-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V4VleqRfZsXJF3rcBJLPBl9nYti7cEazobWVNBJy2XLJ9lt6t2navoVrgg3lCPzI FlKxdaURLhw8EK3mgSF3Nw== 0000850027-99-000006.txt : 19990303 0000850027-99-000006.hdr.sgml : 19990303 ACCESSION NUMBER: 0000850027-99-000006 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAIC GROWTH FUND INC CENTRAL INDEX KEY: 0000850027 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 311274796 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05807 FILM NUMBER: 99555132 BUSINESS ADDRESS: STREET 1: 711 WEST THIRTEEN MILE RD CITY: MADISON HEIGHTS STATE: MI ZIP: 48071 BUSINESS PHONE: 8105836242 MAIL ADDRESS: STREET 1: 711 WEST THIRTEEN MILE RD CITY: MADISON HEIGHTS STATE: MI ZIP: 48071 FORMER COMPANY: FORMER CONFORMED NAME: BETTER INVESTING FUND INC DATE OF NAME CHANGE: 19890716 N-30D 1 NAIC GROWTH FUND, INC. Annual Report December 31, 1998 Report to Shareowners: December 31, 1998 This past year was a bit unusual as many market observers felt another record year could not be recorded in 1998 and yet the Dow Jones Industrial Average again scored a double-digit increase. Most of the advances were seen in the large cap companies as medium and small cap stocks did not perform as well. In fact, more stocks finished the year at lower prices than those with higher prices on both the NYSE and NASDAQ. Still, 1998 was a year that probably rewarded those who continued to hold high quality issues rather than time sales and purchases. That is primarily the policy followed by the Fund managers. During the year, the Net Asset Value went from $10.99 to close on December 31 at $12.48. When adjusted for the dividends paid in 1998, the increase in NAV was 18.8%. The dividend payments for the year were $0.578 and that is 24% above 1997, including regular income and capital gains. Two stocks were sold because they were being purchased by other companies, Dynatech Corp. and ALLIED Group. Three other stocks were sold because of small positions in each Nielsen Media, Solutia, Inc. and Tricon Global Restaurants. All had been received by the Fund as a result of spin-offs from other stocks held. It was felt that they were not significant in the dollar amount of shares held and that they probably would not be added to at any time in the near future. The final sale was 2,000 shares of McDonalds. The Fund still owns 4,000 shares of the fast food chain. Purchases during the year included 1,000 Dallas Semiconductor bringing our total to 6,000 shares; 5,000 Diebold, a new holding; 4,000 EMC Corporation, a new holding; 5,000 Federal Signal to make a total of 10,000 shares; 3,000 Intel, a new holding; 6,000 Invacare, a new holding; 3,313 Molex, Inc. for a combined holding of 8,000 shares; 2,000 OReilly Automotive with a new total of 6,000; 1,000 Stryker Corp. with 7,000 now being held and 2,267 Vishay Intertechnology to bring the total to 15,000. A total of 85% of the dividend paying stocks held by the Fund increased the cash dividend during the year. That is normally an indication that the boards of directors of those companies are positive about the future. We feel that 1999 will be challenging as market observers again feel earnings gains will not be as robust as in past years. At the same time, we think we are well positioned with our portfolio. While we have little control over market fluctuations over the short period, we are confident that earnings progress will continue to be made by our holdings in the long term. Thomas E. O'Hara, Chairman Kenneth S. Janke, President NAIC Growth Fund, Inc. Statement of Assets and Liabilities As of December 31, 1998 ASSETS Investment securities at market value (cost $7,014,993) $18,601,559 Short-term investments at amortized cost 2,198,562 Cash and cash equivalents 743,852 Dividends and interest receivable 22,250 Prepaid insurance 9,917 21,576,140 LIABILITIES Dividends payable 842,972 Accounts payable 31,993 874,965 TOTAL NET ASSETS $20,701,175 SHAREHOLDERS' EQUITY Common Stock par value $0.001 per share; authorized 50,000,000 shares, outstanding 1,659,394 shares $ 1,659 Additional Paid-in Capital 9,101,805 Undistributed net investment income 11,145 Undistributed net realized gain on investments 0 Unrealized appreciation of investments 11,586,566 SHAREHOLDERS' EQUITY $20,701,175 NET ASSET VALUE PER SHARE $ 12.48 See notes to financial statements NAIC Growth Fund, Inc. Statement of Operations For the year ended December 31, 1998 INVESTMENT INCOME Interest $ 111,437 Dividends 265,735 377,172 EXPENSES Advisory fees 143,534 Transfer agent & custodian fees 39,307 Insurance 18,528 Audit fees 14,600 Directors' fees & expenses 11,779 Legal fees 9,616 Annual shareholders meeting 9,102 Printing 7,819 Mailing & postage 4,808 Other fees & expenses 8,698 Less: Advisory fees waived (107,651) Net Expenses 160,140 Net investment