NAIC Growth Fund, Inc.
Semi-Annual Report
June 30, 1998
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, 1998
After selling at a premium to the Net Asset Value that
reached more than 56% at one time, the price of the NAIC Growth
Fund as listed on the Chicago Stock Exchange has come back to a
point where only a slight premium now exists. By June 30th,
the stock was selling at $13.625 and the premium had been
reduced to 9%. While this is not good news for those
shareowners who purchased shares at a higher premium, the price
appears to be more realistic when measured by the Net Asset
Value. That figure has increased from year end, when it stood
at $10.99, to $12.46 as of June 30th, an increase of 13.4%.
The Fund managers made one sale during the first six
months and that was brought on because of a merger. Faced with
receiving a cash settlement later in the year for Dynatech
Corporation, the decision was made to sell the 6,000 shares
immediately, which resulted in a capital gain of slightly more
than $165,000. It should be noted that we also will be faced
with selling our 11,250 shares of ALLIED Group later in the
year at a price of $48.25 because of the company being taken
over. That will result in a capital gain of approximately
$411,000.
Additions to current positions made during the past six
months include 1,000 Dallas Semiconductor; 5,000 Federal
Signal; 2,000 O'Reilly Automotive and 1,000 Stryker
Corporation. New positions were 3,000 Diebold; 4,000 EMC
Corporation; 3,000 Intel and 6,000 Invacare.
A semi-annual dividend of $0.07 per share was declared by
the board of directors. It is payable August 3rd to
shareowners of record on June 30, 1998.
Following the end of the six month period, the stock
market has continued to reach record levels, as measured by the
popular averages. The Net Asset Value of the Fund has mirrored
those increases.
Thomas E. O'Hara, Chairman Kenneth S. Janke, President
NAIC Growth Fund, Inc.
Statement of Assets and Liabilities
As of June 30, 1998
(Unaudited)
ASSETS
Investment securities
-at market value (cost $7,025,508) $18,412,303
Short-term investments
-at amortized cost 1,999,733
Cash and cash equivalents 411,904
Dividends and interest receivable 6,113
Prepaid insurance 1,635
20,831,688
LIABILITIES
Dividends payable 114,130
Accounts payable 395,887 510,017
TOTAL NET ASSETS $20,321,671
SHAREHOLDERS' EQUITY
Common Stock-par value $0.001 per share;
authorized 50,000,000 shares,
outstanding 1,630,434 shares $1,630
Additional Paid-in Capital 8,749,392
Undistributed net investment income 18,214
Undistributed net realized gain
on investments 165,640
Unrealized appreciation of investments 11,386,795
SHAREHOLDERS' EQUITY $20,321,671
NET ASSET VALUE PER SHARE $12.46
See notes to financial statements
NAIC Growth Fund, Inc.
Statement of Operations
For the six months ended June 30, 1998
(Unaudited)
INVESTMENT INCOME
Interest $ 57,336
Dividends 162,548
219,884
EXPENSES
Advisory fees 69,169
Transfer agent & custodian fees 21,211
Annual shareholders' meeting 9,102
Insurance 9,809
Audit fees 7,500
Printing 3,150
Directors' fees & expenses 2,775
Legal fees 2,736
Mailing & postage 2,563
Other fees & expenses 11,924
Less: Advisory fees waived (51,877)
Net Expenses 88,062
Net investment income 131,822
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments:
Proceeds from sale of
investment securities 276,809
Cost of investment securities sold 111,169
Net realized gain on investments 165,640
Unrealized appreciation of investments:
Unrealized appreciation
at beginning of period 9,342,727
Unrealized appreciation
at end of period 11,386,795
Increase in unrealized
appreciation on investments 2,044,068
Net realized and unrealized
gain on investments 2,209,708
NET INCREASE FROM OPERATIONS $ 2,341,530
See notes to financial statements
NAIC Growth Fund, Inc.
Statements of Changes in Net Assets
For the periods ended:
June 30, 1998 December 31, 1997
(Unaudited)
FROM OPERATIONS:
Net investment income $131,822 $150,230
Net realized
gain on investments 165,640 577,028
Net change in unrealized appreciation
on investments 2,044,068 2,816,174
Net increase from
operations 2,341,530 3,543,432
DISTRIBUTION TO STOCKHOLDERS FROM:
Net investment income 114,130 155,619
Net realized gain from investment
Transactions 0 577,028
Total distributions 114,130 732,647
FROM CAPITAL STOCK TRANSACTIONS:
Dividend reinvestment 459,005 423,948
Cash purchases 299,961 612,787
Net increase from capital stock
Transactions 758,966 1,036,735
Net increase
in net assets 2,986,366 3,847,520
TOTAL NET ASSETS:
Beginning of period 17,335,305 13,487,785
End of period (including
undistributed net investment
income of $18,214and
$522, respectively) $20,321,671 $17,335,305
SHARES:
Shares issued to common stockholders
under the dividend reinvestment and
cash purchase plan 53,446 89,346
Shares at beginning
of period 1,576,988 1,487,642
Shares at end of period 1,630,434 1,576,988
NAIC Growth Fund, Inc.
