0000318192-12-000007.txt : 20120307 0000318192-12-000007.hdr.sgml : 20120307 20120306183707 ACCESSION NUMBER: 0000318192-12-000007 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20111231 FILED AS OF DATE: 20120307 DATE AS OF CHANGE: 20120306 EFFECTIVENESS DATE: 20120307 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-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-03074 FILM NUMBER: 12671967 BUSINESS ADDRESS: STREET 1: 100 HIGH STREET CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6175233588 MAIL ADDRESS: STREET 1: 100 HIGH STREET CITY: BOSTON STATE: MA ZIP: 02110 FORMER COMPANY: FORMER CONFORMED NAME: NORTHEAST FUND INC DATE OF NAME CHANGE: 19801001 0000318192 S000011441 NORTHEAST INVESTORS GROWTH FUND INC C000031646 NORTHEAST INVESTORS GROWTH FUND INC NTHFX N-CSR 1 ncsr2011.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) 100 High Street Boston, MA 02110 (Address of principal executive offices) (Zip code) Robert M. Kane 100 High 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, 2011 Date of reporting period: December 31, 2011 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. LOGO A NO-LOAD FUND ANNUAL REPORT ------------------------------------- FOR THE YEAR ENDED ------------------------------------- DECEMBER 31, 2011 ------------------------------------- TABLE OF CONTENTS Letter to Shareholders.......................... 2 Fund Performance................................ 4 Schedule of Investments......................... 9 Financial Statements............................ 11 Notes to the Financial Statements............... 15 Report of Independent Registered Public Accounting Firm............................... 20 Trustees & Officers............................. 21
DEAR FELLOW SHAREHOLDERS: It was another volatile year in the equity markets in 2011 as dramatic news, both at home and abroad, rocked the markets. Looking across the globe, most major equity indices ended the year in negative territory, with the exception of the Dow Jones Industrial Average and the S&P 500 Index. Northeast Investors Growth Fund did not fare as well as our benchmark, the S&P 500 Index, as we ended 2011 with a total return of -7.84% vs. the Index(1) +2.09%. We are not pleased with the performance of our Fund. Yet, as mentioned in June, we believe over the longer-term, the investments we hold in well-run, industry leading companies, exhibiting solid growth, will prove to be rewarding for our shareholders. Much of our underperformance can be explained by our sector allocations. We began the year by positioning the Fund to benefit from an economic recovery reignited at the end of 2010 with the Fed's quantitative easing and Congress' favorable payroll tax reduction. We focused our investments more heavily in the growth oriented, cyclical areas-Industrials, Technology, Energy and Financials- and had little to no exposure to the defensive areas such as Utilities and Consumer Staples. Our thesis was, and still is, that companies like Exxon, Schlumberger, Deere, Emerson, Ford Motor Co, Citigroup, Goldman Sachs Group, Apple and T. Rowe Price would benefit from the slowly recovering U.S. and world economy. For the first quarter of 2011, this theme appeared intact as the Energy and Industrial sectors led the market. During the second quarter, market leadership changed and cyclical sectors began to falter and trailed the market for the quarter. Investor anxiety increased as the third quarter progressed. The U.S. economy was stalling and fear of a second recession increased. Add to this the emergence of a slowdown in the growth rate in China and other emerging economies, concerns about a European sovereign debt crisis, the potential breakdown of the European Union, a showdown in the U.S. Congress about raising the debt ceiling and a downgrade of the U.S. credit rating by the S&P rating agency and one can understand why people abandoned the risk markets and fled to the safety of super safe investments like cash and U.S. Treasuries. Given our cyclical bias, the extreme fear in the market place was detrimental to many investments held in our portfolio. One of our biggest individual drags on performance was Ford. Consumers concerned about the economy would be less confident and less willing to purchase new automobiles. Though the automaker has made decent strides in repaying its debt, and the revamped product line is attractive, a car is still an expensive item. Additionally, with the largest markets- the U.S. and Europe- slowing down, there were concerns that sales would disappoint in the near term. Eventually we believe Ford will be well positioned for recovery in its share price. But, it would not be in 2011 as it is too dependent on a confident and employed consumer base. As a group, our investments in the Financials detracted from performance. The Financial sector was the worst performing sector in the S&P 500 Index, down over 18%. The banking sector was particularly hard hit. Though we stepped to the sidelines in some of the companies we held at the beginning of the year- Citigroup Inc., Goldman Sachs Group, JP Morgan- it was not before performance was impacted on the downside. Though we remain cautious with our investments in the banking and financial services sector, we recognize that despite the headline disdain for these organizations, they provide a crucial ---------- (1) The Standard & Poor's 500 Index is an unmanaged index and does not reflect charges, expenses or taxes. It is not possible to invest directly in this index. Page 2 service to our free-market society. There will be a time when financial organizations have resolved many of the issues clouding their recovery, and it is better for the Fund to be invested in these names before the clouds clear to benefit from their recovery. The Fund did have some good performing names in the portfolio- McDonalds was up over 30% for the year, and IBM, VF Corp, Apple Inc., and Pfizer were all