-----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, HGUiOegm3V8gf4aaxiT3YNgxQozhnX/F/USkCaqt3E71X0oxq4IuA2y5WVKvWuef DecpiiuY3J97vdibIJl2gQ== 0000950124-03-000098.txt : 20030117 0000950124-03-000098.hdr.sgml : 20030117 20030117142037 ACCESSION NUMBER: 0000950124-03-000098 CONFORMED SUBMISSION TYPE: N-2/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20030117 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAIC GROWTH FUND INC CENTRAL INDEX KEY: 0000850027 IRS NUMBER: 311274796 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-2/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-05807 FILM NUMBER: 03517566 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NAIC GROWTH FUND INC CENTRAL INDEX KEY: 0000850027 IRS NUMBER: 311274796 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-2/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-99689 FILM NUMBER: 03517567 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-2/A 1 k74079a1nv2za.txt AMENDMENT NO 10 TO FORM N-2 As filed with the Securities and Exchange Commission on January 17, 2003 Securities Act Registration No. 333-99689 Investment Company Act File No. 811-05807 - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-2 (Check appropriate box or boxes) |X| REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X| Pre-Effective Amendment No. 1 |_| Post-Effective Amendment No. ___ and/or |X| REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X| Amendment No. 10 NAIC GROWTH FUND, INC. - ------------------------------------------------------------------------------- Exact Name of Registrant as Specified in Charter 711 West Thirteen Mile Road, Madison Heights, Michigan 48071 - -------------------------------------------------------------------------------- Address of Principal Executive Offices (Number, Street, City, State, Zip Code) (248) 583-6242 - -------------------------------------------------------------------------------- Registrant's Telephone Number, including Area Code Kenneth S. Janke, NAIC Growth Fund, Inc. 711 West Thirteen Mile Road, Madison Heights, Michigan 48071 - -------------------------------------------------------------------------------- Name and Address (Number, Street, City, State, Zip Code) of Agent for Service With Copies to: Barbara A. Bowman, Esq. Steven J. Dickinson, Esq. Bodman, Longley & Dahling LLP Dorsey & Whitney LLP 34th Floor, 100 Renaissance Center 801 Grand, Suite 3900 Detroit, Michigan 48243 Des Moines, Iowa 50309 As soon as practicable after this registration statement becomes effective. - -------------------------------------------------------------------------------- Approximate Date of Proposed Public Offering If any securities being registered on this form will be offered on a delayed or continuous basis in reliance on Rule 415 under the Securities Act of 1933, other than securities offered in connection with a dividend reinvestment plan, check the following box. |X| It is proposed that this filing will become effective (check appropriate box) |_| when declared effective pursuant to section 8(c) If appropriate, check the following box: |_| this post-effective amendment designates a new effective date for a previously filed post-effective amendment. |_| this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act and the Securities Act registration statement number of the earlier effective registration statement for the same offering is-___. CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
- ----------------------------------------------------------------------------------------------------------------------- Proposed Proposed Maximum Maximum Title of Securities Amount Being Offering Price Per Aggregate Amount of Being Registered Registered Unit Offering Price Registration Fee - ----------------------------------------------------------------------------------------------------------------------- Common stock 5,000,000 $9.98(1) $49,900,000 (1) $4,591 (1) par value $0.001 - -----------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(d) under the Securities Act of 1933, as amended, and based on the net asset value per share of $ 9.98 on September 5, 2002. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine. CROSS-REFERENCE SHEET
