<PAGE>
EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - July 8, 1996
Dear shareholders:
The first half of our fiscal year saw an apparent bottoming of
interest rates and the beginning of the Presidential campaign.
History demonstrates that our stock market often rises in the
face of modestly increasing interest rates and frequently rises
in Presidential election years.
One year ago I wrote you that "the Federal Reserve is trying to
do the nearly impossible". It appears the Federal Reserve has
piloted our economy to a soft landing for the first time since
its foundation in 1913. Stimulating economic growth and
increasing employment, while subduing inflationary pressures, is
a great achievement. The Fed may give interest rates a nudge
up, possibly disturbing the markets; however, when viewed from
a longer term perspective, a small increase would be seen as
further evidence that the Fed is continuing its mastery of
monetary policy. We believe our portfolio is well positioned,
rooted in value and reaching for growth. We stand able to move
quickly in pursuit of opportunities.
We took profits in Arrow Electronics, eliminating our position.
L'oreal's takeover of Maybelline, Inc. induced us to take a
lustrous profit and abandon the cosmetics industry for the
moment.
We took profits on two thirds of our Walt Disney Co. and did the
same with 40% of Green Tree Financial. We bought ValueVision
shares in anticipation of an acceleration in growth. ValueVision
is the third largest television home shopping network,
and changes in Federal Communications Commission policy should
help them. These changes will force cable networks to
significantly lower their charges, thus allowing a large
expansion of ValueVision's audience.
We look forward to exciting developments in our portfolio
companies and continue to thank you, our shareholders, for your
continuing support.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - MAY 31, 1996
<TABLE>
<CAPTION>
Shares Value
- -------- ----------
COMMON STOCKS - 79.0 %
<C> <S> <C>
AIRLINES - 2.9%
3,000 Atlantic Southeast Airlines.......................... $ 79,500
----------
BANKS - 4.1%
4,000 First Hawaiian Inc................................... 113,000
----------
CABLE TELEVISION - 1.4%
2,000 *Tele-Communications Inc. ............................ 37,750
----------
COMMUNICATIONS - 8.9%
2,000 *Cellular Communications, Intl........................ 107,500
4,000 *Commnet Cellular, Inc................................ 137,500
----------
245,500
----------
CONSTRUCTION - 6.0%
1,500 *Jacobs Engineering Group, Inc........................ 40,313
5,000 Lennar Corp.......................................... 124,375
----------
164,688
----------
ELECTRONICS - 3.0%
1,200 Cubic Corp........................................... 40,200
1,200 *Tech-Sym Corp....................................... 40,950
----------
81,150
----------
ENTERTAINMENT - 1.7%
500 *Tele-Communications Liberty Media Group Ser. A....... 15,000
500 Walt Disney Production Co............................ 30,375
----------
45,375
----------
FINANCIAL SERVICES - 22.3%
1,500 Federal Home Loan Corp............................... 123,937
3,171 First Data Corp...................................... 252,887
3,000 Greentree Financial Corp............................. 98,250
2,000 Household International, Inc......................... 138,500
----------
613,574
----------
Shares Value
- -------- ----------
FOOD - 4.1%
5,000 McCormick & Co. Inc.................................. 113,750
----------
INSURANCE - 3.9%
4,400 Leucadia National Corp............................... 108,350
----------
OIL & NATURAL GAS - 7.3%
3,000 Apache Corp.......................................... 85,875
7,000 *Oryx Energy Co....................................... 113,750
----------
199,625
----------
PUBLISHING - 4.2%
3,000 Belo A. H. Corp...................................... 114,750
----------
REAL ESTATE INVESTMENT TRUSTS - 5.3%
10,000 United Dominion Realty Trust, Inc.................... 146,250
----------
RETAIL - 3.9%
15,000 *ValueVision International............................ 106,875
----------
Total Value of Common Stocks (cost $1,396,328)....... 2,169,637
----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 22.2%
$610M U.S. Treasury Bill
4.82% due 6/6/96 (cost $609,592)................. 609,592
----------
Total Value of Investments(cost $2,005,920)....101.2% 2,779,229
Excess of Liabilities Over Other Assets....... (1.2) (31,590)
------ ----------
Net Assets.....................................100.0% $2,747,639
