DIVIDEND
FUND, INC.
214-360-7418 800-704-6072
Part B
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.
DESCRIPTION
OF FUND AND ITS INVESTMENTS AND RISKS 2
Investment Strategies and Risks,
Fund Policies 2
Board of Directors,
Management Information 3
ANTI-MONEY
LAUNDERING PROGRAM 5
CONTROL
PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 5
Control
Persons, Principal Holders 5
INVESTMENT ADVISORY AND OTHER SERVICES 5
Services
Provided by, and Fees Paid to the Investment Advisor 5
Principal Underwriter, Other
Service Providers
6
Third Party
Payments & Service Agreements 6
Dealer
Re-allowances, 12b-1 Fees and Other Services 7
BROKERAGE
ALLOCATIONS AND OTHER PRACTICES 7
Brokerage
Transactions, Commissions 7
Directed
Brokerage and Regular Broker-Dealers 7
CAPITAL
STOCK AND OTHER SECURITIES 7
PURCHASE,
REDEMPTION, AND PRICING OF SHARES 8
Offering
Price and Redemption in Kind 8
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.
PORTFOLIO
HOLDINGS
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
Interested Directors
Laura S. Adams President, Treasurer, Member
8150 N.
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.
Non-Interested Directors
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
Dallas, TX
Vicky L. Hubbard Non-Interested Director Private Investor
5805 Furneaux
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
Expressway #M1120,
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.
PERFORMANCE DATA
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.