N-30D 1 n30d2000.txt TEST Contents Report to Shareowners 2 Statement of Assets and Liabilities 3 Statement of Operation 4 Statements of Changes in Net Assets 5 Financial Highlights 6 Portfolio of Investments 7 Notes to Financial Statements 10 NAIC Growth Fund, Inc., Board of Directors 13 Shareowner Information 14 Report to Shareowners: June 30, 2000 There were a great many gyrations in the stock market during the first six months of the year. Investors experienced a large drop in the NASDAQ and the Dow Jones Industrial Average seemed to trade in a fairly narrow range considering the high level it has attained in the past few years. Still, the Net Asset Value of the NAIC Growth Fund increased from $12.90 at the beginning of 2000 to $14.81 on June 30. That is a rise of 14.8%. Earnings for the majority of stocks held in the portfolio continued to show progress as well as dividend increases in a number of holdings. The managers continue to monitor the portfolio for the fundamentals as stock prices eventually reflect that earnings progress. Some full and partial sales have been made including Broadwing, Convergys, St. Jude Medical, Pharmacia & Upjohn, Monsanto, International Business Machines, Molex, Vishay Intertechnology and Lydall. In addition, both TSI Incorporated and American Business Products were purchased by other corporations. The result is a current gain on the books of approximately $1.7 million that will be reflected in the year-end distribution. Adding to positions included the purchase of 2,500 AFLAC, 2,000 Bank One, 2,000 Carlisle Companies, 1,750 CenturyTel, 2,000 Comerica, 4,000 ConAgra, 6,000 Dana, 2,000 Diebold, 2,000 Donaldson, 1,000 Emerson Electric, 2,000 Federal Signal, 2,000 H.J. Heinz, 4,000 Hon Industries, 5,000 Huntington Bancshares, 2,000 McCormick, 8,000 O'Reilly Automotive, 2,000 Pentair, 3,000 RPM, 2,000 Synovus Financial and 2,000 Teleflex. New positions were taken with the purchase of 7,000 Albertsons and 6,000 Cooper Industries. The Board of Directors declared a cash dividend of $0.045 per share paid on August 1, 2000 to shareowners of record on June 30, 2000. Thomas E. O'Hara Kenneth S. Janke CHAIRMAN PRESIDENT NAIC Growth Fund, Inc. Statement of Assets and Liabilities As of June 30, 2000 (Unaudited) ASSETS Investment securities -at market value (cost $9,066,500) $22,996,341 Short-term investments -at amortized cost 1,793,385 Cash and cash equivalents 980,069 Dividends and interest receivable 22,016 Prepaid insurance 1,417 25,793,228 LIABILITIES Dividends payable 77,984 Accounts payable 41,252 119,236 TOTAL NET ASSETS $25,673,992 SHAREHOLDERS' EQUITY Common Stock-par value $0.001 per share; authorized 50,000,000 shares, outstanding 1,732,982 shares $ 1,733 Additional Paid-in Capital 10,019,948 Undistributed net investment income (1,023) Undistributed net realized gain on investments 1,723,493 Unrealized appreciation of investments 13,929,841 SHAREHOLDERS' EQUITY $25,673,992 NET ASSET VALUE PER SHARE $ 14.81 See notes to financial statements NAIC Growth Fund, Inc. Statement of Operations For the six months ended June 30, 2000 (Unaudited) INVESTMENT INCOME Interest $ 69,240 Dividends 148,773 218,013 EXPENSES Advisory fees 88,988 Transfer agent & custodian fees 21,038 Legal fees 10,113 Audit fees 8,750 Insurance 8,500 Other Professional Services 7,500 Directors' fees & expenses 6,259 Mailing & postage 6,110 Printing 4,264 Annual shareholders' meeting 3,047 Other fees & expenses 3,283 Less: Advisory fees waived (22,247) Net Expenses 145,605 Net investment income 72,408 REALIZED AND UNREALIZED GAIN ON INVESTMENTS Realized gain on investments: Proceeds from sale of investment securities 2,689,470 Cost of investment securities sold 965,977 Net realized gain on investments 1,723,493 Unrealized appreciation of investments: Unrealized appreciation at beginning of period 12,325,472 Unrealized appreciation at end of period 13,929,841 Increase in unrealized appreciation on investments 1,604,369 Net realized and unrealized gain on investments 3,327,862 NET INCREASE FROM OPERATIONS $3,400,270 See notes to financial statements NAIC Growth Fund, Inc. Statements of Changes in Net Assets For the periods ended: June 30,2000 December 31, 1999 (Unaudited) FROM OPERATIONS: Net investment income $72,408 $149,638 Net realized gain on investments 1,723,493 787,318 Net change in unrealized appreciation on investments 1,604,369 738,906 Net increase from operations 3,400,270 1,675,862 DISTRIBUTION TO STOCKHOLDERS