EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - January 6, 1999
Dear shareholders,
The Dow has more than tripled since 1991. Given the market's exuberance,
eleven thousand on the Dow may be within reach, but we admit to an attitude of
cautious optimism. More than ever, at these levels, prudence demands balancing
safety and opportunity in stock selection. We believe good values exist in
some medium sized stocks and continue searching for fresh opportunities.
The additional shares Eagle owns in A.H. Belo Company, Walt Disney Company,
and Southern Union are due to stock splits, not additional purchases. The
market performed weakly during July, August, and September, giving us the
opportunity to buy several stocks on our watch list and to increase
ownership of one holding. We doubled our shares in Segue Software Corp., a
developer and marketer of integrated software solutions used for testing and
management of client/server computer software applications. We acquired stock
in Healthsouth, the largest provider of outpatient surgery and rehabilitation
services in the United States. We thought the market's disappointment with
healthcare issues too extreme, so we bought at reduced prices. Another
position new to our portfolio is MediaOne Group. This company is the third
largest broadband cable company in the United States, and its high speed
internet service can challenge the majors for market dominance. A name new to
our portfolio is BancWest Corporation, the new name for First Hawaiian, a bank
holding company, which merged with BancWest Corporation. You remember First
Hawaiian Corporation as a longtime profitable holding of Eagle Growth Shares.
We eliminated our holdings in Apache Corporation, Saul Centers, John Harland,
SLM Holding Corporation, Cubic Corporation, and the Tribune Company. Realized
net profits in your fund allow us the pleasure of making a capital gains
distribution of 61 cents per share.
As we approach the new century, we reflect on the enormous changes of the
twentieth century, and look towards the twenty-first century expecting the
greatest leap forward in the history of the human race. We gladly share this
thrilling adventure with you.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
Comparison of the change in value of $10,000 investment in the 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>
11/30/88 $ 9,225 $10,000
11/30/89 $15,413 $13,083
11/30/90 $11,575 $12,625
11/30/91 $14,848 $15,190
11/30/92 $17,010 $17,992
11/30/93 $17,313 $19,806
11/30/94 $14,723 $20,016
11/30/95 $17,305 $27,409
11/30/96 $19,695 $35,050
11/30/97 $22,378 $45,037
11/30/98 $21,984 $55,694
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns as of 11/30/98
1 YEAR 5 YEARS 10 YEARS
--------------------------------
<S> <C> <C> <C>
N.A.V. Only -1.76% 4.89% 9.07%
S.E.C. Standardized -10.11% 3.05% 8.11%
</TABLE>
The return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be more of less than their original cost.
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.
** The maximum sales charge of 8.5% was taken from the initial investment
amount when calculating the SEC standardized return figures.
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 1998
<TABLE>
<CAPTION>
Shares Value
- -------- ----------
COMMON STOCKS - 73.1%
<C> <S> <C>
AIRLINES - 5.5%
5,000 ASA Holdings Inc. ............................ $ 169,688
----------
BANKS - 5.6%
4,000 BancWest Corp. ............................... 173,000
----------
BROADCASTING - 2.6%
2,000 *MediaOne Group, Inc. ......................... 81,000
----------
COMPUTER SOFTWARE - 7.1%
10,000 *Segue Software, Inc. ......................... 219,375
----------
CONSTRUCTION - 2.1%
3,000 Lennar Corp. ................................. 66,750
----------
ELECTRONICS - 1.0%
1,200 *Tech-Sym Corp. ............................... 30,075
----------
ENTERTAINMENT - 1.6%
1,500 Walt Disney Co. .............................. 48,281
----------
FINANCIAL SERVICES - 7.6%
3,000 Federal Home Loan Corp. ....................... 181,500
2,000 First Data Corp. .............................. 53,375
----------
234,875
----------
FOOD -11.6%
5,000 McCormick & Co. Inc. .......................... 166,875
20,000 Food Lion, Inc., Class "B" .................... 193,750
----------
360,625
----------
FURNITURE - 3.2%
10,000 *O'Sullivan Industries Holdings, Inc. .......... 100,625
----------
Shares Value
- -------- ----------
HEALTHCARE - 4.3%
10,000 *Healthsouth Corp. ............................. 134,375
----------
INSURANCE - 3.4%
3,400 Leucadia National Corp. ....................... 104,550
----------
PUBLISHING - 3.7%
6,000 Belo A. H. Corp. .............................. 113,250
----------
REAL ESTATE - 6.6%
5,000 LNR Property Corporation ...................... 97,500
10,000 United Dominion Realty Trust, Inc. ............ 108,125
----------
205,625
----------
UTILITIES - 7.2%
11,025 *Southern Union Co. ............................ 223,945
----------
Total Value of Common Stocks (cost $1,444,917). 2,266,039
----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 26.8%
$830M U.S. Treasury Bill 2.00% due 12/03/98
(cost $829,908)............................. 829,908
----------
Total Value of Investments
(Cost $2,274,825)...................... 99.9% 3,095,947
Other Assets, less Liabilities.......... .1 4,188
------ ----------
Net Assets.............................. 100.0% $3,100,135
====== ==========
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $2,274,825) (Note 1-A)... $3,095,947
Cash........................................ 39,155
Dividends receivable........................ 2,150
Other assets................................ 194
----------
TOTAL ASSETS............................. 3,137,446
LIABILITIES
Payable for capital stock redeemed.......... $ 31,792
Accrued advisory and administrative fees.... 5,167
Other accrued expenses...................... 352
----------
TOTAL LIABILITIES........................ 37,311
----------
NET ASSETS..................................... $3,100,135
==========
NET ASSET VALUE PER SHARE
($3,100,135 / 239,303 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $12.95
======
NET ASSETS CONSIST OF:
Capital paid in............................. $2,134,577
Accumulated net realized gain on investments 144,436
Net unrealized appreciation in value of
investments............................... 821,122
----------
TOTAL.................................... $3,100,135
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $12.95
Sales commission: 8 1/2% of offering price* 1.20
------
Offering price (adjusted nearest cent) ..... $14.15
======
Redemption price............................ $12.95
======
</TABLE>
*On purchases of $10,000 or more the offering price is reduced.
