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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: December 31, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
(logo)
NAIC Growth Fund, Inc.
Annual Report
December 31, 2004
www.naicgrowthfund.com
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
Report of Independent Public Accountants 14
Dividends and Distributions 15
NAIC Growth Fund, Inc., Board of Directors 19
Shareowner Information 23
Report to Shareowners:
December 31, 2004
Uncertainties continued to weigh on stocks through 2004 that
included a number of areas that investors had little control over.
Foremost was the Presidential election that was decided in November,
but was still overshadowed, once the results were known, by oil prices,
the war in Iraq, concern about the inflation rate and with it the
resultant possible increases in interest rates. All of this meant
that the price of stocks would rise one day and decline the next.
During the year, the Dow Jones Industrial Average was up 5.3%
while the Standard & Poor's 500 and the Nasdaq Composite fared better,
increasing 10.9% and 9.0%, respectively. The NAV for the NAIC
Growth Fund was up 9.3% when the year-end distribution is taken into
consideration. The vast majority of stocks held that pay dividends,
increased the pay out during the year. We expect to see that trend
continue into 2005 as companies are reporting fairly nice increases in
earnings.
In addition to the sales of Albertson's and Invacare reported in the
Semi-Annual Report, the managers sold American International Group
and a small holding of Hospira that had been spun-off from Abbott
Laboratories, resulting in capital gains of approximately $455,000 for
the year. New positions were made in Abbott Laboratories with 14,000
shares, Medtronic (11,000 shares) and Polymedica (10,000 shares). We
also added to our positions during the year in a number of other stocks.
They included 2,000 Avery Dennison (7,000); 7,000 Citigroup (22,000);
6,000 Colgate-Palmolive (16,000); 2,000 General Electic (24,000);
6,000 H.J. Heinz (16,000); 2,000 Newell Rubbermaid (18,000); 2,000
PepsiCo (17,000); 5,000 Pfizer (28,000); 6,000 State Street (14,000);
3,000 Synovus Financial (27,000); and 2,000 Teleflex (14,000).
We are pleased with the revenue and earnings progress being made
by a large percentage of the companies in the portfolio and look forward
to the return to some normality when prices reflect earnings and
potential earnings. Those periods are never in lock step, but it does
eventually return. The sooner, the better.
Thomas E. O'Hara Kenneth S. Janke
Chairman President
NAIC Growth Fund, Inc.
Statement of Assets and Liabilities
As of December 31, 2004
ASSETS
Investment securities
-at market value (cost $11,996,517) $24,084,502
Short-term investments
-at amortized cost 3,194,369
Cash and cash equivalents 76,065
Dividends & interest receivable 60,299
Prepaid insurance 14,082
Prepaid fees 4,875
27,434,192
LIABILITIES
Dividends payable 474,812
Accounts payable 66,740
Advisor fees payable 19,778 561,330
TOTAL NET ASSETS $26,872,862
SHAREOWNERS' EQUITY
Common Stock-par value $0.001 per share;
authorized 50,000,000 shares,
outstanding 2,427,506 shares $ 2,429
Additional Paid-in Capital 14,776,682
Undistributed net investment income 5,766
Unrealized appreciation of investments 12,087,985
SHAREOWNERS' EQUITY $26,872,862
NET ASSET VALUE PER SHARE $ 11.07
See notes to financial statements
NAIC Growth Fund, Inc.
Statement of Operations
For the Year Ended December 31, 2004
INVESTMENT INCOME
Interest $ 49,294
Dividends 443,261
492,555
EXPENSES
Advisory fees 192,144
Legal fees 70,000
Expense reimbursement 47,322
Audit fees 29,245
Insurance 24,140
Transfer agent 23,595
Printing 15,253
Other fees & expenses 13,381
Custodian fees 12,000
Other professional fees 12,000
Directors' fees & expenses 11,748
Mailing & postage 8,883
Annual shareowners' meeting 3,480
Total Expenses 463,191
Net investment income 29,364
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Realized gain on investments:
Proceeds from sale of
investment securities 1,409,034
Cost of investment
securities sold 954,014
Net realized gain on investments 455,020
Unrealized appreciation of investments:
Unrealized appreciation at
beginning of year 10,347,031
Unrealized appreciation at
end of year 12,087,985
Net change in unrealized
appreciation on investments 1,740,954
Net realized and unrealized
gain on investments 2,195,974
NET INCREASE FROM OPERATIONS $ 2,225,338
See notes to financial statements
NAIC Growth Fund, Inc.
Statements of Changes in Net Assets
For the years ended:
December 31, 2004 December 31, 2003
FROM OPERATIONS:
Net investment income $ 29,364 $ 12,596
Net realized gain on investments 455,020 806,949
Net change in unrealized
appreciation on investments 1,740,954 2,887,254
Net increase/(decrease) from
operations 2,225,338 3,706,799
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income 19,792 16,990
Net realized gain from investment
transactions 455,020 806,949
Total distributions 474,812 823,939
FROM CAPITAL STOCK TRANSACTIONS:
Dividend reinvestment 419,422 748,337
Cash purchases 201,717 314,679
Net increase from capital
stock transactions 621,139 1,063,016
Net increase/(decrease) in
net assets 2,371,665 3,945,876
TOTAL NET ASSETS:
Beginning of year $24,501,197 $20,555,321
End of year (including
undistributed net investment
income of $5,766 and ($3,805),
respectively) $26,872,862 $24,501,197
Shares:
Shares issued to common stockholders
under the dividend reinvestment
plan, cash purchase plan, and
follow-on offering 59,054 104,355
Shares at beginning of year 2,368,452 2,264,097
Shares at end of year 2,427,506 2,368,452
See notes to financial statements
NAIC Growth Fund, Inc.
