EAGLE GROWTH SHARES, INC.
PRESIDENT'S LETTER - January 6, 2000
Bryan Steamer, Cole, Crow-Elkhart, Davis, Elgin, Ford, Haynes, Marmon,
McFarlan, McGill, Morris-London, Pilot, Premier, ReVere, and Star were among
the names of automobiles being produced in 1923, and these names were only from
the state of Indiana! In the year 2100 there will be a list of forgotten
Internet companies having the same degree of recognition as these automobiles
do today.
Waves of speculation pushing prices of Internet stocks to stratospheric heights
will not last forever. The Internet is a revolutionary tool changing the
way businesses function. Exactly how business will be transformed is
uncertain, but some investors have decided it will be pervasive and without
losers. Euphoria pushing Internet issues to dizzying heights has drawn
biotechnology stocks into the party atmosphere to the delight of their
investors.
1999 was a very strange year with technology stocks becoming almost the only
game in town. The result is a split personality in the stock market. The
technology sector of the S&P 500 Index* was up a whopping 73%, as investors
threw fundamentals out the window. The only other sector to outperform the
S&P 500 index was capital goods. Though more stocks fell than rose last year,
investors seemed hypnotized by the daily flight of the latest Internet stock's
initial public offering.
This unusual market situation has presented us with an excellent opportunity to
accumulate a number of valuable stocks at prices which we consider bargains.
New positions initiated in the second half of fiscal 1999 include Cablevision,
the dominant cable provider in New York City and its environs; Rural Cellular,
owner of a current monopoly in its area of operation; and Midway Games which
has developed new electronic games for introduction this winter. We believe
these offer well positioned companies at very reasonable prices.
Your fund paid a long-term capital gain of 85 cents per share. It is our
practice to take gains when a company has fulfilled our expectations. This was
the situation with Cypress Semiconductor, Food Lion, and Tech-Sym which were
sold with pleasing profits. Some stocks were sold to take a tax loss to
minimize the impact on the gains made in the portfolio. Wind River Systems,
Cidco, and Dentsply International were sold for that reason.
Some stocks are simply disappointing which was the case with Alexander and
Baldwin and Tokheim and they were sold for that reason.
<PAGE>
A new millennium has begun. We look back with wonder at the incredible
advances of humanity, and believe future generations will look upon this time
as an exceptional period of progress.
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>
11/30/89 $ 9,225.00 $10,000.00
11/30/90 $ 6,928.07 $ 9,649.82
11/30/91 $ 8,887.19 $11,610.42
11/30/92 $10,181.35 $13,752.47
11/30/93 $10,362.68 $15,138.61
11/30/94 $ 8,813.08 $15,299.35
11/30/95 $10,357.88 $20,950.30
11/30/96 $11,788.88 $26,790.81
11/30/97 $13,394.29 $34,424.01
11/30/98 $13,158.95 $42,563.19
11/30/99 $13,433.15 $51,457.11
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns as of 11/30/99
1 Year 5 Years 10 Years
--------------------------------
<S> <C> <C> <C>
N.A.V Only 2.08% 8.80% 3.83%
S.E.C. Standardized** -6.59% 6.88% 2.91%
</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
when calculating the SEC standardized return figures.
2
<PAGE>
EAGLE GROWTH SHARES, INC.
