As filed with the Securities and Exchange Commission on September 17, 2002
Securities Act Registration No. 33- __________
Investment Company Act File No. 811-05807
--------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
(Check appropriate box or boxes)
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No. ___
[ ] Post-Effective Amendment No. ___
and/or
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 9
NAIC GROWTH FUND, INC.
--------------------------------------------------------------------------------
Exact Name of Registrant as Specified in Charter
711 West Thirteen Mile Road, Madison Heights, Michigan 48071
--------------------------------------------------------------------------------
Address of Principal Executive Offices (Number, Street, City, State, Zip Code)
(248) 583-6242
--------------------------------------------------------------------------------
Registrant's Telephone Number, including Area Code
Kenneth S. Janke, NAIC Growth Fund, Inc.
711 West Thirteen Mile Road, Madison Heights, Michigan 48071
--------------------------------------------------------------------------------
Name and Address (Number, Street, City, State, Zip Code) of Agent for Service
With Copies to:
Barbara A. Bowman, Esq. Steven J. Dickinson, Esq.
Bodman, Longley & Dahling LLP Dorsey & Whitney LLP
34th Floor, 100 Renaissance Center 801 Grand, Suite 3900
Detroit, Michigan 48243 Des Moines, Iowa 50309
As soon as practicable after this registration statement becomes effective.
--------------------------------------------------------------------------------
Approximate Date of Proposed Public Offering
If any securities being registered on this form will be offered on a delayed or
continuous basis in reliance on Rule 415 under the Securities Act of 1933, other
than securities offered in connection with a dividend reinvestment plan, check
the following box. [X]
It is proposed that this filing will become effective (check appropriate box)
[ ] when declared effective pursuant to section 8(c)
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
[ ] this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the
Securities Act and the Securities Act registration statement number of
the earlier effective registration statement for the same offering
is-___.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
Proposed Proposed
Maximum Maximum
Title of Securities Amount Being Offering Price Per Aggregate Amount of
Being Registered Registered Unit Offering Price Registration Fee
------------------------------------------------------------------------------------------------------------------
Common stock 5,000,000 $9.98(1) $49,900,000 (1) $4,591 (1)
par value $0.001
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(d) under the Securities Act of 1933, as amended, and
based on the net asset value per share of $ 9.98 on September 5, 2002.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
CROSS-REFERENCE SHEET
PART A ITEM
NUMBER CAPTION PROSPECTUS CAPTION
------ ------- ------------------
1 Outside Front Cover Outside Front Cover
2 Inside Front and Outside Back Cover Page Outside Front Cover
3 Fee Table and Synopsis Fee Table; Prospectus Summary
4 Financial Highlights Financial Highlights
5 Plan of Distribution Underwriting; How to Invest
6 Selling Shareholders Not Applicable
7 Use of Proceeds Use of Proceeds
8 General Description of the Registrant Risk Factors; The Fund; Investment Objective and
Policies; Determination of Net Asset Value; Reports to
Shareholders
9 Management The Fund; The Investment Adviser; Risk Factors
10 Capital Stock, Long-Term Debt and Other Securities Description of Shares; Taxation; Distribution Policy;
Dividend Reinvestment and Cash Purchase Plan
11 Defaults and Arrears on Senior Securities Not Applicable
12 Legal Proceedings The Fund
13 Table of Contents of the Statement of Additional Statement of Additional Information
Information
PART B ITEM STATEMENT OF ADDITIONAL
NUMBER CAPTION INFORMATION CAPTION
------ ------- -------------------
14 Cover Page Cover Page
15 Table of Contents Table of Contents
16 General Information and History The Fund
17 Investment Objective and Policies Investment Guidelines
18 Management Directors, Officers and Principal Shareholders
19 Control Persons and Principal Holders of Securities Directors, Officers and Principal Shareholders
20 Investment Advisory and Other Services Investment Adviser and Investment Advisory Agreement;
Custodian, Transfer Agent and Dividend Disbursing Agent
21 Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
22 Tax Status Taxation
23 Financial Statements Financial Statements
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 2002
Part A - PROSPECTUS
PROSPECTUS
NAIC GROWTH FUND, INC.
5,000,000 SHARES COMMON STOCK
PAR VALUE $0.001 PER SHARE
NAIC Growth Fund, Inc. is a diversified, closed-end management
investment company. The Fund's investment objective is long-term growth. The
Fund utilizes the concept of "total return" for selecting investments. "Total
return" means the total of all income derived from, and the capital appreciation
value of, a particular investment. The Fund seeks to achieve its investment
objective by investing in a diversified portfolio of equity securities. The
Fund's investments are selected by the Fund's investment adviser, Growth Fund
Advisor, Inc., an indirect subsidiary of the National Association of Investment
Clubs Trust.
The address of the Fund is 711 West Thirteen Mile Road, Madison
Heights, Michigan 48071, and its telephone number is (877) 275-6242.
This prospectus relates to 5,000,000 shares of the Fund's common stock,
par value $0.001, which are being offered on a "best efforts" basis by Broker
Dealer Financial Services Corp. and, in BDFSC's sole discretion, by other
broker-dealers that enter into selected dealer agreements with BDFSC. See
"Underwriting." The Fund will sell shares each week to investors at a price
equal to the Fund's current net asset value per share, which will fluctuate
during this continuous offering and generally will be determined as of the close
of business each Thursday. Subscription payments will be released from escrow by
the Fund weekly in this manner upon acceptance of subscriptions and
determination of the Fund's current net asset value. Subscriptions are
irrevocable by the investor once received by the Fund. The Fund will pay BDFSC
sales commissions for any shares sold pursuant to this prospectus, as follows:
- 3.5% of the gross sales price per share sold before any
broker-dealer enters into a selected dealer agreement with
BDFSC; and
- 5% of the gross sales price per share sold after any
broker-dealer enters into a selected dealer agreement with
BDFSC.
All offering expenses and sales commissions will be paid directly by the Fund.
The minimum investment in this offering by any investor is $500. There is no
minimum number of shares that must be sold in the offering. The offering will
continue until all of the shares are sold or until either the Fund or BDFSC
terminate the offering on 30 days' notice to the other party.
The Fund's common stock is listed on the Chicago Stock Exchange under
the market symbol "GRF."
AN INVESTMENT IN THE FUND INVOLVES RISKS. YOU SHOULD CONSIDER THE
INFORMATION UNDER "RISK FACTORS" BEGINNING ON PAGE __ BEFORE DECIDING WHETHER TO
PURCHASE THE SHARES.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus sets forth important information about the Fund that
you ought to know before making a further investment. Please read this
prospectus carefully and retain it for future reference. A Statement of
Additional Information containing additional information about the Fund has been
filed with the Securities and Exchange Commission. The Statement of Additional
Information is dated_________ _, 2002 and is incorporated by reference in this
prospectus. You may obtain a copy of the Statement of Additional Information
without charge on written or oral request to NAIC Growth Fund, Inc., 711 West
Thirteen Mile Road, Madison Heights, Michigan 48071, attention Statement of
Additional Information, telephone (877) 275-6242, extension 331, or from the
SEC's website at www.sec.gov. The table of contents of the Statement of
Additional Information appears on page __ of this prospectus.
[BDFSC LOGO]
The date of this prospectus is:
__________________ , 2002
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS AS IF WE HAD AUTHORIZED IT. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION IN SUCH JURISDICTION. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE AS OF THE DATE ON ITS COVER.
TABLE OF CONTENTS
PAGE
Fund Expenses...................................................................................................................
Financial Highlights............................................................................................................
Prospectus Summary..............................................................................................................
Risk Factors....................................................................................................................
Forward-Looking Statements......................................................................................................
The Fund........................................................................................................................
Investment Objective and Policies...............................................................................................
The Investment Adviser..........................................................................................................
Use of Proceeds.................................................................................................................
Distribution Policy.............................................................................................................
Dividend Reinvestment and Cash Purchase Plan....................................................................................
Taxation........................................................................................................................
Description of Shares...........................................................................................................
Determination of Net Asset Value................................................................................................
The Offering....................................................................................................................
How to Invest...................................................................................................................
Underwriting....................................................................................................................
Legal Matters...................................................................................................................
Reports to Shareholders.........................................................................................................
Independent Public Accountants..................................................................................................
Financial Statements............................................................................................................
Statement of Additional Information.............................................................................................
Further Information.............................................................................................................
Exhibit 1 - Form of Subscription Agreement
i
FUND EXPENSES
The following table illustrates all expenses and fees that you will
incur as a shareholder of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of offering price)(1) ......................... None
Dividend Reinvestment and Cash Purchase Plan Fees (2) ..................... 0.0%
ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES)
Management Fees............................................................ 0.75%
Other Expenses (1)(3)...................................................... 0.82%
Total Annual Expenses...................................................... 1.57%
(1) All offering expenses, including sales commissions, will be paid
directly by the Fund during the continuous offering. You will pay no
direct sales charge on any purchases of shares. The Fund will pay BDFSC
commissions at a rate of 3.5% of the gross sales price per share sold
until BDFSC uses any soliciting dealers. If BDFSC uses any selected
dealer, then the commission rate will increase to 5% of the gross sales
price per share for the duration of the offering.
(2) You will pay no special fees or charges if you choose to
participate in the Dividend Reinvestment and Cash Purchase Plan other
than reasonable transaction fees and a termination fee of $15 plus
10 cents per share. For purposes of this table, brokerage commissions
are not included as Dividend Reinvestment and Cash Purchase Plan fees.
(3) "Other Expenses" are based on estimated amounts for the current
fiscal year. Historical amounts do not include sales commissions to be
paid by the Fund, as described in note (1).
The purpose of the foregoing table is to assist you in understanding the various
costs and expenses associated with investing in the Fund. For a more complete
description of the Dividend Reinvestment and Cash Purchase Plan fees and the
management fees, see "Dividend Reinvestment and Cash Purchase Plan" and "The
Investment Adviser," respectively.
Example 1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------------------------------------------------
You would pay the following expenses on a
$1,000 investment, assuming a 5% return: $16 $51 $88 $192
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES OR
PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal
securities regulations require the example to assume an annual return of 5%, but
the Fund's actual return may be more or less than 5%; the assumed 5% annual
return is not a prediction of, and does not represent, the projected or actual
performance of the Fund's shares. For purposes of this example, it has been
assumed that the rates listed above under "Annual Expenses" remain the same each
year, and that all dividends have been reinvested and all distributions have
been made at net asset value.
1
FINANCIAL HIGHLIGHTS(A)
The financial highlights present a per share analysis of how the Fund's
net asset value has changed during the periods presented. You should read this
information in conjunction with the Fund's audited financial statements and
notes incorporated by reference in this Prospectus and the Statement of
Additional Information. The financial highlights for each of the ten years ended
December 31 were derived from the Fund's audited financial statements that have
been audited by Arthur Andersen LLP, independent certified public accountants.
Plante & Moran, LLP replaced Arthur Andersen LLP as the Fund's independent
certified public accountants effective May 9, 2002.
Year Ended December 31,
-------------------------------------------------------
Six
Months
Ended 2001 2000 1999 1998
June 30,
2002
(unaudited)
----------------------------------------------------------------------------
NET ASSET VALUE
AT BEGINNING OF
PERIOD $ 11.08 $ 11.96 $ 11.22 $ 10.86 $ 9.56
----------------------------------------------------------------------------
NET INVESTMENT
INCOME .01 .04 .09 .08 .12
NET REALIZED
AND UNREALIZED
GAIN ON
INVESTMENTS .39 (.25) 2.18 .76 1.68
----------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS .38 (.21) 2.27 .84 1.80
DISTRIBUTIONS
FROM:
NET
INVESTMENT
INCOME -- (.04) (.09) (.09) (.11)
REALIZED GAINS -- (.64) (1.44) (.39) (.39)
----------------------------------------------------------------------------
TOTAL
DISTRIBUTIONS -- (.67) (1.53) (.48) (.50)
NET ASSET VALUE
AT END OF
PERIOD $ 10.70 $ 11.08 $ 11.96 $ 11.22 $ 10.86
----------------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------------------------------------------------------------------------------------
NET ASSET VALUE
AT BEGINNING OF
PERIOD $ 7.89 $ 6.61 $ 5.00 $4.89 $4.71 $4.37
----------------------------------------------------------------------------------------
NET INVESTMENT
INCOME .09 .09 .07 .04 .03 .05
NET REALIZED
AND UNREALIZED
GAIN ON
INVESTMENTS 1.99 1.52 1.66 .11 .18 .37
----------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 2.08 1.61 1.73 .15 .21 .42
DISTRIBUTIONS
FROM:
NET
INVESTMENT
INCOME (.09) (.09) (.07) (.04) (.02) (.04)
REALIZED GAINS (.32) (.24) (.05) 0 (.01) (.04)
----------------------------------------------------------------------------------------
TOTAL
DISTRIBUTIONS (.41) (.33) (.12) (.04) (.03) (.08)
NET ASSET VALUE
AT END OF
PERIOD $ 9.56 $ 7.89 $ 6.61 $5.00 $4.89 $4.71
----------------------------------------------------------------------------------------
2
PER SHARE
MARKET VALUE,
END OF PERIOD
ASK $ 11.05 10.75 $ 11.00 $ 10.25 $ 10.75
BID $ 10.55 10.25 $ 10.50 $ 10.00 $ 10.25
TOTAL
INVESTMENT
RETURN:
BASED ON
MARKET VALUE
1 YEAR 5.94% 3.70% 30.90% 2.85% (25.42%)
FROM
INCEPTION 11.42% 11.66% 12.57% 10.28% 11.30%
BASED ON NET
ASSET VALUE
1 YEAR (6.74%) (1.59%) 27.27% 7.75% 18.84%
FROM INCEPTION 11.55% 12.42% 13.81% 13.15% 13.79%
NET ASSETS, END OF
PERIOD (000's) $24,047.6 $23,902.2 $23,927.8 $22,351.7 $20,701.2
PER SHARE
MARKET VALUE,
END OF PERIOD
ASK $ 15.25 $ 9.75 $ 7.13 $4.75 $5.63 $6.00
BID $ 14.50 $ 9.44 $ 6.88 $4.69 $4.75 $4.75
TOTAL
INVESTMENT
RETURN:
BASED ON
MARKET VALUE
1 YEAR 58.50% 42.94% 49.70% (0.54%) 0.83% 1.72%
FROM
INCEPTION 17.84% 12.59% 7.85% 0.27% 0.50% 0.37%
BASED ON NET
ASSET VALUE
1 YEAR 26.43% 24.46% 34.60% 3.12% 4.65% 9.51%
FROM INCEPTION 13.69% 11.92% 9.78% 4.92% 5.45% 5.77%
NET ASSETS, END OF
PERIOD (000's) $17,335.3 $13,487 $10,989,115 8,316,552 8,081,804 7,432,322
(A) All per share data for 2000, 1999, 1998, and 1997 has been restated to
reflect the effect of a 15% stock dividend which was declared on August 18, 2000
and paid on September 29, 2000 to shareholders of record on September 18, 2000,
and a 100% stock dividend which was declared on August 22, 1997 and paid October
1, 1997 to shareholders of record on September 12, 1997.