See notes to financial statements
3
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends..................................$ 45,355
Interest................................... 22,562
--------
TOTAL INCOME......................... $ 67,917
Expenses (Note 4):
Investment advisory fee .................. 24,104
Professional fees......................... 15,928
Transfer agent and dividend disbursing
agent's fees and expenses............ 14,254
Registration fees......................... 9,558
Administrative fee........................ 8,035
Reports and notices to shareholders....... 4,903
Custodian fees............................ 4,102
Other expenses............................ 4,903
--------
TOTAL EXPENSES....................... 85,787
Less: Custodian fees paid indirectly. 1,910 83,877
-------- --------
INVESTMENT INCOME-NET................ (15,960)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments........... 145,165
Net unrealized depreciation of
investments............................ (177,620)
--------
Net loss on investments.............. ( 32,455)
--------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $(48,415)
========
</TABLE>
See notes to financial statements
4
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS - YEARS ENDED NOVEMBER 30, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment loss............................ $ (15,960) $ (30,116)
Net realized gain on investments............... 145,165 393,384
Net unrealized appreciation (depreciation)
of investments.............................. (177,620) 45,422
---------- ----------
Net increase (decrease) in net assets
resulting from operations................ (48,415) 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).... 232,017 (79,185)
---------- ----------
Net increase (decrease) in net assets....... (179,867) 220,024
NET ASSETS
Beginning of year.............................. 3,280,002 3,059,978
---------- ----------
End of year (including net investment deficit
of $0 and $30,116, respectively)............. $3,100,135 $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
November 30, 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 November 30, 1998 there were 239,303 shares outstanding. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------- --------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold......... 29,875 $ 399,326 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..... (37,648) (507,610) (46,335) (646,154)
-------- ---------- -------- ----------
Net increase (decrease).. 18,648 $ 232,017 (4,895) $ (79,185)
======== ========== ======== ==========
6
<PAGE>
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 1998, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $865,710 and $1,494,784 respectively.
At November 30, 1998, the cost of investments for Federal income tax
purposes was $2,274,825. Accumulated net unrealized appreciation on
investments was $821,122 consisting of $823,385 gross unrealized
appreciation and $2,263 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, 1998, BFC received $680 in commissions from the sale of Fund
shares.
Directors of the Fund who are not affiliated with BFC received directors
fees aggregating $1,050 and the Fund's Custodian has provided credits in the
amount of $1,910 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 $0.61 a
share from net realized gains was declared on December 7, 1998. The
distribution is payable on December 31, 1998 to shareholders of record on
December 28, 1998.
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 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year............... $14.86 $13.57 $12.79 $10.93 $13.09
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... (0.07) (0.14) (0.05) (0.14) (0.21)
Net Realized & Unrealized Gain
(Loss) on Investments............ (0.20) 1.92 1.71 2.05 (1.71)
------ ------ ------ ------ ------
Total From Investment Operations... (0.27) 1.78 1.66 1.91 (1.92)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Realized Gains................. 1.64 0.49 0.88 0.05 0.24
------ ------ ------ ------ ------
Net Asset Value, End of Year....... $12.95 $14.86 $13.57 $12.79 $10.93
====== ====== ====== ====== ======
TOTAL RETURN*(%)................... (1.76) 13.62 13.82 17.53 (14.95)
- -------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year
(in thousands)................... $3,100 $3,280 $3,060 $2,804 $2,320
Ratio to Average Net Assets:
Expenses (%)..................... 2.67 2.75 2.58 3.44 3.71
Net Income (Loss) (%)............ (0.50) (0.95) (0.43) (1.27) (1.77)
Ratio to Average Net Assets before
Expense Reimbursements:
Expenses (%)..................... 2.67 2.75 2.69 4.44 4.71
Net Income (Loss) (%)............ (0.50) (0.95) (0.54) (2.27) (2.77)
Portfolio Turnover Rate (%)........ 33 47 24 51 51
</TABLE>
* Calculated without sales charge.
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,
1998, and the related statements of operations for the year then ended, and
the statements of changes in net assets and financial highlights for each of
the two years 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 audits. The financial highlights for each of the three 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 November 30, 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 November 30, 1998, and the results of its
operations for the year then ended and changes in its net assets and financial
highlights for each of the two years in the period ended November 30, 1998, in
conformity with generally accepted accounting principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
December 18, 1998 (Except for Note 5 as to which the date is December 28,
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 & 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 ANNUAL
REPORT
November 30, 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.