income 217,032 REALIZED AND UNREALIZED GAIN ON INVESTMENTS Realized gain on investments: Proceeds from sale of investment securities 1,048,554 Cost of investment securities sold 297,861 Net realized gain on investments 750,693 Unrealized appreciation of investments: Unrealized appreciation at beginning of year 9,342,727 Unrealized appreciation at end of year 11,586,566 Increase in unrealized appreciation on investments 2,243,839 Net realized and unrealized gain on investments 2,994,532 NET INCREASE FROM OPERATIONS $ 3,211,564 See notes to financial statements NAIC Growth Fund, Inc. Statements of Changes in Net Assets For the years ended: December 31, 1998 December 31, 1997 FROM OPERATIONS: Net investment income $217,032 $150,230 Net realized gain on investments 750,693 577,028 Net change in unrealized appreciation on investments 2,243,839 2,816,174 Net increase from operations 3,211,564 3,543,432 DISTRIBUTIONS TO STOCKHOLDERS FROM: Net investment income 206,409 155,619 Net realized gain from investment Transactions 750,693 577,028 Total distributions 957,102 732,647 FROM CAPITAL STOCK TRANSACTIONS: Dividend reinvestment 538,333 423,948 Cash purchases 573,075 612,787 Net increase from capital stock Transactions 1,111,408 1,036,735 Net increase in net assets 3,365,870 3,847,520 TOTAL NET ASSETS: Beginning of year $17,335,305 $13,487,785 End of year (including undistributed net investment income of $11,145 and $522, respectively) $20,701,175 $17,335,305 Shares: Shares issued to common stockholders under the dividend reinvestment and cash purchase plan 82,406 89,346 Shares at beginning of year 1,576,988 1,487,642 Shares at end of year 1,659,394 1,576,988 See notes to financial statements NAIC Growth Fund, Inc. Financial Highlights For the years ended: 1998 1997 1996 1995 1994 Net asset value at beginning of year $10.99 $9.07 $7.60 $5.75 $5.62 Net investment income .14 .10 .10 .08 .05 Net realized and unrealized gain on investments 1.93 2.29 1.75 1.91 .13 Total from investment operations 2.07 2.39 1.85 1.99 .18 Distributions from: Net investment income (.13) (.10) (.10) (.08) (.05) Realized gains (.45) (.37) (.28) (.06) .00 Total distributions (.58) (.47) (.38) (.14) (.05) Net asset value at end of year $12.48 $10.99 $9.07 $7.60 $5.75 Per share market value, end of year Ask 10 3/4 15 1/4 9 3/4 7 1/8 4 3/4 Bid 10 1/4 14 1/2 9 7/16 6 7/8 4 11/16 Total Investment Return: based on market value 1 year (25.42%) 58.50% 42.94% 49.70% (0.54%) from inception 11.30% 17.84% 12.59% 7.85% 0.27% based on net asset value 1 year 18.84% 26.43% 24.46% 34.60% 3.12% from inception 13.79% 13.69% 11.92% 9.78% 4.92% Net Assets, end of year (mil) $20,701.2 $17,335.3 $13,487.8 $10,989.1 $8,316.6 Ratios to average net assets: Ratio of expenses to average net assets (a) 0.83% 0.96% 0.96% 1.19% 1.81% Ratio of net investment income to average net assets (a) 1.13% 0.96% 1.10% 1.16% 0.77% Portfolio turnover rate 5.87% 6.31% 5.93% 6.90% 6.56% (a) For all years presented, the adviser voluntarily waived its fee. Had the adviser not done so in 1998, 1997, 1996, 1995 and 1994, the ratio of expenses to average net assets would have been 1.39%, 1.69%, 1.68%, 1.94% and 2.00% and the ratio of net investment income to average net assets would have been 0.57%, 0.23%, 0.38%, 0.41% and 0.58%, respectively. See notes to financial statements NAIC Growth Fund, Inc. Portfolio of Investments - December 31, 1998 % Common Stock Shares Cost Market 1.7 Agriculture Monsanto 7,500 65,339 356,250 2.2 Auto Replacement Dana Corp. 4,000 53,250 163,500 O Reilly Automotive * 6,000 140,375 283,500 8.3 Banking Citigroup 10,000 79,167 496,875 Comerica, Inc. 3,000 58,750 204,563 Bank One Corp. 3,240 64,750 165,443 Huntington Banc. 14,527 91,086 436,718 Synovus Financial 16,875 81,125 405,000 2.5 Building Products Clayton Homes 12,500 131,981 172,656 Johnson Controls 6,000 96,895 354,000 2.7 Chemicals OM Group, Inc. 6,000 195,562 219,000 RPM 12,500 119,125 200,000 Sigma Aldrich 5,000 94,938 146,875 3.4 Computers EMC Corp. * 4,000 116,000 340,000 IBM 2,000 99,387 368,750 3.2 Consumer Products Colgate-Palmolive 4,000 98,500 371,500 Newell Co. 7,000 153,000 288,750 5.1 Electrical Equipment CBS Corp. 5,000 102,437 164,063 Federal Signal 10,000 239,813 273,750 General Electric 4,000 56,000 408,000 Vishay Intertech. * 15,000 165,456 217,500 2.2 Electronics Diebold 5,000 138,687 178,437 Molex, Inc. 8,000 184,478 273,750 13.3 Ethical Drugs Amer. Home Prod. 6,000 90,510 338,250 Bristol-Myers Squibb 3,000 106,538 401,438 Eli Lilly 6,000 91,688 533,250 Johnson & Johnson 2,000 45,500 167,750 Merck & Co., Inc. 2,500 83,319 368,750 Pfizer, Inc. 4,000 58,750 500,000 Pharmicia & Upjohn 7,975 200,070 451,584 6.6 Financial Services Household Intl. 27,266 242,847 1,080,415 State Street Boston 4,000 75,500 280,500 3.0 Food ConAgra 6,000 