Financial Highlights (a)
For the years ended:
2004 2003 2002 2001 2000
Net asset value at beginning
of year $10.34 $9.08 $11.08 $11.96 $11.22
Net investment income .01 .01 .02 .04 .09
Net realized and unrealized
gain (loss) on investments .92 1.60 (1.48) (.25) 2.18
Total from investment operations .93 1.61 (1.46) (.21) 2.27
Distribution from:
Net investment income (.01) (.01) (.02) (.04) (.09)
Realized gains (.19) (.34) (.52) (.63) (1.44)
Total distributions (.20) (.35) (.54) (.67) (1.53)
Net asset value at end of
period $11.07 $10.34 $9.08 $11.08 $11.96
Per share market value,
end of period
last traded price (b) $9.00 $9.50 $9.95 $10.75 $10.50
Total Investment Return
Annualized:
Based on market value
1 year (3.31%) (1.02%) 2.10% 3.70% 30.90%
from inception 8.97% 9.94% 10.86% 11.66% 12.57%
Based on net asset value
1 year 9.26% 18.05% (13.81%) (1.59%) 27.27%
from inception 10.53% 10.63% 10.06% 12.42% 13.81%
Net Assets, end of year
(000's) $26,872.9 $24,501.2 $20,555.3 $23,909.2 $23,927.8
Ratios to average net assets
annualized:
Ratio of expenses to
average net assets (c) 1.80% 1.79% 1.61% 1.57% 1.25%
Ratio of net investment income
to average net assets (c) .11% .06% .17% 0.32% 0.74%
Portfolio turnover rate 6.53% 11.31% 11.19% 1.77% 10.61%
Average commission rate paid
per share $0.095 $0.125 $0.125 $0.125 $0.125
(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 Sept. 18,
2000.
(b) If there was no sale on the valuation date, the bid price for each
such date is shown.
(c) For the year ended 2000, the adviser voluntarily waived all or a
portion of its fees. Had the adviser not done so in 2000, the ratio of
expenses to average net assets would have been 1.44%, and the ratio of
net investment income to average net assets would have been 0.55%, for
that year.
NAIC Growth Fund, Inc.
Portfolio of Investments - December 31, 2004
% Common Stock Shares Cost Market
3.4 Auto Replacement
O'Reilly Auto* 20,000 $242,606 $901,000
Total $901,000
13.2 Banking
Citigroup 22,000 368,635 1,059,960
Comerica, Inc. 10,000 404,669 610,200
Huntington Banc. 25,000 238,023 618,500
JP Morgan Chase 13,200 331,370 514,932
Synovus Financial 27,000 317,651 771,660
Total 3,575,252
2.8 Building Products
Johnson Controls 12,000 96,895 761,280
Total 761,280
3.0 Chemicals
RPM 25,000 287,099 491,500
Sigma Aldrich 5,000 94,937 302,300
Total 793,800
4.7 Consumer Products
Colgate-Palmolive 16,000 469,850 818,560
Newell Rubbermaid 18,000 452,267 435,420
Total 1,253,980
3.3 Electrical Equipment
General Electric 24,000 441,341 876,000
Total 876,000
2.1 Electronics
Diebold 10,000 269,187 557,300
Total 557,300
9.9 Ethical Drugs
Abbott Laboratories 14,000 599,572 653,100
Johnson & Johnson 15,000 614,274 951,300
Merck & Co., Inc. 10,000 359,350 321,400
Pfizer, Inc. 28,000 606,755 752,920
Total 2,678,720
2.6 Financial Services
State Street Boston 14,000 339,934 687,680
Total 687,680
7.2 Food
ConAgra 18,000 351,815 530,100
Heinz, H.J. 16,000 532,050 623,840
McCormick & Co. 20,000 223,975 772,000
Total 1,925,940
9.7 Hospital Supplies
Biomet Corp. 17,000 166,709 737,630
Medtronic 11,000 545,159 546,370
Polymedica 10,000 284,082 372,900
Stryker Corp. 20,000 95,500 965,000
Total 2,621,900
2.9 Industrial Services
Donaldson Co. 24,000 162,563 781,920
Total 781,920
3.0 Insurance
AFLAC, Inc. 20,000 143,906 796,800
Total 796,800
2.6 Machinery
Emerson Electric Co. 10,000 335,278 701,000
Total 701,000
9.4 Multi Industry
Carlisle 9,000 364,086 584,280
Pentair 28,000 456,569 1,219,680
Teleflex 14,000 445,435 727,160
Total 2,531,120
1.6 Office Supplies
Avery Dennison 7,000 384,044 419,790
Total 419,790
2.1 Realty Trust
First Industrial
Realty Trust 14,000 394,963 570,220
Total 570,220
3.3 Soft Drinks
PepsiCo 17,000 433,218 887,400
Total 887,400
2.8 Transportation
Sysco Corp. 20,000 142,750 763,400
Total 763,400
89.6% Investment
Securities $11,996,517 $24,084,502
Short-term Investments
11.9 United States Treasury Bills,
Maturing 1/27/2005 $3,194,369
0.6 Misc. Cash Equivalents 155,321
12.5% $3,349,690
Total Investments $27,434,192
(2.1) All other assets less liabilities (561,330)
100% TOTAL NET ASSETS $26,872,862
*Non-Income Producing Security
See notes to financial statements
Top Ten Holdings - NAIC Growth Fund, 12/31/04
Market % of
Company Value Portfolio Investments
Pentair $1,219,680 4.5
Citigroup 1,059,960 3.9
Stryker 965,000 3.6
Johnson & Johnson 951,300 3.5
O'Reilly Auto 901,000 3.4
PepsiCo 887,400 3.3
General Electric 876,000 3.3
Colgate-Palmolive 818,560 3.0
AFLAC 796,800 3.0
Donaldson Co. 781,920 2.9
See notes to financial statements
Summary of Investment Position
as % of Total Investments
12/31/2004
Picture (Pie Graph)
88% - Equities - Common Stock
11.7% - Fixed Income-U.S. Treasury Bill
0.3% - Cash
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. 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. If
no such prices are available on the valuation date, the Board of Directors
has determined the most recent market prices be used. 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 accounting principles generally accepted 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 December 31, 2004:
Gross unrealized appreciation $ 12,142,782
Gross unrealized depreciation (54,797)
Net unrealized appreciation $ 12,087,985
Federal income tax cost $ 11,996,517
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. The expenses of the follow-on offering are not considered an
expense of the Fund for purposes of the expense limitations of the
advisory agreement. In addition, during 2004 the Fund's investment
adviser paid for certain advertising and promotional expenses relating to
the Fund's follow-on offering for which it was not reimbursed.