Financial Highlights
For the periods ended:
June 30, 1998
(Unaudited) 1997 1996 1995 1994 1993
Net asset value at
beginning of period $10.99 $9.07 $7.60 $5.75 $5.62 $5.42
Net investment income .08 .10 .10 .08 .05 .04
Net realized and unrealized gain
on investments 1.46 2.29 1.75 1.91 .13 .21
Total from investment
Operations 1.54 2.39 1.85 1.99 .18 .25
Distributions from:
Net investment income (.07) (.10) (.10) (.08) (.05) (.04)
Realized gains .00 (.37) (.28) (.06) .00 (.01)
Total distributions (.07) (.47) (.38) (.14) (.05) (.05)
Net asset value at
end of period $12.46 $10.99 $9.07 $7.60 $5.75 $5.62
Per share market value,
end of period
Ask 13 3/4 15 1/4 9 3/4 7 1/8 4 3/4 5 5/8
Bid 13 1/2 14 1/2 9 7/16 6 7/8 4 11/16 4 3/4
Total Investment Return (annualized):
based on market 6/30/98
value (unaudited) 1997 1996 1995 1994 1993
1 year (12.83%) 58.50% 42.94% 49.70% (0.54%) 0.83%
from inception 15.68% 17.84% 12.59% 7.85% 0.27% 0.50%
based on net asset value
1 year 28.03% 26.43% 24.46% 34.60% 3.12% 4.65%
from inception 14.54% 13.69% 11.92% 9.78% 4.92% 5.45%
Net Assets, end of period (mil)
6/30/98 1997 1996 1995 1994 1993
$20,321.7 $17,335.3 $13,487.8 $10,989.1 $8,316.6 $8,081.8
Ratios to average net assets (annualized):
Ratio of expenses
to average
net assets(a) 0.92% 0.96% 0.96% 1.19% 1.81% 2.00%
Ratio of net investment
income to average
net assets(a) 1.38% 0.96% 1.10% 1.16% 0.77% 0.63%
Portfolio turnover
rate 1.31% 6.31% 5.93% 6.90% 6.56% 0.62%
(a) In 1998, 1997, 1996, 1995 and 1994, the adviser
voluntarily waived either all or a portion of its fee. Had the
adviser not done so in 1998, 1997, 1996, 1995 and 1994, the
ratio of expenses to average net assets would have been 1.46%,
1.69%, 1.68%, 1.94% and 2.00%, and the ratio of net investment
income to average net assets would have been 0.84%, 0.23%,
0.38%, 0.41% and 0.58%, respectively.
NAIC Growth Fund, Inc.
Portfolio of Investments - June 30, 1998
% Common Stock Shares Cost Market
2.1 Agriculture
Monsanto 7,500 65,339 419,062
2.1 Auto Replacement
Dana Corp. 4,000 53,250 214,000
O'Reilly Auto. * 6,000 140,375 216,000
8.9 Banking
Citicorp 4,000 79,167 597,000
Comerica Inc. 3,000 58,750 198,375
First Chicago NBD 2,000 64,750 177,250
Synovus Financial 16,875 81,125 400,781
Huntington Banc. 13,207 91,093 442,435
2.6 Building Products
Clayton Homes 10,000 131,981 190,000
Johnson Controls 6,000 96,895 343,125
3.3 Chemicals
OM Group 6,000 195,562 247,500
RPM 12,500 119,125 212,500
Sigma Aldrich 5,000 94,938 175,625
Solutia 1,500 6,109 43,031
2.0 Computers
EMC Corp. * 4,000 116,000 179,250
IBM 2,000 99,387 229,625
3.5 Consumer Products
Colgate-Palmolive 4,000 98,500 352,000
Newell Co. 7,000 153,000 348,688
4.9 Electrical Equipment
CBS Corp. 5,000 102,438 158,750
Federal Signal 10,000 239,813 243,125
General Electric 4,000 56,000 363,500
Vishay Intertech. * 12,733 132,017 228,398
1.0 Electronics
Diebold 3,000 87,187 86,625
Molex Inc. 4,687 93,240 109,559
11.5 Ethical Drugs
Amer. Home Prod. 6,000 90,510 310,500
Bristol-Myers Squibb 3,000 106,538 344,813
Eli Lilly 6,000 91,687 397,500
Johnson & Johnson 2,000 45,500 148,000
Merck & Co., Inc. 2,500 83,319 334,375
Pfizer Inc. 4,000 58,750 434,750
Pharmacia & Upjohn 7,975 200,070 367,847
11.1 Financial Services
ALLIED Group 11,250 131,625 526,641
Beneficial Corp. 4,000 119,537 612,750
Cognizant Corp. 1,500 35,799 94,500
Household Intl. 15,000 123,313 746,250
State Street Boston 4,000 75,500 278,000
3.2 Food