Year Ended December 31,
---------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Six
Months
Ended
June 30, 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992
2002
(unaudited)
-------------------------------------------------------------------------------------------------------------------------
RATIOS TO
AVERAGE NET
ASSETS:
RATIO OF 1.47% 1.57% 1.25% 1.00% 0.83% 0.96% 0.96% 1.19% 1.81% 2.00% 2.00%
EXPENSES TO
AVERAGE NET
ASSETS (B)
RATIO OF NET .16% 0.32% 0.74% 0.70% 1.13% 0.96% 1.10% 1.16% 0.77% 0.63% 0.92%
INVESTMENT
INCOME
TO AVERAGE NET
ASSETS (B)
PORTFOLIO 11.79% 1.77% 10.61% 4.20% 5.87% 6.31% 5.93% 6.90% 6.56% 0.62% 3.50%
TURNOVER RATE
AVERAGE $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125
COMMISSION RATE
PAID PER SHARE
-------------------------------------------------------------------------------------------------------------------------
(B) For the years ended 2000, 1999, 1998, 1997, 1996, 1995, and 1994, the
Investment Adviser voluntarily waived all or a portion of its fees. Had the
Investment Adviser not done so in 2000, 1999, 1998, 1997, 1996, 1995, and 1994
the ratio of expenses to average net assets would have been 1.44%, 1.37%, 1.39%,
1.69%, 1.68%, 1.94%, and 2.00% and the ratio of net investment income to average
net assets would have been 0.55%, 0.32%, 0.57%, 0.23%, 0.38%, 0.41%, and 0.58%
for each of these years.
3
PROSPECTUS SUMMARY
The following is a summary and does not contain all the information
that may be important to you. You should read the entire prospectus before
deciding to invest.
The Fund and Its
Investment Objective...... The Fund is a diversified closed-end management
investment company. Its shares are traded on the
Chicago Stock Exchange under the symbol "GRF." The
Fund's investment objective is long-term growth. The
Fund utilizes the concept of "total return" for
selecting investments. "Total return" means the total
of all income derived from, and the capital
appreciation in value of, a particular investment.
The Fund's investment adviser is Growth Fund Advisor,
Inc. ("Investment Adviser"), an indirect subsidiary
of the National Association of Investment Clubs
Trust. The Investment Adviser follows the following
four investment principles developed by National
Association of Investors Corporation ("NAIC"), which
was the Fund's original adviser and is an affiliate
of the Investment Adviser:
- Invest regularly
- Reinvest earnings
- Invest in "growth"
- Diversify
The Fund seeks to achieve its investment objective
primarily through investment in a portfolio of equity
securities that is diversified, both by industry and
company size. The Fund typically invests in
securities of "growth companies" that have
price/earnings and debt/equity ratios that are equal
to or lower than the average of companies in the same
industry. Other important factors the Investment
Adviser considers are the price of the stock in
relation to the underlying assets of the company and
the growth potential of the company. The Fund seeks
to achieve long-term growth in value, with little
regard to short-term market fluctuations. In
addition, the Fund invests in companies that the
Investment Adviser determines possess "special
situation" characteristics. In general, a company
possesses "special situation" characteristics if its
securities are expected to appreciate solely by
reason of a development particularly or uniquely
applicable to that company. There can be no assurance
that the Fund can continue to meet its investment
objectives.
The Offering.............. The Fund's authorized capital stock consists of
50,000,000 shares of common stock, $0.001 par value.
As of June 30, 2002, the Fund had 2,247,006 shares of
common stock outstanding. The Fund is offering
5,000,000 shares of its common stock to investors on
a continuous "best efforts" basis through Broker
Dealer Financial Services Corp. ("BDFSC") and, in
BDFSC's sole discretion, by other selected
broker-dealers. See "Underwriting." The Fund will
sell shares each week to investors at a price equal
to the Fund's current net asset value per share,
which generally will be determined as of the close of
business each Thursday. Subscription payments will be
deposited into an escrow account and used by the Fund
each week to purchase shares upon acceptance of
subscriptions, determination of the Fund's net asset
value and receipt of collected funds for the
subscription. Subscriptions are irrevocable by the
subscriber once received by the Fund. The Fund's net
asset value per share as of September 5, 2002, was
$9.98. The minimum investment by an investor in the
this offering is $500. There is no minimum number of
shares that must be sold in the offering. All costs
of the offering, including sales commissions to
BDFSC, will be paid directly by the Fund. Unless
otherwise directed by the investor, shares purchased
by each investor will be held by the Fund's transfer
agent in noncertificated form in the name of the
investor.
Investment Adviser........ The Investment Adviser is a Michigan corporation. Its
parent organization, National Association of
Investment Clubs Trust, has been engaged in providing
investment education and advisory services since
1951. The Fund's initial investment adviser was NAIC.
As part of a corporate reorganization, the Trust
formed the Investment Adviser, which succeeded NAIC
as investment adviser to the Fund in October 1999.
Advisory Fee.............. Under the Advisory Agreement, the Fund pays the
Investment Adviser an annual fee equal to 0.75% of
the Fund's average weekly net asset value. The
Investment Adviser, and its predecessor NAIC, waived
the entire fee from the Fund's inception in 1990
through 1997. The Investment Adviser collected 25% of
the fee in 1998, 50% of the fee in 1999, and 75% of
the fee in 2000. The Investment Adviser did not waive
any of its fee during 2001 and has advised the Fund
it does not intend to waive any fees in the future.
Risk Factors.............. An investment in the Fund involves certain risks,
including:
4
- investing for long-term appreciation with
little regard to short-term market
fluctuations.
- investing in "growth companies" that may be
more subject to business operating risks,
economic conditions or market trends and
volatility than other companies.
- investing in "special situation" companies
that are expected to appreciate in value due
to developments (e.g., a possible takeover,
new product, etc.) uniquely applicable to
that company.
- reliance on key personnel of the Investment
Adviser.
- characteristics of closed-end investment
companies, like the Fund, such as the shares
trading at a discount to the Fund's net
asset value and fluctuations in the market
price of the Fund's shares.
Distribution Policy....... The Fund distributes to shareholders at least
annually substantially all net long-term and
short-term capital gains, dividends and other income
of the Fund, after payment of Fund expenses.
Dividend Reinvestment
and Cash Purchase
Plan...................... You may elect to have all dividends and distributions
which accrue to you as a shareholder in the Fund
automatically reinvested pursuant to the Fund's
Dividend Reinvestment and Cash Purchase Plan.
Depending upon market price per share compared to the
then current net asset value per share of the Fund,
the Plan Agent will either (a) receive shares from
the Fund or (b) purchase shares on the open market on
behalf of the participants in the Plan. If you elect
to participate in the Dividend Reinvestment and Cash
Purchase Plan, you may also elect to make additional
cash payments for investment by the Plan Agent in
additional Fund shares.
RISK FACTORS
The following summarizes certain risks that you should consider before
deciding whether to invest in the Fund.
General Considerations
You should understand that all investments have risks. Therefore, the
Fund cannot guarantee you will not realize losses from investing in the Fund. In
addition, the Fund cannot give you any assurance that the Fund's investment
policy will be successful or that the Fund will attain its investment
objectives. The Fund is not intended to serve as a complete investment program
for an investor.
Long-Term Perspective
The Fund emphasizes investing in equity securities for long-term
capital appreciation as measured by "total return," with little regard to
short-term market fluctuations. The Fund is intended for investors who
understand and are willing to accept the risks of seeking long-term
appreciation.
Investment in Growth Companies
A portion of the companies in which the Fund invests are "growth
companies." A "growth company" is a company that has exhibited
faster-than-average gains in earnings over the last few years and is expected to
continue to show high levels of profitable growth. The stocks of growth
companies may, over the long term, appreciate at a faster rate than other
stocks, but may also involve more risk. For example, growth companies may have
limited product lines, markets or financial resources and may lack management
depth. In addition, stocks of such companies may have limited marketability and
may be subject to more abrupt or erratic market movement than securities of
larger, more established companies or than overall market averages in general.
Investment in Special Situation Companies
The Fund may also invest in companies that are determined by the
Investment Adviser to possess "special situation" characteristics. In general,
shares of special situation companies are expected to appreciate in value solely
by reason of developments uniquely applicable to that company, such as possible
takeovers, new product announcements, etc. If the anticipated development does
not occur, shares of special situation companies may not appreciate in value or
may decrease in value.
Reliance on Key Personnel
Kenneth S. Janke, Sr. is primarily responsible for the investment
decisions made by the Investment Adviser on behalf of the Fund. Mr. Janke was
also responsible, together with Thomas E. O'Hara, for the investment decisions
made on behalf of the Fund by the Investment Adviser's predecessor, NAIC.
Accordingly, Mr. Janke has been responsible in whole or in part for the
investment decisions made on behalf of the Fund since the Fund's inception. Mr.
Janke is a Director and Chairman and Chief Executive Officer
5
of the Adviser. Mr. Janke's principal occupation during the past five years has
been President (to February, 2002), Chairman and Chief Executive Officer (from
February, 2002 to July, 2002), and Chairman (from July, 2002) of NAIC. There can
be no assurance that a replacement can be found for Mr. Janke in the event he
severs his employment relationship with the Investment Adviser or is unable to
fulfill his role due to death or disability. There is no written employment
contract between Mr. Janke and the Investment Adviser. Mr. Janke is 67 years
old.
Offering Price
The shares will be sold in the offering at a price equal to the Fund's
net asset value per share as of the applicable determination date (usually, the
close of business on the Thursday immediately prior to the sale in the
offering). Because the market value of the shares is likely to be different than
the net asset value per share at any given time, the purchase price of shares in
the offering may be more or less than the prevailing market price of the shares
at the time of the sale. Because shares of closed-end funds frequently trade at
market prices less than the net asset value per share, it is likely that the
offering price per share will be greater than the market price per share at any
given time.
Investment Company Shares
As with any security, shares of the Fund may increase or decrease in
value from time to time, and these changes may or may not be related to changes
in the value of the securities held by the Fund (as reflected in its net asset
value). In addition, shares of closed-end investment companies like the Fund
frequently trade at a discount from net asset value. The possibility that shares
of the Fund will trade at a discount to net asset value is a risk which is
separate from the risk that the Fund's net asset value will decrease. The Fund
cannot predict whether its shares will trade in the future at a premium to or a
discount from net asset value or the level of any premium or discount.
Secondary Market for Fund's Shares
The issuance of shares in the offering may have an adverse effect on
the secondary market for the Fund's shares. The increase in outstanding shares
resulting from the offering may put downward pressure on the market price for
the shares of the Fund. The Fund also issues shares through its Dividend
Reinvestment and Cash Purchase Plan. See "Dividend Reinvestment and Cash
Purchase Plan." Shares may be issued under the Dividend Reinvestment and Cash
Purchase Plan at a discount to the market price for the shares, which may also
put downward pressure on the market price for shares of the Fund.
Repurchase of Shares by the Fund
You will not have the right to have the Fund redeem your shares.
However, the Fund is authorized to repurchase shares when they are trading at a
discount of 10% or more below net asset value. If the Fund decides to repurchase
shares, it is permitted to borrow money to finance these repurchases. Any such
borrowing will exaggerate the effect of an increase or decrease in the value of
portfolio securities on the Fund's net asset value. In addition, the Fund will
be required to pay interest and other costs (such as commitment fees or the cost
of maintaining minimum average balances) with respect to the borrowed funds, and
these expenses may exceed the benefit to the Fund from repurchasing its shares.