PART A ITEM NUMBER CAPTION PROSPECTUS CAPTION ------ ------- ------------------ 1 Outside Front Cover Outside Front Cover 2 Inside Front and Outside Back Cover Page Outside Front Cover 3 Fee Table and Synopsis Fee Table; Prospectus Summary 4 Financial Highlights Financial Highlights 5 Plan of Distribution Underwriting; How to Invest 6 Selling Shareholders Not Applicable 7 Use of Proceeds Use of Proceeds 8 General Description of the Registrant Risk Factors; The Fund; Investment Objective and Policies; Determination of Net Asset Value; Reports to Shareholders 9 Management The Fund; The Investment Adviser; Risk Factors 10 Capital Stock, Long-Term Debt and Other Description of Shares; Taxation; Distribution Policy; Securities Dividend Reinvestment and Cash Purchase Plan 11 Defaults and Arrears on Senior Securities Not Applicable 12 Legal Proceedings The Fund 13 Table of Contents of the Statement of Additional Statement of Additional Information Information PART B ITEM STATEMENT OF ADDITIONAL NUMBER CAPTION INFORMATION CAPTION ------ ------- ------------------- 14 Cover Page Cover Page 15 Table of Contents Table of Contents 16 General Information and History The Fund 17 Investment Objective and Policies Investment Guidelines 18 Management Directors, Officers and Principal Shareholders 19 Control Persons and Principal Holders of Securities Directors, Officers and Principal Shareholders 20 Investment Advisory and Other Services Investment Adviser and Investment Advisory Agreement; Custodian, Transfer Agent and Dividend Disbursing Agent 21 Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage 22 Tax Status Taxation 23 Financial Statements Financial Statements
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JANUARY __, 2003 PART A - PROSPECTUS PROSPECTUS NAIC GROWTH FUND, INC. 5,000,000 SHARES COMMON STOCK PAR VALUE $0.001 PER SHARE The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. NAIC Growth Fund, Inc. is a diversified, closed-end management investment company. The Fund's investment objective is long-term growth. The Fund utilizes the concept of "total return" for selecting investments. "Total return" means the total of all income derived from, and the capital appreciation value of, a particular investment. The Fund tries to achieve total return by investing in those equity securities with growth potential and that also may be expected to increase cash dividends on a regular basis. While the Fund does not attempt to purchase equity securities that have a high yield, relative to the popular stock averages, a record of increased cash dividends is one of the factors taken into consideration when selecting equity securities for the Fund's portfolio. The Fund seeks to achieve its investment objective by investing in a diversified portfolio of equity securities. The Fund's investments are selected by the Fund's investment adviser, Growth Fund Advisor, Inc., an indirect subsidiary of the National Association of Investment Clubs Trust. The address of the Fund is 711 West Thirteen Mile Road, Madison Heights, Michigan 48071, and its telephone number is (877) 275-6242. This prospectus relates to 5,000,000 shares of the Fund's common stock, par value $0.001, which are being offered on a "best efforts" basis by Broker Dealer Financial Services Corp. and, in BDFSC's sole discretion, by other broker-dealers that enter into selected dealer agreements with BDFSC. See "Underwriting." The Fund will sell shares each week to investors at a price equal to the Fund's current net asset value per share, which will fluctuate during this continuous offering and generally will be determined as of the close of business each Thursday, plus the applicable sales charge set forth below payable from the subscription payments. The sales price may be determined by the following formula: net asset value divided by (1 minus the applicable sales charge), rounded to the nearest penny. Subscription payments will be released from escrow by the Fund weekly in this manner upon acceptance of subscriptions and determination of the Fund's current net asset value. Subscriptions are irrevocable by the investor once received by the Fund. There will be a sales charge payable by investors to BDFSC for any shares sold pursuant to this prospectus, as follows: - 3.5% of the gross sales price per share sold before any broker-dealer enters into a selected dealer agreement with BDFSC; and - 5% of the gross sales price per share sold after any broker-dealer enters into a selected dealer agreement with BDFSC. All offering expenses other than sales charges will be paid directly by the Fund. The minimum investment (inclusive of sales charges) in this offering by any investor is $500. There is no minimum number of shares that must be sold in the offering. The offering will continue until all of the shares are sold or until either the Fund or BDFSC terminate the offering on 30 days' notice to the other party.
