DIVIDEND
FUND, INC.
214-360-7418 800-704-6072
Part B
STATEMENT OF ADDITIONAL INFORMATION
February 17, 2023
This Statement of Additional Information (“SAI”) is not a prospectus, but should be read in conjunction with the Fund’s current prospectus dated February 17, 2022. This SAI incorporates by reference the Fund's Annual Report to Shareholders for the fiscal year ended December 31, 2021. 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.
TABLE OF CONTENTS
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 61
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.
Non-Interested Directors
Jennifer T. Lapeyre
Non-Interested Director Retired
in 2019, prior
7531 Caillet
Street
acct rep for non-profits
Dallas, TX Age 59 at Auction
Source, LP
(2010-2019) Dallas, TX
Vicky L. Hubbard Non-Interested Director Teacher/Administrator,
5805 Furneaux Prince of Peace
Plano, TX Age 66 Dallas, TX
Jennifer Lapeyre retired in 2019 after working as an account
representative for non-profits from 2010-2019 at Auction Source, LP in Dallas
TX.
Vicky Hubbard is currently
a school administrator and teacher at Prince of Peace school in Dallas, Tx. after
retiring in 2000 from a career in the computer business.
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.
ANTI-MONEY
LAUNDERING PROGRAM
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, 2022, Mrs. Laura S. Adams, President of the Fund, and her husband,
Steven Adams, Portfolio Manager of the Fund, jointly own or control 8.17% 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.
Management Ownership
As of December 31, 2022,
Mrs. Laura S. Adams, President of the Fund, and her husband, Steven Adams,
Portfolio Manager of the Fund, jointly own or control 8.17% 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
2020 $
231,379 $ 0
$ 231,379
2021 $
272,551 $ 0
$ 272,551
2022 $
279,328 $ 0
$ 279,328
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 12-31-22 on Performance
---------------------- ------------- ------------------
Separate Account
Management*
155 accounts $ 794,615,137 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 its 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 its 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
2020 $
0
2021 $
0
2022 $
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.
FINANCIAL STATEMENTS
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, 2021. The Fund will provide the Annual Report
without charge at written or telephone request.
Contents
Page #
1. Financial Statements and Exhibit Index 2
2. Persons Controlled by or Under Common
Control with the Fund 2
3. Indemnification
2
4. Business and other Connections of the
Investment Advisor 3
5. Principal Underwriters 3
6. Location of Accounts & Records 3
7. Management Services 3
8. Undertakings
3
9. Signatures 4
10. Exhibit Index
4
1. a. Financial Statements - Condensed financial
information on a per share basis will be presented in Part A as required by
applicable laws, rules or regulations. All other financial statements will be
presented in Part B at the appropriate time specified as required by applicable
laws, rules or regulations.
b. Exhibit Index
a
- Articles of Incorporation – Exhibit (a) of Pre-Effective Amendment
No. 3 of our Registration under the
Securities Act of 1933.
b
- By-Laws - Exhibit (b) of Pre-Effective Amendment No. 3 of our
Registration under the Securities Act of
1933.
c
- Instruments Defining Rights of Security Holders – Not applicable
d
- Investment Advisory Contract - Exhibit (d) of Pre-Effective
Amendment No. 3 of our Registration under
the Securities Act of
1933.
e
- Underwriting Contracts - Not applicable
f
- Bonus or Profit Sharing Contracts - Not applicable
g
- Custodial Agreements - Not applicable
h
- Other Material Contracts – Not applicable
i -
Legal Opinion - Exhibit (i) of Pre-Effective
Amendment
No. 3 of our Registration under the
Securities Act of 1933.
j
- Other Opinions – Consent of Independent Auditor
k
- Omitted Financial Statements - Not applicable
l
- Initial Capital Agreements - Exhibit (l) of Pre-Effective Amendment
No. 3 of our Registration under the
Securities Act of 1933.
m
- Rule 12b-1 Plan – Not applicable
n
- Rule 18f-3 Plan - Not applicable
p
- Code of Ethics
2. Persons Controlled by or Under Common Control with
the Fund – Mrs. Laura S. Adams and Steven Adams, owners of Adams Asset
Advisors, LLC.
