<PAGE>
EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - January 6, 1997
Dear shareholders,
We are at peace, the economy is growing slowly, interest rates are low but
creeping up and the Presidential election is over.
Many market pundits have been wringing their hands, worrying over inflation
which has not yet arrived. As an economic cycle matures, it is normal for
productivity growth to slow and unit labor costs to accelerate. Several forces
have delayed inflationary momentum. Economists recognize their inability to
measure productivity in the growing service sector which employs most of our
workers. Most recent investment in computers has been directed to this area
where hard to measure productivity gains have taken place. Budget cutting by
European governments has resulted in low demand for our products by Europeans.
This force in European policy should continue for the next two to three years,
as they strive to meet the mandate of the Maastricht Treaty.
The Japanese have been heavy buyers of U.S. Treasury bonds and own an
estimated one quarter of those outstanding. Japan's appetite for U.S. Treasury
securities has remained high because their own interest rates are so low. We
do not doubt they will continue to help finance our federal government's
budget deficit, since they have little choice while they run a trade surplus
with the United States.
Partly due to the market's outlook for interest rates, numerous interest
sensitive stocks performed well over the last year. This contributed to the
Fund's positive performance during fiscal 1996. Household International(1)
appreciated 51.6%; Federal Home Loan Corp.(1) advanced 48.4%; and Lennar(1), a
home builder, rose 17.5%.
In other sectors of our portfolio's holdings, the underlying values of
Apache(1), Cubic Corp.(1) and Oryx Energy(1) were discovered by investors
causing their value to increase 36.6%, 32.7%, and 58.1%, respectively.
These gains were partially offset by lower prices for Value Vision,
Atlantic Southeast Airlines, and Leucadia National.
As always our economy faces problems as well as opportunities. We remain
vigilant in searching out opportunities for our investors.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
Comparison of the change in value of $10,000 investment in Eagle Growth Shares
and the Standard and Poor's Index*
<TABLE>
<CAPTION>
The printed report shows a line graph with the following points.
EAGLE
GROWTH S&P
SHARES INDEX
<S> <C> <C>
5/01/87** $ 9,150 $10,000
11/30/87 $ 6,850 $ 8,137
11/30/88 $ 9,041 $10,032
11/30/89 $15,105 $13,124
11/30/90 $11,344 $12,664
11/30/91 $14,552 $15,238
11/30/92 $11,671 $18,049
11/30/93 $16,968 $19,868
11/30/94 $14,430 $20,079
11/30/95 $16,960 $27,495
11/30/96 $19,303 $35,164
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns as of 11/30/96
1 YEAR 5 YEARS Since 5/1/87**
--------------------------------
<S> <C> <C> <C>
N.A.V. Only 13.82% 5.81% 8.10%
S.E.C. Standardized 4.14% 4.04% 7.10%
</TABLE>
Past performance is not predictive of future performance.
(1) Household International, Federal Home Loan Corp., Lennar, Apache, Cubic
Corp. and Oryx Energy represented 6.2%, 5.6%, 4.2%, 3.6%, 1.2% and 4.7% of
the Fund's total net asset value on 11/30/96, respectively.
* The Standard & Poor's 500 Composite Stock Index is a widely recognized
unmanaged index of common stock prices. Performance figures include the
change in value of the stocks in the index and reinvestment of dividends.
** Mr. Donald H. Baxter became the Fund's portfolio manager on May 1, 1987.
Previous periods during which the Fund was advised by another investment
advisor are not shown.