====== ==========
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 1996
<TABLE>
<S>
ASSETS <C> <C>
Investments in securities, at value
(identified cost $2,005,920) (Note 1-A)... $2,779,229
Cash........................................ 32,945
Dividends receivable........................ 1,795
Other assets................................ 1,164
----------
TOTAL ASSETS............................. 2,815,133
LIABILITIES
Payable for capital stock redeemed.......... $ 39,891
Accrued advisory and administrative fees.... 14,043
Other accrued expenses...................... 13,560
----------
TOTAL LIABILITIES........................ 67,494
----------
NET ASSETS..................................... $2,747,639
==========
NET ASSET VALUE PER SHARE
($2,747,639 / 216,345 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $12.70
======
NET ASSETS CONSIST OF:
Capital paid in............................. $1,881,483
Accumulated net realized gain on investments 100,749
Undistributed net investment deficit........ (7,902)
Net unrealized appreciation in value of
investments............................... 773,309
----------
TOTAL.................................... $2,747,639
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $12.70
Sales commission: 8 1/2% of offering price* 1.18
------
Offering price (adjusted nearest cent) ..... $13.88
======
Redemption price............................ $12.70
======
</TABLE>
*On purchases of $10,000 or more the offering price is reduced.
See notes to financial statements
3
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF OPERATIONS - SIX MONTHS ENDED MAY 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest................................... $ 16,811
Dividends.................................. 15,173
TOTAL INCOME......................... $ 31,984
Expenses (NOTE 4):
Investment advisory fee................... 10,532
Transfer agent and dividend disbursing
agent's fees and expenses............ 7,860
Professional fees......................... 7,795
Registration fees......................... 4,205
Administrative fee ....................... 3,511
Reports and notices to shareholders....... 3,463
Custodian fees............................ 2,115
Other expenses............................ 1,542
--------
TOTAL EXPENSES....................... 41,023
Less: Custodian fees paid indirectly. 1,137 39,886
-------- --------
INVESTMENT INCOME-NET................ (7,902)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (NOTE 3):
Net realized gain on investments........... 100,867
Net unrealized appreciation of investments. 84,020
--------
Net gain on investments.............. 184,887
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $176,985
========
</TABLE>
See notes to financial statements
4
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
May 31, November 30,
1996 1995
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment loss............................ $ (7,902) $ (31,627)
Net realized gain on investments............... 100,867 194,043
Net unrealized appreciation of investments..... 84,020 250,329
---------- ----------
Net increase in net assets
resulting from operations................. 176,985 412,745
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments............... (193,972) (10,248)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting
from capital share transactions (Note 2).... (39,731) 81,437
---------- ----------
Net increase (decrease) in net assets....... (56,718) 483,934
NET ASSETS
Beginning of period............................ 2,804,357 2,320,423
---------- ----------
End of period (including net investment deficit
of $7,902 and $0, respectively).............. $2,747,639 $2,804,357
========== ==========
</TABLE>
See notes to financial statements
5
<PAGE>
EAGLE GROWTH SHARES,INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Eagle Growth Shares, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as a diversified open-end management investment company.
The Fund's investment objective is to achieve growth of capital. The following
is a summary of significant accounting policies consistently followed by the
Fund in the preparation of its financial statements.
A. Security Valuation - securities listed on national exchanges or the
NASDAQ National Market System are valued at the closing sales price on
May 31, 1996. Securities traded over-the-counter and securities not
traded that day are valued at the prevailing quoted bid price. Short-term
obligations are stated at amortized cost which approximates fair value.
