(Logo)
VISTA
Family of Mutual Funds
(Logo)
THE GROWTH FUND OF WASHINGTON
Semi-Annual Report
June 30, 1997
(Logo)
THE GROWTH FUND OF WASHINGTON
Fund results in this letter were computed without a sales charge.
Here are the total and average annual compound returns for the following
periods ended June 30, 1997 on a $1,000 investment at the 4.75% maximum
sales charge with all distributions reinvested: 10 years: +169.77%, or
+10.43% a year; 5 years: +119.54%, or +17.03% a year; and 12 months:
+19.22%. Sales charges are lower for accounts of $100,000 or more.
THE FIGURES IN THIS REPORT REFLECT PAST RESULTS. ALL INVESTMENTS ARE
SUBJECT TO CERTAIN RISKS. FOR EXAMPLE, THOSE WHICH INCLUDE COMMON STOCKS
ARE AFFECTED BY FLUCTUATING STOCK PRICES, SO YOU MAY GAIN OR LOSE MONEY BY
INVESTING IN THE FUND. ACCORDINGLY, INVESTORS SHOULD MAINTAIN A LONG-TERM
INVESTMENT PERSPECTIVE. FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
INSURED, GUARANTEED OR ENDORSED BY, THE U.S. GOVERNMENT, ANY BANK, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY-
OTHER AGENCY, ENTITY OR PERSON
Fellow Shareholders
The Growth Fund of Washington continued its upward momentum during the
first six months of 1997, with the tempo increasing during the second
quarter. The Fund paid a 3-cent per share dividend on June 23 to
shareholders of record at the opening of business on June 20. The Fund's
net asset value rose to $23.20 on June 30, 1997 from $20.00 on December 31,
1996, an increase of 16.15% with the June dividend taken in shares. For
the same period the total return of the unmanaged Standard & Poor's 500
Composite Index increased by 20.59%. At midyear, the weighted average
price-earnings multiple for the Fund's holdings was 13.8 times 1998
estimated earnings, or 26.6% less than the S&P 500's multiple of 18.8
times.
During this same six-month period, the financial markets have been
focused on the strength of the economy and inflation. The Federal Reserve
Board, at its March meeting, increased short term rates by 25 basis points
as a preemptive measure to quell any inflation in the pipeline. The
extraordinary focus on the latest economic news - be it inflation,
unemployment or growth in GDP, has created greater volatility within the
financial markets. There have been concerns preceding each meeting of the
Federal Reserve that short term rates will be increased, but the Federal
Reserve has not implemented rate increases at its subsequent May and July
meetings.
On June 30, 1997, The Growth Fund of Washington held securities of 28
companies diversified within 15 industry groups. The Fund's five largest
holdings, representing 45.43% of net assets, were Federal Home Loan
Mortgage Corp. (11.16%); Federal National Mortgage Association (10.38%);
Lockheed Martin (9.32%); Washington Post (7.37%); and CSX Corporation
(7.20%).
Since the first of the year, five new companies were added to the
Fund's portfolio: Seibels Bruce Group Inc., headquartered outside the
immediate region, provides property and casualty insurance services through
independent agents mainly in the Southeastern states; Student Loan
Marketing Association, the DC-based government-sponsored enterprise
currently undergoing a transformation, is the largest source of funding and
servicing support for education loans; Telco Communications Group, a
Chantilly, Virginia-based telecommunications company, is one of the largest
providers of long distance services in the country; Trigon Healthcare Inc.,
based in Richmond, is Virginia's largest managed health care company,
serving 1.9 million members; and UOL Publishing, Inc., a McLean, Virginia
company, publishes interactive and Web-based courseware for the online,
academic and corporate continuing education market. In addition, American
Radio Systems Corporation now appears, due to its acquisition of EZ
Communications which the Fund had owned. American Radio Systems is
headquartered outside the area and is the fourth largest radio group in
terms of revenue with interests in 29 AM and 64 FM stations nationwide.
The Growth Fund of Washington eliminated the following five holdings
during this period: DIGEX, DST Systems, InteliData Technologies,
Transaction Network Services, and U.S. Office Products.