- ------------------------------------------------------------------------------------------------------------------- PRICE TO PUBLIC(1) SALES CHARGE(1)(2) PROCEEDS TO REGISTRANT(1)(3) - ------------------------------------------------------------------------------------------------------------------- Per Share $9.81 $0.49 $9.32 - ------------------------------------------------------------------------------------------------------------------- Total Maximum $49,050,000 $2,450,000 $46,600,000 - -------------------------------------------------------------------------------------------------------------------
(1) Estimated based on the net asset value per share of $9.32 on January 9, 2003. (2) Estimated based on the maximum sales charge of 5% per share. The sales charge will be 3.5% of the gross sales price per share sold before any broker-dealer enters into a selected dealer agreement with BDFSC; and 5% of the gross sales price per share sold after any broker-dealer enters into a selected dealer agreement with BDFSC. (3) The Fund estimates that the total offering expenses payable by the Fund, assuming that the offering continues for a period of two years, are $167,081. The Fund's common stock is listed on the Chicago Stock Exchange under the market symbol "GRF." AN INVESTMENT IN THE FUND INVOLVES RISKS. YOU SHOULD CONSIDER THE INFORMATION UNDER "RISK FACTORS" BEGINNING ON PAGE __ BEFORE DECIDING WHETHER TO PURCHASE THE SHARES. THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This prospectus sets forth important information about the Fund that you ought to know before making a further investment. Please read this prospectus carefully and retain it for future reference. A Statement of Additional Information containing additional information about the Fund has been filed with the Securities and Exchange Commission. The Statement of Additional Information is dated_________ _, 2003 and is incorporated by reference in this prospectus. You may obtain a copy of the Statement of Additional Information without charge on written or oral request to NAIC Growth Fund, Inc., 711 West Thirteen Mile Road, Madison Heights, Michigan 48071, attention Statement of Additional Information, telephone (877) 275-6242, extension 331, or from the SEC's website at www.sec.gov. The table of contents of the Statement of Additional Information appears on page __ of this prospectus. [BDFSC LOGO] The date of this prospectus is: ___________________, 2003 WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AS IF WE HAD AUTHORIZED IT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF THE DATE ON ITS COVER. TABLE OF CONTENTS PAGE Fund Expenses............................................................... Prospectus Summary.......................................................... Financial Highlights........................................................ Risk Factors................................................................ The Fund.................................................................... Investment Objective and Policies........................................... The Investment Adviser...................................................... Use of Proceeds............................................................. Distribution Policy......................................................... Dividend Reinvestment and Cash Purchase Plan................................ Taxation.................................................................... Description of Shares....................................................... Determination of Net Asset Value............................................ The Offering................................................................ How to Invest............................................................... Underwriting................................................................ Legal Matters............................................................... Reports to Shareholders..................................................... Independent Public Accountants.............................................. Financial Statements........................................................ Important Notice Concerning Arthur Andersen LLP............................. Statement of Additional Information......................................... Further Information......................................................... Exhibit 1 - Form of Subscription Agreement iii FUND EXPENSES The following table illustrates all expenses and fees that you will incur as a shareholder of the Fund. SHAREHOLDER TRANSACTION EXPENSES Sales Load (as a percentage of offering price)(1) .....................3.5% or 5.0% Dividend Reinvestment and Cash Purchase Plan Fees (2) .................0.0%
ANNUAL EXPENSES (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO COMMON SHARES) Management Fees .....................................0.75% Other Expenses(3) .................................. 0.82% ------ Total Annual Expenses .............................. 1.57%
(1) BDFSC will be paid commissions at a rate of 3.5% of the gross sales price per share sold until BDFSC uses any selected dealers. If BDFSC uses any selected dealer, then the commission rate will increase to 5% of the gross sales price per share for the duration of the offering. All other offering expenses will be paid by the Fund. (2) You will pay no special fees or charges if you choose to participate in the Dividend Reinvestment and Cash Purchase Plan other than reasonable transaction fees and a termination fee of $15 plus 10 cents per share. For purposes of this table, brokerage commissions are not included as Dividend Reinvestment and Cash Purchase Plan fees. (3) "Other Expenses" are based on estimated amounts for the current fiscal year. The purpose of the foregoing table is to assist you in understanding the various costs and expenses associated with investing in the Fund. For a more complete description of the Dividend Reinvestment and Cash Purchase Plan fees and the management fees, see "Dividend Reinvestment and Cash Purchase Plan" and "The Investment Adviser," respectively.