FROM: Net investment income 77,984 156,231 Net realized gain from investment transactions 0 787,318 Total distributions 77,984 943,549 FROM CAPITAL STOCK TRANSACTIONS: Dividend reinvestment 0 607,813 Cash purchases 0 310,405 Net increase from capital stock transactions 0 918,218 Net increase in net assets 3,322,286 1,650,531 TOTAL NET ASSETS: Beginning of period $22,351,706 $20,701,175 End of period (including undistributed net investment income (loss) of ($1,023) and $4,552, respectively) $25,673,992 $22,351,706 Shares: Shares issued to common stockholders under the dividend reinvestment and cash purchase plan 0 73,588 Shares at beginning of period 1,732,982 1,659,394 Shares at end of period 1,732,982 1,732,982 See notes to financial statements NAIC Growth Fund, Inc. Financial Highlights For the periods ended: June 30, 2000 (Unaudited) 1999 1998 1997 1996 1995 Net asset value at beginning of period $12.90 $12.48 $10.99 $9.07 $7.60 $5.75 Net investment income .04 .09 .14 .10 .10 .08 Net realized and unrealized Gain on investments 1.92 .88 1.93 2.29 1.75 1.91 Total from investment Operations 1.96 .97 2.07 2.39 1.85 1.99 Distributions from: Net investment income (.05) (.10) (.13) (.10) (.10) (.08) Realized gains .00 (.45) (.45) (.37) (.28) (.06) Total distributions (.05) (.55) (.58) (.47) (.38) (.14) Net asset value at end of period $14.81 $12.90 $12.48 $10.99 $9.07 $7.60 Per share market value, end of period Ask 12 3/4 10 1/4 10 3/4 15 1/4 9 3/4 7 1/8 Bid 12 3/16 10 10 1/4 14 1/2 9 7/16 6 7/8 Total Investment Return (annualized): based on market value 1 year 44.65% 2.85% (25.42%) 58.50% 42.94% 49.70% from inception 13.25% 10.28% 11.30% 17.84% 12.59% 7.85% based on net asset value 1 year 30.31% 7.75% 18.84% 26.43% 24.46% 34.60% from inception 15.73% 13.15% 13.79% 13.69% 11.92% 9.78% Net Assets,end of period (mil) $25,674 $22,351.7 $20,701.2 $17,335.3 $13,487.8 $10,989.1 Ratios to average net assets (annualized): Ratio of expenses to average net assets 1.23% 1.00% 0.83% 0.96% 0.96% 1.19% Ratio of net investment income to average net assets0.61% 0.70% 1.13% 0.96% 1.10% 1.16% Portfolio turnover rate 18.30% 4.20% 5.87% 6.31% 5.93% 6.90% See notes to financial statements 1.9 Auto Replacement Dana Corp. 10,000 223,000 211,875 O'Reilly Auto.* 20,000 242,605 277,500 7.8 Banking Citigroup 15,000 79,167 903,750 Comerica Inc. 5,000 148,750 224,375 Bank One Corp. 7,000 212,495 185,937 Huntington Banc. 22,000 221,907 347,875 Synovus Financial 20,000 140,938 352,500 1.8 Building Products Clayton Homes 20,000 221,325 160,000 Johnson Controls 6,000 96,895 307,875 2.7 Chemicals OM Group 8,000 258,725 352,000 RPM 18,000 190,250 182,250 Sigma Aldrich 5,000 94,938 146,250 4.8 Computers EMC Corp. * 16,000 116,000 1,231,000 2.8 Consumer Products Colgate-Palmolive 8,000 98,500 479,000 Newell Rubbermaid 9,000 237,375 231,750 8.6 Electrical Equipment Amer. Power Conv.* 10,000 190,531 408,125 Cooper Industries 6,000 207,813 195,375 Federal Signal 12,000 280,563 198,000 General Electric 12,000 56,000 636,000 Vishay Intertech. * 19,500 134,973 739,780 1.9 Electronics Diebold 10,000 269,188 278,750 Molex Inc. 6,250 101,819 218,750 9.7 Ethical Drugs Amer. Home Prod. 6,000 90,510 352,500 Bristol-Myers Squibb 6,000 106,538 349,500 Eli Lilly 6,000 91,687 599,250 Johnson & Johnson 2,000 45,500 203,750 Merck & Co., Inc. 5,000 83,319 383,125 Pfizer Inc. 12,000 58,750 576,000 5.7 Financial Services Household Intl. 25,000 223,538 1,039,063 State Street Boston 4,000 75,500 424,250 3.9 Food Albertson's 7,000 235,330 232,750 ConAgra 10,000 166,875 190,625 Heinz, H.J. 6,000 179,375 262,500 McCormick & Co. 10,000 223,975 325,000 4.5 Hospital Supplies Biomet Corp. 7,000 122,250 269,063 Invacare 10,000 245,375 262,500 Stryker Corp. 14,000 160,063 612,500 0.9 Industrial Services Donaldson Co. 12,000 162,563 237,000 4.7 Insurance AFLAC 10,000 143,905 459,375 Amer. Int'l. Group 6,327 79,037 743,423 1.6 Machinery Emerson Electric 7,000 170,393 422,625 1.2 Manufacturing Carlisle Co. 7,000 279,944 315,000 2.1 Multi Industry Pentair 7,000 171,894 248,500 Teleflex Inc. 8,000 213,563 286,000 1.1 Office Equipment Hon Industries 12,000 283,938 282,000 2.0 Publishing Reuters Group PLC 5,199 125,351 519,575 1.1 Realty Trust First Industrial 10,000 257,463 295,000 1.0 Restaurants McDonald's 8,000 53,625 263,500 5.0 Semiconductor Dallas Semiconductor 12,000 138,437 489,000 Intel 6,000 228,562 802,125 3.0 Soft Drinks Coca Cola 4,000 82,250 229,750 PepsiCo 12,000 