DIVIDEND FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
February 22, 2021
This Statement of Additional Information (“SAI”) is not a prospectus, but should be read in conjunction with the Fund’s current prospectus dated February 22, 2021. This SAI incorporates by reference the Fund's Annual Report to Shareholders for the fiscal year ended December 31, 2020. To obtain a free copy of the Prospectus or Annual Report, please write or call the Fund at the address or phone number listed above.
Stock Dividend Fund, Inc.
(the “Fund”) was incorporated in
The Fund is an open-end, non-diversified management investment company.
All investment strategies and risks are discussed in the prospectus.
Investment Restrictions: These investment restrictions are the fundamental investment policies of the Fund and may not be changed without the receipt of the affirmative vote of the holders of two-thirds (2/3rds) of the shares entitled to vote on matters to be presented to shareholders. The Fund may not:
a) change the investment objective, which is growth and income;
b) borrow money or purchase securities on margin; provided, however, the Fund may obtain such short term credit as may be necessary for clearance of purchases and sales of securities for temporary or emergency purposes in an amount not exceeding five percent (5%) of the value of its total assets;
c) make investments in commodities, commodity contracts or real estate; provided, however, the Fund may purchase and sell securities of companies which deal in real estate or interests therein;
d) make loans; provided, however, the purchase of a portion of a readily marketable issue of publicly distributed bonds, debentures or other debt securities shall not be considered the making of a loan by the Fund;
e) invest in another company for the purpose of acquiring control of such company;
f) purchase or retain securities of any issuer thereof if any officer of director of the Fund or its investment adviser owns more than one-half (1/2) of one percent (1%) of any class of security or collectively owns more than five percent (5%) of any class of security of such issuer;
g) pledge, mortgage or hypothecate any of the Fund’s assets;
h) purchase any security that may be subject to registration under the Securities Act of 1933, as amended, prior to the sale thereof to the public or which are not at the time of purchase readily salable.
i) issue senior securities; and
j) underwrite securities of other companies or entities.
In addition, the Fund will not concentrate in any one industry or industries or invest in any illiquid securities.
The expected turnover rates of the Fund are discussed in the section “Principal Investment Strategies” of the Prospectus.
The Fund is required to include a schedule of portfolio holdings in its annual and semi-annual reports to shareholders. These reports are sent to shareholders within 60 days of the end of the second and fourth fiscal quarters and are filed with the Securities and Exchange Commission (the “SEC”) on form N-CSR. The Fund is also required to file a schedule of portfolio holdings each month with the SEC on Form N-PORT within 30 days of the end of each month. The Fund will provide a copy of the complete schedule of portfolio holdings as filed with the SEC, upon request. This policy is applied uniformly to all requesters, regardless of whether the requester is an individual or institutional investor. These are the only times that the portfolio is released and the Board of Directors has determined that this release policy is in the best interests of shareholders of the Fund.
Shareholders meet annually to elect all members of the Board of Directors, select an independent auditor, and vote on any other items deemed pertinent by the incumbent Board. The Directors hold ultimate responsibility for running the Fund, including the valuation of the Fund’s portfolio securities and the pricing of Fund shares. The Board appoints officers to run the Fund and selects an Investment Advisor to provide investment advice (See “Investment Advisor”, in the Prospectus). No remuneration is paid to members of the Board.
Officers and Directors of the Fund: Their addresses and principal occupations during the past five years are:
Name and Address Position Principal Occupation
Laura S. Adams President, Treasurer, Member
Dallas, TX Age 59
Laura Adams is considered an “interested person”, as defined in the Investment Company Act of 1940, because she is affiliated with the Investment Advisor. Mrs. Adams is currently a Member of Adams Asset Advisors, which was started in March 2002. Mrs. Adams is also a Director of Small Cap Value Fund, Inc.
Yolawnde F. Malone Non-Interested Director Pres. Whitford Capital,
P.O. Box 800855 Sr. Tax Mngr. Montgomery
Dallas, TX Age 58 Coscia Greilich LLP prior
Vicky L. Hubbard Non-Interested Director Private Investor
Plano, TX Age 64 Dallas, TX
Yolawnde Malone is President of Whitford Capital. Prior to that she was a Senior Tax Manager at Montgomery Coscia Greilich LLP. Prior to that she was a CPA/Tax Specialist at Family Legacy Trust, an Affiliate of Cain Waters, where she has worked from 2006 to 2012. From 2004 to 2006 she was tax compliance manager at Tolleson Wealth Management. Mrs. Malone is also a Director of Small Cap Value Fund, Inc.
Vicky Hubbard is currently a school administrator and private investor after retiring in 2000 from a career in the computer business. Mrs. Hubbard is also a Director of Small Cap Value Fund, Inc.