- -------------------------------------------------------------------------------------------------- Example 1 Year 3 Years 5 Years 10 Years - -------------------------------------------------------------------------------------------------- You would pay the following expenses on a $1,000 investment, assuming a 5% return: $16 $51 $88 $192 - --------------------------------------------------------------------------------------------------
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Federal securities regulations require the example to assume an annual return of 5%, but the Fund's actual return may be more or less than 5%; the assumed 5% annual return is not a prediction of, and does not represent, the projected or actual performance of the Fund's shares. For purposes of this example, it has been assumed that the rates listed above under "Annual Expenses" remain the same each year, and that all dividends and distributions have been reinvested at net asset value. PROSPECTUS SUMMARY The following is a summary and does not contain all the information that may be important to you. You should read the entire prospectus before deciding to invest. The Fund and Its Invest- ment Objective......... The Fund is a diversified closed-end management investment company. Its shares are traded on the Chicago Stock Exchange under the symbol "GRF." The Fund's investment objective is long-term growth. The Fund utilizes the concept of "total return" for selecting investments. "Total return" means the total of all income derived from, and the capital appreciation in value of, a particular investment. The Fund tries to achieve total return by investing in those equity securities with growth potential and that also may be expected to increase cash dividends on a regular basis. Principal Investment Strategies............. The Fund seeks to achieve its investment objective primarily through investment in a portfolio of equity securities that is diversified, both by industry and company size. The Fund typically invests in securities of "growth companies" that have price/earnings and debt/equity ratios that are equal to or lower than the 1 average of companies in the same industry. Other important factors are the price of the stock in relation to the underlying assets of the company and the growth potential of the company. The Fund invests in securities according to the perceived potential, whether those securities have large or small market capitalization. The majority of holdings are in large market capitalization stocks, but the Fund tries to have a balance in large, medium and small companies (as measured by sales or revenues). Foreign securities may be purchased, but special attention is given to the risks associated with such securities. The Fund seeks to achieve long-term growth in value, with little regard to short-term market fluctuations. In addition, the Fund invests in companies that the Investment Adviser determines possess "special situation" characteristics. In general, a company possesses "special situation" characteristics if its securities are expected to appreciate solely by reason of a development particularly or uniquely applicable to that company. There can be no assurance that the Fund can continue to meet its investment objectives. The Offering........... The Fund's authorized capital stock consists of 50,000,000 shares of common stock, $0.001 par value. As of December 31, 2002, the Fund had 2,264,097 shares of common stock outstanding. The Fund is offering 5,000,000 shares of its common stock to investors on a continuous "best efforts" basis through Broker Dealer Financial Services Corp. ("BDFSC") and, in BDFSC's sole discretion, by other selected broker- dealers. See "Underwriting." The Fund will sell shares each week to investors at a price equal to the Fund's current net asset value per share, which generally will be determined as of the close of business each Thursday, plus the applicable sales charge. The sales price may be determined by the following formula: net asset value divided by (1 minus the applicable sales charge), rounded to the nearest penny. Subscription payments will be deposited into an escrow account and used by the Fund each week to purchase shares upon acceptance of subscriptions, determination of the Fund's net asset value and receipt of collected funds for the subscription. Subscriptions are irrevocable by the subscriber once received by the Fund. The Fund's net asset value per share as of January 9, 2003, was $9.32. The minimum investment (inclusive of sales charges) by an investor in the this offering is $500. There is no minimum number of