<PAGE>
EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - July 7, 1997
Dear shareholders:
Strong forces are working to propel the market to lofty levels, bedazzling
both participants and onlookers. Fortunately, as shareholders of Eagle Growth
Shares, Inc., you may have been participants in the great bull market of the
1990s. Congratulations!
It is difficult to imagine that low interest rates and low inflation can
continue forever, but these powerful economic trends appear sustainable for
the foreseeable future. If one had to outline the ideal environment for
stocks, this would be it. If inflation allows interest rates to continue
their decline, long term bond rates could be at 5% on New Years day in the year
2000. This could elevate the Dow over 9,000.
What could thwart this scenario? Action by the Federal Reserve or some
unexpected upheaval in the international arena could be factors. By bumping
interest rates 1/4 point last March, the Fed served notice to the markets that
it will not be taken for granted. Any action by the Fed appears very unlikely
because the producer price index (PPI) has actually declined for the last five
months. The Fed could be the Grinch who stole Christmas if the stock markets
rise to a level of "irrational exuberance" in the words of Chairman Greenspan.
Corporate profits continue their upward march. One of the benefits of the
information age to business and the economy is tighter inventory control and
less chance of recession induced by inventory reduction.
We constantly search for new opportunities and have initiated positions in
Amylin, Beverly Enterprises, & Octel Communications, while Liberty Media and
Federal Home Loan split their stocks.
Our successful location of value opportunities suggests that the markets may
have room to increase in price further.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - MAY 31, 1997
<TABLE>
<CAPTION>
Shares Value
- -------- ----------
COMMON STOCKS - 87.6%
<C> <S> <C>
AIRLINES - 4.2%
5,000 ASA Holdings Inc. ................................... $ 130,625
----------
BANKS - 4.5%
4,000 First Hawaiian Inc. ................................. 141,750
----------
COMMUNICATIONS - 3.1%
5,000 *Octel Communications Corp. .......................... 96,250
----------
CONSTRUCTION - 5.5%
1,500 *Jacobs Engineering Group, Inc. ...................... 40,313
5,000 Lennar Corp. ........................................ 131,250
----------
171,563
----------
ELECTRONICS - 7.2%
1,800 Cubic Corp. ......................................... 42,300
8,000 Scientific Atlanta .................................. 145,000
1,200 *Tech-Sym Corp. ...................................... 38,250
----------
225,550
----------
ENTERTAINMENT - 1.8%
750 *Tele-Communications Inc.
Liberty Media Group, Class "A".................. 16,359
500 Walt Disney Production Co. .......................... 40,938
----------
57,297
----------
FINANCIAL SERVICES - 22.7%
6,000 Federal Home Loan Corp. ............................. 198,000
5,342 First Data Corp. .................................... 213,680
3,000 Greentree Financial Corp. ........................... 105,000
2,000 Household International, Inc. ....................... 196,500
----------
713,180
----------
FOOD - 4.2%
5,000 McCormick & Co. Inc. ................................ 130,625
----------
Shares Value
- -------- ----------
HEALTH SERVICES - 2.2%
5,000 *Beverly Enterprises Inc. ............................ $ 70,625
----------
INSURANCE - 9.2%
4,400 Leucadia National Corp. ............................. 131,450
2,000 Progressive Corp. ................................... 158,250
----------
289,700
----------
MEDICAL SERVICES - 7.2%
4,000 United Healthcare ................................... 226,000
----------
OIL & NATURAL GAS - 3.3%
3,000 Apache Corp.......................................... 102,750
----------
PHARMACEUTICALS - 4.1%
10,000 *Amlyin Pharmeuticals Inc. ........................... 130,000
----------
PUBLISHING - 3.7%
3,000 Belo A. H. Corp...................................... 115,500
----------
REAL ESTATE INVESTMENT TRUSTS - 4.7%
10,000 United Dominion Realty Trust, Inc.................... 147,500
----------
Total Value of Common Stocks (cost $1,711,938)....... 2,748,915
----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 7.2%
$225M U.S. Treasury Bill
3.95% due 6/5/97 (cost $224,901)................. 224,901
----------
Total Value of Investments (cost $1,936,839).. 94.8% 2,973,816
Other Assets, less Liabilities ............... 5.2 163,042
------ ----------
Net Assets.................................... 100.0% $3,136,858
====== ==========
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 1997
<TABLE>
<S>
ASSETS <C> <C>
Investments in securities, at value
(identified cost $1,936,839) (Note 1-A)... $2,973,816
Cash........................................ 28,752
Receivable for investment securities sold... 137,225
Other assets................................ 3,002
----------
TOTAL ASSETS............................. 3,142,795
LIABILITIES
Accrued advisory and administrative fees.... $ 4,983
Other accrued expenses...................... 954
----------
TOTAL LIABILITIES........................ 5,937
----------
NET ASSETS..................................... $3,136,858
==========
NET ASSET VALUE PER SHARE
($3,136,858 / 228,520 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $13.73
======
NET ASSETS CONSIST OF:
Capital paid in............................. $2,039,157
Undistributed net investment deficit........ (21,742)
Accumulated net realized gain on investments 82,466
Net unrealized appreciation in value of
investments............................... 1,036,977
----------
TOTAL.................................... $3,136,858
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $13.73
Sales commission: 8 1/2% of offering price* 1.28
------
Offering price (adjusted nearest cent) ..... $15.01
======
Redemption price............................ $13.73
======
</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, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends.................................. $ 16,847
Interest................................... 6,799
--------
TOTAL INCOME......................... $ 23,646
Expenses (Note 4):
Investment advisory fee................... 11,171
Professional fees......................... 8,717
Transfer agent and dividend disbursing
agent's fees and expenses............ 8,387
Registration fees......................... 6,440
Administrative fee ....................... 3,724
Reports and notices to shareholders....... 2,874
Custodian fees............................ 1,944
Other expenses............................ 3,004
--------
TOTAL EXPENSES....................... 46,261
Less: Custodian fees paid indirectly. 873 45,388
-------- --------
INVESTMENT INCOME-NET................ (21,742)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments........... 82,993
Net unrealized appreciation of investments. 83,657
--------
Net gain on investments.............. 166,650
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $144,908
========
</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,
1997 1996
----------- -----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment loss............................ $ (21,742) $ (12,127)
Net realized gain on investments............... 82,993 121,199
Net unrealized appreciation of investments..... 83,657 264,031
---------- ----------
Net increase in net assets
resulting from operations................. 144,908 373,103
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments............... (109,481) (193,972)
CAPITAL SHARE TRANSACTIONS
Increase in net assets resulting
from capital share transactions (Note 2).... 41,453 76,490
---------- ----------
Net increase in net assets....... 76,880 255,621
NET ASSETS
Beginning of period............................ 3,059,978 2,804,357
---------- ----------
End of period (including net investment deficit
of $21,742 and $12,127, respectively)........ $3,136,858 $3,059,978
========== ==========
</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 30,
1997. 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. Use of Estimates - the preparation of the finacial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual amounts
could differ from those estimates.
