Omb Approval
Omb Number:
3235-0570
Expires:
September 30, 2007
Estimated
average burden
hours per
response: 19.4
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, Chairman and 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, 2006
Item 1. Reports to Stockholders
NAIC Growth Fund, Inc.
Annual Report
12-31-2006
www.naicgrowthfund.com
Contents
Report to Shareowners 3
Statement of Assets and Liabilities 4
Statement of Operations 5
Statements of Changes in Net Assets 6
Financial Highlights 7
Portfolio of Investments 8
Notes to Financial Statements 11
Report of Independent Public Accountants 15
Dividend Reinvestment and Cash Purchase Plan 16
NAIC Growth Fund, Inc., Board of Directors 20
Director Compensation 22
Shareowner Information 23
Page 2
Report to Shareowners:
December 31, 2006
This marks the last Report to Shareowners that
I will write as I am retiring as Chairman and President of the
Fund effective with the 2007 annual meeting. It has been a
challenge to be portfolio manager of a closed-end mutual
fund, but it has also been an enjoyable experience.
In addition to my retirement, Thomas E.
O'Hara has also decided to retire at the same time. Both of
us have served together since the Fund was organized and I
will miss our personal and professional association that we
have shared for many years.
One of the mandates by the Board of Directors
during the past year was to return more to shareowners in the
form of dividends. The Fund had a number of holdings with
potential capital gains and we did take advantage of those
prices to make some sales and create long-term capital gains.
Through the year, we sold all of our holdings
in ConAgra Foods, Diebold, Donaldson, First Industrial
REIT, Johnson Controls, H.J. Heinz, Merck, Carlisle,
Wendy's and Pentair. In addition, we reduced our holdings
in O'Reilly Automotive with the sale of 10,000 shares. The
result was that the Fund was able to pay a dividend of
$1.1865 per share.
We also added to some of our holdings with
the purchase of 2,000 Abbott Laboratories, 11,000 Biomet,
12,000 Jack Henry & Associates, 5,000 Johnson & Johnson,
3,000 Medtronic, 4,000 McCormick, 12,000 Sysco and 1,000
Washington Mutual.
During 2006, the Dow Jones Industrial
Average increased 16.3% and the S&P 500 was up 13.6%.
Taking into consideration the dividend paid semi-annually to
shareowners, the NAIC Growth Fund NAV was up 12.9%.
Tom O'Hara and I continue to be shareowners
and we wish the Fund managers and the Board of Directors
the best of luck in guiding it in the years to come. It has been
my pleasure to serve you in each capacity that has been
assigned to me since the Fund was organized.
/s/ Kenneth S. Janke
Kenneth S. Janke
Chairman and President
Page 3
NAIC Growth Fund, Inc.
Statement of Assets and Liabilities
As of December 31, 2006
ASSETS
Investment securities
- at market value (cost $12,702,212) $ 24,571,920
Short-term investments
- at amortized cost 1,996,895
Cash and cash equivalents 1,975,610
Dividends and interest receivable 59,895
Prepaid insurance 27,325
28,631,645
LIABILITIES
Dividends payable 1,916,939
Accounts payable 38,475
Advisor fees payable 15,827
1,971,241
TOTAL NET ASSETS $ 26,660,404
SHAREOWNERS' EQUITY
Common stock-par value $0.001 per
share; authorized 50,000,000 shares,
outstanding 2,792,336 shares $ 2,794
Additional paid-in capital 14,783,011
Undistributed net investment income 4,891
Unrealized appreciation of investments 11,869,708
SHAREOWNERS' EQUITY $ 26,660,404
NET ASSET VALUE PER SHARE $ 9.55
See notes to financial statements
Page 4
NAIC Growth Fund, Inc.