78,125 189,000 Heinz, H.J. 3,000 67,250 169,875 McCormick & Co. 8,000 168,850 270,500 1.5 Grocery Hannaford Bros. 6,000 138,562 318,000 5.1 Hospital Supplies Biomet Corp. 7,000 122,250 281,750 IMS Health Inc. 1,500 33,236 113,156 Invacare 6,000 152,500 144,000 Stryker Corp. 7,000 160,063 385,437 St. Jude Medical* 4,500 100,125 125,437 0.6 Industrial Services Donaldson Co. 6,000 37,588 124,500 0.6 Instruments TSI, Inc. 15,000 48,375 131,250 4.0 Insurance AFLAC, Inc. 7,500 51,875 329,063 Amer. Intl. Group 5,062 79,044 489,116 2.6 Machinery Cooper Industries 3,500 129,018 166,906 Emerson Electric Co. 6,000 113,518 363,000 2.5 Multi Industry Pentair 3,000 23,875 119,437 Teleflex 6,000 145,187 273,750 Thermo Electron * 6,750 106,687 114,328 0.8 Office Equipment American Bus. Prod. 7,000 158,000 164,500 0.9 Paper Mead Corp. 6,000 74,144 175,875 0.4 Petroleum Kerr McGee 2,000 95,250 76,500 1.6 Publishing Reuters Holdings 5,199 125,351 329,487 1.5 Restaurants McDonald's 4,000 53,625 307,250 2.9 Semiconductor Dallas Semiconductor 6,000 138,438 244,500 Intel 3,000 228,563 355,688 3.7 Soft Drinks Coca Cola 4,000 82,250 268,000 PepsiCo 12,000 205,374 490,500 2.6 Telecommunications ADC Telecom. * 9,000 21,234 312,750 Cincinnati Bell 6,000 55,250 226,875 1.3 Transportation Sysco Corp. 10,000 142,750 274,375 2.4 Utilities Century Telephone 7,500 140,625 506,250 0.7 Water Treatment Ionics * 5,000 117,188 149,687 89.9 $7,014,993 $18,601,559 Short-term Investments 10.6 United States Treasury Bill, maturing 1/7/99 2,198,562 3.6 Misc. Cash Equivalents 743,852 14.2 2,942,414 Total Investments 21,543,973 (4.1) All other assets less liabilities (842,798) 100.0% Total Net Assets $20,701,175 _ non-income producing security 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). 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. 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. 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 December 31, 1998: Gross unrealized appreciation $ 11,613,816 Gross unrealized depreciation (27,250) Net unrealized appreciation $ 11,586,566 Federal income tax cost $ 7,014,993 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 Funds 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 Advisers monthly fee. A director of the Fund is of counsel to the Fund's legal counsel. Legal counsel has incurred $9,616 for ongoing legal services during the year. (3) MANAGEMENT ARRANGEMENTS Investment Adviser National Association of Investors Corporation (NAIC) 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 $107,651 of its total fee of $143,534 for the year ended 1998. Plan Agent Michigan National Bank (MNB) serves as the Funds 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 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 14, 1998, a distribution of $0.07 per share aggregating $114,130 was declared from net investment income. The dividend was paid August 3, 1998, to shareholders of record June 30, 1998. On December 3, 1998, a distribution of $0.508 per share aggregating $842,972 was declared from net investment income and capital gains. the dividend was paid January 29, 1999 to shareholders of record December 31, 1998. (6) Investment transactions Purchases and sales of securities, other than short-term securities for the year ended December 31, 1998, were $1,004,988 and $297,861, respectively. (7) FINANCIAL HIGHLIGHTS The Financial Highlights present a per share analysis of how the Fund's net asset value has changed during the years presented. Additional quantitative measures expressed in ratio form analyze important relationships between certain items presented in the financial statements. These Financial Highlights have been derived from the financial statements of the Fund and other information for the years 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. Report of Independent Public Accountants To the Board of Directors and Shareholders of NAIC Growth Fund, Inc.: We have audited the accompanying statement of assets and liabilities of NAIC GROWTH FUND, INC. (a Maryland corporation), including the portfolio of investments, as of December 31, 1998, and the related statement of operations for the year then ended, the statement 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1998, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 NAIC Growth Fund, Inc. as of December 31, 1998, 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 the financial highlights for each of the five years in the period then ended in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Detroit, Michigan, January 7, 1999. NAIC Growth Fund, Inc. Dividends and Distributions: Dividend Reinvestment and Cash Purchase Plan We invite you to join the Dividend Reinvestment and Cash Purchase Plan (the Plan), which is provided to give you easy and