EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - January 6, 1998
Dear shareholders,
During the 1990s investment dollars have been flowing into U.S. equities, and
we see no reason for this to change in the near future. Historically, during
international upheavals, nervous money bought gold. Today, those with nervous
minds buy Treasury bonds while central bankers sell their gold hoards.
With upheavals in Asia causing capital flight into U.S. Treasury bonds, we
look for interest rates to stay low. The weakened Asian currencies will hold
our costs for imported goods down, slowing our exports and lessening
inflationary pressures in our economy. These factors combine to convince us
that there is little likelihood of an increase in interest rates, and low
interest rates have been a major positive for our fund's results this year.
We have substantial investments in banking, insurance, and financial services;
these areas tend to do well in a dropping interest rate environment. Dormant
inflation and low interest rates encourage us to anticipate exciting
opportunities in 1998.
The global investment outlook for 1998 appears to be more of the same, though
the world worries about the economies of the Asian Tigers and Japan. The
International Monetary Fund needs vision and a deft hand to prevent the
problems of these countries from spreading to the global economy. If Asian
governments reform their banking regulation, open their markets, grow their
money supplies suitably, and let weak companies merge with the strong, the
problem should be manageable.
Since our last report we have purchased shares in Food Lion, Cubic
Corporation, John H. Harland Company, Lomak Petroleum, Saul Centers, and
Southern Union; a grocer, a defense contractor, a financial stationer, an oil
and gas exploration company, a real estate investment trust, and a public
utility.
Your fund paid a capital gain of $1.64 per share for the year.
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>
11/30/87 $ 9,150 $10,000
11/30/88 $12,076 $12,328
11/30/89 $20,175 $16,128
11/30/90 $15,152 $15,563
11/30/91 $19,436 $18,725
11/30/92 $22,267 $22,180
11/30/93 $22,663 $24,415
11/30/94 $19,274 $24,675
11/30/95 $22,653 $33,789
11/30/96 $25,783 $43,209
11/30/97 $29,294 $55,524
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns as of 11/30/97
1 YEAR 5 YEARS 10 YEARS
--------------------------------
<S> <C> <C> <C>
N.A.V. Only 13.62% 5.64% 12.34%
S.E.C. Standardized 3.96% 3.78% 11.35%
</TABLE>
Past performance is not predictive of future performance.
* 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.
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 1997
<TABLE>
<CAPTION>
Shares Value
- -------- ----------
COMMON STOCKS - 89.3%
<C> <S> <C>
AIRLINES - 4.5%
5,000 ASA Holdings Inc. ............................ $ 148,125
----------
BANKS - 4.6%
4,000 First Hawaiian Inc. .......................... 152,000
----------
CONSTRUCTION - 3.2%
5,000 Lennar Corp................................... 104,375
----------
ELECTRONICS - 5.0%
4,000 Cubic Corp..................................... 128,500
1,200 *Tech-Sym Corp. ................................ 36,375
----------
164,875
----------
ENTERTAINMENT - 1.5%
500 Walt Disney Production Co...................... 47,469
----------
FINANCIAL SERVICES - 19.8%
6,000 Federal Home Loan Corp. ....................... 247,500
2,000 First Data Corp. .............................. 56,625
3,000 Greentree Financial Corp. ..................... 91,875
2,000 Household International, Inc. ................. 252,000
----------
648,000
----------
FOOD - 9.2%
5,000 McCormick & Co. Inc. .......................... 132,500
20,000 Food Lion, Inc. Class "B" ..................... 169,375
----------
301,875
----------
INSURANCE - 7.8%
4,400 Leucadia National Corp. ....................... 152,075
1,000 Progressive Corp............................... 102,000
----------
254,075
----------
Shares Value
- -------- ----------
OIL & NATURAL GAS - 7.6%
3,000 Apache Corp. .................................. $ 110,250
8,000 Lomack Petroleum, Inc. ........................ 139,000
----------
249,250
----------
PUBLISHING - 8.9%
3,000 Belo A. H. Corp. .............................. 147,937
7,000 Harland (John H.) Co. ......................... 144,812
----------
292,749
----------
REAL ESTATE - 12.3%
5,000 LNR Property Corp. ............................ 116,250
8,000 Saul Centers, Inc. ............................ 141,000
10,000 United Dominion Realty Trust, Inc. ............ 146,875
----------
404,125
----------
UTILITIES - 4.9%
6,300 *Southern Union Co. ............................ 160,650
----------
Total Value of Common Stocks (cost $1,928,826). 2,927,568
----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 10.5%
$345M U.S. Treasury Bill 4.00% due 12/04/97
(cost $344,885)............................. 344,885
----------
Total Value of Investments
(Cost $2,273,711)...................... 99.8% 3,272,453
Other Assets, less Liabilities.......... .2 7,549
------ ----------
Net Assets.............................. 100.0% $3,280,002
====== ==========
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $2,273,711) (Note 1-A)... $3,272,453
Cash........................................ 27,071
Dividends receivable........................ 2,595
Other assets................................ 654
----------
TOTAL ASSETS............................. 3,302,773
LIABILITIES
Payable for capital stock redeemed.......... $ 15,685
Accrued advisory and administrative fees.... 5,438
Other accrued expenses...................... 1,648
----------
TOTAL LIABILITIES........................ 22,771
----------
NET ASSETS..................................... $3,280,002
==========
NET ASSET VALUE PER SHARE
($3,280,002 / 220,655 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $14.86
======
NET ASSETS CONSIST OF:
Capital paid in............................. $1,918,519
Undistributed net investment deficit........ (30,116)
Accumulated net realized gain on investments 392,857
Net unrealized appreciation in value of
investments............................... 998,742
----------
TOTAL.................................... $3,280,002
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $14.86
Sales commission: 8 1/2% of offering price* 1.38
------
Offering price (adjusted nearest cent) ..... $16.24
======
Redemption price............................ $14.86
======
</TABLE>
*On purchases of $10,000 or more the offering price is reduced.
