(logo of Chase Vista Funds)
(logo of The Growth Fund of Wasington)
THE GROWTH FUND OF WASHINGTON
(illustration of the East Coast of the US with Washington/Maryland/Virginia
highlighted)
Annual Report
December 31, 1999
Growth of a $10,000 Investment
(graph comparing the growth of a $10,000 investment in Standard and Poor's 500
Composite Index, The Growth Fund of Washington, and the Consumer Price Index
for ten years ended December 31, 1999)
YEAR GFW S&P 500 CPI
12/31/89 9425 10000 10000
12/31/90 7685 9689 10611
12/31/91 9711 12628 10936
12/31/92 11432 13588 11253
12/31/93 12863 14952 11562
12/31/94 11665 15155 11872
12/31/95 18827 20829 12173
12/31/96 19292 25599 12577
12/31/97 26346 34128 12791
12/31/98 32463 43861 12998
12/31/99 31116 53078 13347
Average Annual Total Return to December 31, 1999
1 year 5 years 10 years
-9.65% 20.25% 12.02%
The Fund's results reflect payment of the maximum sales charge of 5.75%, thus
the net investment was $9,425. All dividends and capital gain distributions
are reinvested in additional shares without a sales charge. The graph covers
the ten year period ended December 31, 1999. The indexes are unmanaged and do
not reflect sales charges, commissions or expenses. Past results are not
predictive of future results.
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 December 31, 1999, assuming payment of the 5.75% maximum sales
charge at the beginning of the stated periods_10 years: +211.16%, or +12.02% a
year; 5 years: +151.46%, or +20.25% a year; and 12 months: -9.65%. 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
Nineteen ninety nine proved to be a mercurial year for securities markets in
general and for Washington area stocks in particular. The Fund's net asset
value was $28.23 on December 31, 1999 from $30.86 on December 31, 1998, down
- -4.15% on a total return basis, which includes reinvestment of income
dividends
of 8.0 cents per share and a long-term capital gain distribution of 67.0
cents.
For the same period, the total return on the unmanaged Standard & Poor's 500
Composite Index (S&P 500) was 21.01%. Although the S&P posted double-digit
returns for the year, a very narrow group of stocks, principally technology
stocks, accounted for much of the gains: more than half of the S&P 500 stocks
were down for the year, and over 92% of the S&P 500 stocks were up less than
two percent for the year.
With the Federal Reserve raising interest rates three times during the
year and
the narrow nature of market leadership, it was a challenging environment for
the Fund. Of the top five holdings, only one, Capital One Financial Corp.,
was up for the year. We continue to believe that stock market performance
will
follow business performance over the longer term.
On December 31, 1999, The Growth Fund of Washington held securities of 27
companies in 13 industry groups. The Fund's five largest holdings,
representing 43.58% of net assets, were Freddie Mac (11.82%); Fannie Mae
(11.49%); The Washington Post Co., Class B (7.97%); Capital One Financial
Corp.
(6.43 %); and SunTrust Banks, Inc. (5.87%).
Since our last report to you six months ago, four companies were added to the
Fund's portfolio: Washington, DC-based CAIS Internet Services, Inc., a leading
broadband access solutions company, and provider of comprehensive high speed
Internet solutions; Celera Genomics, headquartered in Rockville, MD, and a
leading source of genomic and related medical and agricultural information;
United Parcel Service, Inc., the world's largest express carrier and package
delivery company and a leading global provider of specialized transportation
and logistics services; and Winstar Communications Inc., a facilities-based
provider of telecommunications services primarily to businesses in over 30
major markets in the United States, including Washington, DC.
The Growth Fund of Washington eliminated the following holdings during this
period: Coventry Health Care; Human Genome Sciences, Inc.; and United Payors
and United Providers.
With the overall market dominated by a few sectors that are at historic highs,
one can expect increased price volatility. 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,
(signature) (signature) (signature)
James H. Lemon, Jr. Harry J. Lister Jeffrey L. Steele
Chairman Vice Chairman President
February 16, 2000
<TABLE>
<CAPTION>
Investment Portfolio as of December 31, 1999
Number
Industry of Market Percent of
Group Securities<F1> Shares Value Net Assets Net Assets
<S> <C> <C> <C> <C>
Aerospace Lockheed Martin Corp. 97,126 $ 2,124,631 3.05%
Bethesda-based defense/aerospace company
that designs and services communication
and information systems.