Prospects remain bright for the regional economy with a favorable
outlook for job growth, especially in the private sector. The local
economy mirrors the national economy with reasonable growth and inflation
under control. Consolidation activity increased in the mid-Atlantic banking
group in the first half of the year and your Fund has participated. On
March 11, 1997, First Citizens Financial, a Fund holding, announced it was
being acquired by Provident Bankshares for a premium to book value of 2.21
times. On July 21, 1997 First Union Corporation announced the acquisition
of Signet Banking Corporation, also a Fund holding, for 3.5 times book
value. Further consolidation in the banking industry is anticipated. In
addition, strategic combinations in the telecommunications area also
increased in this period. Again, your Fund is participating in this area
of mergers and acquisitions as its holding of Telco Communications Group is
in the process of being acquired.
With the general market at historic highs, one can expect increased
volatility and the possibility of lower prices. Your Fund's
lower-than-average price-earnings ratio should provide some protection and
we encourage you to maintain a long-term perspective toward your holdings.
We welcome your comments, as always, and look forward to reporting to
you again in six months.
Sincerely,
(Signatures)
James H. Lemon, Jr. Harry J. Lister
Chairman President
August 15, 1997
<TABLE>
<CAPTION>
Investment Portfolio as of June 30, 1997 (Unaudited)
Number
Industry of Market Percent of
Group Securities<F1> Shares Value Net Assets
<S> <S> <C> <C> <C>
Aerospace Lockheed Martin Corp. 48,563 $ 5,029,306 9.32%
Bethesda-based defense/aerospace company,
that also designs and services communica-
tion and information systems.
Banking & Capital One Financial Corp. 31,000 1,170,250 2.17
Credit Northern Virginia-based general purpose
credit card issuer, with $12.7 billion in
managed loans.
Crestar Financial Corp. 62,000 2,410,250 4.47
Richmond-based bank holding company
with approximately $22.9 billion in assets.
First Citizens Financial Corp.<F2> 32,397 1,004,307 1.86
Montgomery and Frederick County-based
savings bank with about $700 million
in assets.
NationsBank Corporation 44,400 2,863,800 5.31
A multi-bank holding company with
operations in 16 states and Washington, DC
with $240 billion in assets.
Signet Banking Corp. 66,000 2,376,000 4.40
A multi-bank holding company with over
200 branches in Maryland, Virginia and
Washington, DC with about $12 billion
in assets.
TOTAL 9,824,607 18.21
Basic Danaher Corp. 25,000 1,270,313 2.36
Industry & Washington, DC-based manufacturer of
Manufacturing hand tools, automotive & transportation
equipment, and process & environmental
controls.
Biotechnology Human Genome Sciences, Inc.<F2> 20,000 665,000 1.23
Rockville, Maryland-based company, a
leader in gene sequencing, with licensing
agreements with major pharmaceutical
companies for therapeutic and diagnostic
product development.
Computer American Management Systems, Inc.<F2> 34,000 909,500 1.68
Services & Northern Virginia-based leading supplier of
Hardware information technologies.
MICROS Systems, Inc.<F2> 15,500 651,000 1.21
Maryland-based manufacturer and marketer
of systems and software for the hospitality
industry.
TOTAL 1,560,500 2.89
Electronics Harman International Industries, Inc. 15,750 663,469 1.23
Washington, DC-based specialty manu-
facturer of electronic and audio components.
Financial Federal Home Loan Mortgage Corp. 175,200 6,022,500 11.16
Services Northern Virginia-based company which
purchases, securitizes and guarantees
mortgages.
Federal National Mortgage Association 128,320 5,597,960 10.38
Washington, DC-based, it is the nation's
largest residential mortgage funding
operation through the secondary market.
Student Loan Marketing Association 5,000 635,000 1.18
Washington, DC-based, the largest source
of funding and servicing of education loans.
TOTAL 12,255,460 22.72
Food & Richfood Holdings, Inc. 110,000 2,860,000 5.30
Food Services Virginia-based wholesale supplier to
grocery retailers in the region.
Health Services Trigon Healthcare, Inc.<F2> 31,700 768,725 1.43
Richmond-based managed health care
company serving 1.9 million members.
Household The Black & Decker Corp. 10,000 371,875 .69
Products Maryland-based maker of a wide range of
products sold to residential and commercial
markets in over 100 countries.
