-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UEZjtzr0TN3Qai3Ead219Rtr3Z/ecaWCX97hA1OxB5v5wZLi3X0grrMZoArW55yg oRzS6cIw84sSXZumQjX28Q== 0000318192-05-000028.txt : 20050908 0000318192-05-000028.hdr.sgml : 20050908 20050908115925 ACCESSION NUMBER: 0000318192-05-000028 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050908 DATE AS OF CHANGE: 20050908 EFFECTIVENESS DATE: 20050908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST INVESTORS GROWTH FUND INC CENTRAL INDEX KEY: 0000318192 IRS NUMBER: 042708574 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-03074 FILM NUMBER: 051074567 BUSINESS ADDRESS: STREET 1: 50 CONGRESS ST RM 1000 CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6175233588 MAIL ADDRESS: STREET 1: 50 CONGRESS ST CITY: BOSTON STATE: MA ZIP: 02109 FORMER COMPANY: FORMER CONFORMED NAME: NORTHEAST FUND INC DATE OF NAME CHANGE: 19801001 N-CSRS 1 ncsr63005.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-03074 Northeast Investors Growth Fund (Exact name of registrant as specified in charter) 150 Federal Street Boston, MA 02110 (Address of principal executive offices) (Zip code) David Randall 150 Federal Street Boston, MA 02110 (Name and address of agent for service) Registrant's telephone number, including area code: 617-523-3588 Date of fiscal year end: December 31, 2005 Date of reporting period: June 30, 2005 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. 3507. Item 1. Reports to Stockholders. NORTHEAST INVESTORS GROWTH FUND A NO-LOAD FUND Semi-Annual Report For the Period Ended June 30, 2005 Table of Contents Letter to Shareholders **********************3 Fund Performance**************************** 5 Investment Sectors ************************* 8 Schedule of Investments ******************** 9 Financial Statements ********************** 12 Financial Highlights ********************** 15 Notes to the Financial Statements***********16 Trustees & Officers ************************19 Dear Fellow Shareholders: Northeast Investors Growth Fund struggled in the first quarter of 2005, along with the market as a whole. Ground was regained in the second quarter, and for the six-month period ending June 30, 2005 our total return was dead even at 0.00%. During this period the S&P 500 Index was down 0.82%. The Fund's performance benefited from its over-weight position in the Energy sector. Despite some wild oscillations, the price of oil continued its upward trajectory adding significant value to the Fund's Energy holdings. For example, EnCana Corp., a company that explores for and produces natural gas and crude oil in North America, was purchased at the end of 2004 and added to throughout 2005. EnCana was the strongest performer in this area returning +39% for the six-month period. The Biotechnology sub-sector of the Health Care area also contributed favorably to the Fund's performance. Two favored investments in this area-Gilead Sciences, Inc. and Genentech, Inc.-did particularly well with Gilead returning +25% and Genentech appreciating an impressive +47%. Genentech's price rose sharply on clinical trial results expanding the market for two of its oncology drugs- Herceptin for breast cancer and Avastin for colon cancer. As a whole, our Technology holdings performed well with most investments outperforming the S&P 500. The darling of the group was Corning, Inc. with a return of +41% for the six-month period. Our thesis-that Corning would benefit greatly from strong growth in sales of its LCD glass as the market for flat panel televisions increased-proved correct. We anticipate further growth in this company's earnings as sales of flat panel televisions continue to be a growth area within the TV market. A significant disappointment was the Fund's large position in eBay, Inc., the online auction site, which fell in value by more than 40%. The company missed street estimates early in the year and angered members by raising on-line listing prices. We believe the market over-reacted. The company is well positioned as the dominant on-line auction site within the US and should benefit from increased listings in its international markets. We have added to our holding in the company during the past six months and look forward to a recovery in the price of the stock during the second half of the year. We are optimistic that the portfolio will continue to perform well for the rest of 2005. Solid gains in corporate profitability have been reported, the Federal Reserve seems close to ending its interest rate tightening, and valuations seem reasonable. These factors have positive implications. We have been working to target areas that will provide the greatest opportunities for future growth. We believe our investments in areas such as