Anti-Takeover Provisions
Certain provisions of the Fund's Articles of Incorporation and By-laws
are designed to prevent a takeover of the Fund. These provisions may have the
effect of depriving shareholders of an opportunity to sell their shares at a
premium. See "Description of Shares."
Regulated Investment Company
The Fund has conducted and intends to continue to conduct its
operations so that it qualifies as a "regulated investment company" for purposes
of the Internal Revenue Code of 1986, as amended (the "Code"). This relieves the
Fund of any liability for federal income tax to the extent that its earnings are
distributed to its shareholders. If the Fund fails at any time to qualify as a
"regulated investment company," the income of the Fund for that fiscal year will
be taxed. This would result in a decrease in income for distribution to
shareholders of the Fund and a reduction in the net asset value of the Fund.
FORWARD-LOOKING STATEMENTS
This prospectus includes certain statements that may be deemed to be
"forward-looking statements." All statements, other than statements of
historical facts, included in this prospectus that address activities, events or
developments that the Fund or the
6
Investment Adviser expects, believes or anticipates will or may occur in the
future, including the use of proceeds and investment strategies are considered
forward-looking statements. These statements are based on certain assumptions
and analyses made by the Fund or the Investment Adviser in light of its
experience and its perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate in the
circumstances. These statements are subject to a number of assumptions, risks
and uncertainties, including the risk factors discussed herein, general economic
and business conditions, the investment opportunities (or lack thereof) that may
be presented to and pursued by the Fund, changes in laws or regulations and
other factors, many of which are beyond the control of the Fund. Forward-looking
statements are not guarantees of future performance, and actual results or
developments may differ materially.
7
THE FUND
The Fund is a diversified, closed-end management investment company.
Its investment objective is long-term growth as measured by "total return" on
investment. "Total return" means the total of all income derived from, and the
capital appreciation in value of, a particular investment over a particular
period of time with particular emphasis on capital appreciation.
The Fund was incorporated under the laws of the State of Maryland on
April 11, 1989, and has registered under the Investment Company Act of 1940, as
amended (the "1940 Act"). The business of the Fund is managed under the
direction of its Board of Directors. The Fund's initial offering of shares of
Common Stock was completed on July 2, 1990 with 549,810 shares issued at a price
of $10 per share. A 15% stock dividend was declared on August 18, 2000 and paid
on September 29, 2000 to shareholders of record on September 18, 2000, and a
100% stock dividend was declared on August 22, 1997 and paid October 1, 1997 to
shareholders of record on September 12, 1997. As of June 30, 2002, the Fund had
2,247,006 shares outstanding. The Fund has a total of 50,000,000 authorized
shares of common stock.
The Fund is not a party to any material pending legal proceedings.
The Fund's common stock is listed on the Chicago Stock Exchange (the
"Exchange") under the symbol "GRF." The following table shows, for the periods
indicated, the Fund's (1) the high and low prices per share on the Exchange; (2)
net asset value per share on the day of the high or low market price, and (3)
the premium (discount) to net asset value per share on that day.
Applicable
Price Net Asset Value Premium/
Per Share Per Share (Discount) to NAV
--------- --------- -----------------
Calendar Quarters
Ended High Low High Low High Low
----- ---- --- ---- --- ---- ---
June 30, 2002 $ 11.50 $ 10.80 $ 10.83 $ 10.70 6.2% 0.9%
March 31, 2002 11.05 10.25 11.50 11.08 (3.9)% (7.5)%
December 31, 2001 11.05 10.25 11.50 10.97 (3.9)% (6.6)%
September 30, 2001 12.25 10.50 11.65 10.97 5.2% (4.3)%
June 30, 2001 12.00 11.00 11.70 11.14 2.6% (1.3)%
March 31, 2001 11.63 10.75 11.69 10.59 (0.5)% (1.5)%
December 31, 2000 12.25 10.75 13.18 12.42 (7.1)% (13.4)%
September 30, 2000 11.26 10.41 13.07 12.75 (13.9)% (18.3)%
June 30, 2000 10.63 9.56 12.69 12.33 (16.3)% (22.5)%
March 31, 2000 9.93 8.61 10.86 10.79 (8.5)% (20.2)%
December 31, 1999 9.24 8.50 11.23 10.96 (17.7)% (22.5)%
September 30, 1999 10.20 9.14 11.27 10.49 (9.5)% (12.9)%
June 30, 1999 9.99 9.14 11.18 11.09 (10.7)% (17.6)%
March 31, 1999 9.30 8.71 10.77 10.48 (13.7)% (16.8)%
On September 5, 2002, the net asset value per share was $9.98 and the
high sale price was $9.20, which represents a discount of 7.8% from the net
asset value. Like most closed-end investment companies, since the Fund's
inception its shares have generally traded on the market for an amount less than
their net asset value. The Fund cannot predict whether its shares will trade in
the future at a premium or discount to net asset value, and if so, the level of
such premium or discount.
INVESTMENT OBJECTIVE AND POLICIES
8
The investment objective of the Fund is long-term growth utilizing the
concept of "total return" for selecting investments. The Fund's investment
objective may only be changed by the affirmative vote of a majority of the
Fund's outstanding common stock. The Fund attempts to achieve its objective by
investing primarily in a diversified portfolio of equity securities. These
securities may include common and preferred stocks, securities convertible into
common stocks, and securities of "growth" companies and companies that possess
"special situation" characteristics. Accordingly, the Fund typically invests in
the securities of companies that have price/earnings and debt/equity ratios
equal to or lower than the average for companies in the same industry. Other
important factors the Investment Adviser takes into consideration are the price
of the stock in relation to the value of the underlying assets of the company.
In addition, the Fund generally does not issue senior securities, purchase any
securities on margin or make short sales of securities, borrow money or
underwrite securities of other issuers. For further information concerning the
Fund's investment guidelines, including the limitations on and exceptions to
such guidelines, see the information under the caption "Investment Guidelines"
in the Statement of Additional Information.
THE INVESTMENT ADVISER
Background
The Fund's investment adviser is Growth Fund Advisor, Inc. (the
"Investment Adviser"), a Michigan corporation that is registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940.
The Investment Adviser provides the Fund with investment advisory services and,
subject to the authority of the Board of Directors of the Fund, is responsible
for the overall management of the Fund. The Fund is the Investment Adviser's
only advisory client.
The Investment Adviser assumed the role of providing investment
advisory services to the Fund on September 1, 1999 from the Fund's former
investment adviser, National Association of Investors Corporation ("NAIC"), a
Michigan nonprofit corporation. The Investment Adviser is an indirect wholly
owned subsidiary of the National Association of Investment Clubs Trust (the
"Trust"), which is also the sole shareholder of NAIC.
The Trust was formed in 1951 by three investment clubs with the
objective of educating investors and promoting the formation of investment
clubs. NAIC was organized by the Trust in 1975 to further this objective. Both
NAIC and the Trust throughout their respective histories have been integrally
involved in educating investors and assisting and encouraging the formation and
operation of investment clubs. The Investment Adviser was organized in March
1999 to take over the investment advisory activities of NAIC, as part of a
restructuring of NAIC and its various affiliates.
NAIC publishes Better Investing, a monthly magazine distributed to its
members and other subscribers. Better Investing provides investment and
educational services to the public. Prior to the incorporation of NAIC in 1975,
Better Investing was published by the Trust. The publication began in 1951 and
was originally known as National Association of Investment Clubs News. In 1955,
the name was changed to NAIC Bulletin and changed again in 1958 to Investment
Club Bulletin. In 1965, the publication name was changed to Better Investing. As
of December 31, 2001 Better Investing had over 375,911 subscribers as certified
by the Audit Bureau of Circulation, making Better Investing one of the largest
investor magazines in the United States.
The Investment Adviser's address is 711 West Thirteen Mile Road,
Madison Heights, Michigan 48071.
Investment Principles
Through their work with investors over several decades in connection
with providing educational services, publishing Better Investing magazine, and
assisting and promoting the formation of investment clubs, NAIC and the Trust
developed an investment philosophy based on certain investment principles. The
Trust and NAIC advocate their use in the NAIC Official Guide, Starting and
Running a Profitable Investment Club, one of the educational materials prepared
by the Trust and the NAIC. These investment principles may be summarized as
follows:
- Invest Regularly: Money should be invested regularly without
thought as to whether the stock market itself is high or low.
Forecasting short-term movements in the stock market is very
difficult but historically domestic stock prices have
generally moved upwards over long periods of time. Also,
regular purchases of stocks over a period of time without
regard to whether the stock market is high or low will
frequently result in a lower average cost per share.
- Reinvest Earnings: The reinvestment of earnings provides
funds for the purchase of securities and generally builds up
net worth.
- Invest in "Growth": Buying stocks of companies whose sales
and earnings are expected to grow faster than the total
economy and faster than their competitors is important because
such growth, if it is on a sound basis, is likely to result in
higher stock prices.
9
- Diversify: Investments should be diversified, both by the
type of industry and size of company.
NAIC has also developed a stock study program designed to assist its
members in (1) studying an individual company so as to form a judgment as to its
potential investment value, (2) comparing several companies and selecting for
investment the stocks of companies that best meet their investment objectives,
and (3) keeping informed on the stocks currently owned or which they contemplate
owning in order to make informed decisions concerning further purchases or
sales.
The Investment Adviser uses the NAIC's investment principles and the
methodology of the NAIC's stock study program in advising the Fund. However, the
investment principles and stock study program were developed by the Trust and
NAIC primarily for use by NAIC's members, and therefore they are not directly
applicable in all cases to the management of the Fund's portfolio. The
Investment Adviser may also use other investment principles or methods in
managing the Fund's investments.
Advisory Fee
The Fund and the Investment Adviser, as successor to NAIC, are parties
to an Investment Advisory Agreement dated October 2, 1989 (the "Advisory
Agreement"). Pursuant to the Advisory Agreement the Fund pays the Investment
Adviser an annual advisory fee equal to 0.75% of the weekly net assets of the
Fund. However, if the weekly net assets of the Fund are less than $3,800,000
during any week, then no advisory fee is paid or accrued by the Fund to the
Investment Adviser for that week. The advisory fee is paid on a monthly basis.
The Investment Adviser and its predecessor, NAIC, waived all of their advisory
fees since the inception of the Fund in 1990 through 1997. The Investment
Adviser collected 25% of the fee in 1998, 50% of the fee in 1999, and 75% of the
fee in 2000. The Investment Adviser collected all of its advisory fee in 2001
and has advised the Fund it does not intend to waive any of its fees in the
future.
Payment of Expenses
In addition to the advisory fee paid to the Investment Adviser, the
Fund pays all of the other costs and expenses of its operation. This includes,
among other things, expenses for legal and auditing services, costs of printing
proxies, stock certificates and shareholder reports, charges of the custodian
and transfer agent, SEC filing fees, fees and expenses of unaffiliated
directors, accounting and pricing costs, membership fees and trade association
dues, insurance, interest, brokerage costs, taxes, stock exchange listing fees
and expenses, expenses of qualifying the Fund's shares for sale in various
states, and other miscellaneous expenses properly payable by the Fund. The
Advisory Agreement provides that the Fund may not incur annual aggregate
expenses in excess of 2% of the first $10,000,000 of the Fund's average net
assets, 1.5% of the next $20,000,000 of average net assets, and 1% of the
remaining average net assets for any fiscal year. Any excess Fund expenses are
the responsibility of the Investment Adviser, and the pro rata portion of the
estimated annual excess expenses is offset against the Investment Adviser's
monthly advisory fee. In the event such amount exceeds the advisory fee payable
to the Investment Adviser in any month, no advisory fees are paid to the
Investment Adviser.
The Fund will pay the sales charges and expenses of this offering
directly from the general assets of the Fund. These costs will not be considered
an expense of the Fund for purposes of the expense limitations of the Advisory
Agreement.
Portfolio Management
Kenneth S. Janke, Sr. is primarily responsible for the investment
decisions made by the Investment Adviser on behalf of the Fund. Mr. Janke was
also responsible, together with Thomas E. O'Hara, for the investment decisions
made on behalf of the Fund by the Investment Adviser's predecessor, NAIC.
Accordingly, Mr. Janke has been responsible in whole or in part for the
investment decisions made on behalf of the Fund since the Fund's inception. Mr.
Janke is a Director and Chairman and Chief Executive Officer of the Investment
Adviser. Mr. Janke's principal occupation during the past five years has been
President (to February, 2002), Chairman and Chief Executive Officer (from
February, 2002 to July, 2002), and Chairman (from July, 2002) of NAIC.
Legal Proceedings
The Investment Adviser is not a party to any material pending legal
proceedings.
USE OF PROCEEDS
The Fund estimates the net proceeds from the sale of the shares offered
hereby will be, based on the Fund's net asset value of $ 9.98 on September 5,
2002 as an estimated offering price, approximately $__________ after payment of
all offering expenses that we estimate will be approximately $ __________,
assuming all of the shares are sold in the offering. The Investment Adviser
expects to invest the net proceeds in accordance with the Fund's investment
objectives and policies. The timing of these investments will depend on when
such proceeds are received and the availability at that time of securities
meeting the Fund's investment guidelines and
10
policies and other relevant conditions. Pending such investment, it is
anticipated that the proceeds will be invested in short-term debt obligations or
instruments. Investments in such short-term debt obligations or investments may
reduce the Fund's yield. Because of the continuous nature of the offering, the
Fund does not expect to encounter difficulties in investing the offering
proceeds, but we cannot assure you that delays in investing the proceeds will
not occur.
