’s prospects for business success,
Management Risk - risks that the Adviser’s assessment of a company’s growth prospects may not be accurate,
Liquidity Risk - Series Two may face increased liquidity risk which is the risk that a given security or asset may not be readily marketable,
Small Cap Risk - small cap stocks tend to have a high exposure to market fluctuations and failure,
Mid Cap Risk - mid cap stocks tend to have a greater exposure to market fluctuations and failure,
Micro Cap Risk - low-priced stocks issued by the smallest of companies. Many microcap companies do not file financial reports with the SEC, so it's hard for investors to get the facts about the company's management, products, services, and finances. Microcap stocks historically have been more volatile and less liquid than the stock of larger companies,
Convertible Security Risk - risk of loss of principal at maturity,
New Issuer Risk - New Issuers have been in the business less than 3 years, may face increased pressures from established companies, new unseasoned management, may be more volatile and may offer less liquidity than larger companies.
Loss of some or all of the money you invest is a risk of investing in Series Two.
Before you invest in the Fund you should carefully evaluate the risks. Because of the nature of the Fund, you should consider the investment to be a long-term investment that typically provides the best results when held for a number of years.
Loss of some or all of the money you invest is a risk of investing in the Fund.
ADDITIONAL INVESTMENT INFORMATION
The following information supplements the information in Series Two’s Prospectus under the heading Principal Investment Strategy.
The Fund is subject to certain restrictions on its fundamental 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. Series Two cannot invest more than 5% of the value of its total assets at the time of investment in securities of any one issuer other than securities issued by the United States Government, or hold more than 10% of any class of voting securities or other securities of any one issuer in its securities portfolio. These diversification of investment limitations only apply to 75% of Series Two’s total assets.
3. The Fund cannot act as an underwriter of securities of other issuers.
4. 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.
5. 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.
6. Series Two cannot issue senior securities, but is able to invest in other investment companies or investment trusts under a different set of conditions which are set forth below. Series Two is able to invest in other investment companies or investment trusts under the following set of conditions:
(a) Other Investment Companies – Series Two is able to invest in other investment companies to the extent permitted by applicable law or SEC exemption. Under Section 12(d)(1) of the 1940 Act, a mutual fund generally is limited to investing only up to 10% of its assets in shares of other investment companies and up to 5% of its assets in any one investment company, and no such investment can represent more than 3% of the voting stock of an acquired investment company. In addition, no mutual funds for which IRC acts as an advisor may, in the aggregate, own more than 10% of the voting stock of a closed-end investment company. The 1940 Act and related rules provide certain exemptions from these restrictions.
(b) Real Estate Investment Trusts (REITs) – Series Two may invest in REITs as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over Series Two.
7. Series Two cannot invest in direct real estate, but may invest in REITs as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over Series Two.
8. The Fund cannot invest in companies for the purpose of exercising management or control.
9. Series Two may invest in commodity contracts as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over Series Two.
10. In applying its restrictions on concentration of investments in any one industry, the Fund uses industry classifications based, where applicable, on Bridge Information Systems, Reuters, the S&P Stock Guide published by Standard & Poors, the O’Neil Database published by William O’Neil & Co., Inc., information obtained from Value Line, Bloomberg L.P. and Moody’s International, and/or the prospectus of the issuing company, and/or other recognized classification resources. Selection of an appropriate industry classification resource will be made by management in the exercise of its reasonable discretion. The Fund will not concentrate its investments in any particular industry nor will it purchase a security if, as a result of such purchase, more than 25% of its assets will be invested in a particular industry.
11. Series Two may invest in puts, calls, straddles and spreads as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over Series Two.
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 Series Two makes temporary investments in U.S. Government securities, it ordinarily will purchase U.S. Treasury Bills, Notes, or Bonds. Series Two may make temporary investments in repurchase agreements where the underlying security is issued or guaranteed by the U.S. Government or an agency thereof. Series Two will not invest more than 10% of its assets in repurchase agreements maturing in more than seven days. Series Two 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.
The Fund is subject to certain restrictions on its non-fundamental investment policies, including the following:
1) Series Two will invest, at the discretion of the Investment Advisor and when possible, in the securities of issuers involved in the legal cannabis business, and the group of industries that make up the legal cannabis business, without limit, as contemplated by its investment strategy. The legal cannabis business does not need to be the sole focus point of a company for Series Two to invest in it, nor does it need to account for a majority of its overall revenues.
