(logo Chase Vista Fund)
(Logo The Growth Fund of Washington)
THE GROWTH FUND OF WASHINGTON
(graphic eastern seaboard of US)
The Growth Fund of Washington, Inc.
1101 Vermont Avenue, NW
Washington, DC 20005
Semi-Annual Report
June 30, 2000
Bulk Rate
U.S. Postage
PAID
Rockville, MD
Permit No. 3539
(Logo The Growth Fund of Washington)
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 with all distributions reinvested for
periods ended June 30, 2000, assuming payment of the 5.75% maximum sales charge
at the beginning of the stated periods - 10 years: +185.98%, or +11.08% a year;
5 years: +83.10%, or +12.86% a year; and 12 months: -20.33%. 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, or any other agency, entity or person.
Fellow Shareholders
The Growth Fund of Washington's net asset value was $25.40 on June 30, 2000
versus $28.23 on December 31, 1999, a decrease of 11.81% on a total return basis
with the June 19 dividend of 2.5 cents per share taken in shares. For the same
period, the total return on the unmanaged Standard & Poor's 500 Composite Index
decreased by 3.05%. (The Dow Jones Industrial Average also showed a decrease of
8.15%.) While the S&P has been led for over one year by a very narrow group of
Internet and technology stocks, some of that strength now appears to be wearing
off.
On June 30, 2000, The Growth Fund of Washington held securities of 23 companies
in nine industry groups. The Fund's five largest holdings, representing 46.35%
of net assets, were Freddie Mac (12.43%); Fannie Mae (11.73%); The Washington
Post Co., Class B (8.37%); Capital One Financial Corp. (7.27%); and PE Corp.
Celera Genomics (6.55%). While all these investments have appreciated since
their initial purchase, most lost some of their value during the six-month
report period (primarily the interest-sensitive companies, as indicated below).
Celera, however, was up 25.50% for the period, as were other Fund holdings, for
example: American Tower System Corp. (up 36.40%, at 4.64% of net assets) and
Qwest Communications International (up 15.55%, at 6.09% of net assets).
Two factors have made this report period very challenging. First, the securities
markets have been quite volatile, and the Fund's performance has reflected this
volatility. As of March 31, 2000, the halfway point for the report period, the
Fund was up 4.86% on a year-to-date basis; less than one week later the Fund
reached a new high for the year and on April 6, was up 6.73%. By June 30, the
Fund had reached a new low for the year. Second, the Federal Reserve has raised
interest rates three times since the first of the year: this has hurt the Fund's
interest-sensitive financial sector holdings, such as Fannie Mae and Freddie
Mac. However, the fundamentals of both these companies remain strong, and they
expect to generate attractive earnings growth this year and in future years.
Because we believe that stock market performance will follow business
performance over the long term, we have maintained a long-term focus rather than
react to short-term market swings. In addition, prospects for the regional
economy appear to be bright, with signs of more reasonable growth, few (if any)
signs of inflation, and growing telecommunications, biotechnology and Internet
industries.
Since the first of the year, four companies were added to the Fund's portfolio:
CIENA Corp., a Linthicum, Maryland-based provider of optical networking systems,
intelligent switching and distribution technologies that enable carriers to
easily deliver multiple services; Cysive, Inc., a Reston, Virginia-based
software engineering firm that designs and builds customized systems to support
companies that conduct a significant portion of their business through
electronic commerce channels; LifeMinders, Inc., a Herndon, Virginia-based
online direct marketing company that provides personalized content, reminders
and advertisements via e-mail to its community of members; and Teligent, Inc., a
Vienna, Virginia-based 1(bar)provider of broadband communications, offering
business customers local, long distance, high-speed data and dedicated Internet
services over its digital local networks.
In telecommunications, the convergence of voice, data, and video is ongoing.
Indeed, an important telecommunications-oriented industry is developing in
Northern Virginia and the Baltimore-Washington corridor. The Fund is well
positioned in this industry, and continues to explore investment opportunities
in the sector that are consistent with its investment policies.