DISTRIBUTION POLICY
Dividends will be paid annually on the shares in amounts representing
substantially all the net investment income, if any, earned each year. Dividend
payments will vary in amount, depending on investment income received and
expenses of operation. Substantially all of any taxable net capital gain
realized on investments will be paid to shareholders at least annually. The net
asset value of each share that you own will be reduced by the amount of the
distributions or dividends that you receive from that share.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund invites 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. IF YOU HAVE ALREADY
ELECTED TO PARTICIPATE IN THE PLAN, YOU DON'T NEED TO DO ANYTHING FURTHER TO
MAINTAIN YOUR ELECTION. Participation in the Plan is not automatic and you must
affirmatively elect to participate. American Stock Transfer & Trust Company acts
as the Plan Agent on behalf of shareholders who are participants in the Plan.
A subscriber for shares in this offering (other than a broker or a
nominee from a financial institution) who is not currently a shareholder of the
Fund, or a person who is currently a shareholder of the Fund who has not
previously elected to participate in the Plan, or a shareholder which has
terminated its election, may elect to become a participant in the Plan by
filling in and signing a form of authorization included as part of the
subscription agreement accompanying this prospectus and mailing the form to the
Plan Agent, American Stock Transfer & Trust Company, P.O. Box 922, Wall Street
Station, New York, New York 10038. The authorization must be signed by each of
the registered shareholders of an account. Your participation in the Plan is
voluntary and may be terminated or resumed at any time upon written notice from
you 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 made by the Fund to
participants in the Plan are made in one of two ways. They are paid to the Plan
Agent either in cash (which then are used to purchase shares in the open
market), or by the delivery of newly-issued Fund shares. The option chosen by
the Plan Agent is the one that the Plan Agent determines is the most favorable
to Plan participants, as described below.
The Fund determines the net asset value of the Fund's shares on a date
(a "Valuation Date") which is 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 then compares the determined net asset value per share with the market
price per share. For purposes of the Plan, "market price" is 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 $9.20 on
September 5, 2002.
If the net asset value per share in any such comparison is lower than
the market price per share, then the Plan Agent instructs the Fund to satisfy
its obligation with respect to any such dividend or other distribution by
issuing additional shares to the participants in the Plan. The shares are issued
at a price per share equal to the greater of the determined net asset value per
share or 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 instructs the Fund
to 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. The Plan Agent uses such cash payment to buy additional shares in
the "open market" for the account of the Plan participants. However, the Plan
Agent does not purchase shares in the open market at a price in excess of the
net asset value per share as of the relevant Valuation Date. If 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 are used by the Plan Agent to purchase newly
issued shares of the Fund's common stock from the Fund. The shares are issued at
a price equal to the greater of the determined net asset value per share or 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 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 to a
maximum of $1,000 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 determines the amount of funds accumulated. Purchases made
from the accumulation of payments during each calendar month are made on or
about the first business day of the following month ("Investment Date"). These
funds are
11
used to purchase shares of the Fund's common stock from the Fund if the net
asset value per share is lower than the market price per share as of the
Valuation Date which occurs not more than five business days prior to the
relevant Investment Date. In such a case, the Fund issues the shares at a price
per share equal to the greater of the determined net asset value per share or
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 uses such cash payments to
buy additional shares in the open market for the account of the Plan
participants. However, the Plan Agent will not purchase shares in the open
market at a price in excess of the net asset value as of the relevant Valuation
Date. If 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 are used by the Plan Agent to purchase newly issued shares of the
Fund's common stock from the Fund at a price per share equal to the greater of
the determined net asset value per share or 95% 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 are 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 immediately available funds by the end of the month. If a
voluntary cash payment is not received in time to purchase shares in any
calendar month, such payment will 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.
The Plan Agent performs bookkeeping and other administrative functions,
such as maintaining all participants' accounts in the Plan and furnishing
written confirmation of all transactions in the accounts, including information
needed by shareholders for personal and tax records. Shares in the account of
each participant are held by the Plan Agent in noncertificated form in the name
of the participant, and each shareholder's proxy includes those shares purchased
pursuant to the Plan and of record as of the record date for determining those
shareholders who are entitled to vote on any matter involving the Fund. In case
of shareholders such as banks, brokers or nominees holding shares for others who
are the beneficial owners, the Plan Agent administers the Plan on the basis of
the aggregate number of shares certified from time to time by such shareholders
as held for the account of beneficial owners who have elected to participate in
the Plan.
There are no special fees or charges to participants in the Plan other
than reasonable transaction fees and a termination fee of $15 plus 10(cent) per
share. For purchases by voluntary cash payments under the Plan, 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 purchases Shares for all participants in larger
blocks and prorating the lower commission rate thus applied.
The automatic reinvestment of dividends and distributions does not
relieve participants of any associated income tax liability. See "Taxation."
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
shareholders at least ninety days before such specified date. The Plan may also
be terminated on at least ninety days' written notice to all shareholders in the
Plan. All correspondence concerning the Plan should be directed to American
Stock Transfer & Trust Company, P.O. Box 922, Wall Street Station, New York, New
York 10038.
TAXATION
The Fund has elected to qualify, and intends to remain qualified, as a
regulated investment company under Subchapter M of the Internal Revenue Code.
The Fund will distribute substantially all of its net investment income and
gains to shareholders. Therefore, it is not expected that the Fund will be
subject to any federal income tax. These distributions are taxable as ordinary
income or capital gains. Shareholders may be proportionately liable for taxes on
income and gains of the Fund, but shareholders not subject to tax on their
income will not be required to pay tax on amounts distributed to them.
Each January you will be sent information on the tax status of any
distribution made during the previous calendar year, including information on
the amount and nature of the income or gains.
Because each shareholder's situation is unique, you should always
consult your tax adviser concerning the effect income taxes may have on your
individual investment.
12
DESCRIPTION OF SHARES
General
The Fund's only authorized class of capital stock is common stock, par
value $.001 per share, of which 50,000,000 shares are authorized. The shares,
upon issuance and payment therefor in accordance with this prospectus, will be
fully paid and non-assessable. The shares have no preemptive, conversion or
subscription rights and have equal rights as to voting and liquidation.
Shareholders' right to elect directors of the Fund is non-cumulative.
This means that the holders of a majority of the Fund's outstanding shares can
elect all of the directors nominated for election at a meeting called for that
purpose if they choose to do so. If this happens, the holders of the remaining
shares will not be able to elect any directors.
Shares issued in accordance with this prospectus will be held by the
Fund's transfer agent in noncertificated form in the name of the investor,
unless the investor elects otherwise in the subscription agreement. Each
shareholder's proxy includes those shares purchased pursuant to the Plan and of
record as of the record date for determining those shareholders who are entitled
to vote on any matter involving the Fund. A shareholder may request the transfer
agent to issue certificates for its shares. Fractional shares will be held and
aggregated with other fractional shares and paid for by check in the event a
shareholder requests a certificate.
The following table provides certain information about the Fund's
common stock as of September 5, 2002.
(1) (2) (3) (4)
Title Amount Authorized Amount Held by Fund or For Amount Outstanding Exclusive
of Class its Account of Amount Shown under (3)
Common stock
$0.001 par value 50,000,000 0 2,256,003 shares
The number of the Fund's shareholders of record, as of September 5,
2002, is 2,241. The Investment Adviser held no shares as of such date and NAIC,
the Investment Adviser's affiliate, held 29,544 shares as of such date. The
number of shares beneficially owned by all Fund officers and directors as a
group is 158,479 as of September 5, 2002, of which 7,455 are held in investment
clubs with which certain officers and directors are affiliated.
Repurchase of Shares
The Fund's shareholders do not, and will not, have the right to have
their shares redeemed or repurchased by the Fund. The Fund may repurchase its
shares, however, from time to time as and when it is deemed advisable by the
Board of Directors of the Fund in order to attempt to reduce or eliminate a
market discount from the net asset value of the shares. Such repurchases will be
made, if at all, only when the shares are trading at a discount of ten percent
(10%) or more below the net asset value of the shares, and in accordance with
the 1940 Act which provides, in part, that the Fund must notify stockholders of
its intention to purchase shares on the open market at some time within the six
months preceding the purchase. The Fund may incur debt to finance share
repurchase transactions by borrowing from banks and others on an unsecured basis
as a temporary measure as described below ("Temporary Borrowings"). Such
Temporary Borrowings may not exceed five percent (5%) of the value of the Fund's
net assets at the time the loan is made. The Fund may pledge up to ten percent
(10%) of the lesser of the cost or value of its total assets to secure Temporary
Borrowings. The Fund will not borrow for investment purposes. Immediately after
any Temporary Borrowing, the Fund will maintain asset coverage of not less than
three hundred percent (300%) with respect to all Temporary Borrowings. The Fund
may not enter into Temporary Borrowing transactions with affiliates.
The Fund is not required to repurchase shares. Historically, the Fund
has not repurchased any of its shares. The Board of Directors, in consultation
with the Investment Adviser, will review on a regular basis, at meetings of the
Board of Directors held quarterly, the possibility of open market repurchases of
the Fund's shares. Any shares repurchased will be canceled and returned to the
status of authorized, but unissued common stock. Any repurchases of shares of
the Fund will decrease the total assets of the Fund, thereby increasing the
Fund's expense ratio.
The shares trade in the open market, so long as any market exists, at a
price that is a function of several factors, including their net asset value and
yield. The shares of closed-end investment companies generally sell at market
prices that vary from their net asset values. If the Fund repurchases its shares
at prices below their net asset value, the net asset value of the remaining
outstanding shares may be increased, but there can be no assurance that the
market price of the remaining outstanding shares will be affected, either
positively or negatively. Further, interest on borrowings to finance share
repurchase transactions will reduce the Fund's net income. There can be no
assurance that any repurchase of the shares will result in the shares trading at
a price equal to or greater than
13
their net asset value.
Certain Provisions of the Articles of Incorporation and By-laws
The Fund presently has provisions in its articles of incorporation and
by-laws that could have the effect of limiting the ability of certain entities
or persons and their affiliates that beneficially own more than 5% of the
outstanding shares of the Fund (a "Principal Shareholder") to acquire control of
the Fund or to cause it to engage in certain transactions. The affirmative vote
or consent of the holders of sixty-six and two-thirds percent (66 2/3%) of the
shares of the Fund is required to authorize the conversion of the Fund from a
closed-end to an open-end investment company, and generally to authorize any of
the following transactions:
- Merger or consolidation of the Fund with or into any Principal
Shareholder;
- Issuance of any securities of the Fund to any Principal
Shareholder for cash;
- Sale, lease or exchange of all or any substantial part of the
assets of the Fund to any Principal Shareholder (except assets
having an aggregate fair market value of less than $500,000);
or
- Sale, lease or exchange to the Fund, in exchange for
securities of the Fund, of any assets of any Principal
Shareholder (except assets having an aggregate fair market
value of less than $500,000).
However, any such vote or consent is not be required with respect to
the foregoing transactions if the Board of Directors under certain conditions
approves such transaction. Reference is made to the articles of incorporation
and by-laws of the Fund on file with the Securities and Exchange Commission for
the full text of these provisions. See "Further Information." These provisions
could have the effect of depriving shareholders of an opportunity to sell their
shares at a premium over prevailing market prices by discouraging a third party
from seeking to obtain control of the Fund in a tender offer or similar
transaction.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares is computed based upon the market
value of the securities held by the Fund. Net asset value per share is
calculated by dividing the value of all of the securities held by the Fund plus
any cash or other assets minus all liabilities, including accrued expenses, by
the total number of shares outstanding at such time. It is determined as of the
close of business on Thursday of each week. If any Thursday is not a business
day, the net asset value is determined as of the close of business on the last
business day of the week preceding such Thursday. Portfolio securities are
valued at market. Securities and assets for which market quotations are not
readily available are valued by the Investment Adviser and provided to the Plan
Agent. Investments with maturities of 60 days or less are valued at amortized
cost.
Shares of closed-end investment companies frequently trade at a
discount to net asset value, but in some cases trade at a premium. The market
price of the shares is determined by factors that are beyond the control of the
Fund. These factors include trading volume of such shares, general market and
economic conditions. The Fund cannot predict whether its shares will trade at,
below or above net asset value. The Fund can, however, repurchase its own shares
if they are trading at a discount of ten percent (10%) or more of net asset
value. See "Description of Shares."
HOW TO INVEST
To invest in the Fund, please follow the steps below. This will help
avoid any delays in processing your subscription.
- Read this prospectus carefully.
- Determine how much you would like to invest. The
Fund's minimum investment is $500. The Fund reserves
the right to change the amount of this minimum for
certain purchases.
- Carefully complete and sign the enclosed subscription
agreement, including the optional Dividend
Reinvestment and Cash Purchase Plan section if you
want to participate in the Plan. By joining the
Dividend Reinvestment and Cash Purchase Plan now, you
can avoid the delay and inconvenience of having to
submit an additional application later.
- Return the subscription agreement to NAIC Growth
Fund, Inc., c/o Growth Fund Advisor, Inc., P.O. Box
220, Royal Oak, Michigan 48068 with your check made
payable to "Standard Federal Bank N.A.- Escrow
Agent".