up about 25%. Though these investments span various sectors- Consumer Discretionary, Technology and Health Care- they share a common thread. They are well-run, U.S. companies with differentiated products that consumers will seek in the U.S. and the world markets. These are names in which we feel confident, and though many dipped somewhat during the summer doldrums, as the market regained its balance, they did as well. We have been thankful to have these well-managed, well-run companies, and will continue to add names that share these qualities to our holdings. The markets and the Fund did have a decent recovery as the year ended. The Federal Reserve made two significant announcements: they would work to keep interest rates low for at least the next two years; and they would purchase long dated securities so to push down intermediate and long-term interest rates in an effort to aid borrowers. There was further positive news as the year came to a close: U.S. unemployment level fell to 8.5%, the lowest level we have seen since early 2009, consumer confidence levels improved from the low levels reached during the summer crisis period and maybe most importantly, Europe seemed to retreat from a teetering point, and institute some changes that would allow them a little more time to work through their woes. We manage the Fund as a long-term investor in high quality investments rather than a short-term trader trying to predict the next news headline. Thus, there naturally may be times when we cannot shift our portfolio to perfectly align with the market's movement between a "risk on" and "risk off" world. In these instances, we may underperform the market. We would characterize 2011 as "one of these times" and we look forward to a better 2012. We welcome and encourage you to contact us with any questions, concerns or comments. Please call us directly or visit our website at www.northeastinvest.com where you can view the Fund's closing price, portfolio composition, and historical performance. If you follow your investments on-line, the ticker symbol for the Fund is NTHFX. Our lines of communication are always open to our most important partners, our fellow shareholders. We continue to appreciate your support. /s/ William A. Oates, Jr. /s/ John F. Francini William A. Oates, Jr. John F. Francini /s/ Nancy M. Mulligan Nancy M. Mulligan February 2012
Page 3 AVERAGE ANNUAL TOTAL RETURN One year ended December 31, 2011.................... -7.84% Five years ended December 31, 2011.................. -1.64% Ten years ended December 31, 2011................... 1.90%
PERFORMANCE GRAPH (UNAUDITED) (TEN YEARS) 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 December 31, 2001 and reinvestment of dividends and capital gains. The graph does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Keep in mind that past performance does not guarantee future returns, and an investment in the Fund is not guaranteed. For management's discussion of the Growth Fund's 2011 performance, including strategies and market conditions which influenced such performance, see the President's letter to shareholders. [NORTHEAST INVESTORS TEN-YEAR PERFORMANCE GRAPH]
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 NORTHEAST INVESTORS GROWTH $7,733 $ 9,928 $10,778 $12,005 $13,114 $14,937 $8,722 $11,255 $13,099 $12,072 FUND STANDARD & POOR'S $7,790 $10,024 $11,115 $11,661 $13,502 $14,242 $8,972 $11,347 $13,057 $13,333 500 INDEX
Page 4 RETURNS AND PER SHARE DATA
YEAR ENDED DECEMBER 31, 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 ------ ----- ----- ----- ----- ----- ------ ----- ----- ----- Net Asset Value 11.91 15.26 16.52 18.40 20.10 20.19 11.74 15.15 17.60 16.22 ---------------------------------------------------------------------------------------- Income Dividend 0.02 0.03 0.05 0.00 0.00 0.04 0.05 0.00 0.03 0.00 ---------------------------------------------------------------------------------------- Capital Gains Dist. 0.00 0.00 0.00 0.00 0.00 2.60 0.00 0.00 0.00 0.00 ---------------------------------------------------------------------------------------- NEIG Return(%) -22.67 28.39 8.56 11.38 9.24 13.90 -41.61 29.05 16.38 -7.84 ---------------------------------------------------------------------------------------- S&P 500 Return(%) -22.10 28.68 10.88 4.91 15.79 5.48 -37.00 26.47 15.07 2.11 ----------------------------------------------------------------------------------------
[RETURNS BAR GRAPH] QUARTERLY PORTFOLIO HOLDINGS: 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 semi-annual 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 Form N-Q available on its website at www.northeastinvest.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 Page 5 ABOUT YOUR FUND'S EXPENSES
Annualized Beginning Account Value Ending Account Value Expenses Paid During Period Expense Ratio 6/30/2011 12/31/2011 6/30/2011 - 12/31/2011 ----------------------------------------------------------------------------------------- Actual Return -8.10% 1.40% $1,000.00 $ 918.98 $6.45 Hypothetical (5% return per year before expenses) 1.40% $1,000.00 $1,018.06 $7.15
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, 6/30/2011 - 12/31/2011. 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 you 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. Page 6 TEN LARGEST INVESTMENT HOLDINGS DECEMBER 31, 2011 --------------------------------------------------------------------------------
Market Percent of Value Net Assets -------------------------------------------------------------------- Apple, Inc. .......................... $4,475,250 5.87% Google, Inc., Class A................. 3,255,336 4.27% International Business Machines Corp................................ 3,015,632 3.96% Schlumberger Ltd. .................... 2,752,893 3.61% McDonald's Corp. ..................... 2,628,646 3.45% Qualcomm, Inc. ....................... 2,499,790 3.28% American Tower Corp. ................. 2,486,274 3.26% Exxon Mobil Corp. .................... 2,439,562 3.20% Pfizer, Inc. ......................... 2,402,040 3.15% Wells Fargo & Co. .................... 2,287,480 3.00%