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 1996
<TABLE>
<CAPTION>
Shares Value
- -------- ----------
COMMON STOCKS - 86.3%
<C> <S> <C>
AIRLINES - 3.7%
5,000 Atlantic Southeast Airlines................... $ 113,750
----------
BANKS - 4.3%
4,000 First Hawaiian Inc. .......................... 130,000
----------
COMMUNICATIONS - 3.7%
4,000 *Commnet Cellular, Inc. ....................... 113,000
----------
CONSTRUCTION - 5.4%
1,500 *Jacobs Engineering Group, Inc. ............... 36,188
5,000 Lennar Corp................................... 130,000
----------
166,188
----------
ELECTRONICS - 6.4%
1,800 Cubic Corp..................................... 38,025
8,000 Scientific Atlanta............................. 124,000
1,200 *Tech-Sym Corp. ................................ 34,950
----------
196,975
----------
ENTERTAINMENT - 1.6%
500 *Tele-Communications Liberty Media Group Ser A.. 12,500
500 Walt Disney Production Co...................... 36,875
----------
49,375
----------
FINANCIAL SERVICES - 24.2%
1,500 Federal Home Loan Corp. ....................... 171,375
6,342 First Data Corp. .............................. 252,887
3,000 Greentree Financial Corp. ..................... 125,625
2,000 Household International, Inc. ................. 189,500
----------
739,387
----------
FOOD - 4.0%
5,000 McCormick & Co. Inc. .......................... 123,125
----------
Shares Value
- -------- ----------
INSURANCE - 9.6%
2,000 Integon........................................ $ 38,500
4,400 *Leucadia National Corp. ....................... 115,500
2,000 Progressive Corp............................... 139,500
----------
293,500
----------
MANUFACTURED HOUSING - .8%
2,000 Shelter Components............................. 25,000
----------
MEDICAL SERVICES - 5.7%
4,000 United Healthcare.............................. 172,500
----------
OIL & NATURAL GAS - 8.3%
3,000 Apache Corp. .................................. 109,125
7,000 *Oryx Energy Co. ............................... 145,250
----------
254,375
----------
PUBLISHING - 3.8%
3,000 Belo A. H. Corp. .............................. 115,875
----------
REAL ESTATE INVESTMENT TRUSTS - 4.8%
10,000 United Dominion Realty Trust, Inc. ............ 147,500
----------
Total Value of Common Stocks (cost $1,687,230). 2,640,550
----------
Principal
Amount
- ---------
SHORT-TERM SECURITIES - 13.7%
$420M U.S. Treasury Bill 4.82% due 12/5/96
(cost $ 419,775)............................. 419,775
----------
Total Value of Investments
(Cost 2,107,005)...................... 100.0% 3,060,325
Excess of Liabilities Over Other Assets. .0 (347)
------ ----------
Net Assets.............................. 100.0% $3,059,978
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 1996
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $2,107,005) (Note 1-A)... $3,060,325
Cash........................................ 22,604
Dividends receivable........................ 2,345
Other assets................................ 2,741
----------
TOTAL ASSETS............................. 3,088,015
LIABILITIES
Payable for capital stock redeemed.......... $ 1,625
Accrued advisory and administrative fees.... 25,112
Other accrued expenses...................... 1,300
----------
TOTAL LIABILITIES........................ 28,037
----------
NET ASSETS..................................... $3,059,978
==========
NET ASSET VALUE PER SHARE
($3,059,978 / 225,550 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $13.57
======
NET ASSETS CONSIST OF:
Capital paid in............................. $1,997,704
Undistributed net investment deficit........ (12,127)
Accumulated net realized gain on investments 121,081
Net unrealized appreciation in value of
investments............................... 953,320
----------
TOTAL.................................... $3,059,978
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $13.57
Sales commission: 8 1/2% of offering price* 1.26
------
Offering price (adjusted nearest cent) ..... $14.83
======
Redemption price............................ $13.57
======
</TABLE>
*On purchases of $10,000 or more the offering price is reduced.
See notes to financial statements
3
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends..................................$ 30,320
Interest................................... 27,874
--------
TOTAL INCOME......................... $ 58,194
Expenses (Note 4):
Investment advisory fee .................. 21,096
Professional fees......................... 12,221
Registration fees......................... 9,960
Transfer agent and dividend disbursing
agent's fees and expenses............ 9,473
Administrative fee........................ 7,032
Reports and notices to shareholders....... 5,672
Custodian fees............................ 4,250
Other expenses............................ 6,150
--------
TOTAL EXPENSES....................... 75,584
Less: Expenses reimbursed............ (3,016)
Custodian fees paid indirectly. (2,247) 70,321
-------- --------
INVESTMENT INCOME-NET................ (12,127)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments........... 121,199
Net unrealized appreciation of
investments............................ 264,031
--------
Net gain on investments.............. 385,230
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $373,103
========
</TABLE>
See notes to financial statements
4
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS - YEARS ENDED NOVEMBER 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss............................ $ (12,127) $ (31,627)
Net realized gain on investment securities..... 121,199 194,043
Net unrealized appreciation of investments..... 264,031 250,329
---------- ----------
Net increase in net assets resulting from
operations................................ 373,103 412,745
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments............... (193,972) (10,248)
CAPITAL SHARE TRANSACTIONS
Increase in net assets resulting from capital
share transactions (Note 2)................. 76,490 81,437
---------- ----------
Net increase in net assets.................. 255,621 483,934
NET ASSETS
Beginning of year.............................. 2,804,357 2,320,423
---------- ----------
End of year (including net investment deficit
of $12,127 and $0, respectively.............. $3,059,978 $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
November 29, 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. Use of Estimates - the preparation of the financial 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 November 30, 1996 there were 225,550 shares outstanding. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold......... 41,397 $ 516,964 51,630 $ 603,696
Capital stock issued in
reinvestment of net
realized gain on
investments............. 14,566 175,232 822 9,029
Capital stock redeemed..... (49,591) (615,706) (45,547) (531,288)
-------- ---------- -------- ----------
Net increase ............. 6,372 $ 76,490 6,905 $ 81,437
======== ========== ======== ==========
6
<PAGE>
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 1996, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $613,702 and $554,711 respectively.