A director of the Fund receives compensation for acting as secretary to
the Fund. The fees for those services amounted to $12,000 for the year
ended December 31, 2004.
(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.
Custodian and Plan Agent - Standard Federal Bank, NA (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 and Trust Company serves as the
Fund's transfer agent and dividend disbursing agent pursuant to Transfer
Agency and Dividend Disbursement Agreements. American Stock Transfer
and 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
On December 9, 2004, a distribution of $0.1956 per share aggregating
$474,812 was declared from net investment income and realized gains.
The dividend was paid on January 27, 2005, to shareowners of
record on December 20, 2004.
The tax character of distributions paid during 2004 and 2003 was as
follows:
2004 2003
Distributions paid from:
Ordinary income $ 19,792 $ 16,990
Long-term capital gain 455,020 806,949
$474,812 $823,939
As of December 31, 2004, the components of distributable earnings on a
tax basis were as follows:
Undistributed ordinary income $ 5,766
Unrealized appreciation $12,087,985
(6) Investment transactions
Purchases and sales of securities, other than short-term securities for
the year ended December 31, 2004, were $3,254,873 and $1,409,034,
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.
Report of Independent Public Accountants
To the Board of Directors and Shareowners of NAIC Growth Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
NAIC Growth Fund, Inc., including the portfolio of investments, as of
December 31, 2004 and the related statement of operations for the year
then ended, and the statement of changes in net assets and financial
highlights for each of the two years in the period then ended. These
financial statements and financial highlights are the reponsibility of the
Fund's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audit.
The financial highlights of NAIC Growth Fund, Inc. for each of the
three years in the period ended December 31, 2001 were audited by
other auditors who have ceased operations and whose most recent report
dated January 4, 2002 expressed an unqualified opinion on the financial
statements containing those financial highlights.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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. Our procedures included confirmation of securities owned
as of December 31, 2004 by correspondence with the custodian. 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 that our audit provides 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 NAIC Growth Fund, Inc. as of December 31, 2004, the results
of its operations for the year then ended, and the statement of changes
in net assets and financial highlights for each of the two years in the
period then ended, in conformity with accounting principles generally
accepted in the United States of America.
Plante & Moran, PLLC
January 11, 2005
NAIC Growth Fund, Inc.
Dividends and Distributions: Dividend Reinvestment and Cash Purchase
Plan
We invite you to join the Dividend Reinvestment and Cash
Purchase Plan (the "Plan"), which is provided to give you easy and
economical ways of increasing your investment in the Fund's shares.
THOSE SHAREOWNERS WHO HAVE ELECTED TO PARTICIPATE IN THE PLAN
NEED NOT DO ANYTHING FURTHER TO MAINTAIN THEIR ELECTION.
American Stock Transfer and Trust Company will act as the Plan
Agent on behalf of shareowners who are participants in the Plan.
All shareowners of the Fund (other than brokers and nominees of
financial institutions) who have not previously elected to participate in
the Plan or who have terminated their election may elect to become
participants in the Plan by filling in and signing the form of
authorization obtainable from American Stock Transfer and Trust
Company, the transfer agent for the Fund's shares and the shareowners'
agent for the Plan, and mailing it to American Stock Transfer and Trust
Company P.O. Box 922 Wall Street Station, New York, NY 10038. The
authorization must be signed by the registered shareowners of an
account. Participation is voluntary and may be terminated or resumed at
any time upon written notice from the participant received by the Plan
Agent prior to the record date of the next dividend. Additional
information regarding the election may be obtained from the Fund.
Dividend payments and other distributions to be made by the
Fund to participants in the Plan either will be paid to the Plan Agent in
cash (which then must be used to purchase shares in the open market) or,
will be represented by the delivery of shares depending upon which of
the two options would be the most favorable to participants, as hereafter
determined. On each date on which the Fund determines the net asset
value of the shares (a Valuation Date), and which occurs not more than
five business days prior to a date fixed for payment of a dividend or
other distribution from the Fund, the Plan Agent will compare the
determined net asset value per share with the market price per share. For
all purposes of the Plan, market price shall be deemed to be the highest
price bid at the close of the market by any market maker on the date
which coincides with the relevant Valuation Date, or, if no bids were
made on such date, the next preceding day on which a bid was made.
The market price was $9.00 on December 31, 2004. If the net asset value
in any such comparison is found to be lower than said market price, the
Plan Agent will demand that the Fund satisfy its obligation with respect
to any such dividend or other distribution by issuing additional shares to
the Participants in the Plan at a price per share equal to the greater of the
determined net asset value per share or ninety-five percent (95%) of the
market price per share determined as of the close of business on the
relevant Valuation Date. However, if the net asset value per share (as
determined above) is higher than the market price per share, then the
Plan Agent will demand that the Fund satisfy its obligation with respect
to any such dividend or other distribution by a cash payment to the Plan
Agent for the account of Plan participants and the Plan Agent then shall
use such cash payment to buy additional shares in the open market for
the account of the Plan participants, provided, however, that the Plan
Agent shall not purchase shares in the "open market" at a price in excess
of the net asset value as of the relevant Valuation Date. In the event the
Plan Agent is unable to complete its acquisition of shares to be
purchased in the "open market" by the end of the first trading day
following receipt of the cash payment from the Fund, any remaining
funds shall be used by the Plan Agent to purchase newly issued shares of
the Fund's common stock from the Fund at the greater of the determined
net asset value per share or ninety-five percent (95%) of the market price
per share as of the date coinciding with or next preceding the date of the
relevant Valuation Date.
