NAIC
Growth
Fund
Semi-Annual Report
June 30th, 1997
Contents
Report to Shareowners 2
Statement of Assets and Liabilities 3
Statement of Operations 4
Statements of Changes in Net Assets 5
Financial Highlights 6
Portfolio of Investments 7
Notes to Financial Statements 10
NAIC Growth Fund, Inc., Board of Directors 13
Shareowner Information 14
Report to Shareowners:
June 30, 1997
Except for a slight correction in April, the stock market
has continued to set record breaking highs. Trying to find
bargains has been difficult with growth companies selling at
or near their highs. This is evidenced by an increase in
the Fund's Net Asset Value from $18.13 at the beginning of
the period to a current value of $20.67. With the inclusion
of the semi-annual dividend of $0.105, this represents a
14.6% increase.
A number of changes have been made in the Fund's portfolio
since the first of the year including several sales and
additional purchases. The Fund managers decided to sell two
companies that came into the Fund as spin-offs. Alltrista,
1,125 shares, which was a spin-off from Ball Corporation,
was sold along with Cuno, 4,500 shares, which was a spin-off
from Commercial Intertech. It was also decided to sell all
4,500 shares of Commercial Intertech. Arnold, 2,000 shares,
and Sea Containers, 7,000 shares, were long-term holdings of
the Fund and were sold at a loss. The entire position in
Dun & Bradstreet was sold when it was decided that the
company's fundamentals were no longer the same as when the
company was originally purchased. As a result of a
litigation settlement with Community Psychiatric, the Fund
received 114 shares of Transitional Hospital. Since
additional purchases were not anticipated, it too was sold.
Lastly, a partial sale of 1,000 shares of Philip Morris was
completed prior to its three-for-one stock split. The Fund
continues to hold 3,000 shares after the stock split. The
sales resulted in a net long-term capital gain of $140,207.
With the proceeds from the sales several purchases were also
made by the Fund managers. OM Group, 3,000 shares, was
added to the Fund's portfolio as a new holding. OM Group
was reviewed in Better Investing magazine as a Stock to
Study and showed a positive potential for growth in the
years ahead. Additional purchases to existing holdings in
the portfolio included 2,000 Federal Signal, 3,000 Biomet,
2,000 Stryker, 1,000 Teleflex, 2,000 Dallas Semiconductor
and 1,000 Sysco Corporation.
A number of the stocks in the portfolio have also paid stock
dividends or splits since the first of the year including
Bristol-Myers Squibb (2-1), Cincinnati Bell (2-1), Colgate
Palmolive (2-1), Emerson Electric (2-1), General Electric
(2-1), International Business Machines (2-1), Johnson
Controls (2-1), Molex (5-4), Pfizer (2-1), Philip Morris (3-
1), Sigma Aldrich (2-1), State Street Boston (2-1), Synovus
Financial (3-2), Teleflex (2-1) and Vishay Intertechnology
(5%).
As many of the shareowners will note from the Financial
Highlights Statement, the Fund's annualized total return
based on market value for 1997 is 116%. It is the belief of
the Fund's directors that this is largely due to the close
connection between the price of the Fund and the supply and
demand for the Fund's shares. As most of the Fund's
shareowners are long-term investors, the demand for shares
has greatly outweighed the supply. The Fund's board of
directors and legal counsel are currently and will in the
future continue to explore various avenues in an effort to
address this issue for the benefit of the shareowners.
There will not be an easy solution and the Board will, of
course, notify shareowners of any action taken.
Thomas E. O'Hara Kenneth S. Janke
Chairman President
NAIC Growth Fund, Inc.
Statement of Assets and Liabilities
As of June 30, 1997
(Unaudited)
ASSETS
Investment securities'
at market value (cost $6,149,024) $14,413,299
Short-term investments
at amortized cost 1,014,747
Cash and cash equivalents 656,275
Dividends and interest receivable 17,904
Prepaid insurance 1,592
16,103,817
LIABILITIES
Dividends payable 81,350
Accounts payable 5,420 86,770
TOTAL NET ASSETS $16,017,047
SHAREHOLDERS' EQUITY
Common Stock par value $0.001 per share;
authorized 50,000,000 shares,
outstanding 774,763 shares $ 775
Additional Paid-in Capital 7,597,962
Undistributed net investment income 13,828
Undistributed net realized gain
on investments 140,207
Unrealized appreciation of investments 8,264,275
SHAREHOLDERS' EQUITY $16,017,047
NET ASSET VALUE PER SHARE $ 20.67
See notes to financial statements
NAIC Growth Fund, Inc.
