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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-05807
NAIC GROWTH FUND, INC.
(Exact name of registrant as specified in charter)
711 West 13 Mile Road, Madison Heights, MI 48071
(Address of principal executive offices) (zip code)
Kenneth S. Janke, President
NAIC Growth Fund, Inc.
711 W. 13 Mile Road
Madison Heights, MI 48071
(248) 583-6242
(Name and address of agent for service)
Registrant's telephone number, including area code: (877) 275-6242
Date of fiscal year end: December 31
Date of reporting period: June 30, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
NAIC Growth Fund, Inc.
Semi Annual Report
June 30, 2003
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
2003 Annual Meeting 13
NAIC Growth Fund, Inc., Board of Directors 14
Shareowner Information 15
Report to Shareowners:
June 30, 2003
In spite of some progress in the popular averages during the first six
months of this year, the broad market has not performed well. For the six
months, the DJIA was up 7.7% while the Standard & Poor's 500 increased
10.8%. The Net Asset Value of the Fund went from $9.08 to $9.60 in that
period. Annualized investment returns can be found on page 6 of this report.
The one bright spot has been some positive activity in the payments of
dividends since the lower tax rate was initiated in May. Companies held in
the portfolio such as Citigroup, Colgate-Palmolive and AFLAC increased their
dividends more than 20% when compared to the prior year's annualized rates.
This is encouraging, especially with the yields on money markets and T-bills
being so low. We hope this trend continues as we reported in last year's
annual report that dividend increases at that time were less than in prior
years.
One new company was added to the portfolio with the purchase of 2,000
Avery Dennison. Other additions made to existing holdings included 1,000
Albertsons, 2,000 Pentair, 3,000 PepsiCo, 3,000 RPM, and 2,000 Teleflex.
Sales included PolyOne, a reduction in Stryker, DelMonte Foods which was a
spin-off from H.J. Heinz, and Wyeth. That resulted in long-term capital
gains of a little more than $300,000 for the current year.
The Fund managers continue to look at company fundamentals closely
when making buy and sell decisions. Over the short-term, stock prices do not
always reflect earnings progress, but the managers feel confident that
long-term price trends will eventually be tied to earnings performance.
Thomas E. O'Hara Kenneth S.Janke
Chairman President
NAIC Growth Fund, Inc.
Statement of Assets and Liabilities
As of June 30, 2003 (unaudited)
ASSETS
Investment securities
-at market value (cost $9,185,404) $17,453,828
Short-term investments
-at amortized cost 4,197,142
Cash and cash equivalents 914,464
Dividends & interest receivable 37,974
Prepaid insurance 1,344
Prepaid fees 52,697
$22,657,449
LIABILITIES
Dividends payable -
Accounts payable 54,944 54,944
TOTAL NET ASSETS $22,602,505
SHAREOWNERS' EQUITY
Common Stock-par value $0.001 per share;
authorized 50,000,000 shares,
outstanding 2,354,370 shares $ 2,355
Additional Paid-in Capital 14,012,176
Undistributed net investment income/(loss) (3,585)
Undistributed net realized gain on investments 323,135
Unrealized appreciation of investments 8,268,424
SHAREOWNERS' EQUITY $22,602,505
NET ASSET VALUE PER SHARE $ 9.60
See notes to financial statements
NAIC Growth Fund, Inc.
Statement of Operations
For the six months ended June 30, 2003 (unaudited)
INVESTMENT INCOME
Interest $ 29,196
Dividends 165,729
$ 194,925
EXPENSES
Advisory fees $85,000
Legal fees 48,000
Transfer agent & custodian fees 20,000
Insurance 9,500
Audit fees 9,000
Printing 5,300
Other fees & expenses 5,000
Mailing & postage 6,000
Other Professional Services 4,000
Annual shareowners' meeting 3,300
Directors' fees & expenses 4,000
Net Expenses $ 199,100
Net investment income/(loss) (4,175)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments:
Proceeds from sale of
investment securities 599,760
Cost of investment
securities sold 276,625
Net realized gain on investments $ 323,135
Unrealized appreciation of investments:
Unrealized appreciation at
beginning of year 7,459,773
Unrealized appreciation at
end of period 8,268,424
Net change in unrealized
appreciation on investments 808,651
Net realized and unrealized
gain on investments 1,131,786
NET INCREASE FROM OPERATIONS $1,127,611
See notes to financial statements
NAIC Growth Fund, Inc.