Banking Bank of America Corp. 44,400 2,228,325 3.20
Multi-bank holding company with
operations in many states and Washington,
DC with $633 billion in assets.
Capital One Financial Corp. 93,000 4,481,437 6.43
Northern Virginia-based general purpose
credit card issuer, with $20.2 billion in
managed loans.
First Union Corporation 72,600 2,382,188 3.42
Leading financial services company with
assets of $253 billion, serving 16 million
corporate and retail customers in investment
and mortgage banking.
Provident Bankshares Corporation 54,754 947,929 1.36
Baltimore-based bank holding company for
Provident Bank.
SunTrust Banks, Inc. 59,520 4,095,720 5.87
Tenth largest banking company; branches
across six states and Washington, DC
with $95.4 billion in assets.
TOTAL 14,135,599 20.28
Biotechnology Celera Genomics<F2> 20,000 2,980,000 4.27
Rockville, Maryland-based leading
source of genomic and related medical
and agricultural information.
Computer American Management Systems, Inc.<F2> 44,000 1,380,500 1.98
Services & Northern Virginia-based leading supplier
Hardware of information technologies.
CAIS Internet Services, Inc<F2> 14,500 514,750 .74
Washington, DC-based leading broadband
access solutions company, and provider of
comprehensive high speed Internet solutions.
MICROS Systems, Inc.<F2> 31,000 2,294,000 3.29
Maryland-based manufacturer and marketer
of systems and software for the hospitality
industry.
TOTAL 4,189,250 6.01
Financial Fannie Mae 128,320 8,011,980 11.49
Services Washington, DC-based, the largest
residential mortgage funding operation
through the secondary market.
Freddie Mac 175,200 8,245,350 11.82
Northern Virginia-based company which
purchases, securitizes and guarantees
mortgages.
TOTAL 16,257,330 23.31
Health Trigon Healthcare, Inc.<F2> 31,700 935,150 1.34
Services Richmond-based managed health care
company serving approximately
2 million members.
Information America Online, Inc.<F2> 10,000 754,375 1.08
Services Herndon, Virginia-based leader in
interactive services, web brands, internet
technologies, and e-commerce services.
Manufacturing The Black & Decker Corp. 10,000 522,500 .75
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 2,412,500 3.46
Washington, DC-based manufacturer of
hand tools, automotive & transportation
equipment, and process & environmental
controls.
TOTAL 2,935,000 4.21
Publishing & The Washington Post Co., Class B 10,000 5,558,750 7.97
Communications Washington, DC-based company that
publishes "The Washington Post" and
"Newsweek"; owns several TV stations
and over 60 cable TV systems.
Retail Circuit City Stores, Inc. 70,000 3,154,375 4.52
Richmond-based retailer of audio, video and
brand name consumer electronic products,
with a presence in the new and used car
market through CarMax.
Telecommuni- American Tower Corp.<F2> 63,500 1,940,719 2.78
cations Owns and operates more than 10,100
wireless communication towers in the
United States and Mexico.
Bell Atlantic Corp. 56,000 3,447,500 4.94
Holding company for the mid-Atlantic
telephone companies, serving a multi-state
area and Washington, DC.
MCI WorldCom, Inc. 30,000 1,591,875 2.28
A global business telecommunications
company operating in more than 50 countries,
providing fully integrated local, long
distance international, and Internet services.
PRIMUS Telecommunications
Group, Inc.<F2> 40,000 1,530,000 2.19
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 3,008,538 4.31
A leader in reliable, scalable and secure
broadband Internet-based data, voice and
image communications for businesses
and consumers.
Winstar Communications, Inc<F2> 5,000 374,375 .54
A facilities-based provider of telecom-
munications services primarily to
businesses in over 30 major markets in the
United States, including Washington, DC.
TOTAL 11,893,007 17.04
Transportation CSX Corp. 70,000 2,196,250 3.15
Richmond-based holding company for
transportation and natural resources with
railroad, trucking, pipeline, and ocean
shipping units.