Statement of Operations
For the six months ended June 30, 1997
(Unaudited)
INVESTMENT INCOME
Interest $ 37,587
Dividends 108,708
146,295
EXPENSES
Advisory fees 54,558
Transfer agent & custodian fees 9,907
Annual shareholders meeting 9,758
Insurance 9,556
Printing 8,826
Directors fees & expenses 7,143
Legal fees 4,732
Mailing & postage 1,574
Audit fees 774
Other fees & expenses 3,110
Less: Advisory fees waived (52,910)
Net Expenes 57,028
Net investment income 89,267
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments:
Proceeds from sale of
investment securities 446,690
Cost of investment securities sold 306,483
Net realized gain on investments 140,207
Unrealized appreciation of investments:
Unrealized appreciation at
beginning of period 6,526,553
Unrealized appreciation at
end of period 8,264,275
Increase in unrealized appreciation
on investments 1,737,722
Net realized and unrealized
gain on investments 1,877,929
NET INCREASE FROM OPERATIONS $ 1,967,196
See notes to financial statements
NAIC Growth Fund, Inc.
Statements of Changes in Net Assets
For the periods ended:
June 30,1997 December 31, 1996
(Unaudited)
FROM OPERATIONS:
Net investment income $89,267 $136,240
Net realized gain on
Investments 140,207 424,659
Net change in unrealized
appreciation on investments 1,737,722 2,162,041
Net increase from Operations 1,967,196 2,722,940
DISTRIBUTION TO STOCKHOLDERS FROM:
Net investment income 81,350 139,410
Net realized gain from investment
Transactions 0 424,659
Total distributions 81,350 564,069
FROM CAPITAL STOCK TRANSACTIONS:
Dividend reinvestment 365,368 150,443
Cash purchases 278,048 189,356
Net increase from capital
stock transactions 643,416 339,799
Net increase in net assets 2,529,262 2,498,670
TOTAL NET ASSETS:
Beginning of period 13,487,785 10,989,115
End of period (including
undistributed net investment
income of $13,828 and
$5,911,respectively) $16,017,047 $13,487,785
Shares:
Shares issued to common
stockholders under the
dividend reinvestment
and cash purchase plan 30,942 20,377
Shares at beginning of period 743,821 723,444
Shares at end of period 774,763 743,821
See notes to financial statements
NAIC Growth Fund, Inc.
Financial Highlights
For the periods ended:
June 30,1997 1996 1995 1994 1993 1992
(Unaudited)
Net asset value at
beginning of period $18.13 $15.19 $11.50 $11.24 $10.83 $10.06
Net investment income .12 .19 .15 .09 .07 .09
Net realized and
unrealized gain on
investments 2.53 3.51 3.82 .26 .43 .86
Total from investment
operations 2.65 3.70 3.97 .35 .50 .95
Distributions from:
Net investment income (.11) (.19) (.15) (.09) (.07) (.09)
Realized gains 0 (.57) (.13) .00 (.02) (.09)
Total distributions (.11) (.76) (.28) (.09) (.09) (.18)
Net asset value at
end of period $20.67 $18.13 $15.19 $11.50 $11.24 $10.83
Per share market value,
end of period Ask 28 7/8 19 1/2 14 1/4 9 1/2 11 1/4 12
Bid 29 3/4 18 7/8 13 3/4 9 3/8 9 1/2 9 1/2
Total Investment Return (annualized):
based on market value
1 year 116.34% 42.94% 49.70% (0.54%) 0.83% 1.72%
from inception 19.18% 12.59% 7.85% 0.27% 0.50% 0.37%
based on net asset value
1 year 29.18% 24.46% 34.60% 3.12% 4.65% 9.51%
from inception 13.16% 11.92% 9.78% 4.92% 5.45% 5.77%
Net Assets,
end of period (mil) $16,017 $13,488 $10,989 $ 8,317 $8,082 $7,432
Ratios to average net assets (annualized):
Ratio of expenses to
average net assets (a) .78% 0.96% 1.19% 1.81% 2.00% 2.00%
Ratio of net investment
income to average
net assets (a) 1.23% 1.10% 1.16% 0.77% 0.63% 0.92%
Portfolio turnover rate 5.80% 5.93% 6.90% 6.56% 0.62% 3.50%
Average commission rate $0.12 $0.12 $0.12
(a) In 1997, 1996, 1995 and 1994, the adviser voluntarily
waived either all or a portion of its fee. Had the adviser not
done so in 1997, 1996, 1995 and 1994, the ratio of expenses to
average net assets would have been 1.51%, 1.68%, 1.94% and 2.00%
and the ratio of net investment income to average net assets
would have been 0.50%, 0.38%, 0.41% and 0.58%, respectively.
