EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - July 6, 1999
Dear shareholders,
As the twentieth century draws to a close, the United States enjoys brisk
economic activity. The Federal Reserve increased the federal funds rate
by one quarter of one percent, which equates to watering down the party's
punch. This rate increase, along with the market's increase in long-term
rates, should temper the economy's momentum. The question is whether the
deceleration will be enough to alleviate inflationary wage pressure
caused by shortages of skilled labor. Despite concern over a warming
economy, the rest of the world watches the American economic expansion
with envy. Manufacturing, new home sales, and consumer confidence are at
high levels. However, new home sales slowed recently in response to
higher interest rates over the last several months. The eyes of the
investment community will be fixed on corporate profits as the year
progresses. In our last report, six months ago, we said eleven thousand
on the Dow was within reach. We have exceeded that mark.
Worry about inflation will be paramount for the rest of the year. Much
of the good news is behind us. Higher oil prices have been sustained by
a surprisingly disciplined oil cartel. Higher commodity prices could
translate from a minor worry to a major problem. The overriding mood on
Wall Street seems to be Don't Worry, Be Happy! When emotions are this
ebullient, we practice restraint. Overseas economies appear to have
bottomed; this will stimulate our economy.
In the first half of our fiscal year, we eliminated all shares of ASA
Holdings, Healthsouth, Humana, McCormick, MediaOne Group, O'Sullivan
Industries, and Segue Software, in order to invest in a diversified group
of companies which we think offer greater potential. New to the portfolio
is BJ's Wholesale, a wholesale club which is expanding into the southeast
and midwestern United States. BJ's sells at a lower stock market valuation
than some of its competition. RailAmerica Inc. is taking advantage of the
global trend to privatize railroads in Australia, Chile, Canada and the
United States. Cypress Semiconductor is a designer, manufacturer, and
marketer of high performance digital integrated circuits. Wind River
Systems designs software which assists engineers in building complex
embedded electronic applications. We bought Windmere-Durable at a discount
when shares dropped for what we believe to be short-term problems. Dentsply
International is a manufacturer of dental products which should see
increasing demand with a growing over-age-65 population. Stericycle is
expanding in the medical waste management business by purchasing complementary
businesses. Tokheim is one of the largest domestic manufacturers of gasoline
dispensers, and recently bought out a competitor. AT&T Liberty Media Group
is positioned to grow into a major force in the revolution sweeping the
communications and entertainment industries.
These changes result from countless hours of sifting information and
evaluating market forces. We look forward to the new millennium with
confidence.
We have evaluated our computer systems and do not foresee any Y2K problems as
we turn the last page of the calendar and ring in the new century.
Since my next report to you will be after the New Year, may I be the first to
wish you a happy New Year and a happy new century.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - MAY 31, 1999
<TABLE>
<CAPTION>
Shares Value
- -------- ----------
COMMON STOCKS - 80.7%
<C> <S> <C>
BANKS - 5.0%
4,000 BancWest Corp........................................ $ 152,000
----------
BROADCASTING/CABLE TV - 4.4%
2,000 *AT&T Liberty Media Group, Class "A".................. 132,875
----------
CAPITAL GOODS - 1.6%
5,000 *Tokheim Corp........................................ 49,375
----------
CONSTRUCTION - 2.2%
3,000 Lennar Corp.......................................... 67,875
----------
CONSUMER PRODUCTS - 4.4%
10,000 *Windmere-Durable Holdings............................ 131,250
----------
ELECTRONICS - 0.9%
1,200 *Tech-Sym Corp........................................ 26,325
----------
ENTERTAINMENT - 1.4%
1,500 *Walt Disney Co....................................... 43,688
----------
FINANCIAL SERVICES - 8.8%
3,000 Federal Home Loan Corp............................... 174,937
2,000 First Data Corp...................................... 89,875
----------
264,812
----------
FOOD - 7.2%
20,000 Food Lion, Inc., Class "B".......................... 217,500
----------
INSURANCE - 2.4%
3,400 Leucadia National Corp............................... 70,975
----------
MEDICAL EQUIPMENT & SUPPLIES - 3.6%
4,000 Dentsply International Inc........................... 108,000
----------
PUBLISHING - 4.4%
6,000 Belo A. H. Corp...................................... 132,375
----------
Shares Value
- -------- ----------
REAL ESTATE - 7.0%
5,000 LNR Property Corporation............................. $ 100,000
10,000 United Dominion Realty Trust, Inc.................... 110,625
----------
210,625
----------
RAILROADS - 4.9%
15,000 *RailAmerica, Inc..................................... 146,250
----------
RETAIL SPECIALTY - 4.3%
5,000 *BJs Whloesale Club................................... 130,000
----------
SEMICONDUCTOR - 2.2%
6,000 *Cypress Semiconductor Corp........................... 66,750
----------
SOFTWARE - 4.2%
6,000 *Wind River Systems Inc............................... 126,000
----------
UTILITIES - 8.3%
11,025 *Southern Union Co.................................... 249,441
----------
WASTE MANAGEMENT SERVICES- 3.5%
8,000 *Stericycle Co........................................ 105,000
----------
Total Value of Common Stocks (cost $ 1,706,932)...... 2,431,116
----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 18.2%
$550M US. Treasury Bill 3.70 %
due 6/03/98 (cost $ 549,887)......................... 549,887
----------
Total Value of Investments (Cost $2,256,819).. 98.9% 2,981,003
Other Assets, less Liabilities................ 1.1 32,749
------ ----------
Net Assets.................................... 100.0% $3,013,752
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 1999
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $2,256,819) (Note 1-A)... $2,981,003
Cash........................................ 19,015
Dividends receivable........................ 42,400
Other assets................................ 1,708
----------
TOTAL ASSETS............................. 3,044,126
LIABILITIES
Payable for capital stock redeemed.......... $ 24,253
Accrued advisory and administrative fees.... 4,963
Other accrued expenses...................... 1,158
----------
TOTAL LIABILITIES........................ 30,374
----------
NET ASSETS..................................... $3,013,752
==========
NET ASSET VALUE PER SHARE
($3,013,752 / 241,976 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $12.45
======
NET ASSETS CONSIST OF:
Capital paid in............................. $2,168,112
Undistributed net investment income......... 19,124
Accumulated net realized gain on investments 102,332
Net unrealized appreciation in value of
investments............................... 724,184
----------
TOTAL.................................... $3,013,752
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $12.45
Sales commission: 8 1/2% of offering price* 1.16
------
Offering price (adjusted nearest cent) ..... $13.61
======
Redemption price............................ $12.45
======
</TABLE>
*On purchases of $10,000 or more the offering price is reduced.