At November 30, 1996, the cost of investments for Federal income tax
purposes was $2,107,005. Accumulated net unrealized appreciation on
investments was $953,320 consisting of $956,060 gross unrealized appreciation
and $2,740 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.
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 year ended November 30, 1996, BFC reimbursed
advisory and administrative fees amounting to $2,262 and $754, respectively.
BFC also serves as the underwriter of the Fund. For the year ended
November 30, 1996, BFC received $127 in commissions from the sale of Fund
shares.
Directors of the Fund who are not affiliated with BFC received directors
fees aggregating $1,200 and the Fund's Custodian has provided credits in the
amount of $2,247 against custodian charges based on the uninvested cash
balances of the Fund.
5. YEAR-END DISTRIBUTION
Realized gains from security transactions are distributed to shareholders
in December following the end of the fiscal year. A distribution of $.49 a
share from net realized gains was declared on December 9, 1996. The
distribution is payable on December 27, 1996 to shareholders of record on
December 23, 1996.
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 year indicated.
</TABLE>
<TABLE>
<CAPTION>
Year Ended November 30,
-----------------------------------------------------------------------------------------
PER SHARE DATA 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year. $12.79 $10.93 $13.09 $13.41 $11.72 $ 9.35 $12.48 $ 7.47 $ 5.66 $ 7.06
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... (0.05) (0.14) (0.21) (0.19) (0.07) 0.03 0.23 0.01 (0.09) (0.05)
Net Realized & Unrealized Gain
(Loss) on Investments............ 1.71 2.05 (1.71) 0.43 1.78 2.56 (3.33) 5.00 1.90 (1.26)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment Operations... 1.66 1.91 (1.92) 0.24 1.71 2.59 (3.10) 5.01 1.81 (1.31)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Investment Income.............. -- -- -- -- 0.02 0.12 -- -- -- 0.01
Net Realized Gains................. 0.88 0.05 0.24 0.56 -- -- -- -- -- 0.08
Return of Capital.................. -- -- -- -- -- 0.10 0.03 -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions................ 0.88 0.05 0.24 0.56 0.02 0.22 0.03 -- -- 0.09
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Year....... $13.57 $12.79 $10.93 $13.09 $13.41 $11.72 $ 9.35 $12.48 $ 7.47 $ 5.66
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN*(%)................... 13.82 17.53 (14.95) 1.78 14.56 28.28 (24.90) 67.07 31.98 (18.78)
- -------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year
(in thousands)................... $3,060 $2,804 $2,320 $2,748 $2,947 $3,152 $2,818 $3,965 $1,763 $2,068
Ratio to Average Net Assets:
Expenses (%)..................... 2.58 3.44 3.71 2.67 2.50 2.51 1.52 1.53 1.52 1.51
Net Income (Loss) (%)............ (0.43) (1.27) (1.77) (1.30) (0.58) 0.24 2.05 0.03 (0.71) (0.46)
Ratio to Average Net Assets before
Expense Reimbursements:
Expenses (%)..................... 2.69 4.44 4.71 3.67 3.33 3.30 2.62 1.93 1.94 2.00
Net Income (Loss) (%)............ (0.54) (2.27) (2.77) (2.30) (1.41) (0.56) 0.95 (0.38) (1.12) (0.94)
Portfolio Turnover Rate (%)........ 24 51 51 66 7 82 40 7 7 349
Average Commission rate**.......... $.1071 N/A N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
* Calulated without sales charge.
** Average commission rate (per share of security) as required by amended
disclosure requirements effective September 1, 1995.
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
November 30, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the years
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 November 30, 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 November 30, 1996, and the results of its
operations, changes in its net assets and financial highlights for the years
presented, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
December 16, 1996 (Except for Note 5 as
to which the date is December 24, 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 ANNUAL
REPORT
November 30, 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 investors unless preceded
or accompanied by an effective prospectus.