Participants in the Plan will also have the option of
making additional cash payments to the Plan Agent, on a monthly basis,
for investment in the Fund's shares. Such payments may be made in any
amount from a minimum of $50.00 to a maximum of $1,000.00 per
month. The Fund may, in its discretion, waive the maximum monthly
limit with respect to any participant. At the end of each calendar month,
the Plan Agent will determine the amount of funds accumulated.
Purchases made from the accumulation of payments during any one
calendar month will be made on or about the first business day of the
following month (Investment Date). The funds will be used to purchase
shares of the Fund's common stock from the Fund if the net asset value
of the shares is lower than the market price as of the Valuation Date
which occurs not more than five business days prior to the relevant
Investment Date. In such case, such shares will be newly issued shares
and will be issued at a price per share equal to the greater of the
determined net asset value per share or ninety-five percent (95%) of the
market price per share. If the net asset value per share is higher than the
market price per share, then the Plan Agent shall use such cash payments
to buy additional shares in the open market for the account of the Plan
participants, provided, however, that the Plan Agent shall not purchase
shares in the "open market" at a price in excess of the net asset value as
of the relevant Valuation Date. In the event the Plan Agent is unable to
complete its acquisition of shares to be purchased in the "open market"
by the end of the Investment Date, any remaining cash payments shall be
used by the Plan Agent to purchase newly issued shares of the Fund's
common stock from the Fund at the greater of the determined net asset
value per share or ninety-five (95%) percent of the market price per
share as of the relevant Valuation Date. All cash payments received by
the Plan Agent in connection with the Plan will be held without earning
interest. To avoid unnecessary cash accumulations, and also to allow
ample time of receipt and processing by the Plan Agent, participants that
wish to make voluntary cash payments should send such payments to the
Plan Agent in such a manner that assures that the Plan Agent will
receive and collect Federal Funds by the end of the month. This
procedure will avoid unnecessary accumulations of cash and will enable
participants to realize lower brokerage commissions and to avoid
additional transaction charges. If a voluntary cash payment is not
received in time to purchase shares in any calendar month, such payment
shall be invested on the next Investment Date. A participant may
withdraw a voluntary cash payment by written notice to the Plan Agent
if the notice is received by the Plan Agent at least forty-eight hours
before such payment is to be invested by the Plan Agent.
American Stock Transfer and Trust Company as the Plan Agent
will perform bookkeeping and other administrative functions, such as
maintaining all shareowner accounts in the Plan and furnishing written
confirmation of all transactions in the account, including information
needed by shareowners for personal and tax records. Shares in the
account of each Plan participant will be held by the Plan Agent in
noncertificated form in the name of the participant, and each
shareowner's proxy will include those shares purchased pursuant to the
Plan and of record as of the record date for determining those
shareowners who are entitled to vote on any matter involving the Fund.
In case of shareowners such as banks, brokers or nominees, which hold
shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of shares certified from
time to time by such shareowners as representing and limited to the total
number of shares registered in the shareowner's name and held for the
account of beneficial owners who have elected to participate in the Plan.
There are no special fees or charges to participants other than
reasonable transaction fees and a termination fee of $15.00 plus 10
cents per share.
With respect to purchases from voluntary cash payments, the
Plan Agent will charge a pro rata share of the brokerage commissions, if
any. Brokerage charges for purchasing small blocks of stock for
individual accounts through the Plan are expected to be less than the
usual brokerage charges for such transactions, as the Plan Agent will be
purchasing shares for all participants in larger blocks and prorating the
lower commission rate thus applied.
The automatic reinvestment of dividends and distributions will
not relieve participants of any income tax liability associated therewith.
Experience under the Plan may indicate that changes are
desirable. Accordingly, the Fund reserves the right to amend or
terminate the Plan as applied to any voluntary cash payment received
and any dividend or distribution to be paid subsequent to a date specified
in a notice of the change sent to all shareowners at least ninety days
before such specified date. The Plan may also be terminated on at least
ninety days written notice to all shareowners in the Plan. All
correspondence concerning the Plan should be directed to American
Stock Transfer and Trust Company, P.O. Box 922 Wall Street Station,
New York, NY 10038.
Directors Who Are Interested Persons of the Fund and Officers
Thomas E. O'Hara
Age 89
Chairman of the Board and Director
Term of office
one year.
Served as Chairman as a director since 1989.
Principal Occupation(s) During Past 5 Years
Chairman Emeritus of the Board (since 2002) and Trustee (since 1951) of
the National Association of Investors Corporation, a nonprofit
corporation engaged in investment education ("NAIC") and Chairman
Emeritus (since 2002) and Director of the Growth Fund Advisor, Inc.
(since 1999), the Fund's investment adviser ("the Investment Adviser").
Chairman of NAIC (from 1951 to 2002) and Chariman of the Investment
Advisor (from 1999-2002).
Number of Portfolios in Fund Complex Overseen by Director**
One
Other Directorships Held by Director (Public Companies)
None.
Kenneth S. Janke
Age 70
Director, President and Treasurer
Term of office
one year.
Served as a President and a director since 1989.
Principal Occupation(s) During Past 5 Years
Chairman and Trustee of NAIC (since 2002) and Chairman, Chief Executive
Officer and Director (since 2002) and President and Treasurer
(since 1990) of the Investment Adviser. Chief Executive Officer of
NAIC (from 1981 to 2002).
Number of Portfolios in Fund Complex Overseen by Director**
One
Other Directorships Held by Director (Public Companies)
Director, AFLAC Incorporated (Insurance).
Lewis A. Rockwell
Age 86
Director and Secretary
Term of office
one year.
Served as a Secretary and as a director since 1989.
Principal Occupation(s) During Past 5 Years
Counsel to the law firm of Bodman LLP, counsel to the Fund, NAIC and
the Investment Adviser since their inception; Trustee (since 1956)
and Secretary (since 1987) of NAIC; Director; and Secretary of the
Investment Adviser (since 1999).
Number of Portfolios in Fund Complex Overseen by Director**
One
Other Directorships Held by Director (Public Companies)
None.