A non-fundamental policy is a policy that can be changed without obtaining shareholder approval. A 60-day notice must be sent to the shareholders prior to the Mutual Fund making a change in a non-fundamental investment policy.
TEMPORARY DEFENSIVE POSITION
If Series Two invests in fixed-income securities, for temporary defensive purposes, these securities generally are U.S. government obligations. If corporate fixed-income securities are used, the securities normally are rated A or higher by Moody’s Investor Service, Inc. (Moody’s), Fitch Ratings or A or higher by Standard & Poor’s (S&P). There is no maximum limit on the amount of fixed income securities in which Series Two may invest for temporary defensive purposes.
PORTFOLIO TURNOVER
Normal portfolio turnover for Series Two is between 4% and 25%.
DISCLOSURE OF PORTFOLIO HOLDINGS
Disclosures of portfolio holdings are made on a case by case basis by Timothy E. Taggart, President. Considerations for disclosing portfolio holdings include, but are not limited to, the person or group making the request, the frequency of requests, timing of requests, compensation received, and if the disclosure of such information is in the best interest of Series Two’s shareholders. In deciding if the request is within the shareholders’ best interest Mr. Taggart will weigh any possible conflicts between the shareholders and the investment adviser, principal underwriter and any affiliated person of such entity. Mr. Taggart may elect to place restrictions on the use of such information including a requirement that the information be kept confidential or prohibitions on trading based on said information. Restrictions on such use may also include procedures to monitor the use of the information. All instances of the release of such information will be reviewed quarterly by the Board of Directors.
9. Series Two may invest in commodity contracts as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over Series Two.
10. In applying its restrictions on concentration of investments in any one industry, the Fund uses industry classifications based, where applicable, on Bridge Information Systems, Reuters, the S&P Stock Guide published by Standard & Poors, the O’Neil Database published by William O’Neil & Co., Inc., information obtained from Value Line, Bloomberg L.P. and Moody’s International, and/or the prospectus of the issuing company, and/or other recognized classification resources. Selection of an appropriate industry classification resource will be made by management in the exercise of its reasonable discretion. The Fund will not concentrate its investments in any particular industry nor will it purchase a security if, as a result of such purchase, more than 25% of its assets will be invested in a particular industry.
11. Series Two may invest in puts, calls, straddles and spreads as permitted by the 1940 Act or other governing statute, by the Rules thereunder, or by the SEC or other regulatory agency with authority over Series Two.
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 Series Two makes temporary investments in U.S. Government securities, it ordinarily will purchase U.S. Treasury Bills, Notes, or Bonds. Series Two may make temporary investments in repurchase agreements where the underlying security is issued or guaranteed by the U.S. Government or an agency thereof. Series Two will not invest more than 10% of its assets in repurchase agreements maturing in more than seven days. Series Two 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.
The Fund is subject to certain restrictions on its non-fundamental investment policies, including the following:
1) Series Two will invest, at the discretion of the Investment Advisor and when possible, in the securities of issuers involved in the legal cannabis business, and the group of industries that make up the legal cannabis business, without limit, as contemplated by its investment strategy. The legal cannabis business does not need to be the sole focus point of a company for Series Two to invest in it, nor does it need to account for a majority of its overall revenues.
A non-fundamental policy is a policy that can be changed without obtaining shareholder approval. A 60-day notice must be sent to the shareholders prior to the Mutual Fund making a change in a non-fundamental investment policy.
TEMPORARY DEFENSIVE POSITION
If Series Two invests in fixed-income securities, for temporary defensive purposes, these securities generally are U.S. government obligations. If corporate fixed-income securities are used, the securities normally are rated A or higher by Moody’s Investor Service, Inc. (Moody’s), Fitch Ratings or A or higher by Standard & Poor’s (S&P). There is no maximum limit on the amount of fixed income securities in which Series Two may invest for temporary defensive purposes.
PORTFOLIO TURNOVER
Normal portfolio turnover for Series Two is between 4% and 25%.