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Shares Value
- -------- ----------
<C> <S> <C>
COMMON STOCKS - 76.6%
BANKS - 6.1%
4,000 BancWest Corp................................. $ 176,250
----------
BROADCASTING/CABLE TV - 10.5%
4,000 *AT&T Liberty Media Group, Cl "A".............. 167,250
2,000 *Cablevision Systems Corp...................... 137,125
----------
304,375
----------
CONSTRUCTION - 1.7%
3,000 Lennar Corp................................... 48,938
----------
CONSUMER PRODUCTS - 4.9%
10,000 *Windmere-Durable Holdings..................... 143,125
----------
ENTERTAINMENT - 1.4%
1,500 Walt Disney Co................................ 41,812
----------
FINANCIAL SERVICES - 8.1%
3,000 Federal Home Loan Corp........................ 148,125
2,000 First Data Corp............................... 86,500
----------
234,625
----------
INSURANCE - 2.6%
3,400 Leucadia National Corp........................ 74,162
----------
PUBLISHING - 3.7%
6,000 Belo A. H. Corp............................... 108,000
----------
REAL ESTATE - 6.8%
5,000 LNR Property Corporation...................... 88,125
10,000 United Dominion Realty Trust, Inc............. 108,125
----------
196,250
----------
Shares Value
- -------- ----------
RAILROADS - 4.2%
15,000 *RailAmerica, Inc.............................. $ 121,875
----------
RETAIL SPECIALTY - 6.4%
5,000 *BJs Whloesale Club............................ 186,875
----------
TOYS & GAMES - 3.7%
5,000 *Midway Games Inc.............................. 108,125
----------
UTILITIES - 7.6%
11,576 *Southern Union Co............................. 222,838
----------
WASTE MANAGEMENT SERVICES- 4.8%
8,000 *Stericycle Co................................. 139,500
----------
WIRELESS COMMUNICATIONS- 4.1%
1,500 *Rural Cellular Corp, Class "A"................ 120,188
----------
Total Value of Common Stocks
(cost $1,543,639).......................... 2,226,938
----------
Principal
Amount
- ---------
SHORT-TERM INVESTMENTS - 22.9%
$665M US. Treasury Bill 3.00 %
due 12/02/99 (cost $ 664,889).............. 664,889
----------
Total Value of Investments
(Cost $2,208,528)............................... 99.5% 2,891,827
Other Assets, less Liabilities....................... 0.5 14,798
----- ----------
Net Assets...........................................100.0% $2,906,625
===== ==========
</TABLE>
* Non-income producing security
See notes to financial statements
3
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 1999
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $2,208,528) (Note 1-A)... $2,891,827
Cash........................................ 26,566
Dividends receivable........................ 2,095
Other assets................................ 1,469
----------
TOTAL ASSETS............................. 2,921,957
LIABILITIES
Payable for capital stock redeemed.......... $ 7,195
Accrued advisory and administrative fees.... 4,807
Other accrued expenses...................... 3,330
----------
TOTAL LIABILITIES........................ 15,332
----------
NET ASSETS..................................... $2,906,625
==========
NET ASSET VALUE PER SHARE
($2,906,625 / 230,596 shares outstanding)
10,000,000 shares authorized, $0.10 par
value (Note 2)............................. $12.60
======
NET ASSETS CONSIST OF:
Capital paid in............................. $2,025,311
Undistributed net investment income......... 3,469
Accumulated net realized gain on investments 193,735
Net unrealized appreciation in value of
investments............................... 684,110
----------
TOTAL.................................... $2,906,625
==========
SAMPLE PRICE COMPUTATION
Net asset value per share................... $12.60
Sales commission: 8 1/2% of offering price* 1.17
------
Offering price (adjusted nearest cent) ..... $13.77
======
Redemption price............................ $12.60
======
</TABLE>
*On purchases of $10,000 or more the offering price is reduced.
See notes to financial statements
4
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends..................................$ 67,067
Interest................................... 22,550
--------
TOTAL INCOME......................... $ 89,617
Expenses (Note 4):
Investment advisory fee .................. 22,299
Professional fees......................... 15,027
Transfer agent and dividend disbursing
agent's fees and expenses............ 16,074
Registration fees......................... 9,740
Reports and notices to shareholders....... 7,437
Administrative fee........................ 7,433
Custodian fees............................ 6,040
Other expenses............................ 5,455
--------
TOTAL EXPENSES...................... 89,505
Less: Custodian fees paid indirectly. 3,357 86,148
-------- --------
INVESTMENT INCOME-NET................ 3,469
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments........... 193,819
Net unrealized depreciation of
investments............................(137,012)
--------
Net gain on investments.............. 56,807
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS........................... $ 60,276
========
</TABLE>
See notes to financial statements
5
<PAGE>
EAGLE GROWTH SHARES, INC.
