NAIC Growth Fund, Inc.
Semi-Annual Report
June 30, 1999
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, 1999
The first six months of the current year has been little
different than what investors have experienced during the past two, or
three years. While the popular averages such as the Dow Jones
Industrials and the S&P 500 have made progress, price advances have
been limited to a very few stocks that make up the averages. With that
in mind, it is probably not surprising that the Net Asset Value of the
Fund increased 6.6% during the period, going from $12.48 to $13.30.
The important thing in the opinion of the Fund managers is that
earnings progress has been positive for the great majority of stocks
held in the portfolio, even though prices have lagged in some cases.
Eventually, stock prices reflect earnings progress and potential as
different sectors gain investors confidence.
Some sales were made during the period, including Mead
Corporation, Kerr-McGee, Cooper Industries, CBS and IMS Health.
Partial sales were also made in Household International and Monsanto
In the case of Household, the Fund had held both Beneficial and
Household when the merger was made resulting in a very large holding.
It was thought that a partial sale would result in trimming the
dependence on a single stock, which continues to be the largest
holding. The Fund still holds 4,000 shares of Monsanto.
New purchases included 3,000 Carlisle Corporation, 4,000 First
Industrial REIT, 8,000 HON Industries, 8,000 Lydall and 6,000 Merrill
Corporation. Adding to our holdings, the Fund bought 5,500 Clayton
Homes (18,000 shares now held), 2,000 Diebold (7,000), 4,000 Donaldson
(10,000), 2,000 Ionics (7,000), 2,000 Newell (9,000), 2,000 OM Group
(8,000), 2,000 Pentair (5,000), 2,500 RPM (15,000) and 1,000 TSI
(18,000).
The Board of Directors declared a cash dividend of $0.055 per
share payable on August 2, 1999 to shareowners of record on June 30,
1999.
Thomas E. O'Hara Kenneth S. Janke
CHAIRMAN PRESIDENT
NAIC Growth Fund, Inc.
Statement of Assets and Liabilities
As of June 30, 1999
(Unaudited)
ASSETS
Investment securities
at market value (cost $7,871,140) $20,417,801
Short-term investments
at amortized cost 1,998,071
Cash and cash equivalents 509,859
Dividends and interest receivable 10,825
Prepaid insurance 1,417
22,937,973
LIABILITIES
Dividends payable 94,388
Accounts payable 20,510 114,898
TOTAL NET ASSETS $22,823,075
SHAREHOLDERS' EQUITY
Common Stock par value $0.001 per share;
authorized 50,000,000 shares,
outstanding 1,716,143 shares $ 1,716
Additional Paid-in Capital 9,799,230
Undistributed net investment income 3,640
Undistributed net realized gain
on investments 471,828
Unrealized appreciation of investments 12,546,661
SHAREHOLDERS' EQUITY $22,823,075
NET ASSET VALUE PER SHARE $ 13.30
See notes to financial statements
NAIC Growth Fund, Inc.
Statement of Operations
For the six months ended June 30, 1999
(Unaudited)
INVESTMENT INCOME
Interest $ 58,978
Dividends 179,292
EXPENSES
Advisory fees 78,306
Transfer agent & custodian fees 16,789
Annual shareholders meeting 11,606
Insurance 8,500
Directors fees & expenses 5,274
Printing 3,601
Mailing & postage 2,070
Legal fees 971
Audit fees 500
Other fees & expenses 3,945
Less: Advisory fees waived (39,153)
Net Expenses 92,409
Net investment income 86,883
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments:
Proceeds from sale of investment securities 953,158
Cost of investment securities sold 481,330
Net realized gain on investments 471,828
Unrealized appreciation of investments:
Unrealized appreciation at beginning
of period 11,586,566
Unrealized appreciation at end of period 12,546,661
Increase in unrealized appreciation on investments 960,095
Net realized and unrealized gain on investments 1,431,923
NET INCREASE FROM OPERATIONS $ 1,518,806
See notes to financial statements
NAIC Growth Fund, Inc.