DISCLOSURE OF PORTFOLIO HOLDINGS
Disclosures of portfolio holdings are made on a case by case basis by Timothy E. Taggart, President. Considerations for disclosing portfolio holdings include, but are not limited to, the person or group making the request, the frequency of requests, timing of requests, compensation received, and if the disclosure of such information is in the best interest of Series Two’s shareholders. In deciding if the request is within the shareholders’ best interest Mr. Taggart will weigh any possible conflicts between the shareholders and the investment adviser, principal underwriter and any affiliated person of such entity. Mr. Taggart may elect to place restrictions on the use of such information including a requirement that the information be kept confidential or prohibitions on trading based on said information. Restrictions on such use may also include procedures to monitor the use of the information. All instances of the release of such information will be reviewed quarterly by the Board of Directors.
Currently Series Two has no ongoing arrangements or commitment to release portfolio holdings to any individual or group.
1. Trustees and officers of the fund serve until their resignation, removal or retirement.
2. Timothy Taggart, John Pasco and Gerald Opalinski are "interested person of the Fund as defined by the Investment Company Act of 1940 because of the following positions which he holds.
Timothy E. Taggart is the President, Treasurer and a Director of World Capital Brokerage, Inc. and is the President, Treasurer and a Director of Investment Research Corporation.
John Pasco III is an "interested person of the Fund as defined by the Investment Company Act of 1940 because of the following position which he holds.
John Pasco III is the Treasurer and a director of Director of Commonwealth Shareholder Services, Inc., the Fund’s administrator. President and Director of Fund Services, Inc., the Fund’s transfer agent. President and Director of Commonwealth Fund Accounting, Inc., the Fund’s accounting service agent.
Gerald Opalinski is a Registered Representative of World Capital Brokerage, Inc.
Timothy E. Taggart is president and a director of the Distributor and the president and a director of Investment Research Corporation.
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 October 27, 2015, all officers and directors as a group (a total of 11) owned directly 0 of its shares or 0.00% of shares outstanding. Together, directly and indirectly, all the officers and directors as a group owned 0 shares or 0.00% of all shares outstanding.
As of October 27, 2015, officers, directors and members of the advisory board (the Fund does not have an Advisory Board) and their relatives owned of record and beneficially Fund shares with net asset value of approximately $0 representing approximately 0.00% of the total net assets of the Fund.
BOARD OF DIRECTORS
The management of the Fund believes that the business experience and educational background of the Fund’s Directors and Officers set forth above make these individuals well qualified to serve the Fund in the positions that they hold. Specifically, Fund management believes that:
Timothy E. Taggart, President and Director, has held his securities license since 1987. His knowledge of the securities industry is vast as owner and president of World Capital Brokerage, Inc., a registered Broker Dealer, and owner and president of Investment Research Corporation, a registered Investment Advisor. Mr. Taggart is also a member of the Investment Committee and a FINRA Arbitrator.
John Pasco III, Director, has extensive experience in the Securities industry as Treasurer and a Director of a mutual fund administrator, President and a Director of a FINRA Registered Broker Dealer, President and a Director of a mutual fund transfer and disbursing agent, President of two SEC Registered Investment Advisers, President and Director of an accounting firm, President and a Director of a registered investment company, World Funds Trust.
Eddie R. Bush, Fund Independent Director and Audit Committee Chairman, is a Financial Expert as a result of his extensive experience in mutual fund accounting and auditing as a certified public accountant with his own local accounting business in Colorado.
Harold Rosen, Fund Independent Director, in his career as owner of Bi-Right Furniture Stores has gained valuable day-to-day experience in running a successful business.
Dr. Brian Brody, Fund Independent Director, in his position as a Doctor of Professional Psychology with his own local practice in Colorado is an intelligent individual that provides the Board with valuable insight and knowledge into human behaviors that could effect Business and Shareholder action.
Gerald Opalinski, Director, owner of Opal Financial Services, has been registered with FINRA since December of 1982. Besides his General Securities Representative license he also holds General Securities Principal, Financial and Operations Principal, Introducing BD/Financial Operations Principal, Municipal Securities Principal and Registered Options Principal licenses.
Mark Bomber, Director, is a long time flight officer for United Airlines and holds a Bachelor of Business Administration in finance from Notre Dame.
Darrell Bush, Director, is an accountant who offers the Fund, and the Audit Committee, his professional financial opinions.