Statements of Changes in Net Assets
six months ended year ended
June 30, 2003 December 31, 2002
FROM OPERATIONS:
Net investment income/(loss) $ (4,175) $ 43,718
Net realized gain on investments 323,135 1,181,894
Net change in unrealized
appreciation on investments 808,651 (4,492,496)
Net decrease/increase from
operations 1,127,611 (3,266,884)
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income - 43,435
Net realized gain from investment
transactions - 1,181,894
Total distributions - 1,225,329
FROM CAPITAL STOCK TRANSACTIONS:
Dividend reinvestment 748,336 869,087
Cash purchases 171,237 269,238
Net increase from capital stock
transactions 919,573 1,138,325
Net increase/(decrease) in
net assets $ 2,047,184 $(3,353,888)
TOTAL NET ASSETS:
Beginning of period $20,555,321 $23,909,209
End of period (including
undistributed net investment
income/(loss) of ($4,175)
and $590, respectively) $22,602,505 $20,555,321
Shares:
Shares issued to common stockholders
under the dividend reinvestment
and cash purchase plan 90,273 105,525
Shares at beginning of year 2,264,097 2,158,842
Shares at end of year 2,354,370 2,264,097
See notes to financial statements
NAIC Growth Fund, Inc.
Financial Highlights (a)
six months ended
June 30, 2003 years ended December 31,
(unaudited) 2002 2001 2000 1999 1998
Net asset value at beginning
of year $9.08 $11.08 $11.96 $11.22 $10.86 $9.56
Net investment income - .02 .04 .09 .08 .12
Net realized and unrealized
gain
(loss) on investments .52 (1.48) (.25) 2.18 .76 1.68
Total from investment operations .52 (1.46) (.21) 2.27 .84 1.80
Distribution from:
Net investment income - (.02) (.04) (.09) (.09) (.11)
Realized gains - (.52) (.63) (1.44) (.39) (.39)
Total distributions - (.54) (.67) (1.53) (.48) (.50)
Net asset value at end of
period $9.60 $9.08 $11.08 $11.96 $11.22 $10.86
Per share market value,
end of period
last traded price (b) $11.00 $9.95 $10.75 $10.50 $10.00 $10.25
Total Investment Return
Annualized:
Based on market value
1 year 16.73% 2.10% 3.70% 30.90% 2.85% (25.42%)
from inception 11.08% 10.86% 11.66% 12.57% 10.28% 11.30%
Based on net asset value
1 year 11.78% (13.81%) (1.59%) 27.27% 7.75% 18.84%
from inception 10.12% 10.06% 12.42% 13.81% 13.15% 13.79%
Net Assets, end of year
(000's) $22,602.5 $20,555.3 $23,909.2 $23,927.8 $22,351.7 $20,701.2
Ratios to average net assets
annualized:
Ratio of expenses to
average net assets (c) 1.88% 1.61% 1.57% 1.25% 1.00% 0.83%
Ratio of net investment income
to average net assets (c) (0.04%) 0.17% 0.32% 0.74% .70% 1.13%
Portfolio turnover rate 5.50% 11.19% 1.77% 10.61% 4.20% 5.87%
(a) All per share data for all periods has been restated to reflect the effect
of a 15% stock dividend which was declared on August 18, 2000 and
paid on September 29, 2000 to shareholders of record on September 18,
2000.
(b) If there was no sale on the valuation date, the bid price for each such
date is shown.
(c) For the years ended 2000, 1999, & 1998, the adviser voluntarily
waived all or a portion of its fees. Had the adviser not done so in 2000,
1999, & 1998, the ratio of expenses to average net assets would have
been 1.44%, 1.37%, & 1.39%, and the ratio of net investment income to
average net assets would have been 0.55%, 0.32%, & 0.57%, for each of
these years.
NAIC Growth Fund, Inc.