Energy, Biotechnology, Consumer Electronics and the Internet, will continue to propel the Fund. Looking forward, the Fund seems well positioned. We have worked aggressively to rein in our expenses and limit the amount of leverage used. As a result, our expense ratio is lower. Our rating according to MorningstarTM has been upgraded to four stars for the 3, 5, and 10 year period ending June 30, 2005*. We and others in the investment community see "growth stocks" returning to favor in the marketplace and look to benefit from this movement. I should mention that Gordon Barrett, John Francini and Nancy Mulligan have been working closely with me on the investments in Northeast Investors Growth Fund. They are adding new vigor and insights to the investment process. Like me, they can be contacted with any questions or concerns you might have with your investment in Northeast Investors Growth Fund. Many newspapers no longer carry the daily closing price of smaller funds like ours. However, you may call here 1-800-225-6704 x444 to get the closing price or, if you are an on-line expert, our symbol is NTHFX and the price is listed daily at www.northeastinvestors.com. As in the past, please write or call us directly with any questions or comments you might have. Our daily closing price is the bottom line and of continued keen concern to us all. Yours sincerely, William A. Oates, Jr. President August 11, 2005 * For funds with at least 3-year history, a Morningstar RatingTM is based on a risk-adjustment return measure (including the effects of sales charges, loads, and redemption fees) with emphasis on downward variations and consistent performance. The top 10% of funds in each category receive 5 stars, the next 22.5% 4 stars, the next 35% 3 stars, the next 22.5% 2 stars, and the bottom 10% 1 star. Each share class is counted as a fraction of one fund within this scale and rated separately. Morningstar RatingTM is for retail share class only; other classes may have different performance characteristics. (c)2005 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Average Annual Total Return (unaudited) One year ended June 30, 2005 ************************************* 4.39% Five years ended June 30, 2005 ************************************ -5.66% Ten years ended June 30, 2005************************************* 9.70% Performance Graph (Ten Years) (unaudited) The following graph compares the cumulative total shareholder return on the Northeast Investors Growth Fund shares over the ten preceding years to the cumulative total share return on the Standard & Poor's 500 Index. Assuming an investment of $10,000 in both at their closing prices on January 1, 1995 and reinvestment of dividends and capital gains. For management's discussion of the Growth Fund's 2005 performance, including strategies and market conditions which influenced such performance, see the President's letter to shareholders. Table Omitted Six Months Ended June 30, 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Northeast Investors Growth $13,646 $17,003 $23,342 $31,124 $40,190 $34,178 $28,316 $21,897 $28,113 $30,520 $30,520 Fund Standard & Poor's $13,712 $16,822 $22,390 $28,735 $34,781 $31,616 $27,860 $21,703 $27,927 $30,966 $30,715 500 Index
Returns and Per Share Data Six Months Ended Year Ended December 31, June 30, 2005 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 (unaudited) Net Asset Value 10.59 12.15 15.84 20.47 26.08 20.23 15.43 11.91 15.26 16.52 16.52 Income Dividend 0.07 0.05 0.06 0.05 0.02 0.00 0.00 0.02 0.03 0.05 0.00 Capital Gains Dist 0.44 0.98 0.77 0.55 0.31 2.05 1.44 0.00 0.00 0.00 0.00 NEIG Return (%) 36.46 24.60 37.28 33.34 29.13 -14.96 -17.15 -22.67 28.39 8.56 0.00 S&P 500 Return (%) 37.12 22.68 33.10 28.34 21.04 -9.10 -11.88 -22.10 28.68 10.88 -0.81 Table Omitted
About Your Fund's Expenses (unaudited) Beginning Account Value Ending Account Value Expenses Paid During Period 12/31/2004 6/30/2005 12/31/2004 - 6/30/2005 Actual Return 0.00% $1,000.00 $1,000.00 $5.93 Hypothetical (5% return before expenses) $1,000.00 $1,018.72 $6.13