Peter McKown has extensive experience in the securities industry. He is the Senior Advisor for Prince Street Capital Management LLC., and Senior Partner of Prince Street Capital Management LLC.
Eddie R. Bush is the Chairman of the Fund’s Audit Committee, which quarterly reviews and reports to the Board on the validity of the accounting data provided to the Board. It is the duty of the Fund Board to review, on a quarterly basis, the actions taken by Fund Management, including how management addressed any risk management issues confronting the Fund that arose during the previous quarter. This includes, in part, trade, expense and performance issues and data. The Fund does not have a lead independent director. The Fund Board believes that since the majority (i.e., 6) of the Board members are independent and therefore non interested persons and since the data provided to the Board is reviewed by each Fund Director, both individually and as a group, that the current Board structure is effective and appropriate. Specifically, under a standing item on the Agenda for each quarterly Fund Board meeting the information provided to the Board by the management and staff of the Fund is used by the members of the Board to review and analyze risk(s) confronting the Fund on a quarterly basis. Each Director’s opinions, views and questions on risk management and any other issue concerning the Fund are directly communicated to the management and staff of the Fund, both at the quarterly Fund Board meetings and if necessary, between board meetings, under the current leadership structure of the Fund Board.
Mr. Ed Bush, Dr. Brody and Mr. Bomber are members of the Audit Committee whose main purpose is the review and oversight of the Fund’s financials. During the past fiscal year there were a total of four meetings held by the audit committee. Members of the Audit Committee are nominated and voted upon by the Board of Directors.
On September 23, 2010 an Investment Committee was formed with the purpose of offering investment advice to the senior portfolio manager of the Fund. The members of the Investment Committee are Timothy Taggart and Robert Fleck.
All officers and directors in the aggregate (a total of 11) received total compensation of $1,632, from the Fund in fiscal year 2015. Directors of the Fund were compensated at the rate of $400 per meeting attended, and the board members who are members of the audit committee receive an additional $100 per meeting and the audit chairman receives and additional $100 per meeting.
Out-of-town officers and directors are also reimbursed for their travel expenses to meetings.
During the year ended July 31, 2015, Messrs. Taggart, E. Bush, Rosen, Pasco, Dr. Brody, Opalinski, Bomber and D. Bush were the only directors serving during that year.
The Fund, its Investment Adviser (Investment Research Corporation) and its underwriter (World Capital Brokerage, Inc.) have adopted a Code of Ethics under rule 17j-1 of the Investment Company Act. This Code of Ethics contains guidelines for purchasing securities that are held by the Fund and are available by contacting the Fund at 800-525-2406.
PROXY VOTING POLICIES
For proxy votes cast on behalf of American Growth Fund:
Investment Research Corporation ("the adviser"), the investment adviser of the Fund, has a fiduciary duty to act solely in the best interests of the Fund. As it relates to proxy voting, the adviser recognizes that it must vote Fund securities in a timely manner and make voting decisions that are in the best interests of the Fund.
The following are general policies of the adviser with respect to proxy voting but the adviser does reserve the right to depart from these policies, if such a departure is in the best interests of the Fund and its shareholders.
Election of Directors: Unless we are aware of extenuating circumstances, such as a proxy fight for board seats, the adviser will generally vote in favor of management’s slate of directors.
Appointment of Auditors: The adviser will generally vote in favor of the auditors recommended by management.
Changes In Capital Structure: The adviser will generally vote in accordance with management’s recommendation unless other information indicates that the Fund’s interests are better served by a vote against the proposal.
Other Proxy Issues: The adviser will consider other proxy issues on a case by case basis with the Fund’s interests determining the vote.
Conflicts of Interest: The adviser recognizes that there may be situations where a proxy issue presents a conflict of interest between the interest of the Fund and the adviser’s representative casting the proxy vote. If a conflict exists, any votes inconsistent with this policy will be submitted to the Fund’s Board of Directors for review and approval.
The President of the Fund is responsible for voting all proxies. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800-525-2406 or through the Fund’s website at www.americangrowthfund.com and on the Security and Exchange Commission’s website at http://www.sec.gov.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons. No person controls more the 25% of American Growth Fund, Inc.’s voting securities.
Management Ownership. All officers and directors own a combined total of 0% of American Growth Fund, Inc. Series Two shares.