United Parcel Service, Inc. 300 20,700 .03
The world's largest express carrier and
package delivery company and a leading
global provider of specialized transportation
and logistics services.
TOTAL 2,216,950 3.18
Utilities Columbia Energy Group 15,000 948,750 1.36
Reston, Virginia-based utility holding
company with more than $7 billion in
assets, engaged in all phases of the natural
gas business; serves 7 million customers in
15 states and Washington, DC.
TOTAL INVESTMENT SECURITIES
(cost: $18,070,290) 68,083,167 97.62
Cash and receivables over payables 1,657,388 2.38
NET ASSETS $69,740,555 100.00%
<FN>
<F1>Securities listed are common stocks unless otherwise indicated.
<F2>Indicates security which has not paid dividends during the
preceding twelve months.
</FN>
</TABLE>
See Notes to Financial Statements
Statement of Assets and Liabilities
as of December 31, 1999
Assets Investment in securities,
at market (cost: $18,070,290) $68,083,167
Cash 1,734,991
Dividends receivable 2,065
Receivable for Fund's shares sold 49,306
Other assets 28,025
$69,897,554
Liabilities Payable for adviser and management services 41,675
Payable for distribution plan 33,451
Payable for Fund's shares repurchased 48,899
Accounts payable and accrued expenses 32,974
156,999
Net Assets Capital stock
($.01 par value, 2,418,613 shares
outstanding, 25,000,000 authorized) 24,186
Paid-in capital 19,682,790
Undistributed investment income 20,702
Unrealized gains 50,012,877
$69,740,555
Net asset value per share $28.83
See Notes to Financial Statements
Statement of Operations
for the year ended December 31, 1999
Investment Income
Income:
Dividends $ 975,183
Interest and amoritization 107,108
$1,082,291
Expenses:
Investment adviser fee 272,869
Business management fee 248,226
Distribution expenses 144,611
Transfer agent fee 76,542
Auditing and legal fees 23,201
Custodian fee 37,025
Directors' fees 8,000
Postage, stationery and supplies 3,543
Reports to shareholders 18,392
Registration and prospectus 13,773
Other 18,160 864,342
Net investment income 217,949
Realized and Unrealized Gain on Investments
Net realized gain on equities, identified
cost basis 1,576,252
Net change in unrealized gain (4,994,866)
Net realized and change in unrealized
gain on investments (3,418,614)
Net decrease in net assets resulting from
operations $(3,200,665)
See Notes to Financial Statements
Statement of Changes in Net Assets
For the year ended December 31,
1999 1998
Increase in Net Assets
Operations:
Net investment income $ 217,949 $ 181,833
Net realized gain on equity investments 1,576,252 2,941,788
Net change in unrealized gain on
investments (4,994,866) 11,385,760
Net increase (decrease) in net assets
resulting from operations (3,200,665) 14,509,381
Dividends and Distributions Paid to
Shareholders:
Dividends from net investment income (194,252) (169,899)
Distributions from net realized gains (1,584,805) (2,883,033)
Total (1,779,057) (3,052,932)
Capital Stock Transactions:
Net increase (decrease) in net assets
resulting from capital stock transactions (3,147,871) 4,762,643
Total increase (decrease) in net assets (8,127,593) 16,219,092
Net Assets:
Beginning of year 77,868,148 61,649,056
End of year $69,740,555 $77,868,148
See Notes to Financial Statements
<TABLE>
<CAPTION>
Financial Highlights
for a share outstanding throughout the fiscal year
For the year
ended December 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $30.86 $26.09 $20.00 $18.19 $13.32
Income from investment operations:
Net investment income .08 .08 .09 .07 .14
Net realized and unrealized
gain (loss) on investment (1.36) 5.95 7.20 2.60 5.72
Total from investment operations (1.28) 6.03 7.29 2.67 5.86
Less Distributions:
Dividends (from net investment
income) (.08) (.07) (.09) (.07) (.14)
Distributions (from capital gains) (.67) (1.19)(1.11) (.79) (.85)
Total distributions (.75) (1.26)(1.20) (.86) (.99)
Net asset value, end of year $28.83 $30.86 $26.09 $20.00 $18.19
Total return<F1> (4.15)% 23.22% 36.56% 14.65% 44.25%
Ratios/supplemental data:
Net assets,
end of year (in thousands) $69,741 $77,868 $61,649 $48,801 $45,397
Ratio of expenses
to average net assets 1.18% 1.24% 1.25% 1.42% 1.46%
Ratio of net income
to average net assets .30% .26% .35% .35% .87%
Portfolio turnover rate 8.07% 11.17% 13.03% 24.20% 25.65%
<FN>
<F1>Excludes maximum sales charge of 5.75% of the Fund's offering price..