See notes to financial statements
NAIC Growth Fund, Inc.
Portfolio of Investments - June 30, 1997
1.0 Auto Replacement
Dana Corp. 4,000 53,250 152,000
8.8 Banking
Citicorp 4,000 79,167 482,250
Comerica Inc. 2,000 58,750 136,000
First Chicago NBD 2,000 64,750 121,000
Synovus Financial 11,250 81,125 310,079
Huntington Banc. 12,007 91,101 352,706
0.5 Broadcasting
Walt Disney 1,049 67,661 84,182
2.4 Building Products
Clayton Homes 10,000 131,981 143,750
Johnson Controls 6,000 96,895 246,375
4.9 Chemicals
Monsanto 7,500 71,447 322,969
OM Group 3,000 86,625 98,625
RPM 10,000 119,125 183,750
Sigma Aldrich 5,000 94,938 175,313
1.1 Computers
IBM 2,000 99,387 180,500
3.4 Consumer Products
Colgate-Palmolive 4,000 98,500 261,000
Newell Co. 7,000 153,000 278,250
4.9 Electrical Equipment
Federal Signal 5,000 119,875 125,625
General Electric 4,000 56,000 260,000
Vishay Intertech. * 12,127 132,021 350,920
Westinghouse 2,000 23,875 46,250
1.7 Electronics
Dynatech Corp. * 4,000 35,512 143,000
Molex Inc. 3,750 93,250 130,781
12.5 Ethical Drugs
Amer. Home Prod. 3,000 90,510 229,500
Bristol-Myers Squibb 4,000 146,475 324,000
Eli Lilly 5,000 168,963 546,563
Johnson & Johnson 2,000 45,500 128,750
Merck & Co., Inc. 2,500 83,319 255,781
Pfizer Inc. 2,000 58,750 239,000
Pharmacia & Upjohn 7,975 200,070 277,131
8.8 Financial Services
Allied Group 7,500 131,625 285,000
Beneficial Corp. 4,000 119,537 284,250
Cognizant Corp. 1,500 35,799 60,750
Household Intl. 5,000 123,313 587,188
State Street Boston 4,000 75,500 185,000
3.2 Food
ConAgra 3,000 78,125 192,562
Heinz, H.J. 3,000 67,250 138,375
McCormick & Co. 7,000 145,100 176,750
1.3 Grocery
Hannaford Bros. 6,000 138,562 213,375
3.0 Hospital Supplies
Biomet Corp. 5,000 78,500 93,125
Stryker Corp. 6,000 121,750 209,250
St. Jude Medical * 4,500 100,125 175,500
0.7 Industrial Services
Donaldson Co. 3,000 37,588 114,000
0.9 Instruments
TSI Inc. 15,000 48,375 142,500
3.2 Insurance
AFLAC 3,750 51,875 177,187
Amer. Int'l. Group 2,250 79,053 336,094
3.1 Machinery
Cooper Industries 3,500 129,018 174,125
Emerson Electric 6,000 113,518 330,375
3.2 Multi Industry
Pentair 3,000 23,875 98,625
Teleflex Inc. 6,000 145,187 187,500
Thermo Electron * 6,750 106,687 232,031
0.4 Office Equipment
American Bus. Prod. 3,000 62,625 68,250
1.9 Paper
Mead Corp. 5,000 134,002 311,250
0.8 Petroleum
Kerr McGee 2,000 95,250 126,750
2.4 Publishing
Reuters Holdings 6,000 125,375 378,000
2.4 Restaurants
McDonald's 8,000 115,260 386,500
0.3 Rubber
Cooper Tire & Rubber 2,000 31,82 344,000
1.2 Semi Conductor
Dallas Semiconductor 5,000 107,750 195,625
4.5 Soft Drinks
Coca Cola 4,000 82,250 272,000
PepsiCo. 12,000 222,250 450,750
3.1 Telecommunications
ADC Telecom. * 9,000 21,234 300,375
Cincinnati Bell 6,000 55,250 189,000
0.8 Tobacco
Philip Morris 3,000 43,208 132,750
1.1 Transportation
Sysco Corp. 5,000 142,750 182,500
1.1 Utilities
Century Telephone 5,000 140,625 168,437
1.4 Water Treatment
Ionics * 5,000 117,188 227,500
90.0 $6,149,024 $14,413,299
Short-term Investments
6.3 United States Treasury Bill,
maturing 7/3/97 1,014,747
4.1 Misc. Cash Equivalents 656,275
10.4 1,671,022
Total Investments 16,084,321
(0.4)All other assets less liabilities (67,274)
100.0% Total Net Assets $16,017,047
* non-income producing securities
NAIC Growth Fund, Inc.