All subscriptions are subject to acceptance by the Fund and approval by
BDFSC. Either the Fund or BDFSC may reject a
14
subscription in its discretion for any reason. Subscriptions may not be
revoked by the subscriber once received by the Fund.
Shares sold pursuant to this Prospectus will be held by the Fund's
transfer agent in noncertificated form in the purchaser's name, unless the
purchaser elects otherwise in the Subscription Agreement. If a purchaser elects
to receive a certificate for its common shares in the Subscription Agreement,
the Fund will not issue fractional shares to the purchaser and will refund the
portion of the Purchase Price representing the fractional share, without
interest, at the time of delivering the share certificate. Fractional shares
will be issued for shares held by the transfer agent in noncertificated form.
Such fractional shares will be aggregated with any other fractional shares held
by the transfer agent for the purchaser from time to time and will be paid for
by check, at the then-prevailing market price, if the purchaser requests a
certificate for its shares after the acceptance of the purchaser's subscription
in this offering.
UNDERWRITING
The Fund and Investment Adviser have entered into an Underwriting
Agreement with BDFSC, a form of which has been filed as an exhibit to the
Registration Statement of which this prospectus is a part. The summary of the
Underwriting Agreement contained herein is qualified by reference to the
Underwriting Agreement.
Subject to the terms and conditions of the Underwriting Agreement,
BDFSC will offer on a "best efforts" basis up to 5,000,000 shares of the Fund's
common stock. BDFSC may also offer the shares through certain selected dealers.
BDFSC is located at 8800 N.W. 62nd Avenue, Johnston, Iowa 50131. The offering
will continue until all the shares are sold or until either the Fund or BDFSC
terminate the offering on 30 days' notice to the other party.
Sales of shares will generally be made on a weekly basis. Subscribers
will submit Subscription Agreements and subscription payments as described under
"How to Invest." Subscriptions may not be revoked by the subscriber once
received by the Fund. The Fund's net asset value is determined as of the close
of business each Thursday or, if a Thursday is not a business day, on the
business day immediately preceding that Thursday (a "Determination Date"). On
the first business day following each Determination Date, the Fund will sell
shares at a price equal to the net asset value per share on the Determination
Date to each subscriber whose subscription has been accepted by the Fund and
approved by BDFSC on or before the Determination Date and whose subscription
payment is held by the Escrow Agent in collected funds on or before the
Determination Date.
Funds in the escrow account will be held uninvested. Standard Federal
Bank N.A. of Detroit, Michigan will act as the Escrow Agent.
The minimum investment in this offering by any investor is $500. The
Fund reserves the right to change the amount of this minimum for certain
purchases. There is no minimum number of shares that must be sold in the
offering.
Each week during the offering the Fund will compensate BDFSC with
respect to shares sold by the Fund the prior week as follows:
- 3.5% of the gross sales price per share sold before a selected
broker-dealer enters into a soliciting dealer agreement with
BDFSC; and
- 5% of the gross sales price per share sold after any selected
broker-dealer enters into a soliciting dealer agreement with
BDFSC.
The Fund has also paid BDFSC a non-accountable expense allowance of
$15,000.
In connection with the sale of shares on behalf of the Fund, BDFSC may
be deemed to be an underwriter within the meaning of the Securities Act of 1933,
as amended, and the compensation of BDFSC may be deemed to be underwriting
commissions or discounts. BDFSC has from time to time acted, and may continue to
act while principal distributor, as broker in connection with the execution of
the Fund's portfolio transactions. See "Portfolio Transactions and Brokerage"
in the Statement of Additional Information.
The Investment Adviser will provide administrative services to the Fund
in connection with the offering of the shares, including processing subscription
agreements. No subscription will be effective unless and until it is accepted by
the Fund and approved by BDFSC.
The Fund and the Investment Adviser have jointly and severally agreed
to indemnify BDFSC against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments that BDFSC may
be required to make in respect thereof.
15
LEGAL MATTERS
The legality of the shares offered hereby has been passed on by Bodman,
Longley & Dahling LLP, Detroit, Michigan, which serves as counsel to the Fund
and to the Investment Adviser. Lewis A. Rockwell is counsel to the law firm of
Bodman, Longley & Dahling LLP. Mr. Rockwell is also an officer and director of
the Fund and an officer and director of the Investment Adviser.
Certain legal matters have been passed on for BDFSC by Dorsey & Whitney
LLP, Des Moines, Iowa.
REPORTS TO SHAREHOLDERS
The Fund issues to its shareholders reports that include annual audited
financial statements for each year ended December 31 and unaudited financial
statements for each six month period ended June 30. The financial statements
include a list of investments held.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited financial statements included in and incorporated by
reference into the Statement of Additional Information have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto. Plante & Moran, LLP replaced Arthur Andersen LLP as
the Fund's independent certified public accountants effective May 9, 2002. The
address of Plante & Moran, LLP is 27400 Northwestern Highway, Southfield,
Michigan 48034.
FINANCIAL STATEMENTS
The Fund's audited financial statements for the fiscal year ended
December 31, 2001 are incorporated into the Statement of Additional Information
by reference from the Fund's Annual Reports to Shareholders for the year ended
December 31, 2001 and the Fund's unaudited financial statements for the period
ended June 30, 2002 are incorporated by reference into the Statement of
Additional Information from the Fund's Semi-Annual Report to Shareholders for
the period ended June 30, 2002. The Fund will furnish without charge copies of
its annual report and semi-annual report and any subsequent annual and
semi-annual reports to prospective investors and shareholders upon request to
the Fund, 711 West Thirteen Mile Road, Madison Heights, Michigan 48071,
telephone (877) 275-6242, extension 331. These reports are also available on the
Securities and Exchange Commission's EDGAR database and may also be obtained
from the Securities and Exchange Commission. See "Further Information."
STATEMENT OF ADDITIONAL INFORMATION
The Fund's Statement of Additional Information contains additional
information about the Fund which may be of interest to you. A copy of the
Statement of Additional Information is available without charge to any person to
whom this Prospectus is delivered, on written or oral request to the Plan
Administrator, NAIC Growth Fund, Inc., 711 West Thirteen Mile Road, Madison
Heights, Michigan 48071, attention: Statement of Additional Information,
telephone (877) 275-6242, extension 331.
The table of contents of the Statement of Additional Information is as
follows:
The Fund...............................................................
Additional Investment Guidelines.......................................
Directors, Officers and Principal Shareholders.........................
Investment Adviser and Investment Advisory Agreement...................
Dividend Reinvestment and Cash Purchase Plan...........................
Custodian, Transfer Agent and Dividend Disbursing Agent................
Independent Public Accountants.........................................
Portfolio Transactions and Brokerage...................................
Taxation...............................................................
Financial Statements...................................................
FURTHER INFORMATION
This Prospectus and the Statement of Additional Information do not
contain all of the information set forth in the Registration Statement the Fund
has filed with the Securities and Exchange Commission. The complete Registration
Statement is available on the EDGAR Database on the Securities and Exchange
Commission's Internet site at http://www.sec.gov, and may also be obtained from
the Securities and Exchange Commission upon payment of the fee prescribed by its
rules and regulations.
16
EXHIBIT 1
FORM OF SUBSCRIPTION AGREEMENT
NAIC Growth Fund, Inc. Subscription Agreement
CHECKS PAYABLE TO: STANDARD FEDERAL BANK N.A., ESCROW AGENT
MAIL SUBSCRIPTION AGREEMENT AND CHECK TO: NAIC Growth Fund, Inc.
c/o Growth Fund Advisor, Inc.
P.O. Box 220
Royal Oak, MI 48068
Check enclosed for $ for full and (if applicable)
------------------------
fractional shares at Net Asset Value ($500 minimum)
Register these shares exactly as printed below:
Owner Name
-------------------------------------------------------------------
--------------------------------------------
(Tax Identification or Social Security Number)
Co-Owner(s) (if any)
---------------------------------------------------------
Address
---------------------------------------------------------------------
City
----------------------------------------------------------
State Zip
--------------------- -----------------------
Telephone
-----------------------------------------------------
E-mail
----------------------------------------------------
Citizen of the USA: Yes No
----- -------
If no, which country
-------------------------------------------------------
Presently shareholder in Fund: Yes No
------ -------
In case of two or more co-owners, the shares will be registered "Joint Tenants
with Right of Survivorship" (and not as Tenants in Common) unless otherwise
specified. To register shares other than as joint tenants, contact your broker
or Broker Dealer Financial Services Corp. at the address at the bottom of this
form.
For owners other than individuals, the above owner is:
Corporate HR10 or Keogh Investment Club
--------- -------- ---------
IRA or SEP SIMPLE Trust
--------- --------- ---------
401(k) Other (specify)
--------- --------- -----------------------------
SEE BELOW FOR REQUIRED INFORMATION AND SIGNATURES FOR OWNERS OTHER THAN
INDIVIDUALS.
I wish to reinvest dividends and capital gains distributions by participating in
the Dividend Reinvestment and Cash Purchase Plan. Yes No
-------- -------
(IF YOU DO NOT CHECK EITHER LINE, DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
WILL BE PAID IN CASH.)
I wish to: Hold shares in noncertificated form at Transfer Agent
---------
Receive stock certificate
------------
(Fractional shares will not be issued in certificated form.) (If you do not
check either of the above, shares will be held in noncertificated form at
Transfer Agent.)
I am of legal age in my state of residence, which is .
-------------------------
I am not myself, nor am I related to, an officer, director, or employee of
Broker Dealer Financial Services Corp., a Selected Dealer, NAIC Growth Fund,
Inc., or the Growth Fund Advisor, Inc., except as stated below:
Name of Officer, Director, or Employee
-----------------------------------------
Relationship
-----------------------------------------
Position
--------------------------------------------------------------
I authorize any instructions contained herein and certify, under penalties of
perjury:
(1) that the Tax Identification or Social Security Number shown
above is correct; and
(2) (check which of the following is a true statement)
I am not subject to backup withholding because (a) I am
------
exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I am
subject to withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I
am no longer subject to withholding.
I am subject to backup withholding because the IRS has
------
notified me.
(3) I am a U.S. person (including a U.S. resident alien).
I further certify that I have read and understand the Prospectus and related
Statement of Additional Information and that the purchase of the shares pursuant
to this Agreement is appropriate for me in light of my financial situation,
investment objectives and other circumstances.
X
-------------------------------------------------------------
(Signature of Owner)
X
------------------------------------------------------------
(Signature of Co-Owner, if any)
FOR OWNERS OTHER THAN INDIVIDUALS OR JOINT TENANTS:
If the shareholder is an IRA, SEP, SIMPLE, Keogh, or 401(k), this agreement must
be signed be the Fiduciary (Trustee or Custodian).
If the shareholder is a corporate or other non-individual entity (including
Investment Clubs), enclose a copy of the Corporate Resolution or Partnership
Authorization for this account, and a list of beneficial owners certified by
authorized officer of partner.
If the shareholder is an HR10, Keogh, SIMPLE, 401(k), or other Trust, provide a
copy of the trust agreement.
If you have any questions, please call, write or e-mail:
Broker Dealer Financial Services Corporation
8800 NW 62nd Avenue, PO Box 6240, Johnston, IA 50131
515-286-2970 or 800-352-5634
E-mail: GRF@BDFS.com
BDFSC Use Only AESC Selected Dealer Use Only Transfer Agent Use Only
-----------------------
Date
Received
-------------------------------------
Date Mailed to Escrow
Agent
-------------------------
Additional Documents
Required
----------------------
Request Date Dated
------------
Received
------------
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND
MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 2002
PART B - STATEMENT OF ADDITIONAL INFORMATION
NAIC GROWTH FUND, INC.
711 West Thirteen Mile Road
Madison Heights, Michigan 48071
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information ("Statement") is not a
prospectus. It relates to a prospectus of NAIC Growth Fund, Inc. (the "Fund")
dated________ _, 2002 (the "Prospectus"), and should be read together with the
Prospectus. This Statement does not include all information that a prospective
investor should consider before purchasing shares of the Fund, and investors
should obtain and read the Prospectus prior to purchasing shares. This
Statement incorporates by reference the entire Prospectus. A copy of the
Prospectus, and any document incorporated by reference in this Statement, is
available without charge to any prospective investor or shareholder of the Fund
upon written or oral request to, NAIC Growth Fund, Inc., 711 West Thirteen Mile
Road, Madison Heights, Michigan 48071, attention: Statement of Additional
Information, telephone (877) 275-6242, extension 331.
TABLE OF CONTENTS
Page
The Fund.......................................................................
Additional Investment Guidelines...............................................
Directors, Officers and Principal Shareholders.................................
Investment Adviser and Investment Advisory Agreement...........................
Dividend Reinvestment and Cash Purchase Plan...................................
Custodian, Transfer Agent and Dividend Disbursing Agent........................
Independent Public Accountants.................................................
Portfolio Transactions and Brokerage...........................................
Taxation.......................................................................
Financial Statements...........................................................
The Prospectus and this Statement omit certain of the information
contained in the registration statement filed with the Securities Exchange
Commission (the "Commission"), Washington, D.C. The registration statement may
be obtained from the Commission upon payment of the fee prescribed, or
inspected at the Commission's office at no charge. The registration statement
is also available on the Commission's website (www.sec.gov).
This Statement of Additional
Information is dated ________, 2002
THE FUND
NAIC Growth Fund, Inc. (the "Fund") is a diversified closed-end
management investment company. The Fund's investment objective is long-term
growth utilizing the concept of "total return" for selecting investments.