INVESTMENT ADVISORY AGREEMENT
The investment adviser for Series Two is Investment Research Corporation ("IRC"), 1636 Logan Street, Denver, Colorado 80203.
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 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.
IRC will obtain assistance from employees of World Capital Advisors ("WCA"), who will be acting in the capacity of employees of IRC, in managing Series One and Series Two. In return for receiving such services IRC pays those employees up to the full amount of its investment advisory fee.
The advisory agreements require the Fund to pay its own expenses subject to the limitations set by the securities laws in effect from time to time in the states in which the Fund’s securities are then registered for sale or are exempt from registration and offered for sale. The categories of expenses paid by the Fund are set forth in detail in the Fund’s financial statements. Currently the Fund’s securities are either registered for sale or are exempt from registration and offered for sale in California, Colorado, Florida, Kansas, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, Tennessee, Texas and Virginia.
1. Trustees and officers of the fund serve until their resignation, removal or retirement.
2. Timothy Taggart, John Pasco and Gerald Opalinski are "interested person of the Fund as defined by the Investment Company Act of 1940 because of the following positions which he holds.
Timothy E. Taggart is the President, Treasurer and a Director of World Capital Brokerage, Inc. and is the President, Treasurer and a Director of Investment Research Corporation.
John Pasco III is an "interested person of the Fund as defined by the Investment Company Act of 1940 because of the following position which he holds.
John Pasco III is the Treasurer and a director of Director of Commonwealth Shareholder Services, Inc., the Fund’s administrator. President and Director of Fund Services, Inc., the Fund’s transfer agent. President and Director of Commonwealth Fund Accounting, Inc., the Fund’s accounting service agent.
Gerald Opalinski is a Registered Representative of World Capital Brokerage, Inc.
Timothy E. Taggart is president and a director of the Distributor and the president and a director of Investment Research Corporation.
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 October 27, 2015, all officers and directors as a group (a total of 11) owned directly 0 of its shares or 0.00% of shares outstanding. Together, directly and indirectly, all the officers and directors as a group owned 0 shares or 0.00% of all shares outstanding.
As of October 27, 2015, officers, directors and members of the advisory board (the Fund does not have an Advisory Board) and their relatives owned of record and beneficially Fund shares with net asset value of approximately $0 representing approximately 0.00% of the total net assets of the Fund.
BOARD OF DIRECTORS
The management of the Fund believes that the business experience and educational background of the Fund’s Directors and Officers set forth above make these individuals well qualified to serve the Fund in the positions that they hold. Specifically, Fund management believes that:
Timothy E. Taggart, President and Director, has held his securities license since 1987. His knowledge of the securities industry is vast as owner and president of World Capital Brokerage, Inc., a registered Broker Dealer, and owner and president of Investment Research Corporation, a registered Investment Advisor. Mr. Taggart is also a member of the Investment Committee and a FINRA Arbitrator.
John Pasco III, Director, has extensive experience in the Securities industry as Treasurer and a Director of a mutual fund administrator, President and a Director of a FINRA Registered Broker Dealer, President and a Director of a mutual fund transfer and disbursing agent, President of two SEC Registered Investment Advisers, President and Director of an accounting firm, President and a Director of a registered investment company, World Funds Trust.
Eddie R. Bush, Fund Independent Director and Audit Committee Chairman, is a Financial Expert as a result of his extensive experience in mutual fund accounting and auditing as a certified public accountant with his own local accounting business in Colorado.
Harold Rosen, Fund Independent Director, in his career as owner of Bi-Right Furniture Stores has gained valuable day-to-day experience in running a successful business.
Dr. Brian Brody, Fund Independent Director, in his position as a Doctor of Professional Psychology with his own local practice in Colorado is an intelligent individual that provides the Board with valuable insight and knowledge into human behaviors that could effect Business and Shareholder action.
Gerald Opalinski, Director, owner of Opal Financial Services, has been registered with FINRA since December of 1982. Besides his General Securities Representative license he also holds General Securities Principal, Financial and Operations Principal, Introducing BD/Financial Operations Principal, Municipal Securities Principal and Registered Options Principal licenses.
Mark Bomber, Director, is a long time flight officer for United Airlines and holds a Bachelor of Business Administration in finance from Notre Dame.