shares that must be sold in the offering. All costs of the offering, other than sales commissions to BDFSC, will be paid directly by the Fund. Unless otherwise directed by the investor, shares purchased by each investor will be held by the Fund's transfer agent in noncertificated form in the name of the investor. Investment Adviser..... The Fund's investment adviser is Growth Fund Advisor, Inc., a Michigan corporation ("Investment Adviser"). Its parent organization, National Association of Investment Clubs Trust, has been engaged in providing investment education and advisory services since 1951. The Fund's initial investment adviser was National Association of Investors Corporation ("NAIC"), an affiliate of the Investment Adviser. As part of a corporate reorganization, the Trust formed the Investment Adviser, which succeeded NAIC as investment adviser to the Fund in 1999. The Investment Adviser follows the following four investment principles developed by NAIC: - Invest regularly - Reinvest earnings - Invest in "growth" - Diversify Advisory Fee........... Under the Advisory Agreement, the Fund pays the Investment Adviser an annual fee equal to 0.75% of the Fund's average weekly net asset value. The Fund's predecessor investment adviser, NAIC, waived the entire fee from the Fund's inception in 1990 through 1997. NAIC and the Investment Adviser, as applicable, collected 25% of the fee in 1998, 50% of the fee in 1999, and 75% of the fee in 2000. The Investment Adviser did not waive any of its fee during 2001 and has advised the Fund it does not intend to waive any fees in the future. Risk Factors........... An investment in the Fund involves certain risks, including: - Investing for long-term appreciation with little regard to short-term market fluctuations. Price fluctuations over the short term can have an effect on the Fund's net asset value; stocks may have significant fluctuations in price. - Investing in "growth companies" that may be more subject to business operating risks, economic conditions or market trends and volatility than other companies. - Investing in "special situation" companies that are expected to have developments (e.g., a possible takeover, new product, etc.) uniquely applicable to that company. If the anticipated development 2 does not occur, shares of "special situation" companies may not appreciate in value or may decrease in value. - Reliance on key personnel of the Investment Adviser. - Characteristics of closed-end investment companies, like the Fund, such as the shares trading at a discount to the Fund's net asset value and fluctuations in the market price of the Fund's shares. - Securities of small and medium sized companies may involve greater risk than investing in larger companies. - Foreign investments may be subject to heightened political and economic risks, particularly in countries with unstable governments, immature economic structures, different legal systems, economies based on few industries, and national policies restricting investments by foreigners. Distribution Policy.... The Fund distributes to shareholders at least annually substantially all net long-term and short-term capital gains, dividends and other income of the Fund, after payment of Fund expenses. Dividend Reinvestment and Cash Purchase Plan................... You may elect to have all dividends and distributions which accrue to you as a shareholder in the Fund automatically reinvested pursuant to the Fund's Dividend Reinvestment and Cash Purchase Plan. Depending upon market price per share compared to the then current net asset value per share of the Fund, the Plan Agent will either (a) receive shares from the Fund or (b) purchase shares on the open market on behalf of the participants in the Plan. If you elect to participate in the Dividend Reinvestment and Cash Purchase Plan, you may also elect to make additional cash payments for investment by the Plan Agent in additional Fund shares. 3 FINANCIAL HIGHLIGHTS(A) -------------------- The financial highlights present a per share analysis of how the Fund's net asset value has changed during the periods presented. You should read this information in conjunction with the Fund's audited financial statements and notes incorporated by reference in the Statement of Additional Information. The financial highlights for each of the ten years ended December 31 were derived from the Fund's audited financial statements that have been audited by Arthur Andersen LLP, independent certified public accountants. Plante & Moran, LLP replaced Arthur Andersen LLP as the Fund's independent certified public accountants effective May 9, 2002.
