<PAGE>
EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - June 26, 1998
Dear shareholders,
In our last report to shareholders, we discussed the economic problems in
Asia and our view that this might cause U.S. interest rates to go lower.
Interest rates have dipped and stocks responded by rising to impressive
heights. Low interest rates and record mergers pushed financial stocks
skyward. Stock market profits have followed an almost perfect economy.
However, increasing interest rates cannot be ruled out with consumer spending
strong and 4.3% unemployment, a 30 year low. Optimists on interest rates point
to the strong U.S. dollar, low commodity prices and interest rates which have
room to drop if inflation stays low.
High equity prices and uncertainty over the Japanese economic quagmire
prompt our taking a watchful course. The U.S. Treasury has intervened in the
currency markets to support the yen and Japan responded with pledges to fix
its wobbly banking system. Now, the world awaits Japanese action; political
will is needed to attack the problem. All U.S. exports to Asia amount to just
2.4% of U.S. gross domestic product and exports to Japan account for 1% of
U.S. gross domestic product. The United States is not directly exposed, but
many fear a continuing downward economic spiral in Asia and damage to the
entire world economy. These cautionary factors and merger fever in the
markets have encouraged us to take capital gains by reducing our positions in
Freddie Mac, Leucadia National, Progressive Corporation, and Lennar. Green
Tree Financial, Household International, CDI Corporation, John H. Harland Co.,
and Lomak Petroleum were sold.
We invested in Segue Software, a software developer; Tribune, a media
complex; SLM Holdings, a student loan provider; O'Sullivan Industries, a
computer furniture manufacturer; and we added to our position in Southern
Union.
At May's end, 19.2% of our assets were invested in U.S. Treasury bills.
This gives us the capability to seize new opportunities as they occur. We look
forward to fresh opportunity.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - MAY 31, 1998
<TABLE>
<CAPTION>
Shares Value
- -------- ----------
COMMON STOCKS - 80.2%
<C> <S> <C>
AIRLINES - 5.9%
5,000 ASA Holdings Inc. ............................ $ 196,563
----------
BANKS - 4.5%
4,000 First Hawaiian Inc. .......................... 150,500
----------
COMPUTER SOFTWARE - 2.0%
5,000 *Segue Software, Inc .......................... 65,000
----------
CONSTRUCTION - 2.4%
3,000 Lennar Corp. ................................. 79,500
----------
CREDIT INSTITUTIONS - 4.8%
4,000 SLM Holding Corp. ............................ 159,750
----------
ELECTRONICS - 4.6%
4,000 Cubic Corp. ................................... 117,500
1,200 *Tech-Sym Corp. ................................ 34,725
----------
152,225
----------
ENTERTAINMENT - 1.7%
500 Walt Disney Production Co. .................... 56,562
----------
FINANCIAL SERVICES - 6.1%
3,000 Federal Home Loan Corp. ....................... 136,500
2,000 First Data Corp. .............................. 66,500
----------
203,000
----------
FOOD - 10.9%
5,000 McCormick & Co. Inc. .......................... 167,500
20,000 Food Lion, Inc. Class "B" ..................... 193,750
----------
361,250
----------
FURNITURE - 4.5%
10,000 *O'Sullivan Industries Holdings, Inc. .......... 150,000
----------
INSURANCE - 3.5%
3,400 Leucadia National Corp. ....................... 116,663
----------
Shares Value
- -------- ----------
OIL & NATURAL GAS - 3.1%
3,000 Apache Corp. .................................. $ 102,563
----------
PUBLISHING - 8.3%
3,000 Belo A. H. Corp. .............................. 154,500
3,000 Harland (John H.) Co. ......................... 53,812
1,000 Tribune Co. ................................... 66,875
----------
275,187
----------
REAL ESTATE - 12.3%
5,000 LNR Property Corporation ...................... 129,375
8,000 Saul Centers, Inc. ............................ 139,000
10,000 United Dominion Realty Trust, Inc. ............ 141,250
----------
409,625
----------
UTILITIES - 5.6%
7,000 *Southern Union Co. ............................ 187,250
----------
Total Value of Common Stocks (cost $1,784,969). 2,665,638
----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 19.2%
$640M U.S. Treasury Bill 3.75% due 6/04/98
(cost $639,800)............................. 639,800
----------
Total Value of Investments
(Cost $2,424,769)...................... 99.4% 3,305,438
Other Assets, less Liabilities.......... .6 21,385
------ ----------
Net Assets.............................. 100.0% $3,326,823
====== ==========
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 1998
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $2,424,769) (Note 1-A)... $3,305,438
Cash........................................ 27,668
Dividends receivable........................ 2,545
Other assets................................ 529
----------
TOTAL ASSETS............................. 3,336,180
LIABILITIES
Accrued advisory and administrative fees.... $ 5,595
Other accrued expenses...................... 3,762
----------
TOTAL LIABILITIES........................ 9,357
----------
NET ASSETS..................................... $3,326,823
==========
NET ASSET VALUE PER SHARE
($3,326,823 / 243,917 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $13.64
======
NET ASSETS CONSIST OF:
Capital paid in............................. $2,216,727
Undistributed net investment deficit........ (16,829)
Accumulated net realized gain on investments 246,256
Net unrealized appreciation in value of
investments............................... 880,669
----------
TOTAL.................................... $3,326,823
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $13.64
Sales commission: 8 1/2% of offering price* 1.27
------
Offering price (adjusted nearest cent) ..... $14.91
======
Redemption price............................ $13.64
======
</TABLE>
*On purchases of $10,000 or more the offering price is reduced.