Darrell Bush, Director, is an accountant who offers the Fund, and the Audit Committee, his professional financial opinions.
Peter McKown has extensive experience in the securities industry. He is the Senior Advisor for Prince Street Capital Management LLC., and Senior Partner of Prince Street Capital Management LLC.
Eddie R. Bush is the Chairman of the Fund’s Audit Committee, which quarterly reviews and reports to the Board on the validity of the accounting data provided to the Board. It is the duty of the Fund Board to review, on a quarterly basis, the actions taken by Fund Management, including how management addressed any risk management issues confronting the Fund that arose during the previous quarter. This includes, in part, trade, expense and performance issues and data. The Fund does not have a lead independent director. The Fund Board believes that since the majority (i.e., 6) of the Board members are independent and therefore non interested persons and since the data provided to the Board is reviewed by each Fund Director, both individually and as a group, that the current Board structure is effective and appropriate. Specifically, under a standing item on the Agenda for each quarterly Fund Board meeting the information provided to the Board by the management and staff of the Fund is used by the members of the Board to review and analyze risk(s) confronting the Fund on a quarterly basis. Each Director’s opinions, views and questions on risk management and any other issue concerning the Fund are directly communicated to the management and staff of the Fund, both at the quarterly Fund Board meetings and if necessary, between board meetings, under the current leadership structure of the Fund Board.
Mr. Ed Bush, Dr. Brody and Mr. Bomber are members of the Audit Committee whose main purpose is the review and oversight of the Fund’s financials. During the past fiscal year there were a total of four meetings held by the audit committee. Members of the Audit Committee are nominated and voted upon by the Board of Directors.
On September 23, 2010 an Investment Committee was formed with the purpose of offering investment advice to the senior portfolio manager of the Fund. The members of the Investment Committee are Timothy Taggart and Robert Fleck.
All officers and directors in the aggregate (a total of 11) received total compensation of $1,632, from the Fund in fiscal year 2015. Directors of the Fund were compensated at the rate of $400 per meeting attended, and the board members who are members of the audit committee receive an additional $100 per meeting and the audit chairman receives and additional $100 per meeting.
Out-of-town officers and directors are also reimbursed for their travel expenses to meetings.
During the year ended July 31, 2015, Messrs. Taggart, E. Bush, Rosen, Pasco, Dr. Brody, Opalinski, Bomber and D. Bush were the only directors serving during that year.
The Fund, its Investment Adviser (Investment Research Corporation) and its underwriter (World Capital Brokerage, Inc.) have adopted a Code of Ethics under rule 17j-1 of the Investment Company Act. This Code of Ethics contains guidelines for purchasing securities that are held by the Fund and are available by contacting the Fund at 800-525-2406.
PROXY VOTING POLICIES
For proxy votes cast on behalf of American Growth Fund:
Investment Research Corporation ("the adviser"), the investment adviser of the Fund, has a fiduciary duty to act solely in the best interests of the Fund. As it relates to proxy voting, the adviser recognizes that it must vote Fund securities in a timely manner and make voting decisions that are in the best interests of the Fund.
The following are general policies of the adviser with respect to proxy voting but the adviser does reserve the right to depart from these policies, if such a departure is in the best interests of the Fund and its shareholders.
Election of Directors: Unless we are aware of extenuating circumstances, such as a proxy fight for board seats, the adviser will generally vote in favor of management’s slate of directors.
Appointment of Auditors: The adviser will generally vote in favor of the auditors recommended by management.
Changes In Capital Structure: The adviser will generally vote in accordance with management’s recommendation unless other information indicates that the Fund’s interests are better served by a vote against the proposal.
Other Proxy Issues: The adviser will consider other proxy issues on a case by case basis with the Fund’s interests determining the vote.
Conflicts of Interest: The adviser recognizes that there may be situations where a proxy issue presents a conflict of interest between the interest of the Fund and the adviser’s representative casting the proxy vote. If a conflict exists, any votes inconsistent with this policy will be submitted to the Fund’s Board of Directors for review and approval.
The President of the Fund is responsible for voting all proxies. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available without charge, upon request, by calling 800-525-2406 or through the Fund’s website at www.americangrowthfund.com and on the Security and Exchange Commission’s website at http://www.sec.gov.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Control Persons. No person controls more the 25% of American Growth Fund, Inc.’s voting securities.