Peggy Schmeltz
Age 77
Director
Term of office
one year.
Served as director since 1989.
Principal Occupation(s) During Past 5 Years
Adult Education Teacher; Trustee of NAIC (since 1995); Director of
Bowling Green State University Foundation Board. Former member of
NYSE Advisory Committee (1992 to 1994).
Number of Portfolios in Fund Complex Overseen by Director**
One
Other Directorships Held by Director (Public Companies)
None.
*The address of each is the address of the Fund. Messrs. O'Hara, Janke
and Rockwell and Mrs. Schmeltz are interested persons of the Fund
within the meaning of Section 2(a)(19) of the Investment Company Act of
1940. Mr. O'Hara is an interested person because he is a trustee of NAIC
and a director of the Investment Adviser. Messrs. Janke and Rockwell are
interested persons because they are trustees and officers of NAIC and
directors and officers of the Investment Adviser, as noted above.
Mrs. Schmeltz is an interested person because she is a trustee of NAIC.
**The Fund is not part of any fund complex.
Directors Who Are Not Interested Persons of the Fund
Carl A. Holth
Age 72
Director
Term of office
one year.
Served as a director since 1989.
Principal Occupation(s) During Past 5 Years
Director, Sunshine Fifty, Inc., and Harrison Piping Supply, Inc.
Number of Portfolios in Fund Complex Overseen by Director**
One
Other Directorships Held by Director (Public Companies)
None.
Benedict J. Smith
Age 84
Director
Term of office
one year.
Served as a director since 1996.
Principal Occupation(s) During Past 5 Years
Retired; Director and Treasurer, Detroit Executive Service Corps;
Director, Vista Maria (a nonprofit charitable organization); Trustee,
Henry Ford Health System, Behavorial Sciences.
Number of Portfolios in Fund Complex Overseen by Director**
One
Other Directorships Held by Director (Public Companies)
None.
James M. Lane
Age 75
Director
Term of office
one year.
Served as a director since 1996.
Principal Occupation(s) During Past 5 Years
Retired; Director, Wheaton College, Baseball Chapel Inc. and Christian
Camps, Inc.
Number of Portfolios in Fund Complex Overseen by Director**
One
Other Directorships Held by Director (Public Companies)
None.
Luke E. Sims
Age 55
Director
Term of office
one year.
Served as a director since 2002.
Principal Occupation(s) During Past 5 Years
Partner in the law firm of Foley & Lardner LLP and Director,
Wilson-Hurd Mfg. Co.
Number of Portfolios in Fund Complex Overseen by Director**
One
Other Directorships Held by Director (Public Companies)
LaCrosse Footwear, Inc. (manufacturer and marketer of sporting and
industrial footwear).
*The address of each is the address of the Fund.
**The Fund is not part of any fund complex.
Additional information concerning the directors of the Fund is
contained in the Fund's Statement of Additional Information which is
available, without charge, upon request by calling (877) 275-6242.
Compensation
The following table sets forth the aggregate compensation paid to all
directors in 2004. Directors who are affiliated with the Investment
Adviser or the Investment Adviser's affiliates do not receive any
compensation for service as a director. The Chairman and President are
not compensated by the Fund, except for reimbursement for out-of-
pocket expenses relating to attendance at meetings and other operations
of the Fund. No other officer of the Fund received compensation from
the Fund in 2004 in excess of $60,000.
Directors Who Are Interested Persons of the Fund
Thomas E. O'Hara
Chairman and Director
Aggregate Compensation from Fund*
None
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from fund and Complex Paid to Directors**
None
Kenneth S. Janke
President, Treasurer and Director
Aggregate Compensation from Fund*
None
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from fund and Complex Paid to Directors**
None
Lewis A. Rockwell
Secretary and Director
Aggregate Compensation from Fund*
None
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from fund and Complex Paid to Directors**
None
Peggy Schmeltz
Director
Aggregate Compensation from Fund*
$1,425
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from fund and Complex Paid to Directors**
$1,425
Directors Who Are Not Interested Persons of the Fund
Carl A. Holth
Director
Aggregate Compensation from Fund*
$1,425
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from Fund and Complex Paid to Directors**
$1,425
James M. Lane
Director
Aggregate Compensation from Fund*
$1,425
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from Fund and Complex Paid to Directors**
$1,425
Benedict M. Smith
Director
Aggregate Compensation from Fund*
$1,425
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from Fund and Complex Paid to Directors**
$1,425
Luke E. Sims
Director
Aggregate Compensation from Fund*
$1,325
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from Fund and Complex Paid to Directors**
$1,325
*All amounts shown are for service as a director
**The Fund is not part of any fund complex.
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 and 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 and Trust Company, P.O. Box 922 Wall Street Station,
New York, NY 10038 Telephone 1-800-937-5449
The Fund files its complete schedule of portfolio holdings with
Securities and Exchange Commission for the first and third quarters of
each fiscal year on Form N-Q. The Fund's Form N-Q are available on
the Commission's website at http://sec.gov, on the Fund's website at
http://www.naicgrowthfund.com under the heading "SEC Edgar Filings"
and upon request by calling 1-877-275-6242. The Fund's Forms N-Q
may be reviewed and copied at the Commission's Public Reference
Room in Washington, D.C., and information on the operation of the
Public Reference Room may obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available (1) without charge, upon request, by calling 877-275-6242;
(2) on the Fund's website at www.naicgrowthfund.com; and (3) on the
Securities and Exchange Commission website at www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities during the most recent twelve month period ended June 30,
2004 is available (1) without charge, upon request by calling 1-877-275-
6242 or on the Fund's website at http://www.naicgrowthfund.com and
(2) on the Commission's website at http://www.sec.gov.
