EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - July 7, 2000
The famous Tulip bulb craze of the seventeenth century compares with the
Internet craze of 1999 - 2000. The focal points of speculative fervor,
technology and biotech stocks, declined sharply during our second quarter.
We felt comforted by our small involvement in this sector.
The Federal Reserve raised interest rates six times since June 1999, and the
rates have begun to bite. An acknowledged rule of thumb says that it takes
six to nine months for changing interest rates to impact the economy.
The April durable goods report showed a drop of 6.4 percent, the sharpest
decline in eight years. In April, U.S. retail sales fell .2 percent; this
was the second month of deceleration.
U.S. construction spending dropped .6 percent in April, its first drop in seven
months. May's business index fell almost two points and its price index
dropped sharply. The National Association of Purchasing Managers said the
latest data "offer the possibility that manufacturer's prices may have peaked
in March". Further evidence of cooling showed in the National Association of
Purchasing Manager's index of manufacturing activity, which dropped 2.6% to
51.8 in June, its fourth consecutive monthly decline. This index is at its
lowest level since January of 1999.
When this index is over 50, an expanding manufacturing sector is indicated. A
drop to 43.5, signals an economic decline.
Residential mortgage demand is declining, banks are more cautious in lending,
and the market for new issues of securities has dried to a trickle.
When combined, these indicators equate to an automobile's speedometer. It
appears the Fed's application of pressure to the economic brakes may avoid
putting us through the windshield. It is a delicate process.
In coming months, we shall be watching four key components to determine the
course of the economy. First, speed of demand growth must continue to slow.
Second, core price increases must remain low. The core personal consumption
price index (excluding food and energy) is rising at a 1.6% rate. Third,
advances in productivity must continue to grow. Growth has been at 4% for
the last few years. This may be the magic minimum number. Fourth, the labor
market must not tighten more. The unemployment rate may need to go up a bit.
Bad news for one group may be good news for the economy.
Wall Street was hypnotized by wild pricing of speculative stocks, but is now
turning to a more traditional valuation process.
Lower prices have induced us to buy in a number of issues we believe offer good
opportunity: French Fragrance, Alza, Blue Rhino, Cohesion Technology,
Hummingbird Communications, Ibis Technology, and Maxwell Technologies.
We look forward to the second half of the year 2000 and the opportunities we
expect to find.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - MAY 31, 2000,
<TABLE>
<CAPTION>
Shares Value
-------- ----------
<C> <S> <C>
COMMON STOCKS - 84.0%
BANKS - 5.6%
8,000 BancWest Corp................................... $ 149,500
----------
BIOTECHNOLOGY & DRUGS - 3.8%
2,000 *Alza Corp....................................... 101,625
----------
BROADCASTING/CABLE TV - 11.4%
4,000 *AT&T Liberty Media Group, Cl "A"................ 177,250
2,000 *Cablevision Systems Corp........................ 125,250
----------
302,500
----------
CONSTRUCTION - 2.1%
3,000 Lennar Corp..................................... 56,625
----------
CONSUMER PRODUCTS - 9.6%
10,000 *Applica Incorporated ........................... 147,500
14,000 *French Fragrances, Inc.......................... 106,750
----------
254,250
----------
DIVERSIFIED ELECTRONICS - 1.6%
3,000 *Maxwell Technologies, Inc....................... 41,625
----------
FINANCIAL SERVICES - 9.2%
3,000 Federal Home Loan Corp.......................... 133,500
2,000 First Data Corp................................. 112,125
----------
245,625
----------
FUEL DISTRIBUTION - 1.9%
6,000 *Blue Rino Corp.................................. 51,375
----------
INSURANCE - 6.0%
2,000 *First Health Group Corp......................... 70,000
3,400 Leucadia National Corp.......................... 88,613
----------
158,613
----------
MEDICAL EQUIPMENT & SUPPLIES - 1.2%
3,000 *Cohesion Technologies, Inc...................... 32,062
----------
Shares Value
-------- ----------
REAL ESTATE - 7.7%
5,000 LNR Property Corporation........................ $ 96,875
10,000 United Dominion Realty Trust, Inc............... 107,500
----------
204,375
----------
RETAIL SPECIALTY - 5.8%
5,000 *BJs Wholesale Club.............................. 155,000
----------
SEMICONDUCTORS - 1.6%
1,200 *Ibis Technology Corp............................ 42,000
----------
SOFTWARE- 2.9%
2,000 *Hummingbird Communications...................... 77,250
----------
UTILITIES - 7.5%
11,576 *Southern Union Co............................... 199,686
----------
WASTE MANAGEMENT SERVICES- 6.1%
8,000 *Stericycle Co................................... 162,000
----------
Total Value of Common Stocks
(cost $1,684,366)............................. 2,234,111
----------
Principal
Amount
---------
SHORT-TERM INVESTMENTS - 15.5%
$ 410M US. Treasury Bill 4.90 % due 06/01/2000
(cost $ 410,000)............................ 410,000
----------
Total Value of Investments
(cost $2,094,366).................... 99.5% 2,644,111
Other Assets, less Liabilities.......... 0.5 14,172
------ ----------
Net Assets.............................. 100.0% $2,658,283
====== ==========
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - MAY 31, 2000
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $2,094,366) (Note 1-A)... $2,644,111
Cash........................................ 21,789
Dividends receivable........................ 1,360
Other assets................................ 757
----------
TOTAL ASSETS............................. 2,668,017
LIABILITIES
Payable for capital stock redeemed.......... $ 1,569
Accrued advisory and administrative fees.... 2,215
Other accrued expenses...................... 5,950
----------
TOTAL LIABILITIES........................ 9,734
----------
NET ASSETS..................................... $2,658,283
==========
NET ASSET VALUE PER SHARE
($2,658,283 / 236,195 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $11.25
======
NET ASSETS CONSIST OF:
Capital paid in............................. $2,097,271
Undistributed net investment deficit........ (18,709)
Accumulated net realized gain on investments 29,976
Net unrealized appreciation in value of
investments............................... 549,745
----------
TOTAL.................................... $2,658,283
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $11.25
Sales commission: 8 1/2% of offering price* 1.05
------
Offering price (adjusted nearest cent) ..... $12.30
======
Redemption price............................ $11.25
======
</TABLE>
*On purchases of $10,000 or more the offering price is reduced.