The Growth Fund of Washington eliminated the following eight holdings during
this period: CAIS Internet Services, Inc.; Columbia Energy Group; CSX Corp.;
Lockheed Martin Corp.; MICROS Systems Inc.; Trigon Healthcare, Inc.; United
Parcel Service, Inc.; and Winstar Communications, Inc.
Although the general market is off its historic highs, one can continue to
expect volatility and the possibility of lower prices. 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.
Chairman
Harry J. Lister
Vice Chairman
Jeffrey L. Steele
President
August 18, 2000
<TABLE>
<CAPTION>
Investment Portfolio as of June 30, 2000
Number
Industry of Market Percent of
Group Securities<F1> Shares Value Net Assets
<S> <C> <C> <C> <C>
Banking Bank of America Corp. 44,400 $ 1,909,200 3.34%
Multi-bank holding company with
operations in 21 states and Washington,
DC with $672 billion in assets.
Capital One Financial Corp. 93,000 4,150,125 7.27
Falls Church, Virginia-based general
purpose credit card issuer, with $22 billion
in managed loans.
First Union Corporation 72,600 1,801,388 3.15
Leading financial services company
with assets of $251 billion, serving
16 million corporate and retail customers
in investment and mortgage banking.
Provident Bankshares Corporation 57,491 776,128 1.36
Baltimore-based bank holding company
for Provident Bank.
SunTrust Banks, Inc. 59,520 2,719,320 4.76
Ninth largest banking company; branches
across six states and Washington, DC
with $135 billion in assets.
TOTAL 11,356,161 19.88
Biotechnology PE Corp. Celera Genomics, Inc.<F2> 40,000 3,740,000 6.55
Rockville, Maryland-based leading
source of genomic and related medical
and agricultural information.
Computer American Management Systems, Inc.<F2> 44,000 1,444,437 2.53
Services & Fairfax, Virginia-based leading supplier
Hardware of information technologies.
Cysive, Inc.<F2> 10,000 238,750 .42
Reston, Virginia-based leading software
engineering firm supporting companies
that conduct business through electronic
commerce channels.
TOTAL 1,683,187 2.95
Financial Fannie Mae 128,320 6,696,700 11.73%
Services Washington, DC-based, the largest
residential mortgage funding operation
through the secondary market.
Freddie Mac 175,200 7,095,600 12.43
McLean, Virginia-based company
which purchases, securitizes and
guarantees mortgages.
TOTAL 13,792,300 24.16
Information America Online, Inc.<F2> 15,000 791,250 1.39
Services Herndon, Virginia-based leader in
interactive services, web brands, Internet
technologies, and e-commerce services.
LifeMinders, Inc.<F2> 10,000 295,625 .52
Herndon, Virginia-based online direct
marketing leader in providing personalized
content to its community of members.
TOTAL 1,086,875 1.91
Manufacturing The Black & Decker Corp. 10,000 393,125 .69
Maryland-based manufacturer and marketer
of a wide range of products sold to residential
and commercial markets in over 100 countries.
Danaher Corp. 50,000 2,471,875 4.33
Washington, DC-based manufacturer of hand
tools, automotive & transportation equipment,
and process & environmental controls.
TOTAL 2,865,000 5.02
Publishing & The Washington Post Co., Class B 10,000 4,780,000 8.37
Communications Washington, DC-based diversified media
organization whose principal operations
include publishing, television broadcasting,
cable television systems, electronic information
services, test preparation, and educational &
career services.
Retail Circuit City Stores, Inc. 70,000 2,323,125 4.07
Richmond-based retailer of audio, video and
brand name consumer electronic products,
with a presence in the new and used car
markets through CarMax.
Telecommuni- American Tower Systems Corp.<F2> 63,500 $ 2,647,156 4.64%
cations Leading independent owner and operator of over
10,000 broadcast and wireless
communication sites in the continental
United States and Washington, DC.
Bell Atlantic Corp. 56,000 2,845,500 4.98
Holding company for mid-Atlantic
telephone companies serving a multi-
state area and Washington, DC.
CIENA Corp.<F2> 10,000 1,666,875 2.92
Linthicum, Maryland-based market-
leading provider of technologies that enable
carriers to deliver multiple services.