Year Ended December 31, Six ---------------------------------------- Months Ended 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 June 30, 2002 (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ NET ASSET VALUE AT BEGINNING OF $11.08 $11.96 $11.22 $10.86 $9.56 $7.89 $6.61 $5.00 $4.89 $4.71 $4.37 PERIOD - ------------------------------------------------------------------------------------------------------------------------------------ NET INVESTMENT INCOME .01 .04 .09 .08 .12 .09 .09 .07 .04 .03 .05 NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS .39 (.25) 2.18 .76 1.68 1.99 1.52 1.66 .11 .18 .37 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS .38 (.21) 2.27 .84 1.80 2.08 1.61 1.73 .15 .21 .42 DISTRIBUTIONS FROM: NET INVESTMENT INCOME -- (.04) (.09) (.09) (.11) (.09) (.09) (.07) (.04) (.02) (.04) REALIZED GAINS -- (.64) (1.44) (.39) (.39) (.32) (.24) (.05) 0 (.01) (.04) - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL -- (.67) (1.53) (.48) (.50) (.41) (.33) (.12) (.04) (.03) (.08) DISTRIBUTIONS NET ASSET VALUE AT END OF PERIOD $10.70 $11.08 $11.96 $11.22 $10.86 $9.56 $7.89 $6.61 $5.00 $4.89 $4.71 - ------------------------------------------------------------------------------------------------------------------------------------
4
Year Ended December 31, Six ---------------------------------------- Months Ended 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 June 30, 2002 (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE MARKET VALUE, END OF PERIOD ASK $11.05 10.75 $11.00 $10.25 $10.75 $15.25 $ 9.75 $7.13 $ 4.75 $5.63 $6.00 BID $10.55 10.25 $10.50 $10.00 $10.25 $14.50 $ 9.44 $6.88 $ 4.69 $ 4.75 $ 4.75 TOTAL INVESTMENT RETURN: BASED ON MARKET VALUE 1 YEAR 5.94% 3.70% 30.90% 2.85% (25.42%) 58.50% 42.94% 49.70% (0.54%) 0.83% 1.72% FROM INCEPTION 11.42% 11.66% 12.57% 10.28% 11.30% 17.84% 12.59% 7.85% 0.27% 0.50% 0.37% BASED ON NET ASSET VALUE 1 YEAR (6.74%) (1.59%) 27.27% 7.75% 18.84% 26.43% 24.46% 34.60% 3.12% 4.65% 9.51% FROM INCEPTION 11.55% 12.42% 13.81% 13.15% 13.79% 13.69% 11.92% 9.78% 4.92% 5.45% 5.77% NET ASSETS, END OF PERIOD (000's) $24,047.6 $23,902.2 $23,927.8 $22,351.7 $20,701.2 $17,335.3 $13,487 $10,989.1 $8,316.6 $8,081.8 $7,432.3
(A) All per share data for 2000, 1999, 1998, and 1997 has been restated to reflect the effect of a 15% stock dividend which was declared on August 18, 2000 and paid on September 29, 2000 to shareholders of record on September 18, 2000, and a 100% stock dividend which was declared on August 22, 1997 and paid October 1, 1997 to shareholders of record on September 12, 1997.
Year Ended December 31, Six ----------------------------------- Months Ended June 30, 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 2002 (unaudited) - ------------------------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: RATIO OF 1.47% 1.57% 1.25% 1.00% 0.83% 0.96% 0.96% 1.19% 1.81% 2.00% 2.00% EXPENSES TO AVERAGE NET ASSETS (B) RATIO OF NET .16% 0.32% 0.74% 0.70% 1.13% 0.96% 1.10% 1.16% 0.77% 0.63% 0.92% INVESTMENT INCOME TO AVERAGE NET ASSETS (B) PORTFOLIO 11.79% 1.77% 10.61% 4.20% 5.87% 6.31% 5.93% 6.90% 6.56% 0.62% 3.50% TURNOVER RATE AVERAGE $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 $0.125 COMMISSION RATE PAID PER SHARE - ------------------------------------------------------------------------------------------------------------------------------------
(B) For the years ended 2000, 1999, 1998, 1997, 1996, 1995, and 1994, the Investment Adviser voluntarily waived all or a portion of its fees. Had the Investment Adviser not done so in 2000, 1999, 1998, 1997, 1996, 1995, and 1994 the ratio of expenses to average net assets would have been 1.44%, 1.37%, 1.39%, 1.69%, 1.68%, 1.94%, and 2.00% and the ratio of net investment income to average net assets would have been 0.55%, 0.32%, 0.57%, 0.23%, 0.38%, 0.41%, and 0.58% for each of these years. 5 RISK FACTORS The following summarizes certain risks that you should consider before deciding whether to invest in the Fund. General Considerations You should understand that all investments have risks. Therefore, the Fund cannot guarantee you will not realize losses from investing in the Fund. In addition, the Fund cannot give you any assurance that the Fund's investment policy will be successful or that the Fund will attain its investment objectives. The Fund is not intended to serve as a complete investment program for an investor. Long-Term Perspective The Fund emphasizes investing in equity securities for long-term capital appreciation as measured by "total return," with little regard to short-term market fluctuations. The Fund tries to achieve total return by investing in those equity securities with growth potential and that also may be expected to increase cash dividends on a regular basis. While the Fund does not attempt to purchase equity securities that have a high