B. Federal Income Taxes - no provision has been made for Federal income
taxes on net income or capital gains, since it is the policy of the Fund to
continue to comply with the special provisions of the Internal Revenue Code
applicable to investment companies and to make sufficient distributions of
income and capital gains to relieve it from all, or substantially all, such
taxes.
C. Distributions to Shareholders - the Fund distributes its net investment
income, if any, and net realized gains annually. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles.
D. Other - security transactions are accounted for on the date the
securities are purchased or sold. Cost is determined, and gains and losses
are based, on the identified cost basis for both financial statement and
Federal income tax purposes. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income and estimated expenses
are accrued daily.
E. Reclassifications - for the year ended November 30, 1995, a net
operating loss amounting to $31,627 was reclassified from undistributed net
investment income to capital paid in. Net investment loss, net realized gain
on investments, and net assets were not affected by this change.
2. CAPITAL STOCK
At May 31, 1996 there were 216,345 shares outstanding. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1996 November 30, 1995
-------------------------------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold...... 20,416 $ 252,738 51,630 $ 603,696
Capital stock issued in
reinvestment of net
realized gain on
investments......... 14,566 175,233 822 9,029
Capital stock redeemed.. (37,815) (467,702) (45,547) (531,288)
------- --------- ------- ---------
Net increase
(decrease)........ (2,833) $ (39,731) 6,905 $ 81,437
======= ========= ======= =========
</TABLE>
6
<PAGE>
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 1996, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $103,751 and $315,330 respectively.
At May 31, 1996, the cost of investments for Federal income tax purposes
was $2,005,920. Accumulated net unrealized appreciation on investments was
$773,309 consisting entirely of gross unrealized appreciation.
4. INVESTMENT ADVISORY AND OTHER TRANSACTIONS WITH AFFILIATES
Baxter Financial Corporation (BFC), is the Investment Advisor and the
Administrator of the Fund.
As investment advisor, BFC supervises the Fund's investments on a
continuous basis and provides the Fund with investment advice and
recommendations for an annual fee equal to .75% of the first $200 million of
net assets, .625% of net assets between $200 million and $400 million, and
.50% of net assets in excess of $400 million.
As the Fund's administrator, BFC is responsible for providing overall
supervision of the Fund's administrative operations and receives an annual fee
of .25% of the average net assets of the Fund.
Both the investment advisory fee and the administrative fee are payable
monthly, based on the month-end net asset values of the Fund.
Pursuant to California regulations, BFC has agreed to reimburse the Fund
if and to the extent that the Fund's aggregate operating expenses (exclusive
of interest, taxes, brokerage commissions and extraordinary expenses) exceed
any limitation on expenses applicable to the Fund in California. The
reimbursement is limited to the yearly total of the advisory and
administrative fees. For the six months ended May 31, 1996, no reimbursement
was required.
BFC also serves as the underwriter of the Fund. For the six months ended
May 31, 1996, BFC received $58 in commissions from the sale of Fund shares.
During the six months ended May 31, 1996, directors of the Fund who are not
affiliated with BFC received directors fees aggregating $600 and the Fund's
Custodian has provided credits in the amount of $1,137 against custodian
charges based on the uninvested cash balances of the Fund.
7
<PAGE>
EAGLE GROWTH SHARES, INC.
FINANCIAL HIGHLIGHTS
The following table sets forth the per share operating performance data
for a share of capital stock outstanding, total return, ratios to average net
assets and other supplemental data for each period indicated.