SUMMARY OF SECTOR WEIGHTINGS AS A PERCENTAGE OF NET ASSETS DECEMBER 31, 2011 --------------------------------------------------------------------------------
Major Sectors Market Northeast Investors S&P 500 ------------- Value Growth Fund Index ---------------------------------------------------------------------------- Consumer Discretionary......... $10,508,898 13.79% 10.67% Consumer Staples............... $ 9,365,377 12.29% 11.54% Energy......................... $10,949,602 14.37% 12.27% Financials..................... $ 7,155,800 9.39% 13.43% Health Care.................... $ 9,892,705 12.99% 11.85% Industrials.................... $ 8,166,835 10.72% 10.69% Information Technology......... $17,357,133 22.78% 19.02% Materials...................... $ 1,098,720 1.44% 3.50% Telecommunication Services..... $ 2,486,274 3.27% 3.17% Utilities...................... $ -- 0.00% 3.86% Cash, other assets and liabilities.................. $ (790,659) (1.04%) 0.00% ------- ------- 100.00% 100.00% ======= =======
Page 7 SUMMARY OF NET ASSETS BY INDUSTRY DECEMBER 31, 2011
Market % of Value Net Assets ---------------------------------------------------------------------- COMMON STOCKS ---------------------------------------------------------------------- Aerospace & Defense....................... $ 1,556,817 2.04% Beverages................................. 2,782,305 3.65% Capital Markets........................... 2,118,540 2.78% Chemicals................................. 1,098,720 1.44% Commercial Banks.......................... 3,358,660 4.41% Computers & Peripherals................... 6,521,550 8.56% IT Services............................... 3,015,632 3.96% Communications Equipment.................. 4,986,064 6.55% Electrical Equipment...................... 1,556,106 2.04% Road & Rail............................... 1,726,822 2.27% Food & Staples Retailing.................. 3,171,520 4.16% Hotels, Restaurants & Leisure............. 2,628,646 3.45% Household Products........................ 1,524,435 2.00% Industrial Conglomerate................... 1,636,992 2.15% Insurance................................. 1,678,600 2.20% Internet & Catalog Retail................. 1,644,450 2.16% Internet Software & Services.............. 3,255,336 4.27% Machinery................................. 1,690,098 2.22% Media..................................... 2,020,313 2.65% Energy Equipment & Services............... 4,677,010 6.14% Oil, Gas & Consumable Fuels............... 6,272,592 8.23% Packaged Foods............................ 1,887,117 2.48% Pharmaceuticals........................... 9,892,705 12.99% Software.................................. 2,064,825 2.71% Textiles & Apparel........................ 4,215,489 5.53% ----------- ------- TOTAL COMMON STOCKS....................... $76,981,344 101.04% TOTAL CASH EQUIVALENTS.................... 3,056,557 4.01% ----------- ------- TOTAL INVESTMENT PORTFOLIO................ 80,037,901 105.05% NET OTHER ASSETS AND LIABILITIES.......... (3,847,216) -5.05% ----------- ------- TOTAL NET ASSETS.......................... $76,190,685 100.00% =========== =======
Page 8 SCHEDULE OF INVESTMENTS DECEMBER 31, 2011
Number Market Percent COMMON STOCK SECTOR of Value of Net Name of Issuer Shares (Note B) Assets ------------------------------------------------------------------------- CONSUMER DISCRETIONARY ------------------------------------------------------------------------- Amazon.com, Inc................... 9,500 $ 1,644,450 Coach, Inc. ...................... 15,000 915,600 McDonald's Corp. ................. 26,200 2,628,646 Nike, Inc. ....................... 23,700 2,283,969 VF Corp. ......................... 8,000 1,015,920 Walt Disney Co. .................. 53,875 2,020,313 ----------- 10,508,898 13.79% CONSUMER STAPLES ------------------------------------------------------------------------- Colgate-Palmolive Co. ............ 16,500 1,524,435 CVS Caremark Corp. ............... 44,500 1,814,710 Diageo PLC, ADR................... 17,000 1,486,140 Green Mountain Coffee Roasters, Inc.#........................... 28,900 1,296,165 Nestle SA, ADR.................... 32,700 1,887,117 Whole Foods Market, Inc. ......... 19,500 1,356,810 ----------- 9,365,377 12.29% ENERGY ------------------------------------------------------------------------- Chevron Corp. .................... 18,500 1,968,400 Exxon Mobil Corp. ................ 28,782 2,439,562 National Oilwell Varco, Inc.#..... 28,300 1,924,117 Occidental Petroleum Corp. ....... 19,900 1,864,630 Schlumberger Ltd. ................ 40,300 2,752,893 ----------- 10,949,602 14.37% FINANCIALS ------------------------------------------------------------------------- Berkshire Hathaway Inc., Class B.. 22,000 1,678,600 T. Rowe Price Group, Inc.#........ 37,200 2,118,540 U.S. Bancorp...................... 39,600 1,071,180 Wells Fargo & Co. ................ 83,000 2,287,480 ----------- 7,155,800 9.39% HEALTH CARE ------------------------------------------------------------------------- Abbot Laboratories................ 20,600 1,158,338 Allergan, Inc. ................... 25,800 2,263,692 Johnson & Johnson................. 18,000 1,180,440 Novartis AG, ADR.................. 33,500 1,915,195 Perrigo Co.#...................... 10,000 973,000 Pfizer, Inc. ..................... 111,000 2,402,040 ----------- 9,892,705 12.99% INDUSTRIALS ------------------------------------------------------------------------- Danaher Corp. .................... 34,800 1,636,992 Deere & Co. ...................... 21,850 1,690,098 Emerson Electric Co. ............. 33,400 1,556,106 Union Pacific Corp. .............. 16,300 1,726,822 United Technologies Corp. ........ 21,300 1,556,817 ----------- 8,166,835 10.72%
Page 9