Notes to Financial Statements
(1) ORGANIZATION
The NAIC Growth Fund, Inc. (the "Fund") was organized under
Maryland law on April 11, 1989 as a diversified closed-end
investment company under the Investment Company Act of 1940.
The Fund commenced operations on July 2, 1990.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting
policies followed by the Fund not otherwise set forth in the
notes to financial statements:
Dividends and Distributions - Dividends from the Fund's net
investment income and realized net long- and short-term
capital gains will be declared and distributed at least
annually. Shareholders may elect to participate in the
Dividend Reinvestment and Cash Purchase Plan (see Note 4).
Use of Estimates - The preparation of 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 and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Investments - Investments in equity securities are stated at
market value, which is determined based on quoted market
prices or dealer quotes. Pursuant to Rule 2a-7 of the
Investment Company Act of 1940, the Fund utilizes the
amortized cost method to determine the carrying value of
short-term debt obligations. Under this method, investment
securities are valued for both financial reporting and
Federal tax purposes at amortized cost. Any discount or
premium is amortized from the date of acquisition to
maturity. Investment security purchases and sales are
accounted for on a trade date basis.
Federal Income Taxes - The Fund intends to comply with the
general qualification requirements of the Internal Revenue
Code applicable to regulated investment companies. The Fund
intends to distribute at least 90% of its taxable income,
including net long-term capital gains, to its shareholders.
In order to avoid imposition of the excise tax applicable to
regulated investment companies, it is also the Fund's
intention to declare as dividends in each calendar year at
least 98% of its net investment income and 98% of its net
realized capital gains plus undistributed amounts from prior
years.
The following information is based upon Federal income tax
cost of portfolio investments as of June 30, 1997:
Gross unrealized appreciation $8,264,275
Gross unrealized depreciation 0
Net unrealized appreciation $8,264,275
Federal income tax cost $6,149,024
Expenses - The Fund's service contractors bear all expenses
in connection with the performance of their services. The
Fund bears all expenses incurred in connection with its
operations including, but not limited to, management fees
(as discussed in Note 3), legal and audit fees, taxes,
insurance, shareholder reporting and other related costs.
Such expenses will be charged to expense daily as a
percentage of net assets. The Fund's expenses in excess of
two percent (2%) of average net assets shall be the
responsibility of the Investment Adviser. A director of the
Fund is of counsel to the Fund's legal counsel. Legal
counsel has incurred $4,732 for ongoing legal services
during the period.
(3) MANAGEMENT ARRANGEMENTS
Investment Adviser
National Association of Investors Corporation serves as the
Fund's Investment Adviser subject to the Investment Advisory
Agreement, and is responsible for the management of the
Fund's portfolio, subject to review by the board of
directors of the Fund.