Example: As a shareholder of the Fund, you incur ongoing costs, including management fees, and other fund expenses. This example is intended to help you understand these expenses of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, 12/31/2004 - 6/30/2005. Actual Expenses: The first line of the table above provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes: The second line of the table above provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Ten Largest Investment Holdings (unaudited) June 30, 2005 Percent Market of Net Value Assets General Electric Co. ********************************** $5,422,725 4.21% Corning, Inc. ****************************************** 5,310,090 4.12% Whole Foods Market, Inc. ******************************* 4,172,813 3.24% Exxon Mobil Corp. ************************************** 4,027,613 3.13% Zions Bancorporation *********************************** 4,022,091 3.12% Wellpoint, Inc. **************************************** 3,718,776 2.89% Genentech, Inc. **************************************** 3,612,600 2.80% 3M Co. ************************************************* 3,470,400 2.69% Zimmer Holdings, Inc. ********************************** 3,442,884 2.67% Eaton Vance Corp. ************************************** 3,428,694 2.66% Summary of Industry Weightings (unaudited) June 30, 2005 Northeast Market Investors S&P 500 Major Sectors Value Growth Fund Index Consumer Discretionary ******** $12,763,085 10.22% 11.70% Consumer Staples ************** $14,580,988 11.68% 10.60% Energy************************* $15,032,329 12.04% 8.80% Financials ******************** $19,690,852 15.76% 20.10% Health Care ******************* $24,291,199 19.45% 13.20% Industrials ******************* $14,457,435 11.57% 11.10% Information Technology ******** $23,451,254 18.77% 15.20% Materials ********************* $ - 0.00% 2.90% Telecommunication Services **** $ - 0.00% 3.10% Utilities********************** $ - 0.00% 3.30% Cash and other equivalents **** $ 640,051 0.51% 0.00% 100.00% 100.00% Schedule of Investments June 30, 2005 (unaudited) Number Market Percent Common Stock Sector of Value of Net Name of Issuer Shares (Note B) Assets Consumer Discretionary - ------------------------------------------------------------------------------- Best Buy Co., Inc.* 26,800 $ 1,837,140 Comcast Corp., Class A^ 61,700 1,892,339 eBay, Inc.^ 53,900 1,779,239 Getty Images, Inc.^ 17,900 1,329,254 Lowes Cos. 25,000 1,455,500 Starbucks Corp.^ 31,000 1,601,460 Time Warner, Inc.^ 95,500 1,595,805 XM Satellite Radio Holdings, Class A^# 37,800 1,272,348 ---------- 12,763,085 10.22% Consumer Staples - ------------------------------------------------------------------------------- Costco Wholesale Corp. 30,600 1,368,738 CVS Corp. 64,800 1,883,736 PepsiCo, Inc. 45,100 2,432,243 Procter & Gamble Co.* 58,800 3,101,700 United Natural Foods, Inc.^ 53,400 1,621,758 Whole Foods Market, Inc.* 35,300 4,172,813 ---------- 14,580,988 11.68% Energy - ------------------------------------------------------------------------------- Apache Corp. 27,900 1,802,340 B P Amoco, PLC 51,200 3,193,856 Chevron Corp. 34,100 1,906,872 EnCana Corp. 56,800 2,248,712 Exxon Mobil Corp.* 70,082 4,027,613 Schlumberger Ltd 24,400 1,852,936 ---------- 15,032,329 12.04% Financials - ------------------------------------------------------------------------------- American Express Co. 37,500 1,996,125 Bank of America Corp.* 67,170 3,063,624 Citigroup, Inc.* 52,000 2,403,960 Eaton Vance Corp.* 100,000 3,428,694 Goldman Sachs Group* 27,900 2,846,358 State Street Corp. 40,000 1,930,000 Zions Bancorporation* 54,700 4,022,091 ---------- 19,690,852 15.76% Health Care - ------------------------------------------------------------------------------- Amgen, Inc.^ 27,200 $ 1,644,512 Cerner Corp.^# 25,800 1,753,626 Genentech, Inc.^ 45,000 3,612,600 Gilead Sciences, Inc.^ 58,200 2,560,218 Johnson & Johnson* 42,900 2,788,500 Kinetic Concepts, Inc.^ 12,100 726,000 Medco Health Solutions, Inc.^ 48,000 2,561,280 Patterson Cos., Inc.^ 32,900 1,482,803 Wellpoint, Inc.^ 53,400 3,718,776 Zimmer Holdings, Inc.*^ 45,200 3,442,884 ----------- 24,291,199 19.45% Industrials - ------------------------------------------------------------------------------- 3M Co.* 48,000 3,470,400 Danaher Corp. 28,800 1,507,392 General Electric Co.* 156,500 5,422,725 Iron Mountain, Inc.^ 50,075 1,553,326 United Parcel Service, Inc. 36,200 2,503,592 ---------- 14,457,435 11.57% Information Technology - ------------------------------------------------------------------------------- American Tower Corp., Class A^# 53,800 1,130,876 Akamai Technologies, Inc.^# 94,000 1,234,220 Analog Devices, Inc. 28,000 1,044,680 Apple Computer, Inc.^ 67,000 2,466,270 Cisco Systems, Inc.^ 45,000 858,600 Corning, Inc.*^ 319,500 5,310,090 Dell, Inc.*^ 74,100 2,923,986 Google, Inc., Class A^ 7,300 2,147,295 Intel Corp.* 37,600 978,352 Macromedia, Inc.^ 40,300 1,540,266 Marvell Technology Group Ltd.^ 19,300 732,821 Sonus Networks, Inc.^# 160,000 763,200 Texas Instruments, Inc. 34,900 979,643 Yahoo!, Inc.