Number Market Percent COMMON STOCK SECTOR--continued of Value of Net Name of Issuer Shares (Note B) Assets ------------------------------------------------------------------------- INFORMATION TECHNOLOGY ------------------------------------------------------------------------- Apple, Inc.+...................... 11,050 $ 4,475,250 EMC Corp.+........................ 95,000 2,046,300 Google, Inc., Class A+............ 5,040 3,255,336 International Business Machines Corp. .......................... 16,400 3,015,632 Oracle Corp. ..................... 80,500 2,064,825 Qualcomm, Inc. ................... 45,700 2,499,790 ----------- 17,357,133 22.78% MATERIALS ------------------------------------------------------------------------- E.I. DuPont de Nemours & Co. ..... 24,000 1,098,720 ----------- 1,098,720 1.44% TELECOMMUNICATION SERVICES ------------------------------------------------------------------------- American Tower Corp., Class A..... 41,431 2,486,274 ----------- 2,486,274 3.27% TOTAL COMMON STOCKS (COST- $62,033,348).................... $76,981,344 101.04% ----------- CASH EQUIVALENTS ------------------------------------------------------------------------- State Street Bank & Trust Navigator Prime*................ 3,056,557 ----------- TOTAL CASH EQUIVALENTS (COST- $3,056,557)..................... $ 3,056,557 4.01% TOTAL INVESTMENT PORTFOLIO (COST- $65,089,905).................... 80,037,901 105.05% ----------- NET OTHER ASSETS AND LIABILITIES.. (3,847,216) -5.05% TOTAL NET ASSETS.................. $76,190,685 100.00% ===========
+ Non-income producing security # All or a portion of this security is currently out on loan (See Note K) * Security held as collateral for securities on loan The accompanying notes are an integral part of the financial statements. Page 10 STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 2011 -------------------------------------------------------------------------------- ASSETS ---------------------------------------------------------------- Investments--at market value (including securities loaned of $2,956,948) (cost $65,089,905).............................. $80,037,901 Dividends receivable........................ 124,278 Receivable from advisor..................... 3,416 Receivable for shares sold.................. 1,500 Other receivables........................... 90 ----------- TOTAL ASSETS................. 80,167,185 LIABILITIES ---------------------------------------------------------------- Collateral on securities loaned, at value... 3,056,557 Short-term borrowing........................ 744,000 Accrued audit expense....................... 85,722 Accrued investment advisory fee............. 41,079 Accrued other expenses...................... 34,803 Payable for shares repurchased.............. 14,339 ----------- TOTAL LIABILITIES............ 3,976,500 NET ASSETS.................................. $76,190,685 =========== NET ASSETS CONSIST OF: Capital paid-in............................. $61,567,458 Undistributed net investment income......... 117,876 Accumulated net realized gain (loss)........ (442,644) Net unrealized appreciation (depreciation) of investments............................ 14,947,995 ----------- NET ASSETS.................................. $76,190,685 =========== NET ASSET VALUE, offering price and redemption price per share ($76,190,685/4,698,203 shares)............ $16.22 ======
The accompanying notes are an integral part of the financial statements. Page 11 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2011 -------------------------------------------------------------------------------- INVESTMENT INCOME Dividend Income........................... $1,307,658 Security Lending Income................... 8,928 Interest Income........................... 52 Other Income.............................. 828 ----------- TOTAL INCOME......................... 1,317,466 =========== EXPENSES ---------------------------------------------------------------- Investment advisory fee................... $527,019 Administrative expenses and salaries (see note E)................................... 230,476 Legal fees................................ 109,075 Audit fees................................ 82,125 Insurance................................. 41,975 Printing, postage, and stationery......... 39,525 Registration and filing fees.............. 36,500 Trustee fees.............................. 30,000 Computer and related expenses............. 27,854 Custodian fees............................ 24,505 Transfer Agent (see note E)............... 15,180 Commitment fee............................ 12,226 Telephone expense......................... 10,285 Interest fee.............................. 2,340 Retirement................................ 1,380 Miscellaneous fees........................ 9,125 ----------- TOTAL EXPENSES....................... $1,199,590 ----------- NET INVESTMENT INCOME..................... $117,876 ----------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain (loss) from investment transactions.............................. $4,842,748 Change in unrealized appreciation (depreciation) of investments............. (11,762,650) ----------- Net gain (loss) on investments............ (6,919,902) ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................. $(6,802,026) ===========
The accompanying notes are an integral part of the financial statements. Page 12 STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended December 31, December 31, 2011 2010 ----------------------------------------------------------------------- INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income (loss)........... $117,876 $29,402 Net realized gain (loss) from investment transactions............. 4,842,748 2,488,231 Change in unrealized appreciation (depreciation) of investments....... (11,762,650) 10,777,800 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS......... (6,802,026) 13,295,433 ----------- ----------- DISTRIBUTIONS TO SHAREHOLDERS From net investment income............. -- (164,278) ----------- ----------- TOTAL DISTRIBUTIONS TO SHAREHOLDERS.... -- (164,278) FROM NET FUND SHARE TRANSACTIONS......... (10,271,070) (12,231,152) ----------- ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS.............................. (17,073,096) 900,003 NET ASSETS: Beginning of Period.................... 93,263,781 92,363,778 ----------- ----------- End of Period.......................... $76,190,685 $93,263,781 =========== =========== UNDISTRIBUTED NET INVESTMENT INCOME...... $117,876 --