For the services provided under the Investment Advisory
Agreement, the Investment Adviser receives a monthly fee at
an annual rate of three-quarters of one percent (0.75%) of
the average weekly net asset value of the Fund, during the
times when the average weekly net asset value is at least
$3,800,000. The Investment Adviser will not be entitled to
any compensation for a week in which the average weekly net
asset value falls below $3,800,000. The Adviser has
voluntarily waived $52,910 of its total fee of $54,558 for
the period ended june 30, 1997.
Plan Agent
As of June 1, 1997, Michigan National Bank (MNB) became the
Fund's custodian pursuant to the Custodian Agreement. As
the Fund's custodian, MNB receives fees and compensation of
expenses for services provided including, but not limited
to, an annual account charge, annual security fee, security
transaction fee and statement of inventory fee. Boston
EquiServe serves as the Fund's transfer agent and dividend
disbursing agent pursuant to the
Transfer Agency and Dividend Disbursement Agreements.
Boston EquiServe receives fees for services provided
including, but not limited to, account maintenance fees,
activity and transaction processing fees and reimbursement
of out-of-pocket expenses such as forms and mailing costs.
(4) DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund has a Dividend Reinvestment and Cash Purchase Plan
(the "Plan") which allows shareholders to reinvest dividends
paid and make additional contributions.
Under the Plan, if on the valuation date the net asset value
per share is lower than the market price at the close of
trading on that day, then the Plan Agent will elect on
behalf of the shareholders who are participants of the Plan
to take the dividends in newly issued shares of the Fund's
common stock. If net asset value exceeds the market price
on the valuation date, the Plan Agent will elect to receive
cash dividends, and will promptly buy shares of the Fund's
common stock on whatever market is consistent with best
price and execution. The number of shares credited to each
shareholder participant's account will be based upon the
average purchase price for all shares purchased.
(5) DISTRIBUTIONS TO SHAREHOLDERS
On May 15, 1997, a distribution of $0.105 per share
aggregating $81,350 was declared from net investment income.
The dividend was paid August 1, 1997, to shareholders of
record June 30, 1997.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of securities, other than short-term
securities for the period ended June 30, 1997, were $381,478
and $446,690, respectively.
(7) FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of how
the Fund's net asset value has changed during the periods
presented. Additional quantitative measures expressed in
ratio form analyze important relationships between certain
items presented in the financial statements. These
Financial Highlights have been derived from the financial
statements of the Fund and other information for the periods
presented. The Total Investment Return based on market
value assumes that shareholders bought into the Fund at the
bid price and sold out of the Fund at the bid price. In
reality, shareholders buy into the Fund at the ask price and
sell out of the Fund at the bid price. Therefore, actual
returns may differ from the amounts stated.
NAIC Growth Fund, Inc.
Board of Directors
Thomas E. O'Hara
Chairman,
Bloomfield Hills, MI
Lewis A. Rockwell
Secretary,
Grosse Pointe Shores, MI
Cynthia P. Charles
Director,
Ambler, PA
Carl A. Holth
Director,
Clinton Twp., MI
William T. Endicott
Director,
Bethesda, MD
Kenneth S. Janke
President,
Bloomfield Hills, MI
Benedict J. Smith
Director,
Birmingham, MI
James M. Lane
Director,
Grosse Pointe Farms, MI
Peggy L. Schmeltz
Director,
Bowling Green, OH
Shareowner Information
The ticker symbol for the NAIC Growth Fund, Inc., on the
Chicago Stock Exchange is GRF.
The dividend reinvestment plan allows shareowners to
automatically reinvest dividends in Fund common stock with
littler or no commissions. Once enrolled, you can make
additional stock purchases through monthly cash deposits
ranging from $50 to $1,000. For more information, request a
copy of the Dividend Reinvestment Service for Stockholders
of NAIC Growth Fund, Inc., from Boston EquiServe., P.O. Box
8204, Boston, Massachusetts 02266. Telephone 1-800-257-
1770.
Questions about dividend checks, statements, account
consolidation, address changes, stock certificates or
transfer procedures write Boston EquiServe., P.O. Box 8204,
Boston, Massachusetts 02266. Telephone 1-800-257-1770.
Shareowners or individuals wanting general information or
having questions, write NAIC, P.O. Box 220, Royal Oak,
Michigan 48068. Telephone 810-583-6242 Ext. 322.