^ 38,700 1,340,955 ---------- 23,451,254 18.77% Total Common Stocks (Cost-$100,901,103) $124,267,142 99.49% Repurchase Agreement Investors Bank & Trust Co. Repurchase Agreement, 2.01% due 7/1/05@ 546,530 Total Repurchase Agreement (Cost-$546,530) $ 546,530 0.44% Cash Equivalents~ BGI Institutional Money Market Fund~ 3.24515% $ 2,132,768 Freddie Mac~ 3.20797% 2,000,000 Total Cash Equivalents (Cost-$4,132,768) $ 4,132,768 3.31% Total Investment Portfolio (Cost-$105,580,401) 128,946,440 103.24% Total Assets and Liabilities (4,039,247) -3.24% Total Net Assets $124,907,193 100.00% @ Acquired on June, 30 2005. Collateralized by $573,857 of market value of U.S. Government mortgagebacked securities due through 5/25/27. The maturity value is $546,561. * All or a portion of this security is pledged to collateralize short-term borrowings ^ Non-income producing security # All or a portion of this security is currently out on loan ~ Security held as collateral for securities on loan. The rate quotes is the annualized seven-day yield of the fund at period end (See Note I) Note: Each fiscal quarter-end the Fund is required to file a complete schedule of investments with the Securities and Exchange Commission. The schedules of portfolio holdings for the second and fourth quarters appear in the semiannual and annual reports to shareholders. For the first and third quarters, the Fund files the schedules of portfolio holdings with the SEC on Form N-Q. The Fund makes the information on Forms N-Q available on its website at www.northeastinvestors.com or upon request. Shareholders may also access and review information and reports of the Fund, including Form N-Q, at the SEC's Public Reference Room in Washington, D.C. You can call the SEC at 1-202-942-8090 for information about the operation of the Public Reference Room. Reports and other information about the Fund are available on the SEC's internet site at http://www.sec.gov. and copies may be obtained for a duplicating fee by electronic request at the following E-mail address: publicinfo@sec.gov or by writing the Public Reference Center of the Securities and Exchange Commission, Washington, D.C. 20549-0102. The Fund's reference number as a registrant under the Investment Company Act of 1940 is 811-3074. Statement of Assets and Liabilities (unaudited) June 30, 2005 Assets Investments-at market value (including securities loaned of $3,972,038) (cost $105,580,401) $128,946,440 Receivable for investments sold 972,668 Dividends receivable 69,981 Other receivables 89 ------------ Total Assets 129,989,178 Liabilities Collateral on securities loaned, at value 4,132,768 Payable for investments purchased 676,461 Payable for shares repurchased 126,951 Accrued investment advisory fee 60,423 Accrued expenses 85,382 ------------ Total Liabilities 5,081,985 Net Assets $124,907,193 Net Assets Consist of: Capital paid-in $106,863,948 Accumulated net realized loss (5,322,794) Net unrealized appreciation of investments 23,366,039 ------------- Net Assets $124,907,193 Net Asset Value, offering price and redemption price per share ($124,907,193/7,565,304 shares) $16.52 The accompanying notes are an integral part of the financial statements. Statement of Operations (unaudited) Six Months Ended June 30, 2005 Investment Income Dividend income $701,990 Interest income 5,013 Other income 1,514 --------- Total Income $708,517 Expenses Investment advisory fee $368,660 Administrative expenses and salaries 196,405 Printing, postage, and stationery 46,200 Audit fees 35,125 Legal fees 27,150 Computer and related expenses 23,150 Insurance 18,100 Registration and Filing fees 18,100 Trustee fees 15,000 Commitment fee 12,375 Telephone expense 9,050 Custodian fees 6,154 Interest fee 1,744 Miscellaneous fees 4,501 --------- Total Expenses $781,714 --------- Net Investment Income (loss) $(73,197) Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) from investment transactions $5,567,907 Change in unrealized appreciation(depreciation) of investments (5,732,038) ----------- Net gain (loss) on investments (164,131) Net increase (decrease) in net assets resulting from operations ($237,328) The accompanying notes are an integral part of the financial statements. Statements of Changes in Net Assets Six Months Ended June 30, Year Ended 2005 December 31, (unaudited) 2004 Increase (Decrease) in Net Assets From Operations: Net investment income (loss) $(73,197) $388,790 Net realized gain (loss) from investment transactions 5,567,907 6,290,650 Change in unrealized appreciation (depreciation) of investments (5,732,038) 4,404,129 ----------- ---------- Net Increase (Decrease) in Net Assets Resulting from Operations (237,328) 11,083,569 ----------- ---------- Distributions to Shareholders From Net Investment Income - (388,373) From Net Fund Share Transactions (11,093,481) (16,017,737) ------------ ------------ Total Increase (Decrease) in Net Assets (11,330,809) (5,322,541) Net Assets: Beginning of Period 136,238,002 141,560,543 End of Period $124,907,193 $136,238,002 The accompanying notes are an integral part of the financial statements.