Statement of Operations
For the year Ended December 31, 2006
INVESTMENT INCOME
Interest $ 107,085
Dividends 534,208
641,293
EXPENSES
Advisory fees 200,625
Legal fees 88,026
Insurance 25,846
Transfer agent 22,802
Audit fees 20,800
Directors' fees and expenses 12,025
Custodian 11,944
Other fees & expenses 9,415
Printing 7,440
Mailing and postage 6,966
Annual shareowners' meeting 2,537
Taxes 600
Total Expenses 409,026
Net investment income 232,267
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Realized gain on investments:
Proceeds from sale of
investment securities 6,657,295
Cost of investment
securities sold 3,575,516
Net realized gain
on investments 3,081,779
Unrealized appreciation of investments:
Unrealized appreciation at
beginning of year 11,969,788
Unrealized appreciation
at end of period 11,869,708
Net change in unrealized
appreciation on investments (100,080)
Net realized and
unrealized gain
on investment 2,981,699
NET INCREASE FROM OPERATIONS $3,213,966
See notes to financial statements
Page 5
NAIC Growth Fund, Inc.
Statements of Changes in Net Assets
For the years ended:
December 31, 2006 December 31, 2005
FROM OPERATIONS:
Net investment income $232,267 $191,572
Net realized gain on
investments 3,081,779 266,791
Net change in unrealized
appreciation on investments (100,080) (118,197)
Net increase/(decrease)
from operations 3,213,966 340,166
DISTRIBUTIONS TO STOCKHOLDERS FROM:
Net investment income 231,328 193,385
Net realized gain from
investment transactions 3,081,779 266,791
Total distributions 3,313,107 460,176
FROM CAPITAL STOCK TRANSACTIONS:
Dividend reinvestment -- --
Cash purchases -- 6,693
Net increase from capital
stock transactions -- 6,693
Net increase/(decrease)
in net assets (99,141) (113,317)
TOTAL NET ASSETS:
Beginning of year $26,759,545 $26,872,862
End of period
(including undistributed
net investment income of
$4,891 and $3,952,
respectively) $26,660,404 $26,759,545
Shares:
Shares issued to common
stockholders under the dividend
reinvestment plan and cash
purchase plan -- 364,830
Shares at beginning of year 2,792,336 2,427,506
Shares at end of period 2,792,336 2,792,336
See notes to financial statements
Page 6
NAIC Growth Fund, Inc.
Financial Highlights (a)
For the years ended:
2006 2005 2004 2003 2002
Net asset value at
beginning of year $9.58 $9.63 $8.99 $7.90 $9.63
Net investment income .08 .07 .01 .01 .02
Net realized and unrealized
gain (loss) on investments 1.07 .05 .81 1.39 (1.28)
Total from investment
operations 1.15 .12 .82 1.40 (1.26)
Distribution from:
Net investment income (.08) (.07) (.01) (.01) (.02)
Realized gains (1.10) (.10) (.17) (.30) (.45)
Total distributions (1.18) (.17) (.18) (.31) (.47)
Net asset value at end
of period $9.55 $9.58 $9.63 $8.99 $7.90
--------------------------------------------------------------------
Per share market value,
end of period
last traded price (b) $8.00 $8.70 $7.83 $8.26 $8.65
Total Investment Return:
Based on market value
1 year (annualized) 4.15% 13.20% (3.31%) (1.33%) 2.10%
5 year 2.81% 2.70% 6.65% 7.81% 1.79%
10 year 6.91% 9.01% 13.45% 13.77% 14.28%
from inception 9.11% 9.44% 9.18% 10.17% 11.15%
Based on net asset value
1 year (annualized) 12.91% 1.34% 9.26% 17.69% (13.81%)
5 year 4.87% 2.00% 5.64% 5.42% 5.64%
10 year 9.26% 8.97% 13.48% 12.83% 11.40%
from inception 10.29% 10.12% 10.75% 10.86% 10.34%
Net assets, end
of year (000's) $26,660.4 $26,759.5 $26,872.9 $24,501.2 $20,555.3
Ratios to average net assets annualized:
Ratio of expenses to
average net assets 1.50% 1.46% 1.80% 1.79% 1.61%
Ratio of net investment income
to average net assets 0.85% 0.72% 0.11% 0.06% 0.17%
Portfolio turnover rate 6.73% 3.51% 6.53% 11.31% 11.19%
Average commission rate
paid per share $0.063 $0.075 $0.095 $0.125 $0.125
(a) All per share data for 2002-2005 has been restated to
reflect the effect of a 15% stock dividend which
was declared on April 21, 2005 and paid on May 23, 2005 to
shareholders of record on May 13, 2005.