3. Indemnification - Insofar as indemnification for
liability arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant, the registrant
has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
Section 2.02-1 of the Texas Business Corporation Act
provides generally and in pertinent part that a Texas corporation may indemnify
its directors and officers against expenses (if the person is found liable to
the corporation or on the basis that improper benefit was improperly received
by the person) or against expenses, judgments, fines and settlements (in all
other cases) actually and reasonably incurred by them in connection with any
action, suit or proceeding if, in connection with the matters in issue they
acted in good faith and in a manner they reasonably believed to be in, or nor
opposed to, the best interests of the corporations, in connection with any
criminal suit or proceeding, if in connection with the matters in issue, they
had no reasonable cause to believe their conduct was unlawful. Section 2.02-1 does not permit
indemnification when the person is found liable for willful or intentional misconduct
in the performance of his duty to the Corporation. Section 2.02-1 further permits a Texas
corporation to grant to its directors and officers additional rights of
indemnification not inconsistent with Texas Business Corporation Act through
bylaw provisions, agreements, votes of shareholders or interested directors or
otherwise, to purchase indemnity insurance on behalf of such indemnifiable
persons and to advance to such indemnifiable persons expenses incurred in
defending a suit or proceeding upon receipt of certain undertakings.
Article
VII of the Company’s Bylaws provides that, subject to certain exceptions, the
Company shall indemnify, to the fullest extent permitted by law, any person who
is or was a director, officer, employee or agent of the Company or any
affiliate against any and all expenses (including attorney’s fees), judgments,
fines and amounts paid in settlement incurred by such persons in connection
with any civil, criminal, administrative, or investigative actions, suit,
proceeding or claim (including any action by or in the right of the Company or
an affiliate) by reason of the fact that such person is or was serving in such
capacity. In addition, Article VII
authorizes the Company to purchase insurance for itself or any person to whom
indemnification is or may be available against any liability asserted against
such person in, or arising out of, such person’s status as director, officer,
employee or agent of the Company of its affiliates. Article VII authorizes the Company, to the extent
that the Board of Directors deems appropriate, to make advances of expenses to
an indemnifiable person upon the receipt by the Company of a written
undertaking by such person to repay any amounts advanced in the event that it
is ultimately determined that such person is not entitled to such
indemnification.
4. Business and other Connections of the Investment
Advisor – Adams Asset Advisors, LLC activity at the present time is performance
on its Investment Advisory contracts and offering investment advice to
individuals, trusts, retirement plans, and non-profit organizations.
5. Principal Underwriters – Not Applicable
6. Location of Accounts & Records - All Fund
records are held at corporate headquarters – 8150 N. Central
Expressway #M1120,
7. Management
services - Not applicable
8. Undertakings
– None
9.
Signatures –
Pursuant
to the requirements of the Securities Act of 1933 and the Investment Company
Act of 1940, the Stock Dividend Fund, Inc. certifies that it meets all of the
requirements for effectiveness of this Registration Statement and has duly
caused this amendment to the Registration Statement under Rule 485(b) under the
Securities Act to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas and State of Texas on the 17th day
of February, 2022.
Stock
Dividend Fund, Inc. By:
/s/ Laura S. Adams
------------------------
Laura S. Adams, President
Pursuant to the
requirements of the Securities Act of 1933, this amendment to the Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signatures Title Date
By: /s/ Laura S.
Adams President,
Treasurer, 2/17/23
---------------------- Secretary and Director,
Laura S. Adams Principal financial officer,
Principal
accounting officer
By: /s/ Jennifer T. Lapeyre Director 2/17/23
--------------------------
Jennifer T. Lapeyre
By: /s/ Vicky L.
Hubbard Director 2/17/23
------------------------
Vicky L. Hubbard
10. Exhibit Index –
Consent of Independent
Auditor
j
Code of Ethics p