See notes to financial statements
3
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF OPERATIONS - SIX MONTHS ENDED MAY 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends..................................$ 25,962
Interest................................... 8,309
--------
TOTAL INCOME......................... $ 34,271
Expenses (Note 4):
Investment advisory fee .................. 12,512
Professional fees......................... 10,494
Transfer agent and dividend disbursing
agent's fees and expenses............ 9,244
Registration fees......................... 7,733
Administrative fee........................ 4,171
Reports and notices to shareholders....... 3,080
Custodian fees............................ 2,160
Other expenses............................ 2,534
--------
TOTAL EXPENSES....................... 51,928
Less: Custodian fees paid indirectly. 828 51,100
-------- --------
INVESTMENT INCOME-NET................ (16,829)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments........... 246,985
Net unrealized depreciation of investments..(118,073)
--------
Net gain on investments.............. 128,912
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $112,083
========
</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,
1998 1997
---------- ----------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment loss............................ $ (16,829) $ (30,116)
Net realized gain on investment securities..... 246,985 393,384
Net unrealized appreciation (depreciation) of
investments................................. (118,073) 45,422
---------- ----------
Net increase in net assets resulting from
operations................................ 112,083 408,690
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments............... (363,469) (109,481)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting
from capital share transactions (Note 2).... 298,207 (79,185)
---------- ----------
Net increase in net assets.................. 46,821 220,024
NET ASSETS
Beginning of year.............................. 3,280,002 3,059,978
---------- ----------
End of period (including net investment deficit
of $16,829 and $30,116, respectively)........ $3,326,823 $3,280,002
========== ==========
</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 29, 1998. 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 May 31, 1998 there were 243,917 shares outstanding. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1998 November 30, 1997
-------------------- --------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold......... 14,959 $ 207,753 33,686 $ 465,777
Capital stock issued in
reinvestment of net
realized gain on
investments............. 26,421 340,301 7,754 101,192
Capital stock redeemed..... (18,118) (249,847) (46,335) (646,154)
-------- ---------- -------- ----------
Net increase (decrease)... 23,262 $ 298,207 (4,895) $ (79,185)
======== ========== ======== ==========
6
<PAGE>
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 1998, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $596,301 and $987,144 respectively.
At May 31, 1998, the cost of investments for Federal income tax
purposes was $2,424,769. Accumulated net unrealized appreciation on
investments was $880,669 consisting of $914,404 gross unrealized
appreciation and $33,735 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, 1998, BFC received $372 in commissions from the sale of Fund
shares.
Directors of the Fund who are not affiliated with BFC received directors
fees aggregating $500 and the Fund's Custodian has provided credits in the
amount of $828 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, 1998 1997 1996 1995 1994 1993
- -------------------- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year. $14.86 $13.57 $12.79 $10.93 $13.09 $13.41
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... (0.07) (0.14) (0.05) (0.14) (0.21) (0.19)
Net Realized & Unrealized Gain
(Loss) on Investments............ 0.49 1.92 1.71 2.05 (1.71) 0.43
------ ------ ------ ------ ------ ------
Total From Investment Operations... 0.42 1.78 1.66 1.91 (1.92) 0.24
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Realized Gains................. 1.64 0.49 0.88 0.05 0.24 0.56
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period..... $13.64 $14.86 $13.57 $12.79 $10.93 $13.09
====== ====== ====== ====== ====== ======
TOTAL RETURN*(%)................... 3.48 13.62 13.82 17.53 (14.95) 1.78
- -------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period
(in thousands)................... $3,327 $3,280 $3,060 $2,804 $2,320 $2,748
Ratio to Average Net Assets:
Expenses (%)..................... 3.12 (a) 2.75 2.58 3.44 3.71 2.67
Net Income (Loss) (%)............ (1.01)(a) (0.95) (0.43) (1.27) (1.77) (1.30)
Ratio to Average Net Assets Before
Expense Reimbursements:
Expenses (%)..................... 3.12 (a) 2.75 2.69 4.44 4.71 3.67
Net Income (Loss) (%)............ (1.01)(a) (0.95) (0.54) (2.27) (2.77) (2.30)
Portfolio Turnover Rate (%)........ 21 47 24 51 51 66
Average commission rate**.......... $.1518 $.1008 $.1071
</TABLE>
* Calulated without sales charge.
** Average commission rate (per share of security) as required by amended
disclosure requirements effective September 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, 1998,
and the related statement of operations for the six months then ended, and the
statements of changes in net assets and financial highlights for the six
months ended May 31, 1998 and the year ended November 30, 1997. 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. The financial
highlights for each of the four years in the period ended November 30, 1996,
were audited by other auditors, whose report, dated December 16, 1996,
expressed an unqualified opinion on those financial highlights.
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, 1998 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, 1998, and the results of its operations for the
six months then ended and changes in its net assets and financial highlights
for the six months ended May 31, 1998 and the year ended November 30, 1997, in
conformity with generally accepted accounting principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
June 19, 1998
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>
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, 1998
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.