Insurance Seibels Bruce Group, Inc.<F2> 30,000 236,250 .44
Provides property and casualty insurance
through independent agents mainly to the
Southeastern states.
Publishing & American Radio Systems Corporation, 13,500 538,312 1.00
Communications Class A<F2>
Owns and operates AM/FM radio stations
nationwide.
UOL Publishing, Inc.<F2> 25,000 306,250 .57
McLean-based publisher of interactive and
Web-based courseware for online continuing
education.
The Washington Post Co., Class B 10,000 3,980,000 7.37
Washington, DC-based company publishes
"The Washington Post" and "Newsweek;"
owns several TV stations and over 50 cable
TV systems.
TOTAL 4,824,562 8.94
Retail Circuit City Stores, Inc. 35,000 1,244,687 2.31
Richmond-based retailer of audio, video and
brand name consumer electronic products,
and has a presence in the used car market
through CarMax.
Giant Food, Inc., Class A 53,800 1,755,225 3.25
Landover, Maryland-based company which
operates over 170 supermarkets and phar-
macies in the mid-Atlantic region including
Washington, DC.
TOTAL 2,999,912 5.56
Telecommuni- Bell Atlantic Corp. 28,000 2,124,500 3.94
cations Holding company for the mid-Atlantic
telephone companies serving a six-state
area and Washington, DC.
LCI International, Inc.<F2> 30,000 656,250 1.22
Northern Virginia-based long-distance
carrier providing domestic and international
voice & data services.
MCI Communications Corp. 45,000 1,722,656 3.19
Washington, DC-based company which is
the second largest telecommunications
service network in the United States.
Telco Communications Group<F2> 15,000 487,500 .90
Chantilly, Virginia-based company which
is one of the largest long-distance carriers.
TOTAL 4,990,906 9.25
Transportation CSX Corp. 70,000 3,885,000 7.20
Richmond-based holding company for
transportation and natural resources with
railroad, barge, trucking, pipeline, and
ocean shipping units.
Securities in initial period of acquisition 611,875 1.13
TOTAL INVESTMENT SECURITIES
(cost: $17,507,976) 52,817,760 97.90
Repurchase Agreements:
Donaldson, Lufkin & Jenrette Securities
Corporation 1,500,000 2.78
5.05%, issued 6/30/97, $1,500,210
including interest, due 7/1/97 (collateral-
ized by $8,126,000 United States Treasury
Strip Interest, due 11/15/21)
Payables over cash and receivables (370,465) (.68)
NET ASSETS $53,947,295 100.00%
<FN>
<F1> Securities listed are common stocks unless otherwise indicated.
<F2>Indicates security which has not paid dividends during the preceding
twelve months.
See Notes to Financial Statements
</FN>
</TABLE>
Statement of Assets and Liabilities
as of June 30, 1997 (Unaudited)
Assets Investment in securities,
at market (cost: $17,507,976) $52,817,760
Repurchase agreements,
(cost: $1,500,000) 1,500,000
Cash 11,556
Dividends and interest receivable 2,060
Receivable for Fund's shares sold 15,891
Receivable for securities sold 127,496
Other assets 11,649 $54,486,412
Liabilities Payable for adviser and management 32,270
services Payable for distribution plan 44,530
Payable for Fund's shares repurchased 298,680
Payable for securities purchased 150,000
Accounts payable and accrued expenses 13,637 539,117
Net Assets Capital stock ($.01 par value,
2,325,546 shares outstanding,
25,000,000 authorized) 23,255
Paid-in capital 16,947,564
Undistributed investment income 7,814
Undistributed realized capital gains 1,658,878
Unrealized gains 35,309,784 $53,947,295
Net asset value per share $23.20
See Notes to Financial Statements
Statement of Operations
For the six-months ended June 30, 1997 (Unaudited)
Investment Income
Income:
Dividends $ 371,782
Interest 41,551 $ 413,333
Expenses:
Investment advisory fee 93,271
Business management fee 89,454
Distribution fee 62,181
Transfer agency fee and expenses 37,198
Auditing and legal fees 15,157
Custodian fee and expenses 22,338
Directors' fees 4,400
Postage, stationery and supplies 2,748
Reports to shareholders 8,035