Financial Highlights Six Months Ended June 30, 2005 Year Ended December 31, (unaudited) 2004 2003 2002 2001 2000 Per Share Data. Net Asset Value: Beginning of Period $16.52 $15.26 $11.91 $15.43 $20.23 $26.08 Income From Investment Operations: Net investment income (loss) (0.01) 0.04 0.03 0.02 (0.01) (0.09) Net realized and unrealized gain (loss) on investment 0.01 1.27 3.35 (3.52) (3.35) (3.71) ------- ----- ----- ------ ------ ------ Total from investment operations - 1.31 3.38 (3.50) (3.36) (3.80) Less Distributions: Net investment income 0.00 (0.05) (0.03) (0.02) 0.00 0.00 Capital Gain 0.00 0.00 0.00 0.00 (1.44) (2.05) ------ ------ ------ ------ ------ ------ Total Distributions - (0.05) (0.03) (0.02) (1.44) (2.05) Net Asset Value: End of Period $16.52 $16.52 $15.26 $11.91 $15.43 $20.23 ------- ------- ------ ------ ------ ------ Total Return 0.00%* 8.56% 28.39% -22.67% -17.15% -14.96% Ratios & Supplemental Data Net assets end of period (in thousands) $124,907 $136,238 $141,561 $125,986 $187,218 $272,222 Ratio of operating expenses to average net assets (includes interest expense) 1.23%~ 1.32% 1.43% 1.31% 1.14% 0.97% Ratio of interest expense to average net assets 0.00%~ 0.07% 0.22% 0.21% 0.14% 0.22% Ratio of net investment income to average net assets -0.11%~ 0.29% 0.21% 0.17% -0.05% -0.34% Portfolio turnover rate 43%* 19% 25% 26% 30% 33% * Average share method used to calculate per share data * Not annualized ~ Annualized
Notes to Financial Statements (unaudited) Note A-Organization Northeast Investors Growth Fund (the "Fund") is a diversified, no-load, open-end, series-type management investment company registered under the Investment Company Act of 1940, as amended. The Fund presently consists of one portfolio and is organized as a Massachusetts business trust. The Fund's objective is to produce long term growth for its shareholders. Note B-Significant Accounting Policies Significant accounting policies of the Fund are as follows: Valuation of Investments: Investments in securities traded on national securities exchanges are valued based upon closing prices on the exchanges. Securities traded in the over-the-counter market and listed securities with no sales on the date of valuation are valued at closing bid prices. Repurchase agreements are valued at cost with earned interest included in interest receivable. Other short-term investments, when held by the Fund, are valued at cost plus earned discount or interest which approximates market value. Securities and other assets for which market quotations are not readily available (including restricted securities, if any) are valued at their fair value as determined in good faith under consistently applied procedures approved by the Board of Trustees. The Fund may use fair value pricing for foreign securities if a material event occurs that may affect the price of a security after the close of the foreign market or exchange (or on days the foreign market is closed) but before the Fund prices its portfolio, generally at 4:00 p.m. ET. Fair value pricing may also be used for securities acquired as a result of corporate restructurings or reorganizations as reliable market quotations for such issues may not be readily available. At June 30, 2005 there were no securities priced at fair value as determined in good faith. Security Transactions: Investment security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Federal Income Taxes: No provision for federal income taxes is necessary since the Fund has elected to qualify under subchapter M of the Internal Revenue Code and its policy is to distribute all of its taxable income, including net realized capital gains, within the prescribed time periods. State Income Taxes: Because the Fund has been organized by an Agreement and Declaration of Trust executed under the laws of the Commonwealth of Massachusetts, it is not subject to state income or excise taxes. Distributions and Income: Income and capital gain distributions are determined in accordance with income tax regulations which may differ from U.S. generally accepted accounting principles. These differences are primarily due to differing treatments for capital loss carryovers and losses deferred due to wash sales. Permanent book and tax differences relating to shareholder distributions will result in reclassifications to paid-in-capital. The Fund's distributions and dividend income are recorded on the ex-dividend date. Interest income, which consists of interest from repurchase agreements, is accrued as earned. Net Asset Value: In determining the net asset value per share, rounding adjustments are made for fractions of a cent to the next higher cent. Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Notes to Financial Statements (unaudited) (continued) Note C-Investment Advisory and Service Contract The Fund has its investment advisory and service contract with Northeast Management & Research Company, Inc. (the "Advisor"). Under the contract, the Fund pays the Advisor an annual fee at a maximum rate of 1% of the first $10,000,000 of the Fund's average daily net assets, 3/4 of 1% of the next $20,000,000 and 1/2 of 1% of the average daily net assets in excess of $30,000,000, in monthly installments on the basis of the average daily net assets during the month preceding payment. All trustees except Messrs. John C. Emery, Michael Baldwin, and F. Washington Jarvis are officers or directors of the Advisor. The compensation of all disinterested trustees of the Fund is borne by the Fund. Under the Fund's Investment Advisory Agreement (the "Agreement"), personnel of the Advisor provide the Fund with advice and assistance in the choice of investments and the execution of securities transactions, and otherwise maintain the Fund's organization. The Advisor also provides the Fund with necessary office space and portfolio accounting and bookkeeping services. The salaries of all officers of the Fund or of the Advisor performing services relating to research, statistical and investment activities are paid by the Advisor. The Fund pays expenses, including the salaries of employees engaged in the following activities, related to its role as transfer, dividend paying and shareholder servicing agent. Note D-Purchases and Sales of Investments The cost of purchases and proceeds from sales of investments, other than short-term securities, aggregated $55,570,321 and $61,138,229, respectively, for the six months ended June 30, 2005. Note E-Shares of Beneficial Interest At June 30, 2005, there was an unlimited number of shares of beneficial interest authorized with no par value. Transactions in shares of beneficial interest were as follows: June 30, 2005 December 31, 2004 Shares Amount Shares Amount Shares sold 198,372 $ 3,215,747 286,607 $ 4,460,343 Shares issued to shareholders in reinvestment of distributions from net investment income and realized gains from security transactions 0 $ 0 20,568 $ 338,969 -------- ------------ ------- ------------ 198,372 $ 3,215,747 307,175 $ 4,799,312 Shares repurchased (883,085) $(14,309,228) (1,335,365) $(20,817,049) -------- ------------ ----------- ------------- Net increase (684,713) $(11,093,481) (1,028,190) $(16,017,737)
Note F-Repurchase Agreement On a daily basis, the Fund invests any cash balances into repurchase agreements hypothecated by U.S. Government obligations. Securities pledged as collateral for repurchase agreements are held by the Fund's custodian bank until maturity of the repurchase agreement. Provisions of the agreement ensure that the market value of the collateral is sufficient in the event of default. However, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. Notes to Financial Statements (unaudited) (continued) Note G-Committed Line of Credit Short-term bank borrowings, which do not require maintenance of compensating balances, are generally on a demand basis and are at rates equal to adjusted money market interest rates in effect during the period in which such loans are outstanding. At June 30, 2005, the Fund had unused lines of credit amounting to $25,000,000 and there was no outstanding balance. In addition the Fund pays a commitment fee of 0.10% per annum, payable at the end of each quarter based on the unused portion of the line of credit. The committed lines of credit may be terminated at the bank's option at their