Statements of Changes in Net Assets
For the periods ended:
June 30, 1999 December 31,1998
(Unaudited)
FROM OPERATIONS:
Net investment income $86,883 $217,032
Net realized gain on investments 471,828 750,693
Net change in unrealized appreciation
on investments 960,095 2,243,839
Net increase from operations 1,518,806 3,211,564
DISTRIBUTION TO STOCKHOLDERS FROM:
Net investment income 94,388 206,409
Net realized gain from investment transactions 0 750,693
Total distributions 94,388 957,102
FROM CAPITAL STOCK TRANSACTIONS:
Dividend reinvestment 151,276 538,333
Cash purchases 546,206 573,075
Net increase from capital stock
transactions 697,482 1,111,408
Net increase in net assets 2,121,900 3,365,870
TOTAL NET ASSETS:
Beginning of period $20,701,175 $17,335,305
End of period (including undistributed net
investment income of $3,640 and
$11,145, respectively) $22,823,075 $20,701,175
Shares:
Shares issued to common stockholders under
the dividend reinvestment and cash
purchase plan 56,749 82,406
Shares at beginning of period 1,659,394 1,576,988
Shares at end of period 1,716,143 1,659,394
See notes to financial statements
NAIC Growth Fund, Inc.
Financial Highlights
For the periods ended:
June 30, 1999
(Unaudited) 1998 1997 1996 1995 1994
Net asset value at beginning
of period $12.48 $10.99 $9.07 $7.60 $5.75 $5.62
Net investment income .05 .14 .10 .10 .08 .05
Net realized and unrealized
gain on investments .83 1.93 2.29 1.75 1.91 .13
Total from investment
operations .88 2.07 2.39 1.85 1.99 .18
Distributions from:
Net investment income (.06) (.13) (.10) (.10) (.08) (.05)
Realized gains .00 (.45) (.37) (.28) (.06) .00
Total distributions (.06) (.58) (.47) (.38) (.14) (.05)
Net asset value at end of
period $13.30 $12.48 $10.99 $9.07 $7.60 $5.75
Per share market value,
end of period Ask 11 5/8 10 3/4 15 1/4 9 3/4 7 1/8 4 3/4
Bid 11 1/8 10 1/4 14 1/2 9 7/16 6 7/8 4 11/16
Total Investment Return (annualized):
based on market value
1 year 29.01% (25.42%) 58.50% 42.94% 49.70% (0.54%)
from inception 11.61% 11.30% 17.84% 12.59% 7.85% 0.27%
based on net asset value
1 year 24.86% 18.84% 26.43% 24.46% 34.60% 3.12%
from inception 13.84% 13.79% 13.69% 11.92% 9.78% 4.92%
Net Assets,end of period
(mil) $22,823.0 $20,701.2 $17,335.3 $13,487.8 $10,989.1 $8,316.6
Ratios to average net assets (annualized):
Ratio of expenses to average
net assets(a) 0.85% 0.83% 0.96% 0.96% 1.19% 1.81%
Ratio of net investment income
to average net assets(a) 0.80% 1.13% 0.96% 1.10% 1.16% 0.77%
Portfolio turnover rate 5.00% 5.87% 6.31% 5.93% 6.90% 6.56%
(a) In 1999, 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 1999, 1998, 1997, 1996, 1995 and 1994, the ratio of expenses to
average net assets would have been 1.21%, 1.39%, 1.69%, 1.68%,1.94% and 2.00%,
and the ratio of net investment income to average net assets would have been
0.44%, 0.57%, 0.23%, 0.38%, 0.41% and 0.58%, respectively.
See notes to financial statements
NAIC Growth Fund, Inc.