Portfolio of Investments - June 30, 2003 (unaudited)
% Common Stock Shares Cost Market
3.0 Auto Replacement
O'Reilly Auto* 20,000 $242,606 $673,600
10.5 Banking
Citigroup 15,000 53,759 645,150
Comerica, Inc. 9,000 353,214 423,000
Bank One Corp. 10,000 331,370 375,200
Huntington Banc. 24,200 221,907 472,868
Synovus Financial 22,000 196,008 472,340
2.3 Building Products
Johnson Controls 6,000 96,895 513,000
2.7 Chemicals
RPM 25,000 287,099 332,500
Sigma Aldrich 5,000 94,938 272,600
3.7 Consumer Products
Colgate-Palmolive 10,000 200,450 576,800
Newell Rubbermaid 9,000 237,375 250,920
5.6 Electrical Equipment
Federal Signal 17,000 372,110 305,320
General Electric 22,000 378,341 629,640
Vishay Intertech* 25,000 245,379 338,500
1.9 Electronics
Diebold 10,000 269,188 423,500
8.9 Ethical Drugs
Eli Lilly 6,000 91,688 408,720
Johnson & Johnson 4,000 45,500 206,160
Merck & Co., Inc. 10,000 379,816 610,200
Pfizer, Inc. 23,000 442,195 805,000
1.4 Financial Services
State Street Boston 8,000 75,500 315,440
6.4 Food
Albertson's 12,000 349,573 233,520
ConAgra 14,000 254,915 332,360
Heinz, H.J. 10,000 309,522 328,000
McCormick & Co. 20,000 223,975 548,000
6.6 Hospital Supplies
Biomet Corp. 15,750 122,250 460,530
Invacare 10,000 245,375 331,400
Stryker Corp. 10,000 95,500 699,500
2.3 Industrial Services
Donaldson Co. 12,000 162,563 528,600
5.2 Insurance
AFLAC, Inc. 20,000 143,906 615,400
American Int'l Group 10,000 196,449 556,900
2.3 Machinery
Emerson Electric Co. 10,000 335,278 514,400
5.4 Multi Industry
Carlisle 8,000 318,631 343,840
Pentair 9,000 248,383 354,420
Teleflex 12,000 356,377 520,920
0.4 Office Equipment
Avery Dennison 2,000 105,444 96,900
2.0 Realty Trust
First Industrial
Realty Trust 14,000 394,963 443,240
1.1 Semiconductor
Intel 12,000 228,563 246,840
2.9 Soft Drinks
PepsiCo 15,000 335,649 657,600
2.6 Transportation
Sysco Corp. 20,000 142,750 591,000
77.2% Investment
Securities $9,185,404 $17,453,828
Short-term Investments
18.5 United States Treasury Bill,
Maturing 7/24/2003 $4,197,142
4.5 Misc. Cash Equivalents 1,006,479
23.0% $5,203,621
Total Investments $22,657,449
(0.2%) All other assets less liabilities (54,944)
100% TOTAL NET ASSETS $22,602,505
*Non-Income Producing Security
See notes to financial statements
Top Ten Holdings - NAIC Growth Fund, 6/30/03
Market % of
Company Value Portfolio Investments
Pfizer $805,000 3.6
Stryker 699,500 3.1
O'Reilly Auto 673,600 3.0
PepsiCo 657,600 2.9
Citigroup 645,150 2.9
General Electric 629,640 2.8
AFLAC 615,400 2.7
Merck & Co., Inc. 610,200 2.7
Sysco 591,000 2.6
Colgate-Palmolive 576,800 2.6
See notes to financial statements
NAIC Growth Fund, Inc.
Notes to Financial Statements (unaudited)
(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. Shareowners may elect to
participate in the Dividend Reinvestment and Cash Purchase Plan (see
Note 4).
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, which approximates fair value. 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. Interest income is accrued on a daily basis while dividends are
included in income on the ex-dividend date.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles in the united states
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.
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
shareowners. 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, 2003:
Gross unrealized appreciation $ 8,459,811
Gross unrealized depreciation (191,387)
Net unrealized appreciation $ 8,268,424
Federal income tax cost $ 9,185,404
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, shareowner 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 provides professional services to the fund.
The fees for those services amounted to $4,000 for the six months ended
June 30, 2003.
(3) MANAGEMENT ARRANGEMENTS
Investment Adviser - Growth Fund Advisor, Inc., 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.
Plan Agent - Standard Federal Bank (SFB) serves as the Fund's
custodian pursuant to the Custodian Agreement. As the Fund's
custodian, SFB 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.
American Stock Transfer & Trust Company serves as the Fund's
transfer agent and dividend disbursing agent pursuant to Transfer Agency and
Dividend Disbursement Agreements. American Stock Transfer & Trust
Company 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 shareowners 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
shareowners 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 shareowner
participant's account will be based upon the average purchase price for
all shares purchased.
(5) DISTRIBUTIONS TO SHAREOWNERS
No distributions were made this year to date. The tax character of
distributions paid during 2002 and 2001 was as follows:
Distributions paid from: 2002 2001
Ordinary income $43,435 $80,695
Long-term capital gain 1,181,894 1,370,543
1,225,329 1,451,238
As of June 30, 2003, the components of distributable earnings on a tax
basis were as
follows:
Undistributed ordinary income/(loss) ($3,585)
Unrealized appreciation 8,268,424
(6) Investment transactions
Purchases and sales of securities, other than short-term securities for the
period ended June 30, 2003, were $447,142 and $599,760, respectively.