Compensation: No compensation, pension or retirement benefits will be paid to directors and/or officers of the Fund in the current fiscal year and none are presently contemplated. This may be changed in the future by the Board of Directors at their discretion. The Fund does not compensate officers and directors that are affiliated with the Investment Adviser except as they benefit through payment of the Advisory fee. There are no sales loads.
Both the Fund and the Fund’s Investment Advisor have adopted Codes of Ethics under rule 17j-1 of the Investment Company Act. These Codes of Ethics describe rules and regulations for applicable personnel regarding personal investments in securities held within the Fund’s portfolio. These Codes of Ethics are on file with, and available from, the Securities and Exchange Commission.
The Fund does not invest in any security for the purpose of exercising control or management. The Fund has adopted a policy that will insure that all proxies received by the Fund are reviewed in a timely manner. Generally, the Fund will support any policies, plans or structures that will maximize shareholder value and oppose any proposals that have the effect of restricting the ability of shareholders to realize the full potential of their investment. In the event that a conflict regarding a proxy vote does arise between the Fund and the Advisor, the Board will decide how the Fund will vote. The Fund will notify shareholders sixty days in advance if there are any changes to this policy. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling toll-free 800-704-6072 and (2) on the Commission’s website at http://www.sec.gov.
The Fund has policies and procedures in place to address money laundering and terrorism as required by the USA Patriot Act. Our procedures include, but are not limited to, reporting suspicious and/or fraudulent activity and a review of all new account applications.
Major Shareholders: As of December 31, 2020, Mrs. Laura S. Adams, President of the Fund, and her husband, Steven Adams, Portfolio Manager of the Fund, jointly own or control 7.41% of the Fund. This amount includes family related accounts. All remaining outstanding shares of the Fund are owned by National Financial Services Corp.(Fidelity Investments) for the benefit of others.
As of December 31, 2020, Mrs. Laura S. Adams, President of the Fund, and her husband, Steven Adams, Portfolio Manager of the Fund, jointly own or control 7.41% of the Fund. This amount includes family related accounts.
Adams Asset Advisors, LLC was selected by the Board of Directors on April 19, 2004 to be the Investment Advisor to the Fund. Adams Asset Advisors was formed on March 21, 2002 and is currently controlled by Steven Adams, Managing Member, and Mrs. Laura S. Adams, Member, both affiliates of the Fund, to offer investment advice to institutions, individuals, trusts, retirement plans, and non-profit organizations. Mrs. Adams is also President of the Fund and will place buy and sell orders for the Fund in that capacity.
A discussion regarding the basis for the Board of Director's approval of the
Agreement between the Fund and the Adviser is available in the Fund's Annual
Report to Shareholders.
The Investment Advisor is responsible for furnishing investment direction advice to Directors of the Fund on the basis of a continuous review of the portfolio and recommend to the Fund when and to what extent securities should be purchased or disposed. See section “Investment Advisor” in prospectus. The Investment Advisor will be the dividend paying agent. Adams Asset Advisors has an agreement with the Fund to pay the Fund’s start up expenses and to pay all ongoing operating expenses of the Fund except brokerage fees and commissions, taxes, interest, extraordinary legal and other extraordinary expenses. The advisory fee paid by the Fund is 0.85% per year of the average total net assets of the Fund. This fee is computed daily and is payable monthly.
Advisory Fees: The advisory fees to the current adviser, for the last three
years, are as follows:
YEAR ADVISORY FEE AMOUNT WAIVED NET ADVISORY FEE
2018 $ 274,532 $ 0 $ 274,532
2019 $ 256,855 $ 0 $ 256,855
2020 $ 231,379 $ 0 $ 231,379
Steven Adams, Managing Member of the Investment Advisor to the Fund, is the sole portfolio manager. Mr. Adams compensation is paid by Adams Asset Advisors, LLC and is determined by the owners of Adams Asset Advisors, LLC. Because Mr. Adams and his wife are the owners of the Advisor, his compensation is determined by the profitability of the Advisor. Mr. Adams income will likely be affected by the appreciation and depreciation of the portfolio’s securities, as well as the purchase and redemption of shares by the Fund’s shareholders. These events affect the net assets of the Fund and thus the advisory fees paid to the advisor. The table below describes information regarding other accounts managed by the portfolio manager:
Other accounts managed Total Assets Advisory Fee based
by Portfolio Manager as of 12-31-20 on Performance
---------------------- ------------- ------------------
Separate Account Management*
159 accounts $ 502,470,251 No
*Includes all discretionary accounts and all assets under management of Adams Assets Advisors, LLC.
The Fund has no underwriter as it sells shares directly.