annual renewal dates. The following information relates to aggregate short-term borrowings during the six months ended June 30, 2005: Average amount outstanding (total of daily outstanding principal balances divided by number of days during the period) $78,972 Weighted average interest rate (actual interest expense on short-term borrowing divided by average short-term borrowings outstanding) 1.17% Note H-Additional Tax Information The tax character of distributions paid during the fiscal year ended December 31, 2003 and 2004 were $279,662 and $388,373 respectively, and were classified as ordinary income. At June 30, the Fund's aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows: 2004 Tax cost $101,447,633 Gross unrealized gain 24,494,337 Gross unrealized loss (1,128,298) ------------- Net unrealized security gain (loss) $ 23,366,039 The difference between book-basis and tax-basis unrealized gains (losses) is primarily attributable to wash sales. Note I-Securities Lending The Fund may seek additional income by lending portfolio securities to qualified institutions. The Fund will receive cash or securities as collateral in an amount equal to at least 102% of the current market value of any loaned securities plus accrued interest. By reinvesting any cash collateral it receives in these transactions, the Fund could realize additional gains and losses. If the borrower fails to return the securities and the value of the collateral has declined during the term of the loan, the Fund will bear the loss. At June 30, 2005, the value of securities loaned and the value of collateral was $3,972,038 and $4,132,768, respectively. During the six months ended June 30, 2005, income from securities lending amounted to $296. Trustees & Officers The Trustees of Northeast Investors Growth Fund are William A. Oates, Jr., Ernest E. Monrad, Robert B. Minturn, John C. Emery, Michael Baldwin, and F. Washington Jarvis. Under Massachusetts Law, the Trustees are generally responsible for protecting the interests of the shareholders by overseeing the operation and management of the Fund. The table below provides certain information about the Fund's Trustees and Officers. The mailing address for the Trustees and Officers of the Fund is 150 Federal Street, Boston, MA 02110-1745. The Fund's Statement of Additional Information (SAI) contains additional information about the Trustees. To request a free copy, call the Fund at 800-225-6704 or visit our website at www.northeastinvestors.com. Principal Occupation(s)/Other Directorships During the Past Five Name/Age/Service* Position Years Affiliated Trustees and Fund Officers Williams A. Oates, Jr. Trustee and President Trustee and President Northeast Age: 63 Investors Growth Fund; President and Years of Service: 24 Director of Northeast Investment Management, Inc.; President of Northeast Investors Trust until 6/30/05. Ernest E. Monrad Trustee Trustee of Northeast Investors Trust; Age: 75 Director of New America High Years of Service: 24 Income Fund, Inc.; Trustee of Century Shares Trust and Century Small Cap Select until 7/31/05; Officer and Director of Northeast Investment Management, Inc. Gordon C. Barrett Senior Vice President and Executive Vice President and Chief Age: 48 Chief Financial Officer Financial Officer of Northeast Years of Service: 11 Investors Trust, Officer of Northeast Investors Growth Fund, and Officer of Northeast Investment Management, Inc. Robert B. Minturn Trustee, Clerk, Vice Clerk, Vice President, and Chief Age: 66 President, and Chief Legal Officer of Northeast Investors Years of Service: 24 Legal Officer Trust (Trustee until 6/30/05); Officer and Director of Northeast Investment Management, Inc. Independent Trustees John C. Emery Trustee Partner, Law Firm of Sullivan & Age: 74 Worcester Years of Service: 24 Michael Baldwin Trustee Partner, Baldwin Brothers, Age: 64 Registered Investment Advisor Years of Service: 5 F. Washington Jarvis Trustee Retired; Headmaster at Roxbury Age: 66 Latin School until June 30, 2004 Years of Service: 1 * The Trustees serve until their resignation or the appointment of a successor and the officers serve at the pleasure of the Trustees.