205,374 533,250 5.9 Telecommunications ADC Telecom. * 18,000 21,234 1,509,750 1.6 Transportation Sysco Corp. 10,000 142,750 421,250 1.5 Utilities Century Telephone 13,000 196,562 373,750 0.8 Water Treatment Ionics * 7,000 177,313 214,375 89.6 $9,066,500 $22,996,341 Short-term Investments 7.0 United States Treasury Bill, maturing 7/6/00 1,793,385 3.8 Misc. Cash Equivalents 980,069 10.8 2,773,454 Total Investments 25,769,795 (0.4) All other assets less liabilities (95,803) 100.0% Total Net Assets $25,673,992 *Non-income producing securities NAIC Growth Fund, Inc. Notes to Financial Statements (1) ORGANIZATION The NAIC Growth Fund, Inc. (the "Fund") was organized under Maryland law on April 11, 1989 as a diversified closed-end investment company under the Investment Company Act of 1940. The Fund commenced operations on July 2, 1990. (2) SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies followed by the Fund not otherwise set forth in the notes to financial statements: Dividends and Distributions - Dividends from the Fund's net investment income and realized net long- and short-term capital gains will be declared and distributed at least annually. Shareholders may elect to participate in the Dividend Reinvestment and Cash Purchase Plan (see Note 4). Use of Estimates - The preparation of financial statements in conformity with 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. Investments - Investments in equity securities are stated at market value, which is determined based on quoted market prices or dealer quotes. Pursuant to Rule 2a-7 of the Investment Company Act of 1940, the Fund utilizes the amortized cost method to determine the carrying value of short-term debt obligations. Under this method, investment securities are valued for both financial reporting and Federal tax purposes at amortized cost. Any discount or premium is amortized from the date of acquisition to maturity. Investment security purchases and sales are accounted for on a trade date basis. Federal Income Taxes - The Fund intends to comply with the general qualification requirements of the Internal Revenue Code applicable to regulated investment companies. The Fund intends to distribute at least 90% of its taxable income, including net long-term capital gains, to its shareholders. In order to avoid imposition of the excise tax applicable to regulated investment companies, it is also the Fund's intention to declare as dividends in each calendar year at least 98% of its net investment income and 98% of its net realized capital gains plus undistributed amounts from prior years. The following information is based upon Federal income tax cost of portfolio investments as of June 30, 2000: Gross unrealized appreciation $ 14,140,055 Gross unrealized depreciation (210,214) Net unrealized appreciation $ 13,929,841 Federal income tax cost $ 9,066,500 Expenses -The Fund's service contractors bear all expenses in connection with the performance of their services. The Fund bears all expenses incurred in connection with its operations including, but not limited to, management fees (as discussed in Note 3), legal and audit fees, taxes, insurance, shareholder reporting and other related costs. Such expenses will be charged to expense daily as a percentage of net assets. The Advisory Agreement provides that the Fund may not incur annual aggregate expenses in excess of two percent (2%) of the first Ten Million Dollars of the Fund's average net assets, one and one-half percent (1 1/2%) of the next Twenty Million Dollars of the average net assets, and one percent (1%) of the remaining average net assets for any fiscal year. Any excess expenses shall be the responsibility of the Investment Adviser, and the pro rata portion of the estimated annual excess expenses will be offset against the Investment Adviser's monthly fee. A director of the Fund provides professional services to the fund. The fees for those services amounted to $7,500 for the period. (3) MANAGEMENT ARRANGEMENTS Investment Adviser National Association of Investors Corporation serves as the Fund's Investment Adviser subject to the Investment Advisory Agreement, and is responsible for the management of the Fund's portfolio, subject to review by the board of directors of the Fund. For the services provided under the Investment Advisory Agreement, the Investment Adviser receives a monthly fee at an annual rate of three- quarters of one percent (0.75%) of the average weekly net asset value of the