yield, relative to the popular stock averages, a record of increased cash dividends is one of the factors taken into consideration when selecting equity securities for the Fund's portfolio. The Fund is intended for investors who understand and are willing to accept the risks of seeking long-term appreciation. Investment in Growth Companies Most of the companies in which the Fund invests are "growth companies." A "growth company" is a company that has exhibited faster-than-average gains in earnings over the last few years and is expected to continue to show high levels of profitable growth. The stocks of growth companies may involve more risk. For example, growth companies may have limited product lines, markets or financial resources and may lack management depth. In addition, stocks of such companies may have limited marketability and may be subject to more abrupt or erratic changes in stock price than securities of larger, more established companies or than overall market averages in general. Investment in Special Situation Companies The Fund may also invest in companies that are determined by the Investment Adviser to possess "special situation" characteristics by reason of developments uniquely applicable to that company, such as possible takeovers, new product announcements, etc. If the anticipated development does not occur, shares of "special situation" companies may not appreciate in value or may decrease in value. Investment in Small and Medium Sized Companies Investing in securities of small and medium sized companies may involve greater volatility than investing in larger and more established companies because they can be subject to more abrupt or erratic share price changes than larger, more established companies. Small companies may have limited product lines, markets or financial resources and their management may be dependent on a limited number of key individuals. Securities of these companies may have limited market liquidity and their prices may be more volatile. Investment in Foreign Companies Investments in securities of foreign companies involve certain inherent risks. Foreign investments may be subject to heightened political and economic risks, particularly in countries with unstable governments, immature economic structures, different legal systems, economies based on few industries, and national policies restricting investments by foreigners. There is also the risk of unpredictable government confiscation of company assets and/or other controls. Further, foreign issuers may not be subject to the same uniform accounting, auditing, or financial reporting standards. The Fund's investments in companies located in particular foreign countries could be adversely affected by changes in the value of that country's currency. Reliance on Key Personnel Kenneth S. Janke is primarily responsible for the investment decisions made by the Investment Adviser on behalf of the Fund. Mr. Janke was also responsible, together with Thomas E. O'Hara, for the investment decisions made on behalf of the Fund by the Investment Adviser's predecessor, NAIC. Accordingly, Mr. Janke has been responsible in whole or in part for the investment decisions made on behalf of the Fund since the Fund's inception. Mr. Janke is a Director and Chairman and Chief Executive Officer of the Adviser. Mr. Janke's principal occupation during the past five years has been President (to February, 2002), Chairman and Chief Executive Officer (from February, 2002 to July, 2002), and Chairman (from July, 2002) of NAIC. There can be no assurance that a replacement can be 6 found for Mr. Janke in the event he severs his employment relationship with the Investment Adviser or is unable to fulfill his role due to death or disability. There is no written employment contract between Mr. Janke and the Investment Adviser. Mr. Janke is 67 years old. Offering Price The shares will be sold in the offering at a price equal to the Fund's net asset value per share as of the applicable determination date (usually, the close of business on the Thursday immediately prior to the sale in the offering), plus the applicable sales charge. The sales price may be determined by the following formula: net asset value divided by (1 minus the applicable sales charge), rounded to the nearest penny. Because the market value of the shares is likely to be different than the net asset value per share at any given time, the purchase price of shares in the offering may be more or less than the prevailing market price of the shares at the time of the sale. Because shares of closed-end funds frequently trade at market prices less than the net asset value per share, it is likely that the offering price per share will be greater than the market price per share at any given time. Investment Company Shares As with any security, shares of the Fund may increase or decrease