Registration and prospectus expense 9,046
Other 1,121 344,949
Net investment income 68,384
Realized and Unrealized Gain on Investments
Net realized gain on equities,
identified cost basis 1,659,445
Net change in unrealized gain 5,901,893
Net realized and change in unrealized
gain on investments 7,561,338
Net increase in net assets resulting
from operations $7,629,722
See Notes to Financial Statements
Statement of Changes in Net Assets
Six Months
Ended
June 30, 1997 Year Ended
(Unaudited) Dec. 31, 1996
Increase in Net Assets
Operations:
Net investment income $ 68,384 $ 167,012
Net realized gain on equity investments 1,659,445 1,829,459
Net realized gain on option contracts _ 45,648
Net change in unrealized gain on investments 5,901,893 4,460,111
Net increase in net assets resulting
from operations 7,629,722 6,502,230
Dividends and Distributions Paid to Shareholders:
Dividends from net investment income (70,364) (156,885)
Distributions from net realized gains _ (1,874,144)
Total (70,364) (2,031,029)
Capital Stock Transactions:
Net decrease in net assets resulting from
capital stock transactions (2,413,523) (1,066,834)
Total increase in net assets 5,145,835 3,404,367
Net Assets:
Beginning of period 48,801,460 45,397,093
End of period $53,947,295 $48,801,460
See Notes to Financial Statements
<TABLE>
<CAPTION>
Financial Highlights
For a share outstanding throughout the fiscal year
<S> <C> <C> <C> <C> <C> <C>
Six Months
Ended
June 30, 1997 For the year ended December 31,
(Unaudited) 1996 1995 1994 1993 1992
Net asset value, beginning of period $20.00 $18.19 $13.32 $15.37 $14.16
$12.34
Income from investment operations:
Net investment income .03 .07 .14 .18 .14 .14
Net realized and unrealized gain (loss)
on investments 3.20 2.60 5.72 (1.61) 1.63 2.03
Total from investment operations 3.23 2.67 5.86 (1.43) 1.77 2.17
Less Distributions:
Dividends (from net investment
income) (.03) (.07) (.14) ( .18) (.14) (.13)
Distributions (from capital gains) - (.79) (.85) (.44) (.42) (.22)
Total distributions (.03) (.86) (.99) (.62) (.56) (.35)
Net asset value, end of period $23.20 $20.00 $18.19 $13.32 $15.37 $14.16
Total return<F1> 16.15% 14.65% 44.25% (9.32%) 12.52% 17.72%
Ratios/supplemental data:
Net assets, end of period
(in thousands) $53,947 $48,801 $45,397 $33,715 $39,990 $37,162
Ratio of expenses to average
net assets 1.38%<F2> 1.42% 1.46% 1.50% 1.55% 1.55%
Ratio of net income to average
net assets .27%<F2> .35% .87% 1.20% .87% 1.04%
Average commissions paid<F3> 6.22cents 6.96cents
Portfolio turnover rate 17.70%<F2> 24.20% 25.65% 13.34% 13.52% 12.89%
<FN>
<F1> Excludes maximum sales charge of 4.75% of the Fund's offering price.
<F2> Annualized
<F3> Brokerage commissions paid on portfolio transactions increase the cost of securities being purchased or reduce the
proceeds of securities sold, and are not separately reflected in the Fund's Statement of Operations. Shares traded on a
principal basis, such as most over-the-counter and fixed-income transactions, are excluded.
See Notes to Financial Statements
</FN>
</TABLE>
Notes to Financial Statements
Note 1- Summary of Significant Accounting Policies
The Growth Fund of Washington, Inc. (the "Fund") was incorporated in
Maryland on May 24, 1985. The Fund is registered under the Investment
Company Act of 1940 (the "Act"), as amended, as an open-end, diversified
investment company. The Fund's objective is to provide for long-term
growth of capital by investing primarily in securities of companies
headquartered or having a major place of business in Washington, D.C.,
Maryland or Virginia. Washington Investment Advisers, Inc. is the Fund's
investment adviser (the "Investment Adviser"). Washington Management
Corporation is the Fund's business manager (the "Business Manager"). The
Investment Adviser and the Business Manager are wholly owned subsidiaries
of The Johnston-Lemon Group, Incorporated. Vista Fund Distributors, Inc.