Portfolio of Investments - June 30, 1999
% Common Stock Shares Cost Market
0.7 Agriculture
Monsanto 4,000 37,403 158,250
2.1 Auto Replacement
Dana Corp. 4,000 53,250 184,250
O Reilly Auto. * 6,000 140,375 302,250
8.9 Banking
Citigroup 15,000 79,167 712,500
Comerica Inc. 3,000 58,750 178,313
Bank One Corp. 5,000 157,370 297,812
Huntington Banc. 14,527 91,086 508,445
Synovus Financial 16,875 81,125 335,391
2.7 Building Products
Clayton Homes 18,000 202,325 205,875
Johnson Controls 6,000 96,895 415,875
2.9 Chemicals
OM Group 8,000 258,725 276,000
RPM 15,000 159,125 212,812
Sigma Aldrich 5,000 94,938 172,188
4.2 Computers
EMC Corp. * 8,000 116,000 440,000
IBM 4,000 99,387 517,000
3.6 Consumer Products
Colgate-Palmolive 4,000 98,500 394,000
Newell Rubbermaid 9,000 237,375 417,375
4.6 Electrical Equipment
Federal Signal 10,000 239,813 211,875
General Electric 4,000 56,000 452,000
Vishay Intertech. * 18,750 165,456 393,750
2.1 Electronics
Diebold 7,000 196,688 201,250
Molex Inc. 8,000 184,478 268,500
11.6 Ethical Drugs
Amer. Home Prod. 6,000 90,510 344,250
Bristol-Myers Squibb 6,000 106,538 422,625
Eli Lilly 6,000 91,687 429,750
Johnson & Johnson 2,000 45,500 196,000
Merck & Co., Inc. 5,000 83,319 368,125
Pfizer Inc. 4,000 58,750 436,000
Pharmacia & Upjohn 7,975 200,070 453,080
6.7 Financial Services
Household Intl. 25,000 223,538 1,184,375
State Street Boston 4,000 75,500 341,500
2.5 Food
ConAgra 6,000 78,125 159,750
Heinz, H.J. 3,000 67,250 150,375
McCormick & Co. 8,000 168,850 252,500
1.4 Grocery
Hannaford Bros. 6,000 138,562 321,000
4.7 Hospital Supplies
Biomet Corp. 7,000 122,250 278,250
Invacare 8,000 201,750 214,000
Stryker Corp. 7,000 160,063 420,875
St. Jude Medical 4,500 100,125 160,312
1.1 Industrial Service
Donaldson Co. 10,000 115,837 245,000
0.9 Instruments
TSI Inc. 18,000 75,750 209,250
4.2 Insurance
AFLAC 7,500 51,875 359,063
Amer. Intl. Group 5,062 79,044 593,520
1.7 Machinery
Emerson Electric 6,000 113,518 377,625
1.0 Manufacturing
Carlisle Co. 3,000 127,819 144,375
Lydall Inc. 8,000 80,925 92,000
2.7 Multi Industry
Pentair 5,000 97,019 228,750
Teleflex Inc. 6,000 145,187 260,625
Thermo Electron * 6,750 106,687 135,422
1.7 Office Equipment
American Bus. Prod. 10,000 203,925 152,500
Hon Industries 8,000 190,188 233,500
1.8 Publishing
Reuters Group PLC 5,199 125,351 421,444
0.5 Realty Trust
First Industrial 4,000 105,000 109,750
1.4 Restaurants
McDonald's 8,000 53,625 329,000
2.9 Semiconductor
Dallas Semiconductor 6,000 138,438 304,500
Intel 6,000 228,563 357,000
3.1 Soft Drinks
Coca Cola 4,000 82,250 248,000
PepsiCo 12,000 205,374 464,250
0.4 Specialty Printing
Merrill Corp. 6,000 90,975 87,000
3.0 Telecommunications
ADC Telecom. * 9,000 21,234 410,062
Cincinnati Bell 6,000 23,757 149,625
Convergys Corp. 6,000 31,493 116,250
1.3 Transportation
Sysco Corp. 10,000 142,750 298,125
2.0 Utilities
Century Telephone 11,250 140,625 447,187
1.1 Water Treatment
Ionics * 7,000 177,313 255,500
89.5 $7,871,140 $20,417,801
Short-term Investments
8.8 United States Treasury Bill,
maturing 7/8/99 1,998,071
2.2 Misc. Cash Equivalents 509,859
11.0 2,507,930
Total Investments 22,925,731
(0.5) All other assets less liabilities (102,656)
100.0% Total Net Assets $22,823,075
* 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 - 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, 1999:
Gross unrealized appreciation $ 12,629,998
Gross unrealized depreciation (83,337)
Net unrealized appreciation $ 12,546,661
Federal income tax cost $ 7,871,140
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 $971 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 $39,153 of
its total fee of $78,306 for the period ended June 30, 1999.
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 June 10, 1999, a distribution of $0.055 per share aggregating
$94,388 was declared from net investment income. The dividend was paid
August 2, 1999, to shareholders of record June 30, 1999.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of securities, other than short-term securities for
the period ended June 30, 1999, were $1,337,476 and $481,330,
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 877-275-6242 Ext. 322.