economical ways of increasing your investment in the Funds shares. THOSE SHAREHOLDERS WHO HAVE ELECTED TO PARTICIPATE IN THE PLAN NEED NOT DO ANYTHING FURTHER TO MAINTAIN THEIR ELECTION. Boston EquiServe will act as the Plan Agent on behalf of shareholders who are participants in the Plan. All shareholders of the Fund (other than brokers and nominees of financial institutions) who have not previously elected to participate in the Plan or who have terminated their election may elect to become participants in the Plan by filling in and signing the form of authorization obtainable from Boston EquiServe, P.O. Box 8200, Boston, Massachusetts 02266, the transfer agent for the Funds shares and the shareholders agent for the Plan, and mailing it to Boston EquiServe. The authorization must be signed by the registered shareholders of an account. Participation is voluntary and may be terminated or resumed at any time upon written notice from the participant received by the Plan Agent prior to the record date of the next dividend. Additional information regarding the election may be obtained from the Fund. Dividend payments and other distributions to be made by the Fund to participants in the Plan either will be paid to the Plan Agent in cash (which then must be used to purchase shares in the open market) or, will be represented by the delivery of shares depending upon which of the two options would be the most favorable to participants, as hereafter determined. On each date on which the Fund determines the net asset value of the shares (a Valuation Date), and which occurs not more than five business days prior to a date fixed for payment of a dividend or other distribution from the Fund, the Plan Agent will compare the determined net asset value per share with the market price per share. For all purposes of the Plan, market price shall be deemed to be the highest price bid at the close of the market by any market maker on the date which coincides with the relevant Valuation Date, or, if no bids were made on such date, the next preceding day on which a bid was made. The market price was $10 1/2 on December 31, 1998. If the net asset value in any such comparison is found to be lower than said market price, the Plan Agent will demand that the Fund satisfy its obligation with respect to any such dividend or other distribution by issuing additional shares to the Participants in the Plan at a price per share equal to the greater of the determined net asset value per share or ninety-five percent (95%) of the market price per share determined as of the close of business on the relevant Valuation Date. However, if the net asset value per share (as determined above) is higher than the market price per share, then the Plan Agent will demand that the Fund satisfy its obligation with respect to any such dividend or other distribution by a cash payment to the Plan Agent for the account of Plan participants and the Plan Agent then shall use such cash payment to buy additional shares in the open market for the account of the Plan participants, provided, however, that the Plan Agent shall not purchase shares in the open market at a price in excess of the net asset value as of the relevant Valuation Date. In the event the Plan Agent is unable to complete its acquisition of shares to be purchased in the open market by the end of the first trading day following receipt of the cash payment from the Fund, any remaining funds shall be used by the Plan Agent to purchase newly issued shares of the Funds common stock from the Fund at the greater of the determined net asset value per share or ninety-five percent (95%) of the market price per share as of the date coinciding with or next preceding the date of the relevant Valuation Date. Participants in the Plan will also have the option of making additional cash payments to the Plan Agent, on a monthly basis, for investment in the Funds shares. Such payments may be made in any amount from a minimum of $50.00 to a maximum of $1,000.00 per month. The Fund may, in its discretion, waive the maximum monthly limit with respect to any participant. At the end of each calendar month, the Plan Agent will determine the amount of funds accumulated. Purchases made from the accumulation of payments during any one calendar month will be made on or about the first business day of the following month (Investment Date). The funds will be used to purchase shares of the Funds common stock from the Fund if the net asset value of the shares is lower than the market price as of the Valuation Date which occurs not more than five business days prior to the relevant Investment Date. In such case, such shares will be newly issued shares and will be issued at a price per share equal to the greater of the determined net asset value per share or ninety-five percent (95%) of the market price per share. If the net asset value per share is higher than the market price per share, then the Plan Agent shall use such cash payments to buy additional shares in the open market for the account of the Plan participants, provided, however, that the Plan Agent shall not purchase shares in the open market at a price in excess of the net asset value as of the relevant Valuation Date. In the event the Plan Agent is unable to complete its acquisition of shares to be purchased in the open market by the end of the Investment Date, any remaining cash payments shall be used by the Plan Agent to purchase newly issued shares of the Funds common stock from the Fund at the greater of the determined net asset value per share or ninety-five (95%) percent of the market price per share as of the relevant Valuation Date. All cash payments received by the Plan Agent in connection with the Plan will be held without earning interest. To avoid unnecessary cash accumulations, and also to allow ample time of receipt and processing by the Plan Agent, participants that wish to make voluntary cash payments should send such payments to the Plan Agent in such a manner that assures that the Plan Agent will receive and collect Federal Funds by the end of the month. This procedure will avoid unnecessary accumulations of cash and will enable participants to realize lower brokerage commissions and to avoid additional transaction charges. If a voluntary cash payment is not received in time to purchase shares in any calendar month, such payment shall be invested on the next Investment Date. A participant may withdraw a voluntary cash payment by written notice to the Plan Agent if the notice is received by the Plan Agent at least forty-eight hours before such payment is to be invested by the Plan Agent. Boston EquiServe as the Plan Agent will perform bookkeeping and other administrative functions, such as maintaining all shareholder accounts in the Plan and furnishing written confirmation of all transactions in the account, including information needed by shareholders for personal and tax records. Shares in the account of each Plan participant will be held by the Plan Agent in noncertificated form in the name of the participant, and each shareholders proxy will include those shares purchased pursuant to the Plan and of record as of the record date for determining those shareholders who are entitled to vote on any matter involving the Fund. In case of shareholders such as banks, brokers or nominees, which hold shares for others who are the beneficial owners, the Plan Agent will administer the Plan on the basis of the number of shares certified from time to time by such shareholders as representing and limited to the total number of shares registered in the shareholders name and held for the account of beneficial owners who have elected to participate in the Plan. There are no special fees or charges to participants other than reasonable transaction fees and a termination fee of up to one ($1.00) dollar. With respect to purchases from voluntary cash payments, the Plan Agent will charge a pro rata share of the brokerage commissions, if any. Brokerage charges for purchasing small blocks of stock for individual accounts through the Plan are expected to be less than the usual brokerage charges for such transactions, as the Plan Agent will be purchasing shares for all participants in larger blocks and prorating the lower commission rate thus applied. The automatic reinvestment of dividends and distributions will not relieve participants of any income tax liability associated therewith. Contents Report to Shareowners 2 Statement of Assets and Liabilities 3 Statement of Operations 4 Statements of Changes in Net Assets 5 Financial Highlights 6 Portfolio of Investments 7 Notes to Financial Statements 10 Auditors Report 13 Dividends and Distributions 14 NAIC Growth Fund, Inc., Board of Directors 18 Shareholder Information 18 NAIC Growth Fund, Inc. Board of Directors Thomas E. O'Hara Chairman, Bloomfield Hills, MI Lewis A. Rockwell Secretary, Grosse Pointe Shores, MI 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 Cynthia P. Charles Director, Ambler, PA Shareholder Information The ticker symbol for the NAIC Growth Fund, Inc., on the Chicago Stock Exchange is GRF. The dividend reinvestment plan allows shareholders to automatically reinvest dividends in Fund common stock without paying commission. 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 8200, 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 8200, Boston, Massachusetts 02266. Telephone 1- 800-257-1770. Shareholders or individuals wanting general information or having questions, write NAIC, P.O. Box 220, Royal Oak, Michigan 48068. Telephone 248-583-6242 Ext. 322. -----END PRIVACY-ENHANCED MESSAGE-----