The accompanying notes are an integral part of the financial statements. Page 13 FINANCIAL HIGHLIGHTS
Year Ended December 31, 2011 2010 2009 2008 2007 PER SHARE DATA + ------- ------- ------- ------- -------- NET ASSET VALUE: BEGINNING OF PERIOD......... $17.60 $15.15 $11.74 $20.19 $20.10 ------- ------- ------- ------- -------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss).. 0.02 0.01 0.02 0.05 0.02 Net realized and unrealized gain (loss) on investment... (1.40) 2.47 3.39 (8.45) 2.71 ------- ------- ------- ------- -------- Total from investment operations.................. (1.38) 2.48 3.41 (8.40) 2.73 ------- ------- ------- ------- -------- LESS DISTRIBUTIONS: Net investment income....... 0.00 (0.03) 0.00 (0.05) (0.04) Capital Gain................ 0.00 0.00 0.00 0.00 (2.60) ------- ------- ------- ------- -------- TOTAL DISTRIBUTIONS........... 0.00 (0.03) 0.00 (0.05) (2.64) NET ASSET VALUE: END OF PERIOD............... $16.22 $17.60 $15.15 $11.74 $20.19 ======= ======= ======= ======= ======== TOTAL RETURN.................. -7.84% 16.38% 29.05% -41.61% 13.90% RATIOS & SUPPLEMENTAL DATA Net assets end of period (in thousands).................. $76,191 $93,264 $92,364 $78,453 $145,440 Ratio of operating expenses to average net assets (includes interest expense)........... 1.40% 1.39% 1.60% 1.27% 1.10% Ratio of interest expense to average net assets.......... 0.00%* 0.01% 0.00%* 0.00%* 0.01% Ratio of net investment income to average net assets....... 0.14% 0.03% 0.16% 0.29% 0.11% Portfolio turnover rate....... 49% 15% 36% 45% 40%
+ Average share method used to calculate per share data * Amount is less than .01% Page 14 NOTES TO FINANCIAL STATEMENTS 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-FUND ADMINISTRATION, ACCOUNTING, TRANSFER AGENCY AND SHAREHOLDER SERVICING Prior to August 29, 2011 the Fund acted as its own fund administrator, accountant, transfer agent and shareholder servicing agent. Effective August 29, 2011 the Fund appointed ALPS Fund Services, Inc. ("ALPS") as its fund accountant, transfer agent and shareholder servicing agent. ALPS carries out all functions related to the maintenance of shareholder accounts, acquisition and redemption of shares and mailings to shareholders. ALPS also determines the Fund's Net Asset Value. Effective September 1, 2011, the Fund appointed Northeast Management and Research Co., Inc. ("NMR") as its fund administrator. NOTE C-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. Methodologies and factors used to fair value securities may include, but are not limited to, information of any recent sales, the analysis of the company's financial statements, quotations or evaluated prices from broker-dealers and/or pricing services and information obtained from analysts. The Fund may use fair value pricing for foreign securities if a material event occurs that may effect 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 it's 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 December 31, 2011 there were no securities priced at fair value as determined in good faith. SECURITY TRANSACTIONS: 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. The Fund has reviewed the tax positions for the open tax years as of December 31, 2011 and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service. Page 15 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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. NOTE D-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. 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. Messrs. John C. Emery, Michael Baldwin, and F. Washington Jarvis, the Fund's disinterested Trustees, are not officers or directors of the Advisor. The compensation of all disinterested Trustees of the Fund is borne by the Fund. NOTE E-EXPENSES Prior to August 29, 2011 the Fund paid expenses for salaries and benefits of employees responsible for transfer agency, shareholder servicing, and fund administration. Pursuant to agreements effective August 29, 2011 and September 1, 2011, the Fund pays ALPS and NMR, respectively, for these services. Payments to ALPS for transfer agency and shareholder servicing appear under Transfer Agent. Payments to NMR for fund administration are included in administrative expenses and salaries. NMR is responsible for the payments to ALPS for fund accounting services. The Fund continues to bear other expenses including - but not limited to - taxes and other government charges, interest on borrowed money, legal fees, auditing fees, registration and filing fees, insurance premiums, fees and expenses of the custodian, compensation of the Fund's disinterested trustees and the costs of reports to shareholders. Page 16 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE F-PURCHASES AND SALES OF INVESTMENTS The cost of purchases and proceeds from sales of investments, other than short-term securities, aggregated $42,460,846 and $51,730,002, respectively, for the year ended December 31, 2011. NOTE G-SHARES OF BENEFICIAL INTEREST At December 31, 2011, there was an unlimited number of shares of beneficial interest authorized with no par value. Transactions in shares of beneficial interest were as follows:
DECEMBER 31, 2011 DECEMBER 31, 2010 ----------------------- ----------------------- SHARES AMOUNT SHARES AMOUNT Shares sold................. 121,028 $ 2,042,710 94,619 $ 1,505,210 Shares issued to shareholders in reinvestment of distributions from net investment income and realized gains from security transactions..... 0 0 8,317 144,718 -------- ------------ -------- ------------ 121,028 $ 2,042,710 102,936 $ 1,649,928 Shares repurchased.......... (722,022) $(12,313,780) (901,174) $(13,881,080) -------- ------------ -------- ------------ Net Increase (Decrease)..... (600,994) $(10,271,070) (798,238) $(12,231,152) ======== ============ ======== ============
NOTE H-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. At December 31, 2011 the Fund was not invested in a repurchase agreement. NOTE I-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 December 31, 2011, the Fund had an unused line of credit amounting to $9,256,000. In addition the Fund pays a commitment fee of 0.125% per annum, payable at the end of each quarter based on the unused portion of the line of credit. The committed line of credit may be terminated at the bank's option at the annual renewal date. The following information relates to aggregate short-term borrowings during the year ended December 31, 2011: Average amount outstanding (total of daily outstanding principal balances divided by number of days with debt outstanding during the period).................................. $350,984 Weighted average interest rate...................... 1.43%
Page 17 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE J-ADDITIONAL TAX INFORMATION Dividends paid during the fiscal years ended December 31, 2010 and December 31, 2011 were $164,278 and $0 respectively, and such dividends were classified for tax purposes as ordinary income. As of December 31, 2011 the components of accumulated earnings (losses) on a tax basis were as follows: Undistributed net investment income.......... $ 117,876 Timing Differences........................... (442,644) Unrealized gains (losses) -- net............. 14,947,995 ----------- Total accumulated earnings (losses) -- net.................. $14,623,227
During the year, the capital loss carryforward utilized was $4,274,091 At December 31, 2011 the Fund's post October loss deferral was $(442,644) At December 31, 2011 the Fund's aggregate security unrealized gains and losses based on cost for U.S. federal income tax purposes was as follows:
2011 ----------- Tax cost..................................... $65,089,905 Gross unrealized gain........................ 17,123,360 Gross unrealized loss........................ (2,175,365) ----------- Net unrealized security gain (loss)........................... $14,947,995
On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the "Act") was enacted. Under the Act, net capital losses may be carried forward indefinitely, and their character is retained as short-term and/or long- term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. As a result of this ordering rule, pre-enactment capital loss carryforwards may expire unused, whereas under the previous rules these losses may have been utilized. This change is effective for fiscal years beginning after the date of enactment. The Fund has reviewed the tax positions for each of the three open tax years as of December 31, 2011 and has determined that no provision for income tax is required in the Fund's financial statements. The Fund's federal tax returns for the prior three fiscal years remain open subject to examination by the Internal Revenue Service. NOTE K-SECURITIES LENDING The Fund may seek additional income by lending portfolio securities to qualified institutions. The Fund will receive cash 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 December 31, 2011, the value of securities loaned and the value of collateral was $2,956,948 and $3,056,557, respectively. During the year ended December 31, 2011, income from securities lending amounted to $8,928. Page 18 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE L-FAIR VALUE MEASUREMENTS Accounting Standards Codification ASC 820, "Fair Value Measurements and Disclosures" (ASC 820) established a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund's own market assumptions (unobservable inputs). The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The various inputs that may be used to determine the value of the Fund's investments are summarized in the following fair value hierarchy: Level 1 - Unadjusted quoted prices in active markets for identical securities. Level 2 - Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) Level 3 - Significant unobservable inputs (including the Fund's own assumptions used to determine the fair value of investments). The following table summarized the Fund's investment as of December 31, 2011, based on the inputs used to value them.
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL ----------- ------- ------- ----------- Common Stock............. $76,981,344 -- -- $76,981,344 Cash Equivalents......... $ 3,056,557 -- -- $ 3,056,557 Repurchase Agreement..... -- -- -- -- ----------- -- -- ----------- $80,037,901 -- -- $80,037,901
Page 19 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees and Shareholders of Northeast Investors Growth Fund: We have audited the accompanying statement of assets and liabilities of Northeast Investors Growth Fund (the Fund), including the schedule of investments, as of December 31, 2011, 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 each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2011, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Northeast Investors Growth Fund at December 31, 2011, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles. LOGO Boston, Massachusetts February 27, 2012 Page 20 TRUSTEES AND OFFICERS TRUSTEES & OFFICERS The Trustees of the Fund are William A. Oates Jr., John C. Emery, Michael Baldwin, and F. Washington Jarvis. Under Massachusetts law, the Trustees are generally responsible for 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 100 High Street, Suite 1000, Boston, MA 02110-2301.