Adams Asset Advisors, LLC
is the transfer agent and dividend-paying agent of the Fund. Fidelity
Investments, in effect, acts as the sub transfer agent. Adams Asset Advisors,
LLC nor Fidelity Investments will receive compensation from the Fund for these
services. The principal address of Adams Asset Advisors is: 8150 N. Central
The Fund does it’s own accounting subject to Turner Stone & Company LLP for all audit procedures. The principal address of Turner Stone & Company LLP is: 12700 Park Central Drive, Ste 1400, Dallas, Texas 75251.
There are no third-party payments or service agreements with any organization or individual other than the Investment Advisor as described in the previous paragraph and fees paid to the outside auditor.
There is no individual or organization that receives remuneration from the Investment Advisor or the Fund for providing investment advice.
The Fund is a no-load Fund in that investors in the Fund pay no purchase or sales fees. Purchases made through Broker-dealers or other Service Agents may charge a fee either at time of purchase or redemption as described in “Purchase of Fund Shares” in the prospectus. Any fee, if charged, is retained by the broker-dealer and not remitted to the Fund or the Advisor.
The Fund requires brokers to execute transactions in portfolio securities promptly and at the most favorable price.
The Fund has no fixed policy, formula, method, or criteria which it uses in allocating brokerage business based on commission charges. The Board of Directors will evaluate and review the reasonableness of brokerage commissions paid annually.
Fund management will place buy and sell orders for securities based on recommendations from the Investment Advisor. The Fund may select brokers who, in addition to meeting primary requirements of execution and price, may furnish statistical or other factual information and services, which in the opinion of management, are helpful or necessary to the Fund’s normal operations. Information or services may include economic studies, industry studies, statistical analysis, corporate reports, or other forms of assistance to the Fund or it’s Advisor. No effort is made to determine the value of these services or the amount they might have reduced expenses of the Advisor. The Fund will not pay higher brokerage commissions for soft dollar credits.
The following table details all commissions paid for the most recent three fiscal years:
Year Total Commissions Paid
2018 $ 317
2019 $ 0
2020 $ 0
The Fund selects brokers based on competitive commission rates and transaction services rendered. At this time the Fund will not be making principal transactions with broker-dealers.
Description of Common Stock: The authorized capitalization of the Fund consists of 100,000,000 shares of Stock Dividend Fund, Inc. common stock of .001 par value per share. Each share has equal dividend, distribution and liquidation rights. There are no conversion or preemptive rights applicable to any shares of the Fund. All shares once issued in book format are fully paid and non-assessable.
Voting Rights: Each holder of Fund shares has voting rights equal to the number of shares held. Voting rights are non-cumulative. Therefore the holders of a majority of shares of common stock can elect all directors of the Fund if they so choose, although holders of remaining shares are still able to cast their votes.
See section “Purchase of Fund Shares” in the prospectus for more information.
The Fund always trades at the net asset value. Details about the offering price are given in the section “Pricing of Fund Shares” of the Prospectus. Redemption in kind is discussed in the section “Redemption of Fund Shares” of the Prospectus.
Taxation of the Fund is discussed in the section “Tax Consequences” of the Prospectus.
The Fund has no underwriter as it sells shares directly.
The Investment Advisor, Adams Asset Advisors, is the transfer agent of the Fund, which records all Fund share purchases and redemptions on Fund premises. Fidelity Investments, in effect, is a sub-transfer agent. The Advisor is registered as a transfer agent with the SEC. All shareholder holdings are maintained in book form. The Fund has computer hardware and software, which are provided and managed by Adams Asset Advisors, to run the daily operations. All data is backed up and stored in secure locations on Fund premises.
The Fund’s total returns are based on the overall dollar or percentage change in the value of a hypothetical investment in the Fund, assuming all dividends and distributions are reinvested. Average annual total return reflects the hypothetical annually compounded return that would have produced the same cumulative total return if the Fund’s performance had been constant over the entire period presented. Because average annual total returns tend to smooth out the variations in a Fund’s returns, investors should recognize that they are not the same as actual year to year returns. Average annual return is based on historical earnings and is not intended to indicate future performance.
After tax returns are calculated using historical highest federal tax rates and do not reflect the impact of state and local taxes. Redemptions assume long term capital gains rates. Actual after tax returns depend on an individual investor’s tax situation and may differ from those shown. After tax returns are not relevant to investors who hold Fund shares through tax-deferred arrangements such as 401(k) plans or IRA’s.
The Financial Statements and Independent Auditor’s Report required to be included in the Statement of Additional Information are incorporated herein
by reference to the Fund’s Annual Report to Shareholders for the fiscal year ended December 31, 2020. The Fund will provide the Annual Report without charge at written or telephone request.