(the "Distributor"), a wholly owned subsidiary of The BISYS Group, Inc., is
the distributor of the Fund's shares.
Security Valuation: Securities (except for short-term obligations) are
valued at the last sales price on the exchange or national securities
market on which the securities primarily are traded. Securities not listed
on an exchange or national securities market, or securities in which there
were no reported transactions, are valued at the latest reliable quoted bid
price. Short-term obligations with maturities of 60 days or less are
valued at amortized cost, which approximates market value. Any securities
for which reliable recent market quotations are not readily available are
valued at fair value as determined in good faith by a committee appointed
by the Board of Directors.
Premiums received for covered call options written are deferred until
the contract expires or is closed. Such premiums are valued at the last
sales price of the option or, in the absence of a sale, the mean between
the last reliable bid and ask price.
Securities Transactions and Investment Income: Securities
transactions are recorded on a trade date basis. Realized gain and loss
from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date and interest income,
including, where applicable, amortization of discount on short-term
investments, is recorded on the accrual basis.
Pursuant to the custodian agreement, the Fund received credits against
its custodian fee for imputed interest on certain balances with the
custodian bank. The custodian fee of $22,338 includes $4,700 that was paid
by these credits rather than in cash.
Federal Income Taxes: It is the Fund's policy to continue to comply
with the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income, including
any net realized gain on investments, to its shareholders. Therefore, no
federal income tax provision is required. Cost of securities for tax
purposes is the same as for financial reporting purposes.
Note 2- Investment Adviser and Business Management Fees and Other
Transactions with Affiliates
Pursuant to the Investment Advisory Agreement, the Investment Adviser
receives a fee of 0.375% per annum on the Fund's net assets up to
$100,000,000, decreasing to 0.35% on the net assets in excess of
$100,000,000. The Business Management Agreement provides that the Business
Manager receive a fee of 0.375% per annum on the Fund's first $40,000,000
of net assets, 0.30% on net assets in excess of $40,000,000 but not
exceeding $100,000,000 and 0.25% on net assets in excess of $100,000,000.
The fees are computed daily and paid monthly. The Fund pays all expenses
not assumed by the Investment Adviser or Business Manager but will be
reimbursed in equal parts out of fees paid to those parties to the extent
certain of its expenses exceed applicable state limits. No such limits
were exceeded during the six months ended June 30, 1997. Expenses paid by
the Fund include custodian, stock transfer and dividend disbursing fees;
accounting and recordkeeping expenses; Distribution Plan expenses; costs of
designing, printing, and mailing reports, prospectuses, proxy statements
and notices to its shareholders; taxes and insurance; expenses of the
issuance, sale, or repurchase of shares of the Fund (including federal
registration and state fees); legal and auditing fees and expenses;
compensation, fees and expenses paid to Directors who are not interested
persons of the Fund; association dues; and costs of stationery and forms
prepared exclusively for the Fund.
Pursuant to a Distribution Plan, the Fund pays a fee at a maximum
annual rate of 0.25% of the Fund's net assets. Payments under this plan
are primarily intended to result in the sale and retention of Fund shares
including, but not limited to, advertising, salaries and other expenses of
the Distributor relating to selling or servicing efforts, expenses of
organizing and conducting sales seminars, printing of prospectuses and
reports for other than existing shareholders, preparation and distribution
of advertising material and sales literature and payments to dealers whose
customers purchase Fund shares.
Johnston, Lemon & Co. Incorporated, a wholly owned subsidiary of The
Johnston-Lemon Group, Incorporated, earned $22,105 on its retail sales of
shares of the Fund and Distribution Plan fee and received no brokerage
commissions resulting from purchases and sales of securities for the
investment account of the Fund. Sales charges are not an expense of the
Fund and hence are not reflected in the accompanying Statement of
Operations.
All Officers and two Directors of the Fund are "affiliated persons"
(as defined in the Act) of the Investment Adviser or Business Manager and
received no remuneration from the Fund in such capacities.