Management Ownership. All officers and directors own a combined total of 0% of American Growth Fund, Inc. Series Two shares.
INVESTMENT ADVISORY AGREEMENT
The investment adviser for Series Two is Investment Research Corporation ("IRC"), 1636 Logan Street, Denver, Colorado 80203.
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 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.
IRC will obtain assistance from employees of World Capital Advisors ("WCA"), who will be acting in the capacity of employees of IRC, in managing Series One and Series Two. In return for receiving such services IRC pays those employees up to the full amount of its investment advisory fee.
The advisory agreements require the Fund to pay its own expenses subject to the limitations set by the securities laws in effect from time to time in the states in which the Fund’s securities are then registered for sale or are exempt from registration and offered for sale. The categories of expenses paid by the Fund are set forth in detail in the Fund’s financial statements. Currently the Fund’s securities are either registered for sale or are exempt from registration and offered for sale in California, Colorado, Florida, Kansas, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, Tennessee, Texas and Virginia.
Total advisory fees paid by the Fund to the Investment Research Corporation in fiscal years 2013, 2014 and 2015 were $22,801, $23,807 and $22,803 resulting in management fees of 1%, 1% and 1% of average net assets, respectively.
The advisory agreement will continue from year to year so long as such continuance is specifically approved annually either by the vote of the entire board of directors of the Fund or by the vote of a majority of the outstanding shares of the Fund, and in either case by the vote of a majority of the directors who are not interested persons of the Fund or the 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.
PRINCIPAL UNDERWRITER
World Capital Brokerage, Inc., at 1636 Logan, Denver, CO 80203, is the underwriter and distributor for the Fund. Timothy E. Taggart is the President and a Director of the Underwriter.
Total fees paid to the Underwriter/Distributor for the fiscal years 2013, 2014 and 2015 were $1,364, $3 and $54, respectively.
SERVICE AGREEMENTS
The Fund’s Transfer Agent is Fund Services, Inc. and was paid, $5,759 for the 2013 fiscal year, $3,841 for the 2014 fiscal year and $3,629 for the 2015 fiscal year.
UMB Bank is the Fund’s Custodian. For the fiscal years 2013, 2014 and 2015 total fees paid to the Custodian were $4,831, $3,472 and $5,755, respectively.
Tait, Weller and Baker, LLP is the Fund’s auditors. For the fiscal years 2013, 2014 and 2015 total fees paid to the Auditor were $18,500, $19,310 and $18,909, respectively.
DEALER REALLOWANCES. No front-end sales loads were reallowed to dealers.
RULE 12b-1 PLANS The Fund’s directors have adopted separate 12b-1 rule plans for Class E shares that allow such class to pay distribution fees for the sales and distribution of its shares. Class E shares are subject to an annual 12b-1 fee no greater than 0.30% of average net assets.
For the fiscal year ended July 31, 2015 principal types of activities for which payments were made, including those amounts, are;
In addition to the aforementioned service fees, the 12b-1 plan allows for reimbursement to the Distributor of expenses incurred. Expenses are reimbursed on an ongoing basis, subject to review by the board of directors and do not carryover from year to year.
The Fund does not participate in any joint distribution activities.
No affiliated person of the Fund has a direct or indirect financial interest in the operation of the 12b-1 plan or related agreements.
The Fund anticipates the 12b-1 plan will result in the distributor providing the Fund and its shareholders with a high level of service. The 12b-1 plan is subject to the review of the board of directors on a quarterly basis.
OTHER SERVICE PROVIDERS
No other person provides significant administrative or business affairs management services for the Fund.