(b) If there was no sale on the valuation date, the bid
price for each such date is shown. Price obtained from
Chicago Stock Exchange.
See notes to financial statements
Page 7
NAIC Growth Fund, Inc.
Portfolio of Investments - December 31, 2006 (audited)
% Common Stock Shares Cost Market
3.6 Auto Replacement
O'Reilly Auto* 30,000 $189,637 $961,800
Total $961,800
14.8 Banking
Citigroup 22,000 368,635 1,225,400
Comerica, Inc. 10,000 404,669 586,800
Huntington Banc. 25,000 238,023 593,750
JP Morgan Chase 15,000 396,347 724,500
Synovus Financial 27,000 317,651 832,410
Total 3,962,860
4.0 Beverages - Soft Drinks
PepsiCo 17,000 433,218 1,063,350
Total 1,063,350
4.0 Chemicals
RPM 25,000 287,099 522,250
Sigma Aldrich 7,000 213,317 544,040
Total 1,066,290
3.9 Consumer Products
Colgate-Palmolive 16,000 469,850 1,043,840
Total 1,043,840
3.1 Electrical Equipment
General Electric 24,000 441,341 893,040
Total 893,040
11.4 Ethical Drugs
Abbott Laboratories 20,000 860,150 974,200
Johnson & Johnson 20,000 915,045 1,320,400
Pfizer, Inc. 28,000 606,755 725,200
Total 3,019,800
8.8 Financial Services
CIT Group 10,000 392,785 557,700
State Street 16,000 436,700 1,079,040
Washington Mutual 15,000 609,130 682,350
Total 2,319,090
Page 8
3.5 Food
McCormick & Co. 24,000 347,055 925,440
Total 925,440
4.4 Food Wholesale
Sysco 32,000 507,179 1,176,320
Total 1,176,320
14.2 Hospital Supplies
Biomet Corp. 28,000 573,428 1,155,560
Medtronic 17,000 850,214 909,670
Polymedica 12,000 346,237 484,920
Stryker Corp. 22,000 180,012 1,212,420
Total 3,762,570
3.5 Insurance
AFLAC, Inc. 20,000 143,906 920,000
Total 920,000
2.7 Information Technology
Jack Henry & Assoc. 34,000 626,878 727,600
Total 727,600
3.3 Machinery
Emerson Electric Co. 10,000 335,278 838,100
Total 838,100
3.9 Multi Industry
Teleflex 16,000 545,608 1,032,960
Total 1,032,960
3.1 Office Supplies
Avery Dennison 12,000 666,064 815,160
Total 815,160
Page 9
92.2% Investment
Securities $12,702,212 $24,571,920
Short-term Investments
7.5 United States Treasury Bills,
Maturing 1/11/2007 $1,996,895
7.7 Misc. Cash Equivalents 2,062,830
------ ---------------
15.2% $4,059,725
Total Investments $28,631,645
(7.4) All other assets less liabilities (1,971,241)
------ ---------------
100% TOTAL NET ASSETS $26,660,404
NAIC Growth Fund, Inc.
Portfolio of Investments - December 31, 2006 (audited)
Top Ten Holdings - NAIC Growth Fund, 12/31/2006
Company Market Value % of Portfolio
Investments
Johnson & Johnson $1,320,400 5.4
Citigroup 1,225,400 5.0
Stryker 1,212,420 4.9
Sysco 1,176,320 4.8
Biomet Corp. 1,155,560 4.7
State Street 1,079,040 4.4
Pepsico 1,063,350 4.3
Colgate-Palmolive 1,043,840 4.2
Teleflex 1,032,960 4.2
Abbott Laboratories 974,200 4.0
Summary of Investment Position as % of Total
Investmnets 12/31/2006
(Graph)
Equities-Common Stock 86.1%
Fixed Income-U.S.
Treasury Bills 7.0%
Cash 6.9%
Page 10
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.