ConAgra 6,000 78,125 190,125
Heinz, H.J. 3,000 67,250 168,375
McCormick & Co. 8,000 168,850 285,750
1.3 Grocery
Hannaford Bros. 6,000 138,562 264,000
4.0 Hospital Supplies
Biomet Corp. 7,000 122,250 231,438
Invacare 6,000 152,500 153,750
Stryker Corp. 7,000 160,063 268,625
St. Jude Medical 4,500 100,125 165,656
0.7 Industrial Services
Donaldson Co. 6,000 37,588 141,750
0.6 Instruments
TSI Inc. 15,000 48,375 121,875
3.5 Insurance
AFLAC 7,500 51,875 227,344
Amer. Int'l. Group 3,375 79,053 492,750
2.7 Machinery
Cooper Industries 3,500 129,018 192,281
Emerson Electric 6,000 113,518 362,250
2.9 Multi Industry
Pentair 3,000 23,875 127,500
Teleflex Inc. 6,000 145,187 228,000
Thermo Electron * 6,750 106,687 230,766
0.7 Office Equipment
American Bus. Prod. 7,000 158,000 143,500
0.9 Paper
Mead Corp. 6,000 74,144 190,500
0.6 Petroleum
Kerr McGee 2,000 95,250 115,750
1.8 Publishing
Reuters Group PLC 5,199 125,351 356,132
2.2 Restaurants
McDonald's 6,000 83,125 414,000
Tricon Global 1,200 16,876 38,025
2.0 Semiconductor
Dallas Semiconductor 6,000 138,438 186,188
Intel 3,000 228,563 222,375
4.1 Soft Drinks
Coca Cola 4,000 82,250 342,000
PepsiCo 12,000 205,374 494,250
2.5 Telecommunications
ADC Telecom. * 9,000 21,234 328,781
Cincinnati Bell 6,000 55,250 171,750
1.3 Transportation
Sysco Corp. 10,000 142,750 256,250
1.7 Utilities
Century Telephone 7,500 140,625 344,062
0.9 Water Treatment
Ionics * 5,000 117,188 184,375
90.6 $7,025,508 $18,412,303
Short-term Investments
9.9 United States Treasury Bill,
maturing 8/6/98 1,999,733
2.0 Misc. Cash Equivalents 411,904
11.9 2,411,637
Total Investments 20,823,940
(2.5) All other assets less liabilities (502,269)
100.0% Total Net Assets $20,321,671
* non-income producing securities
See notes to financial statements
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, 1998:
Gross unrealized appreciation $ 11,408,045
Gross unrealized depreciation (21,250)
Net unrealized appreciation $ 11,386,795
Federal income tax cost $ 7,025,508
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
Advisory Agreement provides that the Fund may not incur annual
aggregate expenses in excess of two percent (2%) of the first
Ten Million Dollars of the Fund's average net assets, one and
one-half percent (1 1/2%) of the next Twenty Million Dollars of
the average net assets, and one percent (1%) of the remaining
average net assets for any fiscal year. Any excess expenses
shall be the responsibility of the Investment Adviser, and the
pro rata portion of the estimated annual excess expenses will
be offset against the Investment Adviser's monthly fee. A
director of the Fund is of counsel to the Fund's legal counsel.
Legal counsel has incurred $2,736 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 $51,877
of its total fee of $69,169 for the period ended june 30, 1998.
Plan Agent
Michigan National Bank (MNB) serves as 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 14, 1998, a distribution of $0.07 per share aggregating
$114,130 was declared from net investment income. The dividend
was paid August 3, 1998, to shareholders of record June 30,
1998.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of securities, other than short-term
securities for the period ended June 30, 1998, were $828,811
and $111,169, 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
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
little 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 248-583-6242 Ext. 322.