<TABLE>
<CAPTION>
Six Months
Ended Year Ended November 30,
May 31, ------------------------------------------
PER SHARE DATA 1996 1995 1994 1993 1992 1991
- -------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.............. $12.79 $10.93 $13.09 $13.41 $11.72 $ 9.35
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... (0.04) (0.14) (0.21) (0.19) (0.07) 0.03
Net Realized & Unrealized Gain
(Loss) on Investments............ 0.83 2.05 (1.71) 0.43 1.78 2.56
------ ------ ------ ------ ------ ------
Total From Investment Operations... 0.79 1.91 (1.92) 0.24 1.71 2.59
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Investment Income.............. -- -- -- -- 0.02 0.12
Net Realized Gains................. 0.88 0.05 0.24 0.56 -- --
Return of Capital.................. -- -- -- -- -- 0.10
------ ------ ------ ------ ------ ------
Total Distributions................ 0.88 0.05 0.24 0.56 0.02 0.22
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period..... $12.70 $12.79 $10.93 $13.09 $13.41 $11.72
====== ====== ====== ====== ====== ======
TOTAL RETURN* (%).................. 6.52 17.53 (14.95) 1.78 14.56 28.28
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period
(in thousands)................... $2,748 $2,804 $2,320 $2,748 $2,947 $3,152
Ratio to Average Net Assets:
Expenses (%)..................... 2.92 (a) 3.44 3.71 2.67 2.50 2.51
Net Income (Loss) (%)............ (0.56) (a) (1.27) (1.77) (1.30) (0.58) 0.24
Ratio to Average Net Assets Before
Expense Reimbursements
Expenses (%)..................... -- 4.44 4.71 3.67 3.33 3.30
Net Income (Loss) (%)............ -- (2.27) (2.77) (2.30) (1.41) (0.56)
Portfolio Turnover Rate (%)........ 5 51 51 66 7 82
</TABLE>
* Calulated without sales charge.
(a) Annualized
See notes to financial statements
8
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of
Directors of Eagle Growth Shares, Inc.
We have audited the accompanying statement of assets and liabilities of Eagle
Growth Shares, Inc., including the portfolio of investments as of May 31, 1996,
and the related statement of operations for the six months then ended, the
statement of changes in net assets for the six months ended May 31, 1996 and
the year ended November 30, 1995, and financial highlights for each of the
periods presented. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of May 31, 1996 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Eagle
Growth Shares, Inc. at May 31, 1996, and the results of its operations, changes
in its net assets and financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
June 17, 1996
9
<PAGE>
EAGLE GROWTH SHARES, INC.
EAGLE GROWTH SHARES, INC.
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432 (561)395-2155
INVESTMENT ADVISOR, ADMINISTRATOR AND UNDERWRITER
BAXTER FINANCIAL CORP.,
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432
CUSTODIAN
STAR BANK, N.A., P.O. Box 640115, Cincinnati, OH 45264-0115
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
AMERICAN DATA SERVICES, INC.
24 West Carver Street, Location #00150, Huntington, NY 11743
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, Malvern, PA
AUDITORS
TAIT, WELLER & BAKER, Philadelphia, PA
10
<PAGE>
[This Page Intentionally Left Blank]
<PAGE>
Eagle Growth Shares, Inc.
1200 North Federal Highway
[LOGO] Suite 424
Boca Raton, FL 33432
(561) 395-2155
[LOGO]
OFFICERS EAGLE
Donald H. Baxter GROWTH
Chairman and President SHARES,INC.
Ronald F. Rohe
Vice President/Secretary/Treasurer
ADMINISTRATIVE STAFF
Keith A. Edelman
Director of Operations
Diane M. Sarro
Director of Shareholder Services
DIRECTORS
Donald H. Baxter
Thomas J. Flaherty
James Keogh
Kenneth W. McArthur
Robert L. Meyer
Donald P. Parson
Robert A. Utting SEMI-ANNUAL
REPORT
May 31, 1996
You will find important information
about EAGLE GROWTH SHARES, INC. - its
investment policy and management, past
record, the method of calculating
the per-share net asset value and the
sales commission included in the public
offering price - in the current
prospectus. This report is submitted
for the general information of the
Fund's shareholders. It is not
authorized for distribution to
prospective shareholder unless preceded
or accompanied by an effective prospectus.