PORTFOLIO MANAGERS
The Fund is managed by an Investment Committee, activated in April of 2011, made up of; Timothy Taggart, the Fund’s President who has been a member of the Investment Committee since September of 2010 and is the President of the Fund’s principal underwriter and distributor, World Capital Brokerage, Inc. ("WCB"), and Robert Fleck, employee of the Adviser who has acted in this capacity since September 2010. Mr. Fleck is owner of World Capital Advisors (“WCA”). WCA is not a sub-advisor to the Fund. Mr. Taggart and Mr. Fleck are jointly and primarily responsible for the portfolio management of Series One (total net assets of $14,259,113 as of close of business on 06/30/2016) and Series Two (total net assets of $1,687,666 as of close of business on 06/30/2016). As of 7/31/2015 there were no conflicts of interest in connection with the portfolio manager’s management of Series One or Series Two. Mr. Taggart receives a salary which is allocated between the Fund, the Advisor, the Underwriter and other affiliated companies. Mr. Fleck receives 85% of the management fee of assets raised directly by him and 15% of the management fee of assets raised from other sources. Neither individual’s compensation is based upon performance of the Fund. Neither individual manages any other funds. As of 10/27/2015 Mr. Taggart owned between $0-$10,000 of Series Two Fund shares. Mr. Fleck owned between $100,001-$500,000 of Series Two Fund shares.
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.
PRINCIPAL UNDERWRITER
World Capital Brokerage, Inc., at 1636 Logan, Denver, CO 80203, is the underwriter and distributor for the Fund. Timothy E. Taggart is the President and a Director of the Underwriter.
Total fees paid to the Underwriter/Distributor for the fiscal years 2013, 2014 and 2015 were $1,364, $3 and $54, respectively.
SERVICE AGREEMENTS
The Fund’s Transfer Agent is Fund Services, Inc. and was paid, $5,759 for the 2013 fiscal year, $3,841 for the 2014 fiscal year and $3,629 for the 2015 fiscal year.
UMB Bank is the Fund’s Custodian. For the fiscal years 2013, 2014 and 2015 total fees paid to the Custodian were $4,831, $3,472 and $5,755, respectively.
Tait, Weller and Baker, LLP is the Fund’s auditors. For the fiscal years 2013, 2014 and 2015 total fees paid to the Auditor were $18,500, $19,310 and $18,909, respectively.
DEALER REALLOWANCES. No front-end sales loads were reallowed to dealers.
RULE 12b-1 PLANS The Fund’s directors have adopted separate 12b-1 rule plans for Class E shares that allow such class to pay distribution fees for the sales and distribution of its shares. Class E shares are subject to an annual 12b-1 fee no greater than 0.30% of average net assets.
For the fiscal year ended July 31, 2015 principal types of activities for which payments were made, including those amounts, are;
In addition to the aforementioned service fees, the 12b-1 plan allows for reimbursement to the Distributor of expenses incurred. Expenses are reimbursed on an ongoing basis, subject to review by the board of directors and do not carryover from year to year.
The Fund does not participate in any joint distribution activities.
No affiliated person of the Fund has a direct or indirect financial interest in the operation of the 12b-1 plan or related agreements.
The Fund anticipates the 12b-1 plan will result in the distributor providing the Fund and its shareholders with a high level of service. The 12b-1 plan is subject to the review of the board of directors on a quarterly basis.
OTHER SERVICE PROVIDERS
No other person provides significant administrative or business affairs management services for the Fund.
PORTFOLIO MANAGERS
The Fund is managed by an Investment Committee, activated in April of 2011, made up of; Timothy Taggart, the Fund’s President who has been a member of the Investment Committee since September of 2010 and is the President of the Fund’s principal underwriter and distributor, World Capital Brokerage, Inc. ("WCB"), and Robert Fleck, employee of the Adviser who has acted in this capacity since September 2010. Mr. Fleck is owner of World Capital Advisors (“WCA”). WCA is not a sub-advisor to the Fund. Mr. Taggart and Mr. Fleck are jointly and primarily responsible for the portfolio management of Series One (total net assets of $14,259,113 as of close of business on 06/30/2016) and Series Two (total net assets of $1,687,666 as of close of business on 06/30/2016). As of 7/31/2015 there were no conflicts of interest in connection with the portfolio manager’s management of Series One or Series Two. Mr. Taggart receives a salary which is allocated between the Fund, the Advisor, the Underwriter and other affiliated companies. Mr. Fleck receives 85% of the management fee of assets raised directly by him and 15% of the management fee of assets raised from other sources. Neither individual’s compensation is based upon performance of the Fund. Neither individual manages any other funds. As of 10/27/2015 Mr. Taggart owned between $0-$10,000 of Series Two Fund shares. Mr. Fleck owned between $100,001-$500,000 of Series Two Fund shares.
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