Note 3 - Investment Transactions
The Fund made purchases of investment securities, other than
short-term securities, of $4,382,576 and sales of $6,348,027 during the six
months ended June 30, 1997. Net unrealized gains at June 30, 1997 include
unrealized gains of $35,347,284 and unrealized losses of $37,500.
The Fund may buy and sell put and call options, or write covered call
options on portfolio securities in order to produce incremental earnings or
protect against changes in the value of portfolio securities. The Fund
generally purchases put options or writes covered call options to hedge
against adverse movements in the value of portfolio holdings. When a call
option is written, the Fund receives a premium and becomes obligated to
sell the underlying security at a fixed price, upon exercise of the option.
The Fund segregates assets to cover its obligations under option contracts.
The Fund will realize a gain or loss upon the expiration or closing of the
option transaction. Options written are reported as a liability in the
Statement of Assets and Liabilities. Gains or losses are reported in the
Statement of Operations.
The risk in writing a call option is that the Fund gives up the
opportunity for profit if the market price of the security increases and
the option is exercised. The risk in buying an option is that the Fund pays
a premium whether or not the option is exercised. The Fund also has the
additional risk of not being able to enter into a closing transaction if a
liquid secondary market does not exist.
Note 4 - Capital Stock Transactions
Transactions in capital stock were:
For the For the
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
In shares:
Shares sold 21,615 108,114
Shares issued in rein-
vestment of dividends 2,671 92,912
Total shares issued 24,286 201,026
Shares redeemed (138,909) (257,397)
Net decrease (114,623) (56,371)
In dollars:
Shares sold $ 456,049 $ 2,072,038
Shares issued in rein-
vestment of dividends 62,942 1,861,005
Total shares issued 518,991 3,933,043
Shares redeemed (2,932,514) (4,999,877)
Net decrease $(2,413,523) $(1,066,834)
THE GROWTH FUND OF WASHINGTON
(logo)
Board of Directors
James H. Lemon, Jr.
Chairman
Chairman of the Board and
Chief Executive Officer,
The Johnston-Lemon Group, Incorporated
Harry J. Lister
President
President, Washington Management Corporation
Cyrus A. Ansary
President, Investment Services International Company
T. Eugene Smith
President,
T. Eugene Smith Inc.
Leonard P. Steuart II
Vice President,
Steuart Investment Co.
Margita E. White
President, Association for Maximum Service Television Inc.
Officers
Stephen Hartwell
Executive Vice President
Chairman of the Board,
Washington Management Corporation
Howard L. Kitzmiller
Senior Vice President,
Secretary and Treasurer
Senior Vice President,
Secretary and Assistant
Treasurer, Washington Management Corporation
Prabha S. Carpenter
Vice President
Vice President, Washington Investment Advisers, Inc.
Lois A. Erhard
Vice President
Vice President, Washington Management Corporation
Michael W. Stockton
Assistant Vice President, Assistant Secretary,
and Assistant Treasurer
Assistant Vice President
and Assistant Treasurer,
Washington Management Corporation
J. Lanier Frank
Assistant Vice President
Assistant Vice President,
Washington ManagementCorporation
(Logo)
Vista
Family of Mutual Funds
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
1-800-34-VISTA
Office of the Fund and Business Manager
Washington Management Corporation
1101 Vermont Avenue, NW
Washington, DC 20005
(202) 842-5665
Investment Adviser
Washington Investment Advisers, Inc.
Custodian
The Chase Manhattan Bank
Transfer Agent
DST Systems, Inc.
Distributor
Vista Fund Distributors, Inc.
Independent Accountants
Johnson Lambert & Co.
Counsel
Dechert Price & Rhoads
This report is for the information of the shareholders of The Growth Fund
of Washington, Inc., but it may be used as sales literature when preceded
or accompanied by the current prospectus, which gives details about
charges, expenses, investment objectives and operating policies of the
Fund. If used as sales material after September 30, 1997, this report must
also be accompanied by the Fund's most recent calendar quarter statistical
update.
Vista Fund Distributors, Inc., is unaffiliated with the Fund's Business
Manager or Investment Adviser.
GFW-3
The Growth Fund of Washington, Inc.
1101 Vermont Avenue, NW
Washington, DC 20005