"Total return" for purposes of this Statement of Additional Information
("Statement") is the total of all income derived from, and the capital
appreciation in value of, a particular investment. The Fund seeks to achieve
its investment objective through investment in a diversified portfolio of
equity securities. These securities may include those that possess "special
situation" characteristics. The Fund's Investment Adviser is Growth Fund
Advisor, Inc. (the "Investment Adviser"), an indirect subsidiary of the
National Association of Investment Clubs Trust.
ADDITIONAL INVESTMENT GUIDELINES
The investment objective, policies and restrictions of the Fund are
described in the Prospectus under "Investment Objective and Policies." In
addition, the Fund operates under the following additional guidelines. These
guidelines constitute fundamental policies that cannot be changed without the
affirmative vote of the holders of a majority of the Fund's outstanding common
stock. All percentage limitations set forth below apply immediately after a
purchase or initial investment. Any subsequent change in any applicable
percentage resulting from market fluctuations does not require elimination of
any security from the portfolio.
The Fund may not:
- Issue senior securities, as defined in the Investment
Company Act of 1940 (the "1940 Act"), or mortgage, pledge,
hypothecate or in any manner transfer, as security for
indebtedness, any securities owned or held by the Fund
except as may be necessary in connection with the
borrowings mentioned in bullet three below. Any such
mortgaging, pledging or hypothecating may not exceed 10%
of the Fund's total assets, taken at the lesser of cost or
market value.
- Purchase any securities on margin or make short sales of
securities, except as follows. The Fund may (i) obtain
such short-term credit as may be necessary for the
clearance of purchases and sales of portfolio securities,
and (ii) make short sales of securities so long as at all
times during which a short position is open, the Fund owns
an equal amount of such securities or, by virtue of
ownership of securities, has the right without payment of
further consideration to obtain an equal amount of the
securities sold short (i.e., immediately convertible
securities). No more than 15% of the Fund's total assets
taken at current value will be held to cover such short
sales at any one time.
- Borrow money, except that the Fund may borrow from banks
and others on an unsecured basis as a temporary measure to
finance the repurchase of its shares, or for other
extraordinary or emergency purposes. For further
information, see the Prospectus under the caption
"Description of Shares - Repurchase of Shares."
- Underwrite securities of other issuers, except insofar as
the Fund may be deemed an underwriter under the Securities
Act of 1933, as amended, in selling portfolio securities.
- With respect to 50% of its net assets, invest in
securities of any one issuer if immediately thereafter, as
a result of such investment, more than 5% of the total
assets of the Fund would be invested in the securities of
such issuer. This restriction does not apply to
investments in United States government securities.
- Purchase more than 10% of the outstanding voting
securities of any one issuer.
- Invest more than 25% of its net assets, taken at market
value at the time of each investment, in the securities of
issuers of any particular industry. This restriction does
not apply to investments in United States government
securities.
- Invest in oil, gas or mineral leases.
- Invest in real estate or real estate limited partnerships.
- Invest in general and limited partnership interests.
- Invest in options.
- Invest more than fifteen percent 15% of net assets in
illiquid assets, including but not limited to,
commodities, puts, calls, straddles, spreads, foreign
securities, and included within this 15% limitation no
more than 10% of net
1
assets in companies with less than three years of
operating history, nor more than 5% of net assets in
restricted securities.
- Invest more than 5% of net assets in warrants valued at
the lower of cost or market of which at least 3% must be
listed on the NYSE or AMEX.
- Make loans of money or securities.
- Purchase securities of other investment companies, except
in connection with a merger, consolidation, acquisition,
or reorganization or during Temporary Periods, if more
than 10% of the market value of the Fund's total assets
would be invested in securities of other investment
companies, more than 5% of the market value of the Fund's
total assets would be invested in the securities of any
one investment company, or the Fund would own more than
three percent 3% of any other investment company's
securities. See the information in the Prospectus under
the caption "Investment Objective and Policies."
- Engage in short-term trading resulting in portfolio
turnover greater than 50% annually.
- Effect brokerage transactions in its portfolio securities
with any broker-dealer affiliated directly or indirectly
with its investment adviser, unless such transactions
(including the frequency thereof, the receipt of
commissions payable in connection therewith and the
selection of the affiliated broker-dealer affecting such
transaction) are not unfair or inequitable to the
shareholders of the Fund. See "Portfolio Transactions and
Brokerage."
DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS
The business of the Fund is managed under the direction of its Board of
Directors. The directors and officers of the Fund, their principal occupations
for at least the last five years and other pertinent information are set forth
below. The address of each is the address of the Fund.
DIRECTORS WHO ARE INTERESTED PERSONS OF THE FUND AND OFFICERS
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OCCUPATION(S) DURING NUMBER OF OTHER
ADDRESS AND HELD WITH FUND AND LENGTH OF PAST 5 YEARS PORTFOLIOS IN DIRECTORSHIPS
AGE* TIME SERVED FUND COMPLEX HELD BY
OVERSEEN BY DIRECTOR
DIRECTOR** (PUBLIC
COMPANIES)
Thomas E. Chairman of Term of office Chairman Emeritus of the Board and One None.
O'Hara the Board and one year. Trustee of the National
Age 86 Director Served as a Association of Investors
director since Corporation, a nonprofit
1989. corporation engaged in investment
education ("NAIC") and Chairman
Emeritus and Director of Growth
Fund Advisor, Inc., the Fund's
investment adviser (the
"Investment Adviser"), from
February, 2002 to present.
Chairman and Trustee of NAIC and
Chairman and Director of the
Investment Adviser to February,
2002.
Kenneth S. Director, Term of office Chairman and Trustee of NAIC and One Director,
Janke President and one year. Chairman, Chief Executive Officer American
Age 67 Treasurer Served as a and Director of the Investment Family Life
director since Adviser from July, 2002. Chairman, Assurance
1989. Chief Executive Company
2
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OCCUPATION(S) DURING NUMBER OF OTHER
ADDRESS AND HELD WITH FUND AND LENGTH OF PAST 5 YEARS PORTFOLIOS IN DIRECTORSHIPS
AGE* TIME SERVED FUND COMPLEX HELD BY
OVERSEEN BY DIRECTOR
DIRECTOR** (PUBLIC
COMPANIES)
Officer and
Trustee of NAIC and
Chairman, Chief
Executive Officer
and Director of the
Investment Adviser
from February, 2002
to July, 2002.
President and
Trustee of NAIC and
President and
Director of the
Investment Adviser
to February, 2002.
Lewis A. Director and Term of office Counsel to the law firm of Bodman, One None.
Rockwell Secretary one year. Longley & Dahling LLP, counsel to
Age 83 Served as a the Fund, NAIC and the Investment
director since Adviser; Trustee and Secretary of
1989. NAIC; Director and Secretary of
the Investment Adviser.
Peggy L. Director Term of office Adult Education Teacher; Trustee One None.
Schmeltz one year. of NAIC; Director of Bowling Green
Age 74 Served as a State University Foundation Board;
director since former member of NYSE Advisory
1989. Committee.
*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.
3
DIRECTORS WHO ARE NOT INTERESTED PERSONS OF THE FUND
NAME, POSITION(S) TERM OF OFFICE PRINCIPAL OCCUPATION(S) DURING NUMBER OF OTHER
ADDRESS AND HELD WITH FUND AND LENGTH OF PAST 5 YEARS PORTFOLIOS IN DIRECTORSHIPS
AGE* TIME SERVED FUND COMPLEX HELD BY DIRECTOR
OVERSEEN BY (PUBLIC
DIRECTOR** COMPANIES)
Carl A. Holth Director Term of office President and Director, Greater One None.
Age 69 one year. Detroit Capital Corporation;
Served as a Financial Consultant and President
director since of Carl A. Holth & Associates,
1989. Inc. (a private financial
consulting and business appraisal
firm); Director, Sunshine Fifty,
Inc., and Harrison Piping Supply,
Inc.
Benedict J. Director Term of office Retired; Director and Treasurer, One None.
Smith one year. Detroit Executive Service Corps;
Age 81 Served as a Director, Vista Maria (a nonprofit
director since charitable organization); Trustee,
1989. Henry Ford Health System,
Behavioral Services.
James M. Lane Director Term of office Retired; Director, Chateau One None.
Age 72 one year. Communities, Inc., Wheaton
Served as a College, William Tyndale College,
director since Baseball Chapel, Inc. and
1989. Christian Camps, Inc.
Luke E. Sims Director Term of office Partner in the law firm of Foley & One LaCrosse
Age 52 of one year. Lardner. Director, Wilson-Hurd Footwear, Inc.
Served as a Mfg. Co. and Notre Dame Middle (manufacturer
director since School, Inc. and marketer of
2002. sporting and
industrial
footwear)
*The address of each is the address of the Fund.
**The Fund is not part of any fund complex.
No person is known by the Fund to own of record or beneficially 5% or
more of its outstanding shares of common stock.
The Fund has no standing nominating or compensation committees of the
Board of Directors, or committees performing similar functions. The Fund has a
Management Proxy Committee comprised of Messrs. O'Hara and Janke to cast votes
represented by properly executed proxies. The Management Proxy Committee met one
time during the Fund's fiscal year ended December 31, 2001. The Fund also has an
Audit Committee comprised of Messrs. O'Hara, Holth and Smith. The Audit
Committee reviews the services provided by the Fund's independent accountants
and consults with the accountants. The Audit Committee met 1 time during the
Fund's fiscal year ended December 31, 2001.
The following tables set forth the dollar range of the Fund's common
stock, par value $0.001 per share, which is the Fund's only equity security,
owned by each director, valued at the market price per share of $10.75 as of
December 31, 2001.
4
DIRECTORS WHO ARE INTERESTED PERSONS OF THE FUND
NAME OF DIRECTOR DOLLAR RANGE OF EQUITY SECURITIES IN AGGREGATE DOLLAR RANGE OF EQUITY
THE FUND SECURITIES IN ALL FUNDS OVERSEEN OR
TO BE OVERSEEN BY DIRECTOR OR NOMINEE
IN FAMILY OF INVESTMENT COMPANIES*
Thomas E. O'Hara $50,001 - $100,000 $50,001 - $100,000
Kenneth S. Janke Over $100,000 Over $100,000
Lewis A. Rockwell Over $100,000 Over $100,000
Peggy L. Schmeltz Over $100,000 Over $100,000
*The Fund is not part of a family of investment companies.
DIRECTORS WHO ARE NOT INTERESTED PERSONS OF THE FUND
NAME OF DIRECTOR DOLLAR RANGE OF EQUITY SECURITIES IN AGGREGATE DOLLAR RANGE OF EQUITY
THE FUND SECURITIES IN ALL FUNDS OVERSEEN OR
TO BE OVERSEEN BY DIRECTOR OR NOMINEE
IN FAMILY OF INVESTMENT COMPANIES*
Carl A. Holth $10,001 - $50,000 $10,001 - $50,000
Benedict J. Smith $10,001 - $50,000 $10,001 - $50,000
James M. Lane $10,001 - $50,000 $10,001 - $50,000
Luke E. Sims Over $100,000 Over $100,000
*The Fund is not part of a family of investment companies.
No director, nor any of their immediate family members, owns any
securities beneficially or of record in the Fund's Investment Adviser or any of
its affiliates, or in the Fund's principal underwriter or any of its affiliates.
The following tables set forth the aggregate compensation paid to all
directors in 2001. 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 2001 in excess of $60,000.
5
DIRECTORS WHO ARE INTERESTED PERSONS OF THE FUND
NAME OF PERSON, POSITION AGGREGATE PENSION OR ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION FROM RETIREMENT BENEFITS BENEFITS UPON FROM FUND AND FUND
FUND* ACCRUED AS PART OF RETIREMENT COMPLEX PAID TO
FUND EXPENSES DIRECTORS**
Thomas E. O'Hara, None None None None
Chairman and Director
Kenneth S. Janke, None None None None
President, Treasurer
and Director
Lewis A. Rockwell, None None None None
Secretary and Director
Peggy L. Schmeltz, $ 1900 None None $ 1900
Director
*All amounts shown are for service as a director.
**The Fund is not part of any fund complex.
DIRECTORS WHO ARE NOT INTERESTED PERSONS OF THE FUND
NAME OF PERSON, POSITION AGGREGATE PENSION OR ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION FROM RETIREMENT BENEFITS BENEFITS UPON FROM FUND AND FUND
FUND* ACCRUED AS PART OF RETIREMENT COMPLEX PAID TO
FUND EXPENSES DIRECTORS**
Cynthia P. Charles, $ 1900 None None $ 1900
Director ***
Carl A. Holth, $ 1900 None None $ 1900
Director
James M. Lane, $ 1900 None None $ 1900
Director
Benedict M. Smith, $ 1900 None None $ 1900
Director
*All amounts shown are for service as a director.
**The Fund is not part of any fund complex.
***Mrs. Charles resigned as a director on April 18, 2002.
INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT
The Fund's Investment Adviser is Growth Fund Advisor, Inc., a Michigan
corporation (the "Investment Adviser"). The Investment Adviser is a wholly owned
subsidiary of N.A.I.C. Holding Corporation, a Michigan corporation which
conducts no business activities. The National Association of Investors
Corporation, a Michigan nonprofit corporation ("NAIC") and N.A.I.C. Holding
Corporation are each wholly owned subsidiaries of the National Association of
Investment Clubs Trust (the "Trust"). Mr. O'Hara is the Chairman Emeritus and a
Trustee of the Trust; Mr.