</FN>
</TABLE>
See Notes to Financial Statements
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 $37,025 includes $4,622 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. The Fund reclassified $27,449 from
undistributed earnings to paid-in capital during the year. 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 $272,869 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 $248,226 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 $90,682 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 $5,721,644 and sales of $9,720,609 during the year ended
December 31, 1999. Net unrealized gains at December 31, 1999 included
unrealized gains of $50,012,877 and no unrealized losses.
Note 4 _ Investment Transactions
Transactions in capital stock were:
For the year ended
December 31,
1999 1998
In shares:
Shares sold 94,465 238,097
Shares issued in reinvestment of dividends 55,199 92,251
Total shares issued 149,664 330,348
Shares redeemed (254,718) (169,144)
Net increase (decrease) (105,054) 161,204
In dollars:
Shares sold $2,837,075 $6,750,474
Shares issued in reinvestment of dividends 1,593,468 2,777,562
Total shares issued 4,430,543 9,528,036
Shares redeemed (7,578,414) (4,765,393)
Net increase (decrease) $(3,147,871) $4,762,643
Report of Independent Accountant
The Board of Directors and Shareholders
The Growth Fund of Washington, Inc. / Washington, DC
We have audited the accompanying statement of assets and liabilities and
investment portfolio of The Growth Fund of Washington, Inc. as of December 31,
1999, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended. 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. 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 and financial highlights. Our
procedures included confirmation of securities owned as of December 31, 1999,
by correspondence with the custodian and brokers. 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 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 The Growth Fund of Washington, Inc. as of December 31, 1999, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended in conformity
with generally accepted accounting principles.
JOHNSON LAMBERT & CO.
(signature)
Bethesda, MD
January 13, 2000
Tax Information (unaudited)
We are required to advise you within 60 days of the Fund's fiscal year-end
regarding the federal tax status of distributions received by shareholders
during such fiscal year. The distributions made during the fiscal year by the
Fund were earned from the following sources:
Dividends and Distributions Per
Share
To Shareholders From Net From Net
Realized
of Record Payment Date Investment Income Long-Term Gains
June 18, 1999 June 21, 1999 $.04 _
December 30, 1999 December 31, 1999 $.04 $.67
The Fund also designates as a capital gain distribution a portion of earnings
and profits paid to shareholders in redemption of their shares.
Corporate shareholders may exclude up to 70% of qualifying dividends received
during the year. For purposes of computing this exclusion, 100% of the
dividends paid by the Fund from net investment income represent qualifying
dividends.
Dividends and distributions received by retirement plans such as IRAs,
Keogh-type plans, and 403(b) plans need not be reported as taxable income.
However, many retirement plan trusts may need this information for their
annual
information reporting.
Shareholders should consult their tax adviser.
(logo The Growth fund of Washington)
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
(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.
1101 Vermont Avenue, NW
Washington, DC 20005
Custodian
The Chase Manhattan Bank
One Chase Manhattan Plaza
New York, NY 10081
Transfer Agent
DST Systems, Inc
127 West 10th Street
Kansas City, MO 64105
(800)-34-VISTA
Distributor
Vista Fund Distributors, Inc.
125 West 55th Street
New York, NY 10019
Counsel
Thompson, O'Donnell, Markham, Norton & Hannon
805 Fifteenth Street, NW
Washington, DC 20005
Independent Accountants
Johnson Lambert & Co.
7500 Old Georgetown Road
Bethesda, MD 20814
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 March 31, 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-2-1299
(indecia)
Bulk Rate
U.S. Postage
PAID
Rockville, MD
Permit No. 3539
The Growth Fund of Washington, Inc.
1101 Vermont Avenue, NW
Washington, DC 20005