E. 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.
2. CAPITAL STOCK
At May 31, 1997 there were 228,520 shares outstanding. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1997 November 30, 1996
-------------------------------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold......... 18,816 $ 244,636 41,397 $ 516,964
Capital stock issued in
reinvestment of net
realized gain on
investments............. 7,754 101,192 14,566 175,232
Capital stock redeemed..... (23,600) (304,375) (49,591) (615,706)
-------- --------- -------- ---------
Net increase ............. 2,970 $ 41,453 6,372 $ 76,490
======== ========= ======== =========
6
<PAGE>
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 1997, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $390,645 and $448,930 respectively.
At May 31, 1997, the cost of investments for Federal income tax purposes
was $1,936,839. Accumulated net unrealized appreciation on investments was
$1,036,977 consisting of $1,038,627 gross unrealized appreciation and $1,650
gross unrealized depreciation.
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 month-end net asset values of the Fund.
BFC also serves as the underwriter of the Fund. For the six months ended
May 31, 1997, BFC received $296 in commissions from the sale of Fund shares.
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 $873 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>
<TABLE>
<CAPTION>
Six Months Year Ended November 30,
Ended ------------------------------------------
PER SHARE DATA May 31, 1997 1996 1995 1994 1993 1992
- -------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year................ $13.57 $12.79 $10.93 $13.09 $13.41 $11.72
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... (0.10) (0.05) (0.14) (0.21) (0.19) (0.07)
Net Realized & Unrealized Gain
(Loss) on Investments............ 0.75 1.71 2.05 (1.71) 0.43 1.78
------ ------ ------ ------ ------ ------
Total From Investment Operations... 0.65 1.66 1.91 (1.92) 0.24 1.71
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Investment Income.............. -- -- -- -- -- 0.02
Net Realized Gains................. 0.49 0.88 0.05 0.24 0.56 --
------ ------ ------ ------ ------ ------
Total Distributions................ 0.49 0.88 0.05 0.24 0.56 0.02
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period..... $13.73 $13.57 $12.79 $10.93 $13.09 $13.41
====== ====== ====== ====== ====== ======
TOTAL RETURN* (%).................. 4.98 13.82 17.53 (14.95) 1.78 14.56
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period
(in thousands)................... $3,137 $3,060 $2,804 $2,320 $2,748 $2,947
Ratio to Average Net Assets:
Expenses (%)..................... 3.11 (a) 2.58 3.44 3.71 2.67 2.50
Net Income (Loss) (%)............ (1.46) (a) (0.43) (1.27) (1.77) (1.30) (0.58)
Ratio to Average Net Assets Before
Expense Reimbursements
Expenses (%)..................... 3.11 (a) 2.58 4.44 4.71 3.67 3.33
Net Income (Loss) (%)............ (1.46) (a) (0.54) (2.27) (2.77) (2.30) (1.41)
Portfolio Turnover Rate (%)........ 15 24 51 51 66 7
Average commission rate**.......... $.0920 $.1071
</TABLE>
* Calulated without sales charge.
** Average commission rate (per share security) as required by amended
disclosure requirements effective September 1, 1995.
(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, 1997, and the related statements of operations, changes in net assets and
financial highlights for the six months then ended. 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 audit. The statement of changes in net
assets for the year ended November 30, 1996 and the financial highlights for
each of the five years in the period ended November 30, 1996, were audited by
other auditors, whose report, dated December 16, 1996, expressed an
unqualified opinion on that statement and the financial highlights.
We conducted our audit 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, 1997 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 audit provides 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, 1997, and the results of its operations,
changes in its net assets and financial highlights for the six months ended
May 31, 1997, in conformity with generally accepted accounting principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
June 30, 1997
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.
P.O. Box 5536, Hauppauge, NY 11788-0132
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, Malvern, PA
AUDITORS
BRIGGS, BUNTING & DOUGHERTY, LLP Philadelphia, PA
10
<PAGE>
<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, 1997
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 investors unless preceded
or accompanied by an effective prospectus.