The board of directors of the Fund approved the continuation of the
investment advisory agreement with its investment advisor, Growth
Fund Advisor, Inc., in December 2004. In renewing the investment
advisory agreement, the board discussed the following material factors:
a comparison fof the fees paid to, and services rendered by, certain other
investment advisors of other funds historically selected by the board for
peer comparisons (including the reasonableness and low price of the fees
charged by Growth Fund Advisor, the favorable long-term investment
performance of the Fund, the utilization of, generally, the NAIC
investment principles and the NAIC stock study program for investment
decisions, the reasonableness of the costs of services provided by the
Growth Fund Advisor, Inc.), and the profits realized by Growth Fund
Advisor, Inc. during its tenure as investment advisor to the Fund. The
board also favorably considered that Growth Fund Advisor, Inc. uses a
broker based primarily on best execution while also looking at the value
of any research provided as well as financial responsibility and
responsiveness. The board deferred any discussion of the effect on fee
payable to Growth Fund Advisor, Inc. of any growth in assets resulting
in economies of scale until such time as the potential for significant asset
fund growth becomes realizable. Overall, the board determined that it
remains satisified with the nature, extent and quality of services, and the
investment performance provided by Growth Fund Advisor, Inc.
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.
The Fund has adopted a Code of Ethics for Financial Professionals,
which applies to the principal executive officer of the Fund, all
professionals serving as principal financial officer, the principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
by Fund or a third party, and the members of the Fund's Board of
Directors. The Code of Ethics for Financial Professionals has been
posted on the Fund's website at www.naicgrowthfund.com
There have been no amendments to or waivers from any provisions of the
Code of Ethics for Financial Professionals since its adoption.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Fund's Board of Directors has determined that the Fund has at least
one audit committee financial expert serving on its audit committee,
Benjamin J. Smith, who is independent.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees. Plante & Moran, LLP was paid $16,250 for the fiscal
year ending December 31, 2004 and $13,600 for the fiscal year ending
December 31, 2003 by the Fund for audit fees.
Audit-Related Fees. Plante & Moran, LLP was not paid any
audit-related fees by the Fund in either of the last two fiscal years.
Tax Fees. Plante & Moran, LLP was paid $4,200 for the fiscal
year ending December 31, 2004 and $3,180 for fiscal year ending
December 31, 2003 by the Fund for tax fees, for services in connection
with the preparation of the Fund's tax returns and assistance with IRS
notice and tax matters.
All Other Fees. Plante & Moran, LLP was paid $6,500 for the
fiscal year ending December 31, 2004 by the Fund for all other fees and
$6,500 for the fiscal year ended December 31, 2003 by the Fund for all
other fees, for services in connection with (i) the review of registration
documents and consent procedures and a comfort letter and related
procedures with respect to the Fund's registration statement filed
with the Securities and Exchange Commission for its follow-on
offering, and (ii) assistance with year-end dividend calculation and
reporting.
"Audit fees" are fees paid by the Fund to Plante & Moran, PLLC
for professional services for the audit of our financial statements, or
for services that are usually provided by an auditor in connection with
statutory and regulatory filings and engagements. "Audit-related fees"
are fees for assurance and related services that are reasonably related
to the performance of the audit or review of financial statements.
"Tax fees" are fees for tax compliance, tax advice and tax planning.
All other fees are fees billed for any services not included in the
first three categories.
None of the services covered under the captions "Audit Related
Fees," "Tax Fees," and All Other Fees with Respect to Plante & Moran
were provided under the de minimis exception to audit committee
approval of 17 CFR 210.2-01(c) 7(i)(C) and (ii). Plante & Moran, PLLC
was not engaged during the last two fiscal years to provide non-audit
services to Investment Adviser and its affiliates that provide ongoing
services to the Fund that relate directly to the operations and financial
reporting of the Fund ("Other Non-Audit Services"). Under the audit
committee charter, the audit committee is to pre-approve all non-audit
services of the Fund and all Other Non-Audit Services. The audit
committee has not adopted "pre-approval policies and procedures" as
such term is used in 17 CFR 210.2-01(c)(7)(i)(B) and (ii).
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
The Fund's Board of Directors has separately-designated standing
audit committee established in accordance with Section 3(a)(58)(A)
of the Securities Exchange Act of 1934. The members of the
committee are Carl A. Holth, Benjamin J. Smith and James M. Lane.
ITEM 6. SCHEDULE OF INVESTMENTS
Funds schedule of investments is included in the Report to Shareholders
under item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED
END MANAGEMENT INVESTMENT COMPANIES.
GROWTH FUND ADVISOR, INC.
PROXY VOTING POLICIES AND PROCEDURES
BACKGROUND
Growth Fund Advisor, Inc., a Michigan corporation (the
"Advisor"), is the investment advisor for NAIC Growth Fund, Inc., a
Maryland corporation which is an investment company registered under
the Investment Company Act of 1940 (the "Fund"). The Fund and the
Advisor, as successor to National Association of Investors Corporation,
are parties to an Investment Advisory Agreement dated October 2, 1989
(the "Advisory Agreement"). The Fund is the Advisor's sole advisory
client.
The Advisor hereby adopts the following policies and procedures
effective as of August 1, 2003, which it believes are reasonably designed
to ensure that proxies are voted in the best interest of the Fund, in
accordance with its fiduciary duties and Rule 206(4)-6 under the
Investment Advisers Act of 1940 (the "Advisers Act"). The Advisor's
authority to vote the proxies of the Fund is established through the
Advisory Agreement, and these proxy voting guidelines have been
tailored to reflect this contractual obligation and the Advisor's fiduciary
duty to the Fund and its shareholders.
POLICY
The Advisor's proxy voting procedures are designed and are to
be implemented in a way that is reasonably expected to ensure that
proxy matters are handled in the best interest of the Fund and its
shareholders. While the guidelines included in the procedures are
intended to provide a benchmark for voting standards, each vote is
ultimately cast on a case-by-case basis, taking into consideration the
Advisor's fiduciary duty to the Fund and all other relevant facts and
circumstances at the time of the vote (such that these guidelines may be
overridden to the extent the Advisor deems appropriate).
PROCEDURES
RESPONSIBILITY AND OVERSIGHT
The Chief Executive Officer of the Advisor or his designee (the
"CEO") is responsible for administering and overseeing the proxy voting
process, proxy gathering, and for determining appropriate voting
positions on each proxy utilizing any applicable guidelines contained in
these procedures.