Page 11
The following information is based upon Federal income tax
cost of portfolio investments as of December 31, 2006:
Gross unrealized appreciation $ 11,869,708
Gross unrealized depreciation -
Net unrealized appreciation $ 11,869,708
Federal income tax cost $ 12,702,212
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. In addition, the investment adviser has
historically paid the Fund's administrative and clerical cost
from its monthly fee.
(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 - LaSalle Bank, NA (LB)
serves as the Fund's custodian pursuant to the Custodian Agreement.
As the Fund's custodian, LB receives fees 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.
Page 12
(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, cash dividends and voluntary cash payments
will be invested in shares purchased in the open market.
In the event the Plan agent is unable to complete its
acquisition of shares to be purchased on the open market
by the end of the thirtieth (30th) day following receipt of
the cash dividends from the Fund, any remaining funds will
be returned to the participants on pro rata basis. In the
event the Plan agent is unable to complete its acquisition of
shares to be purchased from additional contributions on the open
market by the end of the twentieth (20th) day following the
Investment Date, any remaining funds will be returned
to the participants on a pro rata basis. 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 June 15, 2006, a distribution of $0.50 per share
aggregating $1,396,168 was declared from realized gains.
The divideND WAS PAID ON July 6, 2006, to shareowners
of record on June 26, 2006. On December 7, 2006, a
distribution of $0.6865 per share aggregating $1,916,939 was
declared from realized gains and ordinary income. The
dividend was paid on January 11, 2007, to shareowners of
record December 20, 2006.
The tax character of distributions paid during 2006 and 2005
was as follows:
2006 2005
Distributions paid from:
Ordinary income $262,108 $193,385
Long-term capital gain 3,050,999 266,791
$3,313,107 $460,176
As of December 31, 2006, the components of distributable
earnings on a tax basis were as follows:
Undistributed ordinary income $4,891
Unrealized appreciation 11,869,708
Page 13
(6) INVESTMENT TRANSACTIONS
Purchases and sales of securities, other than short-
term securities for the period ended December 31, 2006,
were $1,699,846 and $6,657,295, 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.
Page 14
Report of Independent registered accounting firm
To the Board of Directors and Shareowners
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, 2006 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
responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight
Board (United States). 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, 2006 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, 2006, the results of its operations for the
year then ended, and the statement of changes in net assets
for the two years in the period then ended and the financial
highlights for each of the five years in the period then ended,
in conformity with accounting principles generally accepted in the
United States of America.
Plante & Moran, PLLC
January 16, 2007
Page 15
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.
COSTS OF THE PLAN
There are no special fees or charges relating to
participation in the Plan, other than reasonable transaction fees.
A termination or a partial sale fee (currently $15 plus $0.10 per
share) may be imposed when you terminate or partially sell your
shares in the Plan and take delivery of accumulated shares.
The benefit of any reducedbrokerage commission changes will be
passed on, pro rata to participants. In addition, if you wish
to deposit your certificated shares in your plan account, there is
currently a transaction fee of $7.50 for this service.
DIVIDEND REINVESTMENT
The Plan agent, will receive the total amount
of your dividend (a) on shares which are held directly by you
and (b) on any full and fractional shares held for you under the
Plan, in cash. These cash dividends will be used by the Plan agent
to buy shares of the Fund's common stock on the open market
(determined to three decimal places, in terms of any fractional
share). In the event the Plan agent is unable to complete its
acquisition of shares to be purchased on the open market by
the end of the thirtieth (30th) day following receipt of the
cash dividends from the Fund, any remaining funds will be
returned to the participants on a pro rata basis.
Page 16
VOLUNTARY CASH PAYMENTS
You may make voluntary cash payments of not less
than $50.00 nor more than $1,000.00 per month for the
purpose of acquiring additional shares. You may make these
voluntary cash payments regularly or from time to time, and
you may also vary the amount of each payment so long as the
amount of any monthly voluntary cash payment meets the
foregoing limitations. Voluntary cash payments must be
received by the Plan agent on or prior to the last day of any
month and will be invested beginning on or about the first
business day of the following month (an "Investment Date").
