DIVIDEND FUND, INC.
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:
<![if !supportLists]>a) <![endif]>change the investment objective, which is growth and income;
<![if !supportLists]>b) <![endif]>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;
<![if !supportLists]>c) <![endif]>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;
<![if !supportLists]>d) <![endif]>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;
<![if !supportLists]>e) <![endif]>invest in another company for the purpose of acquiring control of such company;
<![if !supportLists]>f) <![endif]>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;
<![if !supportLists]>g) <![endif]>pledge, mortgage or hypothecate any of the Fund’s assets;
<![if !supportLists]>h) <![endif]>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.
<![if !supportLists]>i) <![endif]>issue senior securities; and
<![if !supportLists]>j) <![endif]>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 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.
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.
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
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.
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, 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
<![if !supportLists]>1. <![endif]>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
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
<![if !supportLists]>2. <![endif]>Persons Controlled by or Under Common Control with the Fund – Mrs. Laura S. Adams and Steven Adams, owners of Adams Asset Advisors, LLC.
<![if !supportLists]>3. <![endif]>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.
<![if !supportLists]>4. <![endif]>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.
<![if !supportLists]>5. <![endif]>Principal Underwriters – Not Applicable
<![if !supportLists]>6. <![endif]>Location of Accounts & Records - All Fund
records are held at corporate headquarters – 8150 N. Central
<![if !supportLists]>7. <![endif]>Management services - Not applicable
<![if !supportLists]>8. <![endif]>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