Trustees William A. Oates, Jr. John C. Emery Ernest E. Monrad Michael Baldwin Robert B. Minturn F. Washington Jarvis Officers William A. Oates, Jr., President Gordon C. Barrett, Senior Vice President & Chief Financial Officer Ernest E. Monrad, Assistant Treasurer Robert B. Minturn, Vice President, Clerk & Chief Legal Officer Richard J. Semple, Vice President & Chief Compliance Officer Bruce H. Monrad, Vice President David A. Randall, Vice President Investment Advisor Northeast Management & Research Company, Inc. 150 Federal Street Boston, Massachusetts 02110 Custodian Investors Bank & Trust Company 200 Clarendon Street Boston, Massachusetts 02205 Legal Counsel Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. One Financial Center Boston, Massachusetts 02111 Transfer Agent Northeast Investors Growth Fund 150 Federal Street Boston, Massachusetts 02110 This report is prepared for the information of the shareholders of Northeast Investors Growth Fund and must not be given to others unless preceded or accompanied by a copy of the current Prospectus by which all offerings of the Fund shares are made. It should be noted in reading this report and the letter to shareholders that the record of past performance is not a representation as to the Fund's future performance, and that the Fund's investments are subject to market risks. For a free copy of the Fund's proxy voting guidelines and proxy voting record visit www.northeastinvestors.com/growth/proxypolicy.stm, call 1-800-225-6704 or visit the Securities and Exchange Commission (SEC)'s website at www.sec.gov. Shares of the Fund are sold to investors at net asset value by Northeast Investors Growth Fund 150 Federal Street Boston, Massachusetts 02110 800-225-6704 617-523-3588 www.northeastinvestors.com The share price for Northeast Investors Growth Fund is quoted daily in the Mutual Funds section of most major newspapers under several abbreviations including: NE Inv GR, NE Investor. Item 2. Code of Ethics. Not applicable for semi-annual report. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual report. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual report. Item 5. Audit Committee of Listed Registrants. Not applicable to the registrant. Item 6. Schedule of Investments Included as part of Item 1 above. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable to the registrant. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to the registrant. Item 9. Purchase of Equity Securities by Closed-End Management Company and Affiliated Purchasers Not applicable to the registrant. Item 10. Submission of Matters to a Vote of Security Holders. The registrant has not adopted procedures for the submission of nominees for Trustee. Item 11. Controls and Procedures. (a) The registrant's principal executive and financial officers, after evaluating the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-2(c) under the Investment Company Act of 1940, as amended), have concluded that, based on such evaluation, the registrant's disclosure controls and procedures were effective as of a date within 90 days of the filing of this report. (b) The registrant's principal executive officer and principal financial officer are aware of no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a) 99.CERT Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (b) 99.906CERT A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Northeast Investors Growth Fund By (Signature and Title) William A. Oates, Jr. President (principal executive officer) Date: September 7, 2005 By (Signature and Title) Gordon C. Barrett Chief Financial Officer (principal financial officer) Date: September 7, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) William A. Oates, Jr. President (principal executive officer) Date: September 7, 2005 By (Signature and Title) Gordon C. Barrett Chief Financial Officer (principal financial officer) Date: September 7, 2005 Exhibit 99.CERT Certification Pursuant to Section 302 of the Sarbanes-Oxley Act I, William A. Oates, Jr., certify that: 1. I have reviewed this report on Form N-CSR of Northeast Investors Growth Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 7, 2005 William A. Oates, Jr. President (principal executive officer) Certification Pursuant to Section 302 of the Sarbanes-Oxley Act I, Gordon C. Barrett, certify that: 1. I have reviewed this report on Form N-CSR of Northeast Investors Growth Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 7, 2005 Gordon C. Barrett Chief Financial Officer (principal financial officer) Exhibit 99.906CERT Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Northeast Investors Growth Fund, a Massachusetts business trust (the "Registrant"), does hereby certify, to such officer's knowledge, that: The report on Form N-CSR for the period ended June 30, 2004 of the Company (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: September 7, 2005 William A. Oates, Jr. President (Principal Executive Officer) Dated: September 7, 2005 Gordon C. Barrett Chief Financial Officer (Principal Financial Officer) The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. EX-99.CERT 2 cert99.txt Exhibit 99.CERT Certification Pursuant to Section 302 of the Sarbanes-Oxley Act I, William A. Oates, Jr., certify that: 1. I have reviewed this report on Form N-CSR of Northeast Investors Growth Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 7, 2005 William A. Oates, Jr. President (principal executive officer) Certification Pursuant to Section 302 of the Sarbanes-Oxley Act I, Gordon C. Barrett, certify that: 1. I have reviewed this report on Form N-CSR of Northeast Investors Growth Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: September 7, 2005 Gordon C. Barrett Chief Financial Officer (principal financial officer) EX-99.906 CERT 3 cert99906.txt Exhibit 99.906CERT Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of Northeast Investors Growth Fund, a Massachusetts business trust (the "Registrant"), does hereby certify, to such officer's knowledge, that: The report on Form N-CSR for the period ended June 30, 2004 of the Company (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: September 7, 2005 William A. Oates, Jr. President (Principal Executive Officer) Dated: September 7, 2005 Gordon C. Barrett Chief Financial Officer (Principal Financial Officer) The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----