Voluntary cash payment will be invested in shares purchased
in the open market, (determined to three decimal places, in
terms of any fractional share). In the event the Plan agent is
unable to complete its acquisition of shares to be purchased
on the open market by the end of the twentieth (20th) day
following the Investment Date, any remaining funds will be
returned to the participants on a pro rata basis. 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 for 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 for the calendar month
indicated, the Plan Agent shall attempt to invest such payment
on the next Investment Date. Optional cash payments can also
be made online at www.amstock.com. You need to know your
American Stock Transfer and Trust Company 10 digit account
number and your social security number to access your account.
You may obtain the return of any voluntary cash payment, if your
written request is received by the Plan agent at least forty-
eight (48) hours prior to the time such voluntary cash
payment is invested.
HOLDING OF SHARES
For your convenience, the Plan agent will hold all
shares that you acquire as a result of your participation in the
Plan, for safekeeping. However, upon your online request at
www.amstock.com, telephonically at (877) 739-9994 or
request by mail, the Plan agent will send you a certificate
representing a specified number of full shares which you
have acquired through the Plan and which are held for your
account. The Plan agent will also allow you to deposit with
it, in safekeeping and in your "book-entry" account for the
Plan, any additional stock certificates for the Fund's shares
you might have in your possession. This will enable you to
guard against loss, theft or damage.
Page 17
STATEMENT OF ACCOUNT
A cumulative, detailed statement of your
account under the Plan for each current calendar year will be
sent to you by the Plan agent; and you will also receive the
customary Form 1099 (Internal Revenue Service) reporting
dividend income.
WITHDRAWAL OF SHARES
You are not committed to remain in the Plan. You
may terminate your participation at any time by notice to the
Plan agent. Beginning with the dividend which relates to the
first dividend record date which occurs at least ten days after
the Plan agent's receipt of your termination notice, dividends
will be remitted to you, directly, at your address of record or
as you otherwise shall have directed. Upon terminating
participation in the Plan, certificates for all full shares
standing to your credit in your Plan account will be issued
and sent to you and any voluntary cash payments held for
investment until the next Investment Date will also be sent
to you. Any remaining fractional share will be converted to
cash, on the basis of the then current market price of the
Fund's common stock, and a check, representing the same, will
be issued and sent to you. If you desire, you may direct that
your full shares be sold in the open market and that the proceeds
(less any brokerage commission incurred as a result of such sale)
be sent to you.
INCOME TAX CONSIDERATIONS
Dividends (including those declared in shares of
stock) invested under the Plan are taxable in the same way as
dividends paid to you in cash.
SHAREHOLDERS' RIGHTS
Shares held under the Plan have the same rights as all
other shares, in terms of stock dividends, stock splits, and
preemptive and voting rights. Stock dividends will be fully
credited to your account. Transaction processing may either
be curtailed or suspended until the completion of any stock
dividend, stock split or corporate action.
Page 18
MORE DETAILED INFORMATION
If you have any questions regarding your specific
participation in the Plan, please visit us online at
www.amstock.com, call us at (877) 739-9994 or write the
Plan Agent's at:
Transaction Processing Inquiries
American Stock Transfer American Stock
Transfer & Trust Company Trust Company
DRP Plan 59 Maiden Lane
P.O. Box 922 Wall Street Station New York, NY 10038
New York, NY 10269-0560
Page 19
Directors Who Are Interested Persons of the Fund and
Officers
Thomas E. O'Hara
Age 91
Director
Term of office
Served as a director since 1989
Principal Occupation(s) During Past 5 Years
Chairman (1989-April 2006) and Director of the Fund;
Chairman (1951-2002), Chairman Emeritus (2002-November 2006)
and Trustee (1951-November 2006) of NAIC; and Chairman
(1999-2002), Chairman Emeritus (since 2002) and Director
of Growth Fund Advisor, Inc. (since 1999).
Number of Portfolios in Fund Complex Overseen by Director
or Nominee for Director**
One
Other Directorships Held by Director or Nominiee for
Director (Public Companies)
None.
Kenneth S. Janke
Age 72
Chairman, President, Treasurer and Director
Term of office
Served as a President and director since 1989.