PRIMUS Telecommunications Group, Inc.<F2> 50,000 1,243,750 2.18
Vienna, Virginia-based provider of domestic
and international long-distance switched voice,
data, private network and value-added
services.
Qwest Communications International, Inc.<F2> 69,966 3,476,436 6.09
Leading broadband Internet-based data,
voice and image communications company,
serving both businesses and consumers.
Teligent, Inc.<F2> 10,000 236,250 .41
Vienna, Virginia-based leader in broadband
offering data and dedicated Internet
services over its networks.
WorldCom, Inc.<F2> 30,000 1,376,250 2.41
A global business telecommunications
company operating in more than 65
countries, providing fully integrated
local, long distance, international, and
Internet services.
TOTAL 13,492,217 23.63
TOTAL INVESTMENT SECURITIES
(cost: $16,054,459) 55,118,865 96.54
Short Term Securities:
Federal Home Loan Bank Discount Note $2,242,190 3.93%
6.50% due 7/3/2000
Payables over cash and receivables (259,628) (.47)
NET ASSETS $57,101,427 100.00%
<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, 2000 (Unaudited)
Assets Investment in securities,
at market (cost: $16,054,459) $55,118,865
Discount Note 2,242,190
Cash 23,110
Dividends receivable 1,975
Receivable for Fund's shares sold 19,605
Other assets 18,207 $57,423,952
Liabilities Payable for adviser and management services 36,589
Payable for distribution plan 47,531
Payable for Fund's shares repurchased 218,294
Accounts payable and accrued expenses 20,111 322,525
Net Assets Capital stock
($.01 par value, 2,247,575 shares
outstanding, 25,000,000 authorized) 22,476
Paid-in capital 14,887,202
Undistributed investment income 7,158
Undistributed realized gains 3,120,185
Unrealized gains 39,064,406 $57,101,427
Net asset value per share $25.40
See Notes to Financial Statements
Statement of Operations
for the six months ended June 30, 2000 (Unaudited)
Investment Income
Income:
Dividends $ 397,765
Interest 58,644 $ 456,409
Expenses:
Investment advisory fee 121,746
Business management fee 112,319
Distribution expenses 81,159
Transfer agent fee 42,777
Auditing and legal fees 15,000
Custodian fee 18,430
Directors' fees 4,600
Postage, stationery and supplies 2,569
Reports to shareholders 8,357
Registration and prospectus 5,240
Other 1,324 413,521
Net investment income 42,888
Realized and Unrealized Gain on Investments
Net realized gain on equities, identified
cost basis 3,120,185
Net change in unrealized gain (10,948,471)
Net realized and change in unrealized
gain on investments (7,828,286)
Net decrease in net assets resulting from
operations $(7,785,398)
See Notes to Financial Statements
Statement of Changes in Net Assets
Six Months
Ended
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 42,888 $ 217,949
Net realized gain on equity investments 3,120,185 1,576,252
Net change in unrealized gain on
investments (10,948,471) (4,994,866)
Net increase (decrease) in net assets
resulting from operations (7,785,398) (3,200,665)
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (56,432) (194,252)
Distributions from net realized gains - (1,584,805)
Total (56,432) (1,779,057)
Capital Stock Transactions:
Net increase (decrease) in net assets resulting
from capital stock transactions (4,797,298) (3,147,871)
Total increase (decrease) in net assets (12,639,128) (8,127,593)
Net Assets:
Beginning of period 69,740,555 77,868,148
End of period $57,101,427 $69,740,555
See Notes to Financial Statements
<TABLE>
<CAPTION>
Financial Highlights
for a share outstanding throughout the period
Six Months
Ended
June 30, 2000 For the Year Ended December 31,
(Unaudited) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $28.83 $30.86 $26.09 $20.00 $18.19 $13.32
Income from investment operations:
Net investment income .02 .08 .08 .09 .07 .14
Net realized and unrealized gain (loss)
on investment (3.42) (1.36) 5.95 7.20 2.60 5.72
Total from investment operations (3.40) (1.28) 6.03 7.29 2.67 5.86
Less Distributions:
Dividends (from net investment
income) (.03) (.08) (.07) (.09) (.07) (.14)
Distributions (from capital gains) - (.67) (1.19) (1.11) (.79) (.85)
Total distributions (.03) (.75) (1.26) (1.20) (.86) (.99)
Net asset value, end of period $25.40 $28.83 $30.86 $26.09 $20.00 $18.19
Total return<F1> (11.81)% (4.15)% 23.22% 36.56% 14.65% 44.25%
Ratios/supplemental data:
Net assets, end of period
(in thousands) $57,101 $69,741 $77,868 $61,649 $48,801 $45,397
Ratio of expenses
to average net assets 1.27%<F2> 1.18% 1.24% 1.25% 1.42% 1.46%
Ratio of net income
to average net assets .13%<F2> .30% .26% .35% .35% .87%
Portfolio turnover rate 15.60%<F2> 8.07% 11.17% 13.03% 24.20% 25.65%
<FN>
<F1> Excludes sales charge
<F2> Annualized
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. ("WIA") is the Fund's investment adviser (the "Investment
Adviser"). Washington Management Corporation ("WMC") 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 under policies approved by the Board of Directors.