(7) FINANCIAL HIGHLIGHTS
The Financial Highlights present a per share analysis of how the Fund's
net asset value has changed during the years presented. Additional
quantitative measures expressed in ratio form analyze important
relationships between certain items presented in the financial statements.
The Total Investment Return based on market value assumes that shareowners
bought into the Fund at the bid price and sold out of the Fund at the bid
price. In reality, shareowners 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.
2003 ANNUAL MEETING
The 2003 annual meeting of shareholders was held on April 17, 2003 for
the following
purposes:
1. To elect a Board of eight (8) Directors;
2. To ratify or reject the selection of Plante & Moran, PLLC as
independent auditors of the Fund for the calendar year ending
December 31, 2003.
The following Directors were elected for Proposal 1: Thomas O'Hara,
Kenneth Janke, Lewis Rockwell, Carl Holth, Peggy Schmeltz, Benedict Smith,
James Lane, and Luke Sims. For Proposal 2, shareholders ratified the
selection of Plante & Moran, PLLC as independent accountants of the Fund.
Tabulation Report
For Against Abstain Withheld
Proposal 1 - Election of
Directors
Thomas O'Hara 1,946,913 24,555
Kenneth Janke 1,953,143 18,325
Lewis Rockwell 1,947,051 24,417
Carl Holth 1,953,488 17,981
Peggy Schmeltz 1,950,474 20,996
Benedict Smith 1,946,850 24,617
James Lane 1,953,488 17,981
Luke Sims 1,952,611 18,857
Proposal 2 - Selection of
Plante & Moran, PLLC 1,929,325 14,389 27,752
Total shares issued and
outstanding on record date: 2,339,194
NAIC Growth Fund, Inc.
Board of Directors
Thomas E. O'Hara
Chairman,
Highland Beach, FL
Lewis A. Rockwell
Secretary,
Grosse Pointe Shores, MI
Carl A. Holth
Director,
Clinton Twp., MI
Kenneth S. Janke
President,
Bloomfield Hills, MI
Benedict J. Smith
Director,
Birmingham, MI
James M. Lane
Director,
Highland Beach, FL
Peggy L. Schmeltz
Director,
Bowling Green, OH
Luke E. Sims
Director,
Milwaukee, WI
Shareowner Information
The ticker symbol for the NAIC Growth Fund, Inc., on the Chicago
Stock Exchange is GRF. You may wish to visit the Chicago Stock
Exchange web site at www.chicagostockex.com.
The dividend reinvestment plan allows shareowners to automatically
reinvest dividends in Fund common stock without paying 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 American Stock
Transfer & Trust Company, P.O. Box 922 Wall Street Station, New
York, NY 10038, telephone 1-800-937-5449.
Questions about dividend checks, statements, account consolidation,
address changes, stock certificates or transfer procedures write American
Stock Transfer & Trust Company, P.O. Box 922 Wall Street Station,
New York, NY 10038, telephone 1-800-937-5449.
Shareowners or individuals wanting general information or having
questions, write NAIC Growth Fund, Inc., P.O. Box 220, Royal Oak,
Michigan 48068. Telephone 877-275-6242 or visit us at our website at
www.naicgrowthfund.com.
ITEM 2. CODE OF ETHICS.
Not applicable
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not aplicable
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED
END MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(i) As of August 13, 2003, an evaluation of the
effectiveness of the registrant's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the
Investment Company Act of 1940) was performed under
the supervision and with the participation of the registrant's
President (Principal Executive Officer) and Accountant
(person performing the functions of the Principal Financial
Officer). Based on that evaluation, the registrant's
President and Accountant concluded that the registrant's
controls and procedures are adequately and effectively
designed to insure that information required to be disclosed
by the registrant is recorded, processed, summarized and
reported within the time periods required by the
Commission's rules and forms, and that information
required to be disclosed in the reports that the registrant
files is accumulated and communicated to the registrant's
management, as appropriate, to allow timely decisions
regarding required disclosure.
(ii) There have been no significant changes in the
registrant's internal controls or in other factors that could
significantly affect these controls subsequent to the date of
their evaluation, and there were no corrective actions with
regard to significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS:
(A) Not applicable
(B)(1) Certification of principal executive officer as required by
Rule 30a-2 under the Act.
(B)(2) Certification of principal financial officer as required by
Rule 30a-2 under the Act.
(B)(3) Certification Pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
NAIC GROWTH FUND, INC.
By: /s/ Kenneth S. Janke
----------------------
Kenneth S. Janke
President
Date: August 22, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: /s/ Kenneth S. Janke
----------------------
Kenneth S. Janke
President
Date: August 22, 2003
By: /s/ Calvin George
---------------------
Calvin George
Accountant (Principal financial officer)
Date: August 22, 2003