PRINCIPAL OCCUPATION(S) AND OTHER DIRECTORSHIPS DURING THE PAST NAME/AGE/SERVICE * POSITION FIVE YEARS ------------------ -------- ----------------------- INTERESTED TRUSTEES AND FUND OFFICERS William A. Oates, Jr. ** Trustee and President Trustee and President of Age: 69 Northeast Investors Years of Service: 31 Growth Fund; President and Director of Northeast Investment Management, Inc.; President and Director of Northeast Management & Research Co., Inc.; Robert B. Minturn Clerk; Vice President; Officer of Northeast Age: 72 Chief Legal Officer Investors Trust, Years of Service: 31 Northeast Investors Growth Fund (Trustee until Nov. 2008) and Northeast Investment Management, Inc. Robert M. Kane Chief Compliance Officer Fund Accountant of Age: 36 *** Northeast Investors Years of Service: 11 Growth Fund John F. Francini, Jr Chief Financial Officer Officer of Northeast Age: 43 ***; Portfolio Manager Investors Growth Fund; Years of Service: 4 Officer of Northeast Investment Management, Inc. Nancy M. Mulligan Portfolio Manager Officer of Northeast Age: 44 Investors Growth Fund; Years of Service: 4 Officer of Northeast Investment Management, Inc. INDEPENDENT TRUSTEES John C. Emery Trustee Of Counsel, Law Firm of Age: 81 Sullivan & Worcester Years of Service: 31 LLP; President of Boston Investment Company Michael Baldwin Trustee Partner, Baldwin Age: 71 Brothers, Registered Years of Service: 12 Investment Advisor F. Washington Jarvis Trustee Headmaster Emeritus at Age: 72 Roxbury Latin School; Years of Service: 8 Director, ELM Program, Yale Divinity School
-------- * The Trustees serve until their resignation or the appointment of a successor and the officers serve at the pleasure of the Trustees. ** Mr. Oates is an interested Trustee because of his affiliation with the Fund's investment adviser. *** Effective September 1, 2011 Page 21 Trustees -------------------------------------------------------------------------------- William A. Oates, Jr. John C. Emery Michael Baldwin F. Washington Jarvis Officers -------------------------------------------------------------------------------- William A. Oates, Jr., President Robert B. Minturn, Vice President, Clerk & Chief Legal Officer Robert M. Kane, Chief Compliance Officer John F. Francini, Vice President & Chief Financial Officer Nancy M. Mulligan, Vice President Investment Advisor -------------------------------------------------------------------------------- Northeast Management & Research Company, Inc. 100 High Street Boston, Massachusetts 02110 Custodian -------------------------------------------------------------------------------- State Street Bank & Trust Company 200 Clarendon Street Boston, Massachusetts 02111 Legal Counsel -------------------------------------------------------------------------------- Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 Transfer Agent -------------------------------------------------------------------------------- ALPS Fund Services, Inc. 1290 Broadway Suite 1100 Denver, Co 80203 Independent Registered Public Accounting Firm -------------------------------------------------------------------------------- Ernst & Young LLP 200 Clarendon Street Boston, Massachusetts 02116-5072 This report and the financial statements contained herein are submitted for the general information of the shareholders of the Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus. Past performance is not predictive of future results. You may lose money by investing in the Fund. The information in this letter should not be construed as a recommendation to purchase or sell a particular security, and there is no assurance the securities described remain part of the Fund's portfolio today. For a free copy of the Fund's proxy voting guidelines and proxy voting record visit www.northeastinvest.com/growthfund/proxypolicy.shtml, call 855-755-NEIG (6344) 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 100 High Street Boston, Massachusetts 02110 855-755-NEIG (6344) www.northeastinvest.com Item 2. Code of Ethics. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial officer. A copy of the code of ethics is filed as Exhibit to registrant's Report on this Form N-CSR for its fiscal year ended December 31, 2011. The registrant has not granted any waivers from any provisions of the code of ethics during the covered period. Item 3. Audit Committee Financial Expert. The registrant does not have an Audit Committee Financial Expert. Although the members of the registrant's Audit Committee have a variety of business and investment experience, none of them has been determined to meet the technical qualifications required in order to meet the definition of an Audit Committee Financial Expert under this Item. The registrant's trustee who is considered to be an "interested person" as defined in Section 2(a)(19) under the Investment Company of 1940, as amended, does possess such qualifications, but it has been determined that the Audit Committee should consist entirely of independent trustees. The Audit Committee, under its charter, has the ability to retain independent advisers if it deems it necessary or appropriate without the need to seek approval from the management of the Fund. Item 4. Principal Accountant Fees and Services. (a) Audit Fees. The aggregate fees billed for the registrant's fiscal years ended December 31, 2011 and December 31, 2010 for professional services rendered by the registrant's principal accountant for audit of its annual financial statements or services that are normally provided by such accountant in connection with statutory and regulatory filings were $75,000, and $52,410 respectively. (b) Audit-Related Fees The aggregate fees billed for the registrant's fiscal year ended December 31, 2011 and December 31, 2010 for assurance and related services by the registrant's principal accountant reasonably related to the performance of audit of the registrant's financial statements and not reported under Paragraph (a) of this Item were $21,800 and $21,270 respectively. Such services consisted of a report of the Fund's transfer agent internal controls pursuant to rule 17AD-13, semi-annual report review and a report on the Fund's anti-money laundering controls and policies. (c) Tax Fees. The aggregate fees billed in the registrant's fiscal years ended December 31, 2011 and December 31, 2010 for professional services rendered by the registrant's principal accountant for tax matters were $8,800 and $8,760 respectively. Such services consisted of the preparation of the registrant's federal income and excise tax returns. (d) Other Fees. During the fiscal years ended December 31, 2011 and 2010 the aggregate fees billed for other services rendered by the registrant's principal accountant were $0. (e) It is the registrant's policy that all audit and non-audit services provided by the registrant's principal accountant be approved in advance by the Audit Committee, and all of the services described in Paragraphs (a) - (d) of this item were so approved. (f) The registrant has been advised by its independent accountants that less than 50% of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for its fiscal year ended December 31, 2011 were attributed to work by persons other than the principal accountants' full-time, permanent employees. (g) No non-audit services were provided by the registrant's principal accountant to the registrant's investment adviser. There is no entity affiliated with registrant's investment adviser that provides ongoing services to the registrant. (h) Not applicable to the registrant. 