PROXY GATHERING
All persons associated with the Advisor or the Fund that receive
proxy materials on behalf of the Fund ("Proxy Recipients") shall be
instructed to forward them to the CEO on a timely basis.
PROXY VOTING
Once proxy materials are received by the CEO, the following
shall occur:
1. The CEO shall review the proxy materials to determine if
there are any material conflicts of interest (see the
conflicts of interest section of these procedures for further
information on determining material conflicts of interest).
2. If a material conflict of interest exists, the CEO shall seek
voting instructions from an independent third party or
shall inform the Board of the Fund of the conflict and
seek voting instructions from the Board of the Fund. The
CEO shall keep a written record of each such voting
instruction which shall include the name(s) of the person
giving the instruction, the date(s) of the instruction, and
determination.
3. The CEO shall determine votes on a case-by-case basis,
taking into account the voting guidelines contained in
these procedures.
4. The CEO's staff shall vote the proxy pursuant to the
instructions received in (2) or (3) and return the voted
proxy as indicated in the proxy materials.
TIMING
The Advisor's personnel shall act in such a manner to ensure
that, absent special circumstances, the proxy gathering and proxy voting
steps noted above can be completed before the applicable deadline for
returning proxy votes.
RECORDKEEPING
The Advisor shall maintain the records of proxies voted required
pursuant to Rule 204-2 under the Advisers Act. These records shall
include (except as otherwise provided in such rule):
1. A copy of the Advisor's proxy voting policies and
procedures.
2. Copies of proxy statements received regarding the Fund's
securities.
3. A copy of any document created or received by the
Advisor that was material to making a decision how to
vote proxies or that memorializes the basis for that
decision.
4. A copy of each written request from the Fund for
information on how the Advisor voted proxies on behalf
of the Fund, and a copy of any written response by the
Advisor to any (written or oral) request from the Fund on
how the Advisor voted proxies on behalf of the Fund.
5. A proxy log including:
a. Issuer name;
b. Exchange ticker symbol of the issuer's shares to
be voted (if available through reasonably
practicable means);
c. Council on Uniform Securities Identification
Procedures ("CUSIP") number for the shares to be
voted (if available through reasonably practicable
means);
d. A brief identification of the matter voted on;
e. Whether the matter was proposed by the issuer or
by a shareholder of the issuer;
f. Whether a vote was cast by the Advisor on the
matter;
g. A record of how the vote was cast; and
h. Whether the vote was cast for or against the
recommendation of the issuer's management
team.
Records shall be maintained in an easily accessible place for five years,
the most recent two years in the Advisor's offices.
DISCLOSURE
The Fund will be provided a copy of these policies and
procedures, as well as periodic reports on how its proxies have been
voted. These reports shall be provided no less frequently than annually
and upon the request of the Fund to the CEO, and shall include on a
timely basis all information required to be disclosed with respect to the
Fund's proxies on the Fund's Form N-PX to be filed each year with the
Securities and Exchange Commission. The Advisor agrees that the Fund
may disclose these policies and procedures as required by applicable
laws and regulations and as otherwise agreed by the CEO.
CONFLICTS OF INTEREST
All proxies are reviewed by the CEO for material conflicts of
interest between the shareholders of the Fund, on one hand, and those of
the Advisor, its affiliates or the Fund's underwriter, on the other. Issues
to be reviewed include, but are not limited to:
1. Whether the Advisor (or, to the extent required to be
considered by applicable law, its affiliates or the Fund's
underwriter) has an interest in the company;
2. Whether the Advisor or an officer or director of the
Advisor (together, "Voting Persons") is, is a close
relative of, or has a personal or business relationship with
the company, an executive, director or person who is a
candidate for director of the company or is a participant
in a proxy contest; and
3. Whether there is any other business or personal
relationship where a Voting Person has a personal interest
in the outcome of the matter before shareholders.
VOTING GUIDELINES
The Advisor's substantive voting decisions turn on the particular
facts and circumstances of each proxy vote and are evaluated by the
CEO on a case-by-case basis. The examples outlined below are meant
only as guidelines to aid in the decision making process.
Guidelines are grouped according to the types of proposals
generally presented to shareholders. Part I deals with proposals which
have been approved and are recommended by a company's board of
directors; Part II deals with proposals submitted by shareholders for
inclusion in proxy statements; Part III addresses issues relating to voting
shares of investment companies; and Part IV addresses unique
considerations pertaining to foreign issuers.
I. Board Approved Proposals
The vast majority of matters presented to shareholders for a vote
involve proposals made by a company itself that have been approved
and recommended by its board of directors. In view of the enhanced
corporate governance practices currently being implemented in public
companies, the Advisor generally votes in support of decisions reached
by independent boards of directors. More specific guidelines related to
certain board-approved proposals are as follows:
1. Matters relating to the Board of Directors
The Advisor votes proxies for the election of the company's
nominees for directors and for board-approved proposals on other
matters relating to the board of directors with the following exceptions:
a. Votes are withheld for the entire board of
directors if the board does not have a majority of
independent directors or the board does not have
nominating, audit and compensation committees
composed solely of independent directors.
b. Votes are withheld for any nominee for director
who is considered an independent director by the
company and who has received compensation
(directly or indirectly) from the company other
than for service as a director.
c. Votes are withheld for any nominee for director
who attends less than 75% of board and
committee meetings without valid reasons for
absences.
d. Votes are cast on a case-by-case basis in contested
elections of directors.