See notes to financial statements
3
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF OPERATIONS - SIX MONTHS ENDED MAY 31, 2000
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends..................................$ 15,077
Interest................................... 12,008
--------
TOTAL INCOME......................... $ 27,085
Expenses (Note 4):
Investment advisory fee .................. 10,589
Professional fees......................... 8,285
Transfer agent and dividend disbursing
agent's fees and expenses............ 9,932
Registration fees......................... 5,590
Reports and notices to shareholders....... 4,590
Administrative fee........................ 3,530
Custodian fees............................ 2,820
Other expenses............................ 2,237
--------
TOTAL EXPENSES...................... 47,573
Less: Custodian fees paid indirectly. 1,779 45,794
-------- --------
INVESTMENT INCOME-NET................ (18,709)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments........... 30,887
Net unrealized depreciation of
investments............................(134,365)
--------
Net loss on investments.............. (103,478)
--------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $(122,187)
========
</TABLE>
See notes to financial statements
4
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Year Ended
Ended November 30,
May 31, 2000 1999
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss)................... $ (18,709) $ 3,469
Net realized gain on investments............... 30,887 193,819
Net unrealized depreciation of investments..... (134,365) (137,012)
---------- ----------
Net increase (decrease) in net assets
resulting from operations................ (122,187) 60,276
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......... .. ............. (3,469) ----
Net realized gain on investments............... (194,646) (144,520)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting
from capital share transactions (Note 2).... 71,960 (109,266)
---------- ----------
Net decrease in net assets.................. (248,342) (193,510)
NET ASSETS
Beginning of year.............................. 2,906,625 3,100,135
---------- ----------
End of period (including undistributed net
investment income (deficit) of ($18,709)
and $3,469, respectively).................... $2,658,283 2,906,625
========== ==========
</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 are valued at the closing sales price on May 31, 2000.
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, 2000 there were 236,195 shares outstanding. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 2000 November 30, 1999
-------------------- --------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold.......... 12,471 $ 145,548 26,706 $ 329,434
Capital stock issued in
reinvestment of
distributions............... 15,617 191,787 11,188 138,732
Capital stock redeemed...... (22,489) (265,375) (46,601) (577,432)
-------- --------- -------- ---------
Net increase (decrease)..... 5,599 $ 71,960 (8,707) $(109,266)
6
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2000, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $519,861 and $410,021 respectively.
At May 31, 2000, the cost of investments for Federal income tax purposes was
$2,094,366. Accumulated net unrealized appreciation on investments was
$549,745 consisting of $602,527 gross unrealized appreciation and $52,782
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, 2000, BFC received $303 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 $1,779 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
PER SHARE DATA Ended Year Ended November 30, 1999
-------------- May 31, ------------------------------------------
2000 1999 1998 1997 1996 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year...............$12.60 $12.95 $14.86 $13.57 $12.79 $10.93
------ ------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... (0.08) 0.02 (0.07) (0.14) (0.05) (0.14)
Net Realized & Unrealized Gain
(Loss) on Investments............ (0.40) 0.24 (0.20) 1.92 1.71 2.05
------ ------ ------ ------ ------ ------
Total From Investment Operations... (0.48) 0.26 (0.27) 1.78 1.66 1.91
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Investment Income.............. 0.02 -- -- -- -- --
Net Realized Gains................. 0.85 0.61 1.64 0.49 0.88 0.05
------ ------ ------ ------ ------ ------
Total Distributions............... 0.87 0.61 1.64 0.49 0.88 0.05
------ ------ ------ ------ ------ ------
Net Asset Value, End of Period.....$11.25 $12.60 $12.95 $14.86 $13.57 $12.79
====== ====== ====== ====== ====== ======
TOTAL RETURN*(%)................... (4.43) 2.08 (1.76) 13.62 13.82 17.53
-------------
RATIOS/SUPPLEMENTAL DATA
------------------------
Net Assets, End of Period
(in thousands)...................$2,658 $2,906 $3,100 $3,280 $3,060 $2,804
Ratio to Average Net Assets:
Expenses (%)..................... 3.37 (a) 3.01 2.67 2.75 2.58 3.44
Net Income (Loss) (%)............(1.20)(a) 0.23 (0.50) (0.95) (0.43) (1.27)
Ratio to Average Net Assets Before
Expense Reimbursements:
Expenses (%)..................... 3.37 (a) 3.01 2.67 2.75 2.69 4.44
Net Income (Loss) (%)............(1.20)(a) 0.23 (0.50) (0.95) (0.54) (2.27)
Portfolio Turnover Rate (%)........ 18 95 33 47 24 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 May 31,
2000, 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, 1999 and financial highlights for the six months
ended May 31, 2000 and each of the three years in the period ended November
30, 1999. 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 two 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, 2000 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, 2000, 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, 1999 and financial highlights for
the six months ended May 31, 2000 and each of the three years in the period
ended November 30, 1999, in conformity with generally accepted accounting
principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
June 19, 2000
<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>
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
SEMI-ANNUAL
REPORT
MAY 31, 2000
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.