See notes to financial statements
3
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends..................................$ 36,188
Interest................................... 18,994
--------
TOTAL INCOME......................... $ 55,182
Expenses (Note 4):
Investment advisory fee .................. 23,738
Transfer agent and dividend disbursing
agent's fees and expenses............ 15,420
Professional fees......................... 14,146
Registration fees......................... 10,825
Administrative fee........................ 7,913
Reports and notices to shareholders....... 5,179
Custodian fees............................ 4,112
Other expenses............................ 5,739
--------
TOTAL EXPENSES....................... 87,072
Less: Custodian fees paid indirectly. 1,774 85,298
-------- --------
INVESTMENT INCOME-NET................ (30,116)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments........... 393,384
Net unrealized appreciation of
investments............................ 45,422
--------
Net gain on investments.............. 438,806
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $408,690
========
</TABLE>
See notes to financial statements
4
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS - YEARS ENDED NOVEMBER 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment loss............................ $ (30,116) $ (12,127)
Net realized gain on investment securities..... 393,384 121,199
Net unrealized appreciation of investments..... 45,422 264,031
---------- ----------
Net increase in net assets resulting from
operations................................ 408,690 373,103
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments............... (109,481) (193,972)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting
from capital share transactions (Note 2).... (79,185) 76,490
---------- ----------
Net increase in net assets.................. 220,024 255,621
NET ASSETS
Beginning of year.............................. 3,059,978 2,804,357
---------- ----------
End of year (including net investment deficit
of $30,116 and $12,127, respectively......... $3,280,002 $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
November 28, 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 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, 1997 there were 220,655 shares outstanding. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold......... 33,686 $ 465,777 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..... (46,335) (646,154) (49,591) (615,706)
-------- ---------- -------- ----------
Net increase ............. (4,895) $ (79,185) 6,372 $ 76,490
======== ========== ======== ==========
6
<PAGE>
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 1997, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $1,252,816 and $1,404,604 respectively.
At November 30, 1997, the cost of investments for Federal income tax
purposes was $2,273,711. Accumulated net unrealized appreciation on
investments was $998,742 consisting of $1,042,182 gross unrealized
appreciation and $43,440 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 year ended
November 30, 1997, BFC received $533 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 $1,774 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 $1.64 a
share from net realized gains was declared on December 8, 1997. The
distribution is payable on December 31, 1997 to shareholders of record on
December 24, 1997.
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 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -------------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year. $13.57 $12.79 $10.93 $13.09 $13.41 $11.72 $ 9.35 $12.48 $ 7.47 $ 5.66
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... (0.14) (0.05) (0.14) (0.21) (0.19) (0.07) 0.03 0.23 0.01 (0.09)
Net Realized & Unrealized Gain
(Loss) on Investments............ 1.92 1.71 2.05 (1.71) 0.43 1.78 2.56 (3.33) 5.00 1.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment Operations... 1.78 1.66 1.91 (1.92) 0.24 1.71 2.59 (3.10) 5.01 1.81
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Investment Income.............. -- -- -- -- -- 0.02 0.12 -- -- --
Net Realized Gains................. 0.49 0.88 0.05 0.24 0.56 -- -- -- -- --
Return of Capital.................. -- -- -- -- -- -- 0.10 0.03 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions................ 0.49 0.88 0.05 0.24 0.56 0.02 0.22 0.03 0.00 0.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Year....... $14.86 $13.57 $12.79 $10.93 $13.09 $13.41 $11.72 $ 9.35 $12.48 $ 7.47
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN*(%)................... 13.62 13.82 17.53 (14.95) 1.78 14.56 28.28 (24.90) 67.07 31.98
- -------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year
(in thousands)................... $3,280 $3,060 $2,804 $2,320 $2,748 $2,947 $3,152 $2,818 $3,965 $1,763
Ratio to Average Net Assets:
Expenses (%)..................... 2.75 2.58 3.44 3.71 2.67 2.50 2.51 1.52 1.53 1.52
Net Income (Loss) (%)............ (0.95) (0.43) (1.27) (1.77) (1.30) (0.58) 0.24 2.05 0.03 (0.71)
Ratio to Average Net Assets before
Expense Reimbursements:
Expenses (%)..................... 2.75 2.69 4.44 4.71 3.67 3.33 3.30 2.62 1.93 1.94
Net Income (Loss) (%)............ (0.95) (0.54) (2.27) (2.77) (2.30) (1.41) (0.56) 0.95 (0.38) (1.12)
Portfolio Turnover Rate (%)........ 47 24 51 51 66 7 82 40 7 7
Average commission rate**.......... $.1008 $.1071
</TABLE>
* Calulated without sales charge.
** Average commission rate (per share of security) as required by amended
disclosure requirements effective September 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,
1997, and the related statements of operations, changes in net assets and
financial highlights for the year 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 nine 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 November 30, 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 November 30, 1997, and the results of its
operations, changes in its net assets and financial highlights for the year
ended November 30, 1997, in conformity with generally accepted accounting
principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
December 19, 1997 (Except for Note 5 as to which the date is December 26,
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.
Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, NY 11788
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, Malvern, PA
AUDITORS
BRIGGS, BUNTING & DOUGHRTTY, LLP 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, 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.