Principal Occupation(s) During Past 5 Years
Chairman (since April, 2006) and Director,
President and Treasurer (since 1989) of the Fund; CEO
(1981-2002), Chairman and Trustee of NAIC (2002 to
September 2006); Chairman, Chief Executive Officer and
Director (since 2002) and President and Treasurer (since
1990) of Growth Fund Advisor.
Number of Portfolios in Fund Complex Overseen by Director
or Nominee for Director**
One
Other Directorships Held by Director or Nominiee for
Director (Public Companies)
AFLAC Incorporated (Insurance)
Lewis A. Rockwell
Age 88
Secretary
Term of office
Served as a Secretary since 1989.
Principal Occupation(s) During Past 5 Years
Chairman and Director of Sunshine Fifty, Inc. (since 1956;
Secretary of the Fund (since 1989); Secretary of NAIC (since
1987); and Secretary of Growth Fund Advisor, Inc. (since 1999).
Number of Portfolios in Fund Complex Overseen by Director
or Nominee for Director**
One
Other Directorships Held by Director or Nominiee for
Director (Public Companies)
None.
Peggy Schmeltz
Age 79
Address*
Director
Term of office
one year.
Served as director since 1989.
Principal Occupation(s) During Past 5 Years
Trustee of NAIC (since 1995); Director of Bowling Green State
University Foundation Board. Former member ofNYSE Advisory
Committee (1992 to 1994).
Number of Portfolios in Fund Complex Overseen by Director
or Nominee for Director**
One
Other Directorships Held by Director
or Nominee for Director (Public Companies)
None.
Luke E. Sims
Age 57
Address*
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. Manager of Sims Capital Management LLC,
a registered investment adviser.
Number of Portfolios in Fund Complex Overseen by Director
or Nominee for Director**
One
Other Directorships Held by Director
or Nominee for Director (Public Companies)
LaCrosse Footwear, Inc. (manufacturer and marketer of sporting
and industrial footwear)
* The address of each is the address of the Fund.
Messrs. O'Hara, Janke, Rockwell and Sims 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
director of the Investment Adviser. Messrs. Janke and
Rockwell are interested persons because they are directors
and officers of the Investment Adviser, as noted above. Mrs.
Schmeltz is an interested person because she is a trustee of
NAIC, which is affiliated with the current investment
adviser, Growth Fund Advisor, Inc. Mr. Sims is an interested
person because he beneficially owns in excess of 5.0% of the
Fund's outstanding shares of common stock.
** The Fund is not part of any fund complex.
Page 20
Directors Who Are Not Interested Persons of the Fund
Carl A. Holth
Age 74
Address*
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
or Nominee for Dirctor**
One
Other Directorships Held by Director
or Nominee for Director (Public Companies)
None.
Benedict J. Smith
Age 87
Address*
Director
Term of office
one year.
Served as a director since 1996.
Principal Occupation(s) During Past 5 Years
Retired; Director, Detroit Executive Service Corp. (an advisory
service for non-profit organizations; Director,
Vista Maria (a nonprofit charitable organization).
Number of Portfolios in Fund Complex Overseen by Director
or Nominee for Director**
One
Other Directorships Held by Director
or Nominee for Director (Public Companies)
None.
Robert M. Bilkie, Jr.
Age 46
Address*
Director
Term of office
one year.
Served as a director since 2006.
Principal Occupation(s) During Past 5 Years
President and CEO of Sigma Investment Counselors, Inc.
(a registered investment adviser); member of the NAIC/Better
Investing Securities Review Committee and of the NAIC/Better
Investing Editorial Advisory Committee (non-remunerative)
Number of Portfolios in Fund Complex Overseen by Director
or Nominee for Director**
One
Other Directorships Held by Director
or Nominee for Director (Public Companies)
None.
* 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.
Page 21
Compensation
The following table sets forth the aggregate
compensation paid to all directors through December 31,
2006. Directors also receive reimbursement for out-of-pocket
expenses relating to attendance at meetings of the Fund. No
officer of the Fund received compensation from the Fund
through December 31, 2006 in his capacity as an officer of
the Fund.