See notes to financial statements
3
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF OPERATIONS - SIX MONTHS ENDED MAY 31, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends..................................$ 55,070
Interest................................... 12,411
--------
TOTAL INCOME......................... $ 67,481
Expenses (Note 4):
Investment advisory fee .................. 11,182
Professional fees......................... 9,555
Transfer agent and dividend disbursing
agent's fees and expenses............ 8,627
Reports and notices to shareholders....... 5,863
Registration fees......................... 5,090
Administrative fee........................ 3,727
Custodian fees............................ 3,350
Other expenses............................ 2,627
--------
TOTAL EXPENSES....................... 50,021
Less: Custodian fees paid indirectly. 1,664 48,357
-------- --------
INVESTMENT INCOME-NET................ 19,124
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments........... 102,416
Net unrealized depreciation of
investments............................ ( 96,938)
--------
Net gain on investments.............. 5,478
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $ 24,602
========
</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,
1999 1998
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss)................... $ 19,124 $ (15,960)
Net realized gain on investments............... 102,416 145,165
Net unrealized depreciation
of investments.............................. (96,938) (177,620)
---------- ----------
Net increase (decrease) in net assets
resulting from operations................ 24,602 (48,415)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments............... (144,520) (363,469)
CAPITAL SHARE TRANSACTIONS
Increase in net assets resulting
from capital share transactions (Note 2).... 33,535 232,017
---------- ----------
Net decrease in net assets.................. (86,383) (179,867)
NET ASSETS
Beginning of year.............................. 3,100,135 3,280,002
---------- ----------
End of period (including net investment income
of $19,124 and $0, respectively)............. $3,013,752 $3,100,135
========== ==========
</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 28, 1999. 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, 1999 there were 241,976 shares outstanding. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1999 November 30, 1998
-------------------- --------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold......... 14,108 $ 170,688 29,875 $ 399,326
Capital stock issued in
reinvestment of net
realized gain on
investments............. 11,188 138,732 26,421 340,301
Capital stock redeemed..... (22,623) (275,885) (37,648) (507,610)
-------- ---------- -------- ----------
Net increase ............ 2,673 $ 33,535 18,648 $ 232,017
======== ========== ======== ==========
6
<PAGE>
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 1999, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $1,808,575 and $1,648,976 respectively.
At May 31, 1999, the cost of investments for Federal income tax
purposes was $2,256,819. Accumulated net unrealized appreciation on
investments was $724,184 consisting of $735,647 gross unrealized
appreciation and $11,463 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, 1999, BFC received $277 in commissions from the sale of Fund
shares.
Directors of the Fund who are not affiliated with BFC received directors
fees aggregating $550 and the Fund's Custodian has provided credits in the
amount of $1,664 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, 1999 1998 1997 1996 1995 1994
------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year............... $12.95 $14.86 $13.57 $12.79 $10.93 $13.09
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... 0.08 (0.07) (0.14) (0.05) (0.14) (0.21)
Net Realized & Unrealized Gain
(Loss) on Investments............ 0.03 (0.20) 1.92 1.71 2.05 (1.71)
------ ------ ------ ------ ------ ------
Total From Investment Operations... 0.11 (0.27) 1.78 1.66 1.91 (1.92)
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Realized Gains................. 0.61 1.64 0.49 0.88 0.05 0.24
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period..... $12.45 $12.95 $14.86 $13.57 $12.79 $10.93
====== ====== ====== ====== ====== ======
TOTAL RETURN*(%)................... 0.87 (1.76) 13.62 13.82 17.53 (14.95)
- -------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Period
(in thousands)................... $3,014 $3,100 $3,280 $3,060 $2,804 $2,320
Ratio to Average Net Assets:
Expenses (%)..................... 3.36(a) 2.67 2.75 2.58 3.44 3.71
Net Income (Loss) (%)............ 1.29(a) (0.50) (0.95) (0.43) (1.27) (1.77)
Ratio to Average Net Assets Before
Expense Reimbursements:
Expenses (%)..................... 3.36(a) 2.67 2.75 2.69 4.44 4.71
Net Income (Loss) (%)............ 1.29(a) (0.50) (0.95) (0.54) (2.27) (2.77)
Portfolio Turnover Rate (%)........ 69 33 47 24 51 51
</TABLE>
* Calculated without sales charge.
(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, 1999, and the related statement of operations for the
six months then ended, the statements of changes in net assets for the
six months then ended and the year ended November 30, 1998 and
financial highlights for the six months ended May 31, 1999 and each of
the two years in the period ended November 30, 1998. 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 May 31, 1999 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, 1999, and the results of its
operations for the six months then ended, changes in its net assets for the
six months then ended and the year ended November 30, 1998 and financial
highlights for the six months ended May 31, 1999 and 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
June 18, 1999
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
FIRSTAR 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 Sharehold er 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, 1999
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.