STATEMENT OF CHANGES IN NET ASSETS - YEARS ENDED NOVEMBER 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income (loss)................... $ 3,469 $ (15,960)
Net realized gain on investments............... 193,819 145,165
Net unrealized depreciation of investments..... (137,012) (177,620)
---------- ----------
Net increase (decrease) in net assets
resulting from operations................ 60,276 (48,415)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments............... (144,520) (363,469)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting
from capital share transactions (Note 2).... (109,266) 232,017
---------- ----------
Net decrease in net assets.................. (193,510) (179,867)
NET ASSETS
Beginning of year.............................. 3,100,135 3,280,002
---------- ----------
End of year (including undistributed
net investment income of $3,469 and
$0, respectively)............................ $2,906,625 $3,100,135
========== ==========
</TABLE>
See notes to financial statements
6
<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 November 30,
1999. 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, 1999 there were 230,596 shares outstanding. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
Shares Amount Shares Amount
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Capital stock sold......... 26,706 $ 329,434 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..... (46,601) (577,432) (37,648) (507,610)
-------- ---------- -------- ----------
Net increase (decrease).. (8,707) $(109,266) 18,648 $ 232,017
======== ========== ======== ==========
7
<PAGE>
EAGLE GROWTH SHARES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 1999, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $2,306,204 and $2,401,301 respectively.
At November 30, 1999, the cost of investments for Federal income tax
purposes was $2,208,528. Accumulated net unrealized appreciation on
investments was $684,110 consisting of $688,720 gross unrealized
appreciation and $4,610 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, 1999, BFC received $560 in commissions from the sale of Fund
shares.
Directors of the Fund who are not affiliated with BFC received directors'
fees aggregating $1,100 and the Fund's Custodian has provided credits in the
amount of $3,357 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 Fund's fiscal year. A distribution of
$.865 a share, consisting of $.85 from realized gains and .015 from ordinary
income was declared on December 6, 1999. The distribution is payable on December
31, 1999 to shareholders of record on December 28, 1999.
8
<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 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year...............$12.95 $14.86 $13.57 $12.79 $10.93
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss)....... 0.02 (0.07) (0.14) (0.05) (0.14)
Net Realized & Unrealized Gain
(Loss) on Investments............ 0.24 (0.20) 1.92 1.71 2.05
------ ------ ------ ------ ------
Total From Investment Operations... 0.26 (0.27) 1.78 1.66 1.91
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Realized Gains................. 0.61 1.64 0.49 0.88 0.05
------ ------ ------ ------ ------
Net Asset Value, End of Year.......$12.60 $12.95 $14.86 $13.57 $12.79
====== ====== ====== ====== ======
TOTAL RETURN*(%)................... 2.08 (1.76) 13.62 13.82 17.53
- -------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year
(in thousands)...................$2,906 $3,100 $3,280 $3,060 $2,804
Ratio to Average Net Assets:
Expenses (%)..................... 3.01 2.67 2.75 2.58 3.44
Net Income (Loss) (%)............ 0.23 (0.50) (0.95) (0.43) (1.27)
Ratio to Average Net Assets Before
Expense Reimbursements:
Expenses (%)..................... 3.01 2.67 2.75 2.69 4.44
Net Income (Loss) (%)............ 0.23 (0.50) (0.95) (0.54) (2.27)
Portfolio Turnover Rate (%)........ 95 33 47 24 51
</TABLE>
* Calculated without sales charge.
See notes to financial statements
9
<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, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in
the period ended November 30, 1999 and financial highlights for 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 November 30, 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 November 30, 1999, and the results of its
operations for the year then ended, changes in its net assets for the each of
the two years in the period ended November 30, 1999 and financial highlights
for 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
December 20, 1999 (Except for Note 5 as
to which the date is December 28, 1999)
10
<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
11
<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
ANNUAL REPORT
November 30, 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.