Directors Who Are Interested Persons of the Fund
Kenneth S. Janke
Chairman, 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
Thomas E. O'Hara
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*
$600
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**
$600
Peggy Schmeltz
Director
Aggregate Compensation from Fund*
$1800
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**
$1800
Luke E. Sims
Director
Aggregate Compensation from Fund*
$1800
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**
$1800
* All amounts shown are for service as a director.
** The Fund is not part of any fund complex.
*** Resigned as a director on September 8, 2006.
Directors Who Are Not Interested Persons of the Fund
Carl A. Holth
Director
Aggregate Compensation from Fund*
$1800
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from Fund and Fund Complex Paid to Directors**
$1800
Benedict M. Smith
Director
Aggregate Compensation from Fund*
$1800
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from Fund and Fund Complex Paid to Directors**
$1800
Robert M. Bilkie, Jr.
Director
Aggregate Compensation from Fund*
$1200
Pension or Retirement Benefits Accrued as Part of Fund Expenses
None
Estimated Annual Benefits Upon Retirement
None
Total Compensation from Fund and Fund Complex Paid to Directors**
$1200
* All amounts shown are for service as a director.
** The Fund is not part of any fund complex.
Page 22
NAIC Growth Fund, Inc.
Board of Directors
Kenneth S. Janke
Chairman and President,
Bloomfield Hills, MI
Thomas E. O'Hara
Director,
Highland Beach, FL
Peggy L. Schmeltz
Director,
Bowling Green, OH
Carl A. Holth
Director,
Clinton Twp., MI
Benedict J. Smith
Director,
Birmingham, MI
Luke E. Sims
Director,
Milwaukee, WI
Robert M. Bilkie
Director,
Southfield, MI
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, 2006 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.
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.
Page 23
On December 7, 2006, the Board of Directors (except for
Luke E. Sims who did not participate) voted to approve an
investment advisory agreement (the "SCM Investment
Advisory Agreement"), to go into effect on May 1, 2007,
between the Fund and Sims Capital Management LLC ("SCM"),
subject to shareholder approval. The proposal to
vote on the SCM Investment Advisory Agreement is the
result of a selection process approved by the Board at its
meeting of September 8, 2006. At such meeting, the Board
determined to put out for bid the services of investment
adviser to the Fund. In connection therewith, a committee
of directors was appointed by the Board (the "Committee")
to handle the selection process. The Committee members
consisted of Robert M. Bilkie, Jr. (acting as chairman),
Carl A. Holth, Peggy L. Schmeltz and Benedict J. Smith.
The Committee was authorized to establish and implement a
process for identifying, interviewing and selecting an
investment adviser to the Fund and to report back to the
Board at its December 7, 2006 Board meeting with the
Committee's findings and recommendations.
The Committee solicited potential investment
advisers by issuing a press release, advertisements in trade
periodicals and through direct contact of firms. Each
potential investment adviser was directed to complete a
Request for Proposal ("RFP") seeking detailed information
about the firm, its clients, its investment strategy, rates of
return on its investment portfolio, fee schedule, client
references, group turnover and disciplinary history. The
Committee stated in the RFP that the successful bidder will
have a verifiable history of strong investment returns relative
to portfolio risk and an impressive track record with both
personal and corporate integrity, honesty and fair dealing
with clients. Over twenty investment advisers indicated an
interest in becoming the Fund's investment adviser. Growth
Fund Adviser, Inc., the current investment adviser, did not
submit a proposal. The Committee reviewed the submissions based
predominantly on quantitative criteria, including, but not
limited to, investment experience, historical investment
performance, assets under management, portfolio turnover,
willingness to report portfolio changes on a timely basis, and
fees. Based on such review, the Committee sent notices
during the week of November 6, 2006 to five firms requesting
personal interviews. On November 21, 2006, the Committee
conducted personal interviews looking at both the quantitative
criteria set forth above and qualitative criteria, including,
an understandable investment process, an articulation of a manner
in which a stock's intrinsic value was determined, consistency
with NAIC investment principles and a demonstrated understanding
of equity risk and return characteristics.
Based on its thorough review, the Committee
determined that SCM was the best candidate. SCM included
the verified investment performance of Luke E. Sims for the
periods prior to SCM's organization in responding to the
RFP. SCM had the highest rating of all five candidates with
respect to compounded annual returns over a three-year, five-
year and ten-year time-frame. Also, the bulk of SCM's
portfolio was in stocks that the Committee felt were
consistent with NAIC principles.