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 Manager 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. No material changes have been made with respect to procedures by which shareholders may recommend nominees for trustee during the covered period. 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.CODE ETH A copy of the Code of Ethics For Principle Executive and Senior Financial Officers (b) 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. (c) 99.906 CERT 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: March 6, 2012 By (Signature and Title) John F. Francini Chief Financial Officer (principal financial officer) Date: March 6, 2012 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: March 6, 2012 By (Signature and Title) John F. Francini Chief Financial Officer (principal financial officer) Date: March 6, 2012 EX-99.CODE ETH 2 code2011.txt September 1, 2011 Procedure #2C NORTHEAST INVESTORS GROWTH FUND CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. Covered Officers/Purpose of the Code This code of ethics (this "Code") of Northeast Investors Growth Fund (the "Fund") applies to the Fund's Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer (the "Covered Officers" each of whom are set forth in Exhibit A) for the purpose of promoting: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Fund; - compliance with applicable laws and governmental rules and regulations; - the prompt internal reporting of violations of the Code to the Fund's Compliance Officer; and - accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Fund. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund. Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" of the Fund. The Fund's compliance procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between theFund and its investment adviser, of which the Covered Officers may also be officers or employees. As a result, this Code recognizes that the Covered Officerswill, in the normal course of their duties (whether formally for the Fund or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund. Each Covered Officer must: - not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund; - not cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Fund; - not disclose any material non-public information to any third parties; - not use material non-public knowledge of portfolio transactions made or contemplated for the Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; There are some conflict of interest situations that may be discussed with the Fund's Compliance Officer, if material. Examples of these include: - service as a director on the board of any public company; - the receipt of any entertainment from any company with which the Fund has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; - any ownership interest in, or any consulting or employment relationship with, any of the Fund's service providers, other than its investment adviser or any affiliated person thereof; - a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. Disclosure and Compliance - Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Fund; - each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's trustees and auditors, and to governmental regulators and self-regulatory organizations; - each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Fund and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Fund; and - it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Officer must: - upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing that he has received, read, and understands the Code; - not retaliate against any other Covered Officer or any employee of the Fund or their affiliated persons for reports of potential violations that are made in good faith; and - notify the Compliance Officer promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. The Compliance Officer is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. The Compliance Officer may impose certain restrictions on behavior in order to prevent proposed activities from giving rise to a conflict of interest and that Covered Officers will be obligated to act in accordance with such restrictions. However, any approvals or waivers sought by the Principal Executive Officer will be considered by the Fund's Board of Trustees (the "Board"). The Fund will follow these procedures in investigating and enforcing this Code: - the Compliance Officer will take all appropriate action to investigate any potential violations reported to him and may review any potential violations of the Code with outside counsel; - if, after such investigation, the Compliance Officer believes that no violation has occurred, the Compliance Officer is not required to take any further action; - any matter that the Compliance Officer believes is a violation will be reported to the Board and will be recorded by the Compliance Officer and retained as part of the Fund's records; - if the Board concurs that a violation has occurred, it will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss or otherwise discipline the Covered Officer; and - any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Fund, or the Fund's adviser, govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Fund's and its investment adviser's codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code. This Code does not supersede or otherwise affect any other code. VI. Amendments Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of independent trustees. VII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, the Fund, its adviser and counsel to any of them. VIII. Internal Use The Code is intended solely for the internal use by the Fund and does not constitute an admission, by or on behalf of the Fund, as to any fact, circumstance, or legal conclusion. IX. Acknowledgement I have read and understand the foregoing Code of Ethics and will comply in all respects with its provisions. ___________________________ _____________________ Signature Date Exhibit A Persons Covered by this Code of Ethics for Principal Executive and Senior Financial Officers. William A. Oates, Jr. Principal Executive John F. Francini Chief Financial Officer EX-99.CERT 3 cert992011.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: March 6, 2012 William A. Oates, Jr. President (principal executive officer) Certification Pursuant to Section 302 of the Sarbanes-Oxley Act I, John F. Francini, 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: March 6, 2012 John F. Francini Chief Financial Officer (principal financial officer) EX-99.906 CERT 4 cert999062011.txt Exhibit 99.906 CERT 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 December 31, 2011 of the Registrant (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: March 6, 2012 William A. Oates, Jr. President (Principal Executive Officer) Dated: March 6, 2012 John F. Francini 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.