6
Janke is the Chairman and a Trustee of the Trust; and Mr. Rockwell is the
Secretary and a Trustee of the Trust. The Fund is the Investment Adviser's sole
advisory client. The Trust was formed in 1951 by three investment clubs with the
objective of educating investors and promoting the formation of investment
clubs. NAIC was organized by the Trust in 1975 to further this objective. Both
NAIC and the Trust throughout their respective histories have been integrally
involved in educating investors and assisting and encouraging the formation and
operation of investment clubs. The Investment Adviser was organized in March
1999 to take over the investment advisory activities of NAIC, as part of a
restructuring of NAIC and its various affiliates. For further information
concerning the Investment Adviser, see the information in the Prospectus under
the caption "The Investment Adviser."
Affiliated Persons
The following persons are "affiliated persons" of the Fund who are also
"affiliated persons" with respect to the Investment Adviser, as defined by the
1940 Act:
Individual Position with Investment Adviser
Thomas E. O'Hara (1) Chairman Emeritus of the Board and Director
Kenneth S. Janke (2) Chairman, Chief Executive Officer and Director
Lewis A. Rockwell (3) Secretary, Director
(1) Mr. O'Hara is also the Chairman of the Board of Directors of the Fund.
(2) Mr. Janke is primarily responsible for the investment decisions made on
behalf of the Fund by the Investment Adviser. Mr. Janke is also the President
and a Director of the Fund.
(3) Mr. Lewis A. Rockwell is counsel to the law firm of Bodman, Longley &
Dahling LLP, which acts as counsel for the Investment Adviser as well as the
Fund. Mr. Rockwell is also the Secretary and a Director of the Fund.
Advisory Agreement
The Advisory Agreement between the Investment Adviser, as successor to
NAIC, and the Fund dated October 2, 1989 (the "Advisory Agreement") provides
that, subject to the direction of the board of directors of the Fund, the
Investment Adviser is responsible for the actual management of the Fund's
portfolio. The responsibility for making decisions to buy, sell or hold a
particular security rests with the Investment Adviser, subject to review by the
board of directors of the Fund.
The Investment Adviser is not dependent on any other party in providing
the investment advisory services required in the management of the Fund. The
Investment Adviser may, however, consider analyses from other various sources,
including broker-dealers with which the Fund does business. The Investment
Adviser is also obligated to perform certain administrative and management
services for the Fund and is obligated to provide all of the office space,
facilities, equipment and personnel necessary to perform its duties under the
Advisory Agreement.
Code of Ethics
The Fund and the Investment Adviser have adopted a Code of Ethics under
Rule 17j-1 of the Investment Company Act of 1940. This Code of Ethics permits
personnel subject to its provisions to invest in securities, including
securities that may be purchased or held by the Fund. The Code of Ethics may be
reviewed and copied at the Commission's Public Reference Room in Washington,
D.C. Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 1-202-942-8090. The Code of Ethics is also
available on the EDGAR Database on the Commission's internet site at
http://www.sec.gov. Copies of the Code of Ethics may be obtained, after paying a
duplicating fee, by electronic request at: publicinfo@sec.gov or by writing the
Commission's Public Reference Section, Washington, D.C. 20549-0102.
Advisory Fee
For the services provided by the Investment Adviser under the Advisory
Agreement, the Fund will pay to the Investment Adviser a monthly advisory fee at
an annual rate of three-quarters of one percent (0.75%) of the weekly net assets
of the Fund. However, if the weekly net assets of the Fund are below $3,800,000,
then no advisory fee is paid or accrued by the Fund to the Investment Adviser
for that month. The Investment Adviser and its predecessor NAIC waived the
advisory fee from the Fund's inception through 1997, collected 25% of the fee
($35,883) in 1998, 50% of the fee
7
($80,336) in 1999, and 75% of the fee ($139,978) in 2000. The Investment Adviser
collected all of the fee in 2001($182,924) and has advised the Fund it intends
to collect all of the fee thereafter.
Payment of Expenses
In addition to the advisory fee, the Fund pays all of the other costs
and expenses of its operation. These include, among other things, expenses for
legal and auditing services, costs of printing proxies, stock certificates and
shareholder reports, charges of the custodian and transfer agent, Commission
filing fees, fees and expenses of unaffiliated directors, accounting and pricing
costs, membership fees and trade association dues, insurance, interest,
brokerage costs, taxes, stock exchange listing fees and expenses, expenses of
qualifying the Fund's shares for sale in various states, and other miscellaneous
expenses properly payable by the Fund. The Advisory Agreement provides that the
Fund may not incur annual aggregate expenses in excess of 2% of the first
$10,000,000 of the Fund's net assets, 1.5% of the next $20,000,000 of the net
assets, and 1% of the remaining net assets of the Fund for any fiscal year. Any
excess expenses are the responsibility of the Investment Adviser, and the pro
rata portion of the estimated annual excess expenses is offset against the
Investment Adviser's monthly advisory fee. In the event such amount exceeds the
advisory fee payable in any month, no fees are collected by the Investment
Adviser at such time.
The Fund will pay all sales charges and expenses of this offering
directly from the general assets of the Fund. These costs will not be considered
an expense of the Fund for purposes of the expense limitations of the Advisory
Agreement.
Duration and Termination; Approval
The Advisory Agreement became effective on July 2, 1990. It has been
approved by a vote of the majority of the Board of Directors of the Fund and by
the vote of a majority of the Directors who are not parties to the Advisory
Agreement or interested persons of any such party (as defined in the 1940 Act).
The Advisory Agreement will continue in effect only so long as such continuance
is specifically approved at least annually by the Board of Directors of the Fund
or by a vote of the majority of the outstanding voting securities of the Fund.
Under the 1940 Act, this is the vote (a) of 67% or more of the shares of the
Fund present at an annual or special meeting if the holders of more than 50% of
the outstanding shares are present or represented by proxy, or (b) of more than
50% of the outstanding shares, whichever is less. The Advisory Agreement is not
assignable. The Advisory Agreement may be terminated at any time without the
payment of any penalty by the Board of Directors of the Fund or by a vote of the
majority of the outstanding voting securities of the Fund. The Investment
Adviser may terminate the Advisory Agreement upon sixty days written notice to
the Fund.
The continuance of the Advisory Agreement has been approved annually by
the Board of Directors of the Fund since its inception. It was last approved by
the Board of Directors of the Fund at its meeting on December 6, 2001. The Board
of Directors, in approving the continuance of the Advisory Agreement, took into
consideration that the Investment Adviser principally uses the NAIC's investment
principles and the methodology of the NAIC's stock study program in advising the
Fund, which is consistent with the Fund's investment objective. The Board of
Directors also regularly reviews the performance of the Fund in comparison to
other closed end growth funds and based upon this review, and taking into
account the amount of the advisory fee, has determined that it is in the best
interest of the Fund to continue the Advisory Agreement.
Use of Name
The National Association of Investors Corporation ("NAIC"), the
predecessor to the Investment Adviser, has become well known through its
educational activities and publications. The Fund had no prior operating history
and therefore at the time of the initial public offering of the Fund's shares
was not well known. As a result, NAIC consented to allow the Fund to use NAIC as
part of the Fund's name. The Fund acknowledges that NAIC may withdraw from the
Fund the use of its name. However, if it does so, the Investment Adviser has
agreed to submit the question of continuing the Investment Advisory Agreement to
a vote of the Fund's shareholders at that time. Pursuant to the Advisory
Agreement NAIC may grant the use of its name in whole or in part to another
investment company or business enterprise. However, the Investment Adviser has
agreed to submit the question of continuing the Advisory Agreement to the vote
of the Fund's shareholders at that time.
9
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan")
allows participating shareholders to reinvest all dividends and capital gain
distributions in additional shares of the Fund. The Plan also allows
participants to make optional cash investments monthly through American Stock
Transfer & Trust Company, the Plan Agent, in amounts ranging from a minimum of
$50 to a maximum of $1,000. With the Fund's permission, participating
shareholders may also make optional cash investments in excess of the monthly
maximum. Shares purchased by Plan Participants in connection with the
reinvestment of dividends or optional cash investments may be issued by the Fund
if the Fund's shares are trading at a premium to net asset value. If the Fund's
shares are trading at a discount to net asset value, shares purchased under the
Plan will be purchased on the open market. Shares issued by the Fund under the
Plan will be issued at the greater of (i) net asset value or (ii) a discount of
5% to the market price. Shareholders in the Fund may elect to participate in the
Plan by notifying American Stock Transfer & Trust Company, P.O. Box 922, Wall
Street Station, New York, New York 10038. Additional information about the Plan
may be obtained from the Fund at (877) 275-6242, extension 331. For additional
information, See "Dividend Reinvestment and Cash Purchase Plan" in the
Prospectus.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Standard Federal Bank N.A. ("SFB") acts as Custodian for the Fund. SFB
is a national banking association whose address is 2600 West Big Beaver Road,
Troy, Michigan 48084. American Stock Transfer & Trust Company acts as the
Transfer Agent and Dividend Disbursing Agent for the Fund. American Stock
Transfer & Trust Company's address is P.O. Box 922, Wall Street Station,
New York, New York 10038.
INDEPENDENT PUBLIC ACCOUNTANTS
The annual financial statements included in and incorporated by
reference in the Prospectus and Statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto. Arthur Andersen LLP did not perform any other services for the Fund
during the year ending December 31, 2001. Plante & Moran, LLP replaced Arthur
Andersen LLP as the Fund's independent certified public accountants effective
May 9, 2002.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the policies established by the Board of Directors of the
Fund, the Investment Adviser is primarily responsible for the execution of the
Fund's portfolio transactions and the allocation of brokerage. In executing such
transactions, the Investment Adviser seeks to obtain the most favorable
execution and price taking into account such factors as price, size of order,
difficulty of execution and operation of facilities of the firm involved and the
firm's risk in positioning a block of securities.
The Investment Adviser and the Fund have no obligations to deal with
any broker or group of brokers in executing transactions in portfolio
securities. The Investment Adviser is also authorized to consider, in selecting
brokers or dealers with which such orders may be placed, certain statistical,
research and other information or services furnished to the Investment Adviser
by brokers or dealers (the terms "statistical, research and other information or
services" include advice as to the value of securities and the responsibility of
investing in, purchasing, or selling securities; the availability of securities
or purchasers or sellers of securities; and the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
and portfolio strategy in the performance of accounts). The Investment Adviser
may pay a broker a commission in excess of that which another broker might
charge in recognition of the value of the statistical, research and other
information provided by such broker.
The Investment Adviser also makes recommendations as to the manner in
which voting rights, rights to consent to corporate action, or other rights
pertaining to the Fund's portfolio securities will be exercised.
A substantial portion of the securities in which the Fund invests may
be traded in the over-the-counter markets, and the Fund deals directly with the
dealers who make markets in the securities involved, except in those
circumstances where better prices and execution are available elsewhere. Under
the 1940 Act, persons affiliated with the Fund are prohibited from dealing with
the Fund as principal in the purchase and sale of securities. Since transactions
in the over-the-counter market usually involve transactions with dealers acting
as principal for their own account, the Fund does not deal with affiliated
persons in connection with such transactions. However, affiliated persons of the
Fund may serve as its broker in the over-the-counter market and other
transactions conducted on an agency basis.
10
The Board of Directors of the Fund has adopted certain policies
incorporating the standards of Rule 17e-1 issued by the Commission under the
1940 Act, which require that the commissions paid to affiliates of the Fund, or
to affiliates of such persons, must be reasonable and fair compared to the
commissions, fees or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time. The rule and procedures also contain review
requirements and require the Investment Adviser to furnish reports to the Board
of Directors of the Fund and to maintain records in connection with such
reviews. After consideration of all factors deemed relevant, the Board of
Directors of the Fund will consider from time to time whether the advisory fee
will be reduced by all or a portion of the brokerage commission given to brokers
that are affiliated with the Fund.
The aggregate dollar amount of brokerage commissions paid by the Fund
during the fiscal years ending December 31, 1999, 2000, 2001 was $15,053,
$19,294 and $5,884, respectively. The lower amount of brokerage commissions paid
in 2001 was primarily due to a decrease in the Fund's portfolio turnover rate.
During the Fund's fiscal year ending December 31, 2001, 100% of the brokerage
commissions paid by the Fund were paid to Broker Dealer Financial Services Corp.
("BDFSC"), the Fund's principal underwriter, for 100% of the Fund's aggregate
dollar amount of transactions involving the payment of commissions effected
through such broker such year.
The rate of total portfolio turnover of the Fund through its fiscal
year ending December 31, 2001 was 1.77%.
TAXATION
Other Tax Consequences
In addition to the federal income tax consequences described in the
Prospectus applicable to an investment in the Fund, the Fund may be subject to
state or local taxes in jurisdictions in which the Fund may be deemed to be
doing business. Also, there may be other federal, state, or local tax
considerations applicable to the circumstances of a particular investor.
Prospective shareholders are therefore urged to consult their tax advisers with
respect to the effects of this investment on their own tax situation.
FINANCIAL STATEMENTS
The Fund's statement of assets and liabilities, including the portfolio
of investments, as of December 31, 2001, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for the last
five years, are hereby incorporated by reference to the Fund's Annual Report to
Shareholders for the year ended December 31, 2001.