At the Board meeting of December 7, 2006, the
Committee presented its findings to the Board
and its recommendation that SCM be selected as the Fund's
new investment adviser. The Board, except for Mr. Sims
who did not participate in the vote or discussion, and Mr. Janke,
who was not present at the time of the vote, approved of the
selection of SCM subject to shareholder approval at this Meeting.
At the Board meeting of February 16, 2007, the Board then also
approved the SCM Investment Advisory Agreement (except for
Mr. Sims of the SCM Investment Advisory Agreement, who did not
participate in the vote). Luke E. Sims, a director, and an
owner of more than five percent (5%) of the outstanding
shares, of the Fund, is a fifty percent (50%) owner of SCM.
David C. Sims, age 25, who is also a fifty percent (50%)
owner of SCM, is SCM's Operating Manager with responsibility
for SCM's day-to-day operations. Luke E. Sims has agreed to
be the principal contact and decision-maker at SCM with respect
to the Fund and its investment portfolio. Luke E. Sims and
David C. Sims are father and son. The affiliation between
Mr. Sims and SCM was made known to all members of the Committee
and the Board during the entire period of the investment advisory
selection process.
Also on December 7, 2006, the Board of Directors
determined to continue the investment advisory agreement
between the Fund and Growth Fund Advisor, Inc. on an
interim basis until the earlier to occur of (a) September 30,
2007 or (b) May 1, 2007 if the SCM Investment Advisory
Agreement is approved by shareholders at the 2007 annual
meeting of shareholders.
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 Benedict J. Smith
qualifies as a financial expert; and that both Carl A. Holth and
Robert M. Bilkie Jr. also qualify as financial experts. Benedict J. Smith,
Carl A. Holth and Robert M. Bilkie, Jr. are independent.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees. Plante & Moran, PLLC was paid $16,000 for the fiscal
year ending December 31, 2006 and $15,075 for the fiscal year ending
December 31, 2005 by the Fund for audit fees.
Audit-Related Fees. Plante & Moran, PLLC was not paid any
audit-related fees by the Fund in either of the last two fiscal years.
Tax Fees. Plante & Moran, PLLC was paid $4,800 for the fiscal
year ending December 31, 2006 and $4,200 for fiscal year ending
December 31, 2005 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, PLLC was not paid any other fees in
either of the last two fiscal years.
"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 PLLC
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, Benedict J. Smith and Robert M. Bilkie, Jr.
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 adopted 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
Kenneth S. Janke
Chairman, President, Treasurer and Director of the Fund.
Chairman, CEO, Director, President and Treasurer of the Investment
Adviser.
Serves as a President and a Director of the Fund (since 1989) and serves
as Chairman, CEO, Director, President, and Treasurer of the Investment
Adviser since the years set forth below.
Principal Occupation(s) During Past 5 Years
Chairman (since April, 2006) and Director,
President and Treasurer (since 1989) of the Fund; CEO
(1981-2002), Chairman and Trustee of NAIC (2002 to
September 2006); Chairman, Chief Executive Officer and
Director (since 2002) and President and Treasurer (since
1990) of Growth Fund Advisor.
As of 12-31-2006, the Investment Adviser paid Mr. Janke a salary on
a fixed basis (not tied to Fund performance) out of its investment advisory
fee.
Dollar range of equity securities of the NAIC Growth Fund, Inc. beneficially
owned by Kenneth S. Janke is between $100,001-$500,000.
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 2006 proxy statement
ITEM 11. CONTROLS AND PROCEDURES.
(i) As of February 28, 2007, 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
on Form N-CSR and Form N-Q 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 on FOrm N-CSR and Form N-Q
is accumulated and communicated to the registrant's management,
including its Principal ExecutiveOfficer 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 second fiscal
quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the
registrant's internalcontrol 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: February 28, 2007
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: February 28, 2007
By: /s/ Calvin George
---------------------
Calvin George
Accountant (Principal Financial Officer)
Date: February 28, 2007