Repurchase Agreements: In connection with transactions in repurchase
agreements, it is the Fund's policy that its custodian take possession of the
underlying collateral securities, the fair value of which exceeds the principal
amount of the repurchase transaction, including accrued interest, at all times.
If the seller defaults, and the fair value of the collateral declines,
realization of the collateral by the Fund may be delayed or limited.
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 $18,430 includes $3,727 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
WIA was paid a fee of $121,746 for investment management services. The
Investment Advisory Agreement provides for monthly fees, accrued daily, based on
an annual rate of 0.375% 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. WMC was paid a fee of
$112,319 for business management services. The Business Management Agreement
provides for monthly fees, accrued daily, based on an annual rate of 0.375% 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 Fund pays all expenses not assumed by the Investment Adviser
or Business Manager.
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, sales 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 $38,359 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 $4,917,745 and sales of $10,053,760 during the six months ended
June 30, 2000. Net unrealized gains at June 30, 2000 included unrealized gains
of $39,341,356 and unrealized losses of $276,950.
Note 4 - Investment Transactions
Transactions in capital stock were:
For the Six For the Year
Months Ended Ended
June 30, December 31,
2000 1999
In shares:
Shares sold 29,965 94,465
Shares issued in re-investment of
dividends 1,842 55,199
Total shares issued 31,807 149,664
Shares redeemed (202,845) (254,718)
Net increase (decrease) (171,038) (105,054)
In dollars:
Shares sold $ 937,922 $2,837,075
Shares issued in re-investment of
dividends 49,150 1,593,468
Total shares issued 987,072 4,430,543
Shares redeemed (5,784,370) (7,578,414)
Net increase (decrease) $(4,797,298) $(3,147,871)
(logo The Growth Fund of Washington)
Board of Directors
James H. Lemon, Jr.
Chairman
Chairman of the Board and Chief Executive Officer, The Johnston-Lemon Group,
Incorporated
Harry J. Lister
Vice Chairman
President, Washington Management Corporation
Cyrus A. Ansary
President, Investment Services International Co. LLC
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
Jeffrey L. Steele
President
Stephen Hartwell
Executive Vice President
Howard L. Kitzmiller
Senior Vice President,
Secretary and Treasurer
Prabha S. Carpenter
Senior Vice President
Lois A. Erhard
Vice President
Ralph S. Richard
Vice President
Michael W. Stockton
Assistant Vice President,
Assistant Secretary and Assistant Treasurer
J. Lanier Frank
Assistant Vice President
Ashley L. Shaw
Assistant Secretary
(Logo, Chase Vista Funds)
Chase Vista Service Center
P.O. Box 219392
Kansas City, MO 64121-9392
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
Thompson, O'Donnell, Markham, Norton & Hannon
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, 2000, this report must also be accompanied by
the Fund's most recent calendar quarter statistical update.
Vista Fund Distributors, Inc. is unaffiliated with The Chase Manhattan Bank.
GFW-3-600