The Fund's statement of assets and liabilities, including the portfolio
of investments, as of June 30, 2002, and the related statement of operations for
the period then ended, the statements of changes in net assets for the period
then ended, and the financial highlights for the period then ended, are hereby
incorporated by reference to the Fund's Semi-Annual Report to Shareholders for
the period ended June 30, 2002.
11
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(1) Financial Statements
Contained in Part A:
Financial Highlights for the years ended December 31, 2001,
2000, 1999, 1998, 1997, 1996, 1995, 1994, 1993, and 1992.
Contained in Part B:
Financial Statements are incorporated in Part B by reference
to the Registrant's December 31, 2001 Annual Report and
Semi-Annual Report for the period ended June 30, 2002.
(2) Exhibits
(a) Articles of Incorporation, as amended (incorporated
by reference to Exhibit 1 to the Registrant's Form
N-2 Registration Statement, Securities Act
Registration No. 33-28506, Investment Company Act
File No. 811-5807, Amendment No. 1, dated July 14,
1990).
(b) By-laws, as amended
(c) Not Applicable
(d) Not Applicable
(e) Dividend Reinvestment and Cash Purchase Plan
(incorporated by reference to Exhibit 1OA to the
Registrant's Form N-2 Registration Statement,
Securities Act Registration No. 33-38825, Investment
Company Act File No. 811-5807, Amendment No. 1, dated
March 29, 1991)
(f) Not Applicable
(g) Investment Advisory Agreement between the Fund and
the Investment Adviser (incorporated by reference to
Exhibit (g) to the Registrant's Form N-2 Registration
Statement, Securities Act Registration No. 33-38825,
Post-Effective Amendment No. 1, Investment Company
Act File No. 811-5807, Amendment No. 7, dated August
3, 1993)
(h)(i) Form of Underwriting Agreement by and among the Fund,
the Investment Adviser, NAIC and BDFSC
(ii) Form of Selected Dealer Agreement.
(i) Not Applicable
(j) Custodial Agreement between the Fund and Standard
Federal Bank, N.A., as successor to Michigan National
Bank
(k) Form of Escrow Agreement
(1) Opinion of Bodman, Longley & Dahling LLP regarding
legality of the securities being offered and consent
(to be filed by amendment).
(m) Not Applicable
(n) Consent of Arthur Andersen LLP (to be filed by
amendment).
(o) Not applicable
(p) Not Applicable
(q) Not Applicable
(r) Code of Ethics of NAIC Growth Fund, Inc. and Growth
Fund Advisor, Inc.
Item 25. Marketing Arrangements
None.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses expected to be
incurred in connection with the offering described in this Registration
Statement:
Registration fees $4,591
Trustees' and transfer agents' fees $
------
Printing and engraving $
------
Fees and expenses of qualification under
state securities laws (excluding fees
of counsel)
$
------
Accounting fees and expenses $
------
Legal fees and expenses $
------
NASD filing fees $ 5,490
Chicago Stock Exchange
listing fee $
------
Miscellaneous $
------
C-1
Total $
------
Item 27. Persons Controlled by or Under Common Control
Not applicable.
Item 28. Number of Holders of Securities
Title of Class Number of Record Holders
Common stock, $0.001 par value 2241
2,256,003 as of September 5, 2002
Item 29. Indemnification.
The Maryland General Corporation Law ("MGCL") of the State of Maryland
provides in general that a Maryland corporation, such as the Fund, may indemnify
any director made a party to any proceeding by reason of service as a director
unless it is established that the act or omission was material and was committed
in bad faith or was the result of active dishonesty; the director received an
improper personal benefit; or in the case of any criminal proceeding, the
director had reasonable cause to believe that the act or omission was unlawful.
Indemnification may be against judgments, penalties, fines, settlements, and
reasonable expenses actually incurred by the director in connection with the
proceeding. However, in the case of an action by or in the right of the
corporation, indemnification may not be made if the director has been adjudged
to be liable to the corporation. The MGCL also generally permits the advancement
of reasonable expenses, including payments authorized by a charter or bylaw
provision. In general, an officer of the corporation is entitled to
indemnification and advancement of expenses to the same extent as a director.
Under Article XII of the Registrant's Articles of Incorporation and
Article XIII of the Registrant's Bylaws, any past or present director, officer,
employee or agent of the Registrant will be indemnified, and will be advanced
expenses to the fullest extent permitted by law, but not in violation of Section
17(h) of the Investment Company Act of 1940. Article VIII of the Investment
Advisory Agreement between the Registrant and the Investment Adviser provides
that the Investment Adviser shall not be liable for any error in judgment or
mistake of law or for any loss arising out of any investment or any act or
omission in the execution and management of the Registrant or its portfolio of
securities, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder.
Insurance is maintained on a regular basis (and not specifically in
connection with this offering) against liabilities arising on the part of
directors and officers out of their performance in such capacities or arising on
the part of the Fund out of its foregoing indemnification provisions, subject to
certain exclusions and to the policy limits.
The Fund and Investment Adviser have jointly and severally agreed to
indemnify Broker Dealer Financial Services Corp. against certain liabilities in
connection with the offering of shares in the Fund, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments that BDFSC
may be required to make in respect thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court or appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 30. Business and Other Connections of Investment Adviser
Growth Fund Advisor, Inc. (the "Investment Adviser") was organized on
March 31, 1999 and has not been engaged in any business activities other than
acting as investment adviser to the Fund.
The following is a list of each officer and director of the Investment
Adviser indicating each business, profession, vocation or employment of a
substantial nature in which each such person has been engaged since January 1,
1999, for his own account or in the capacity of a director, officer, employee,
partner or trustee.
NAME POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION,
INVESTMENT ADVISER VOCATION OR EMPLOYMENT
Thomas E. O'Hara Chairman Emeritus of the Board Chairman Emeritus of the Board and Trustee
of NAIC, 711 West Thirteen Mile Road,
Madison Heights, Michigan 48071
Kenneth S. Janke, Sr. Chairman, Chief Executive Officer Chairman and Trustee of NAIC, 711 West
and Director Thirteen Mile Road, Madison Heights,
Michigan 48071
Lewis A. Rockwell Secretary and Director Attorney and Counsel to the law firm of
Bodman, Longley & Dahling LLP, 100
Renaissance Center, 34th Floor, Detroit,
Michigan 48243
Item 31. Location of Accounts and Records
C-2
(a) American Stock Transfer & Trust Company, P.O. Box
922, Wall Street Station, New York, New York 10038
(records relating to dividend disbursing agent and
transfer agent);
(b) Standard Federal Bank N.A., 2600 West Big Beaver
Road, Troy, Michigan 48084 (records relating to
custodian);
(c) Growth Fund Advisor, Inc., 711 West Thirteen Mile
Road, Madison Heights, Michigan 48071 (records
relating to functions as Investment Adviser); and
(d) Bodman, Longley & Dahling LLP, 100 Renaissance
Center, 34th Floor, Detroit, Michigan 48243
(Registrant's Articles of Incorporation, By-Laws and
Minute Books).
Item 32. Management Services
Except as described in Part A of this Registration Statement under the
caption "Investment Advisory Agreement," the Registrant is not a party to any
management-related service contract.
Item 33. Undertakings
1. The Registrant undertakes to suspend offering of its shares
until it amends its prospectus if (1) subsequent to the
effective date of this Registration Statement, the
Registrant's net asset value declines more than 10 percent
from its net asset value as of the effective date of the
Registration Statement or (2) the net asset value increases to
an amount greater than its net proceeds as stated in the
prospectus.
2. The Registrant undertakes:
a. to file, during any period in which offers or sales are
being made, a post-effective amendment to the registration statement:
(1) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(2) to reflect in the prospectus any facts or events
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(3) to include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
b. that, for the purpose of determining any liability under
the 1933 Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of those securities at that time shall be deemed to be the initial bona
fide offering thereof; and
c. to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
3. The Registrant undertakes to send by first class mail or other
means designed to ensure equally prompt delivery, within two business days of
receipt of a written or oral request, any Statement of Additional Information.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Madison Heights and State of Michigan on the 17th day
of September, 2002.
NAIC GROWTH FUND, INC.
By: /s/Kennth S. Janke
------------------------------------
Kenneth S. Janke
Its: President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates listed.
*
---------------------------------------------------
Thomas E. O'Hara, Director and Chairman
Date: September 17, 2002
/s/ Kenneth S. Janke
---------------------------------------------------
Kenneth S. Janke, Director, President and Treasurer
Date: September 17, 2002
*
---------------------------------------------------
Lewis A. Rockwell, Director and Secretary
Date: September 17, 2002
*
---------------------------------------------------
Peggy L. Schmeltz, Director
Date: September 17, 2002
*
---------------------------------------------------
Luke E. Sims, Director
Date: September 17, 2002
*
---------------------------------------------------
Carl A. Holth, Director
Date: September 17, 2002
*
---------------------------------------------------
Benedict J. Smith, Director
Date: September 17, 2002
*
---------------------------------------------------
James M. Lane, Director
Date: September 17, 2002
*By his signature below, Kenneth S. Janke, pursuant to duly executed powers of
attorney filed with the Securities and Exchange Commission, has signed this
Registration Statement on Form N-2 on September 17, 2002 on behalf of the
above-listed persons designated by asterisks, in the capacities set forth by
their respective names.
/s/ Kenneth S. Janke
-----------------------------------
Kenneth S. Janke, Attorney-in-Fact
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officers and directors of
NAIC Growth Fund, Inc., a Maryland corporation (the "Fund"), do hereby
constitute and appoint Thomas E. O'Hara, Kenneth S. Janke, Lewis A. Rockwell,
and each of them, the lawful attorneys and agents or attorney and agent, with
power and authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, and any one of them, determine may
be necessary or advisable or required to enable said corporation to comply with
the Securities Act of 1933 as amended, and the Investment Company Act of 1940,
as amended, and any rules or regulations or requirements of the Securities and
Exchange Commission in connection with a Registration Statement on Form N-2
relating to the offer and sale of 5,000,000 shares of common stock of the Fund.
Without limiting the generality of the foregoing power and authority, the powers
granted include the power and authority to sign the names of the undersigned
officers and directors in the capacities indicated below to the Registration
Statement, to any and all amendments, both pre-effective and post-effective, and
supplements to the Registration Statement, and to any and all instruments or
documents filed as part of or in conjunction with the Registration Statement or
amendments or supplements thereto, and each of the undersigned hereby ratifies
and confirms all that said attorneys and agents or any of them shall do or cause
to be done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated by his or her name.
/s/ Thomas E. O'Hara
----------------------------------------------------
Thomas E. O'Hara, Director and Chairman
Date: April 18, 2002
/s/ Kenneth S. Janke
----------------------------------------------------
Kenneth S. Janke, Director, President and Treasurer
Date: April 18, 2002
/s/ Lewis A. Rockwell
----------------------------------------------------
Lewis A. Rockwell, Director and Secretary
Date: April 18, 2002
/s/ Peggy L. Schmeltz
----------------------------------------------------
Peggy L. Schmeltz, Director
Date: April 18, 2002
/s/ Luke E. Sims
----------------------------------------------------
Luke E. Sims, Director
Date: April 18, 2002
/s/ Carl A. Holth
----------------------------------------------------
Carl A. Holth, Director
Date: April 18, 2002
/s/ Benedict J. Smith
----------------------------------------------------
Benedict J. Smith, Director
Date: April 18, 2002
/s/ James M. Lane
----------------------------------------------------
James M. Lane, Director
Date: April 18, 2002
EXHIBIT INDEX
(a) Articles of Incorporation, as amended (incorporated by
reference to Exhibit 1 to the Registrant's Form N-2
Registration Statement, Securities Act Registration No.
33-28506, Investment Company Act File No. 811-5807, Amendment
No. 1, dated July 14, 1990).
(b) By-laws, as amended
(c) Not Applicable
(d) Not Applicable
(e) Dividend Reinvestment and Cash Purchase Plan (incorporated by
reference to Exhibit 1OA to the Registrant's Form N-2
Registration Statement, Securities Act Registration No.
33-38825, Investment Company Act File No. 811-5807, Amendment
No. 1, dated March 29, 1991)
(f) Not Applicable
(g) Investment Advisory Agreement between the Fund and the
Investment Adviser (incorporated by reference to Exhibit (g)
to the Registrant's Form N-2 Registration Statement,
Securities Act Registration No. 33-38825, Post-Effective
Amendment No. 1, Investment Company Act File No. 811-5807,
Amendment No. 7, dated August 3, 1993)
(h)(i) Form of Underwriting Agreement by and among the Fund, the
Investment Adviser, NAIC and BDFSC
(ii) Form of Selected Dealer Agreement.
(i) Not Applicable
(j) Custodial Agreement between the Fund and Standard Federal
Bank, N.A., as successor to Michigan National Bank
(k) Form of Escrow Agreement
(1) Opinion of Bodman, Longley & Dahling LLP regarding legality of
the securities being offered and consent (to be filed by
amendment).
(m) Not Applicable
(n) Consent of Arthur Andersen LLP (to be filed by amendment).
(o) Not applicable
(p) Not Applicable
(q) Not Applicable
(r) Code of Ethics of NAIC Growth Fund, Inc. and Growth Fund
Advisor, Inc.