Fund, during the times when the average weekly net asset value is at least $3,800,000. The Investment Adviser will not be entitled to any compensation for a week in which the average weekly net asset value falls below $3,800,000. The Adviser has voluntarily waived $22,247 of its total fee of $88,988 for the period ended june 30, 2000. Plan Agent Michigan National Bank (MNB) serves as the Fund's custodian pursuant to the Custodian Agreement. As the Fund's custodian, MNB receives fees and compensation of expenses for services provided including, but not limited to, an annual account charge, annual security fee, security transaction fee and statement of inventory fee. Boston EquiServe serves as the Fund's transfer agent and dividend disbursing agent pursuant to the Transfer Agency and Dividend Disbursement Agreements. Boston EquiServe receives fees for services provided including, but not limited to, account maintenance fees, activity and transaction processing fees and reimbursement of out-of-pocket expenses such as forms and mailing costs. (4) DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN The Fund has a Dividend Reinvestment and Cash Purchase Plan (the "Plan") which allows shareholders to reinvest dividends paid and make additional contributions. Under the Plan, if on the valuation date the net asset value per share is lower than the market price at the close of trading on that day, then the Plan Agent will elect on behalf of the shareholders who are participants of the Plan to take the dividends in newly issued shares of the Fund's common stock. If net asset value exceeds the market price on the valuation date, the Plan Agent will elect to receive cash dividends, and will promptly buy shares of the Fund's common stock on whatever market is consistent with best price and execution. The number of shares credited to each shareholder participant's account will be based upon the average purchase price for all shares purchased. (5) DISTRIBUTIONS TO SHAREHOLDERS On May 18, 2000, a distribution of $0.045 per share aggregating $77,984 was declared from net investment income. The dividend was paid August 1, 2000 to shareholders of record June 30, 2000. (6) INVESTMENT TRANSACTIONS Purchases and sales of securities, other than short-term securities for the period ended June 30, 2000, were $1,955,763 and $2,689,470, respectively. (7) FINANCIAL HIGHLIGHTS The Financial Highlights present a per share analysis of how the Fund's net asset value has changed during the periods presented. Additional quantitative measures expressed in ratio form analyze important relationships between certain items presented in the financial statements. These Financial Highlights have been derived from the financial statements of the Fund and other information for the periods presented. The Total Investment Return based on market value assumes that shareholders bought into the Fund at the bid price and sold out of the Fund at the bid price. In reality, shareholders buy into the Fund at the ask price and sell out of the Fund at the bid price. Therefore, actual returns may differ from the amounts stated. NAIC Growth Fund, Inc. Board of Directors Thomas E. O'Hara Chairman, Bloomfield Hills, MI Lewis A. Rockwell Secretary, Grosse Pointe Shores, MI Cynthia P. Charles Director, Ambler, PA Carl A. Holth Director, Clinton Twp., MI Kenneth S. Janke President, Bloomfield Hills, MI Benedict J. Smith Director, Birmingham, MI James M. Lane Director, Grosse Pointe Farms, MI Peggy L. Schmeltz Director, Bowling Green, OH Shareowner Information The ticker symbol for the NAIC Growth Fund, Inc., on the Chicago Stock Exchange is GRF. The dividend reinvestment plan allows shareowners to automatically reinvest dividends in Fund common stock with little or no commissions. Once enrolled, you can make additional stock purchases through monthly cash deposits ranging from $50 to $1,000. For more information, request a copy of the Dividend Reinvestment Service for Stockholders of NAIC Growth Fund, Inc., from Boston EquiServe., P.O. Box 8204, Boston, Massachusetts 02266. Telephone 1-800-257-1770. Questions about dividend checks, statements, account consolidation, address changes, stock certificates or transfer procedures write Boston EquiServe., P.O. Box 8204, Boston, Massachusetts 02266. Telephone 1- 800-257-1770. Shareowners or individuals wanting general information or having questions, write NAIC, P.O. Box 220, Royal Oak, Michigan 48068. Telephone 877-275-6242.