2. Matters relating to Stock Option Plans and Other
Executive Compensation Issues
The Advisor generally favors compensation programs that relate
executive compensation to a company's long-term performance. Votes
are cast on a case-by-case basis on board-approved proposals relating to
stock option plans and executive compensation, except as follows:
a. Except where the Advisor is otherwise
withholding votes for the entire board of directors,
the Advisor votes for stock option plans that will
result in an annual dilution of 10% or less.
b. The Advisor votes against stock option plans or
proposals that permit replacing or re-pricing of
underwater options.
c. The Advisor votes against stock option plans that
permit issuance of options with an exercise price
below the stock's current market price.
d. Except where the Advisor is otherwise
withholding votes for the entire board of directors,
the Advisor votes for employee stock purchase
plans that limit the discount for shares purchased
under the plan to no more than 15% of their
market value, have an offering period of 27
months or less and result in dilution of 10% or
less.
3. Matters relating to Capitalization
The management of a company's capital structure involves a
number of important issues, including cash flows, financing needs and
market conditions that are unique to the circumstances of each company.
As a result, the Advisor votes on a case-by-case basis on board-approved
proposals involving changes to a company's capitalization, including
increases and decreases of capital and preferred stock issuances, except
where the Advisor is otherwise withholding votes for the entire board of
directors. Generally:
a. The Advisor votes for proposals relating to the
authorization of additional common stock.
b. The Advisor votes for proposals to effect stock
splits (excluding reverse stock splits).
c. The Advisor votes for proposals authorizing share
repurchase programs.
4. Matters relating to Changes in State of Incorporation,
Mergers and Other Corporate Restructurings, and Social
and Corporate Responsibility Issues
The Advisor votes these issues on a case-by-case basis on board-
approved transactions.
5. Matters relating to Anti-Takeover Measures
The Advisor votes against board-approved proposals to adopt
anti-takeover measures such as staggered boards, poison pills and
supermajority provisions except as follows:
a. The Advisor votes on a case-by-case basis on
proposals to ratify or approve shareholder rights
plans.
b. The Advisor votes on a case-by-case basis on
proposals to adopt fair price provisions.
6. Other Business Matters
The Advisor votes for board-approved proposals approving such
routine business matters such as changing the company's name, ratifying
the appointment of auditors and procedural matters relating to the
shareholder meeting. Generally:
a. The Advisor votes on a case-by-case basis on
proposals to amend a company's charter or
bylaws.
b. The Advisor votes against authorization to
transact other unidentified, substantive business at
the meeting.
II. Shareholder Proposals
The regulations of the Securities and Exchange Commission
permit shareholders to submit proposals for inclusion in a company's
proxy statement. These proposals generally address social and corporate
responsibility issues and seek to change some aspect of a company's
corporate governance structure or to change some aspect of its business
operations. The Advisor votes in accordance with the recommendation
of the company's board of directors on all shareholder proposals, except
as follows:
1. The Advisor votes for shareholder proposals to require
shareholder approval of shareholder rights plans.
2. The Advisor votes for shareholder proposals that are
consistent with the Advisor's proxy voting guidelines for
board-approved proposals.
3. The Advisor votes on a case-by-case basis on other
shareholder proposals where the Advisor is otherwise
withholding votes for the entire board of directors.
III. Voting Shares of Investment Companies
The Advisor may utilize shares of open or closed-end investment
companies in accordance with the Fund's investment guidelines.
Shareholder votes for investment companies that fall within the
categories listed in Parts I and II above are voted in accordance with
those guidelines.
1. The Advisor votes on a case-by-case basis on proposals
relating to changes in the investment objectives of an
investment company taking into account the original
intent of the fund and the role the fund plays in the
Fund's portfolio.
2. The Advisor votes on a case-by-case basis on all
proposals that would result in increases in expenses (e.g.,
proposals to adopt 12b-1 plans, alter investment advisory
arrangements or approve fund mergers) taking into
account comparable expenses for similar funds and the
services to be provided.
IV. Voting Shares of Foreign Issuers
In the event the Advisor is required to vote on securities held in
foreign issuers, i.e. issuers that are incorporated under the laws of a
foreign jurisdiction and that are not listed on a U.S. securities exchange
or the NASDAQ stock market, the following guidelines are used, which
are premised on the existence of a sound corporate governance and
disclosure framework. These guidelines, however, may not be
appropriate under some circumstances for foreign issuers and therefore
apply only where applicable.
1. The Advisor votes for shareholder proposals calling for a
majority of the directors to be independent of
management.
2. The Advisor votes for shareholder proposals seeking to
increase the independence of board nominating, audit and
compensation committees.
3. The Advisor votes for shareholder proposals that
implement corporate governance standards similar to
those established under U.S. federal law and the listing
requirements of U.S. stock exchanges, and that do not
otherwise violate the laws of the jurisdiction under which
the company is incorporated.
4. The Advisor votes on a case-by-case basis on proposals
relating to the issuance of common stock.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to annual reports for the period ended December 31, 2004.
ITEM 9. PURCHASE OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
During the period covered by this report, no purchases were made by or
on behalf of the registrant or any "affiliated purchaser" (as defined
in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934 (the
"Exhange Act") of shares of registrant's equity securities that are
registered by the registrant pursuant to Section 12 of the Exchange Act.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No changes to the procedures by which shareholders may recommend
nominees to the registrant's board of directors have been implemented
after registrant last provided disclosure in response to Item
7(d)(2)(ii)(g) of schedule 14A in registrant's 2004 proxy statement
ITEM 11. CONTROLS AND PROCEDURES.
(i) As of February 18, 2005, an evaluation of the
effectiveness of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(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 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, including its Principal Executive
Officer and Principal Financial Officer,as appropriate, to allow
timely decisions regarding required disclosure.
(ii) There has been no change in the registrants's internal
control over financial reporting (as defined in Rule 30a-3(d) under
the Investment Company Act) that occurred during the 6 months
ending December 31, 2004 that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
ITEM 12. EXHIBITS:
(A)(1) Not applicable.
(A)(2) Separate certification of principal executive officer and
principal financial officer as required by Rule 30a-2(a) under
the Investment Company Act of 1940.
(B) Certification Pursuant to Rule 30a-2(b) under the Investment
Company Act of 1940 and 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: March 3, 2005
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: March 3, 2005
By: /s/ Calvin George
---------------------
Calvin George
Accountant (Principal Financial Officer)
Date: March 3, 2005