in value from time to time, and these changes may or may not be related to changes in the value of the securities held by the Fund (as reflected in its net asset value). In addition, shares of closed-end investment companies like the Fund frequently trade at a discount from net asset value. The possibility that shares of the Fund will trade at a discount to net asset value is a risk which is separate from the risk that the Fund's net asset value will decrease. The Fund cannot predict whether its shares will trade in the future at a premium to or a discount from net asset value or the level of any premium or discount. Secondary Market for Fund's Shares The issuance of shares in the offering may have an adverse effect on the secondary market for the Fund's shares. The increase in outstanding shares resulting from the offering may put downward pressure on the market price for the shares of the Fund. The Fund also issues shares through its Dividend Reinvestment and Cash Purchase Plan. See "Dividend Reinvestment and Cash Purchase Plan." Shares may be issued under the Dividend Reinvestment and Cash Purchase Plan at a discount to the market price for the shares, which may also put downward pressure on the market price for shares of the Fund. Repurchase of Shares by the Fund You will not have the right to have the Fund redeem your shares. However, the Fund is authorized to repurchase shares when they are trading at a discount of 10% or more below net asset value. If the Fund decides to repurchase shares, it is permitted to borrow money to finance these repurchases. Any such borrowing will exaggerate the effect of an increase or decrease in the value of portfolio securities on the Fund's net asset value. In addition, the Fund will be required to pay interest and other costs (such as commitment fees or the cost of maintaining minimum average balances) with respect to the borrowed funds, and these expenses may exceed the benefit to the Fund from repurchasing its shares. Anti-Takeover Provisions Certain provisions of the Fund's Articles of Incorporation and By-laws are designed to prevent a takeover of the Fund. These provisions may have the effect of depriving shareholders of an opportunity to sell their shares at a premium. See "Description of Shares." Regulated Investment Company The Fund has conducted and intends to continue to conduct its operations so that it qualifies as a "regulated investment company" for purposes of the Internal Revenue Code of 1986, as amended (the "Code"). This relieves the Fund of any liability for federal income tax to the extent that its earnings are distributed to its shareholders. If the Fund fails at any time to qualify as a "regulated investment company," the income of the Fund for that fiscal year will be taxed. This would result in a decrease in income for distribution to shareholders of the Fund and a reduction in the net asset value of the Fund. THE FUND The Fund is a diversified, closed-end management investment company. Its investment objective is long-term growth as measured by "total return" on investment. "Total return" means the total of all income derived from, and the capital appreciation in value of, a particular investment over a particular period of time with particular emphasis on capital appreciation. The Fund tries to achieve total return by investing in those equity securities with growth potential and that also may be expected to increase cash dividends on a regular basis. While the Fund does not attempt to purchase equity securities that have a high yield, relative to the popular stock averages, a record 7 of increased cash dividends is one of the factors taken into consideration when selecting equity securities for the Fund's portfolio. The Fund was incorporated under the laws of the State of Maryland on April 11, 1989, and has registered under the Investment Company Act of 1940, as amended (the "1940 Act"). The business of the Fund is managed under the direction of its Board of Directors. The Fund's initial offering of shares of Common Stock was completed on July 2, 1990 with 549,810 shares issued at a price of $10 per share. A 15% stock dividend was declared on August 18, 2000 and paid on September 29, 2000 to shareholders of record on September 18, 2000, and a 100% stock dividend was declared on August 22, 1997 and paid October 1, 1997 to shareholders of record on September 12, 1997. As of December 31, 2002, the Fund had 2,264,097 shares outstanding. The Fund has a total of 50,000,000 authorized shares of common stock. The Fund is not a party to any material pending legal proceedings. The Fund's common stock is listed on the Chicago Stock Exchange (the "Exchange") under the symbol "GRF." The following table shows, for the periods indicated, the Fund's (1) the high and low prices per share on the Exchange, (2) net asset value per share on the date of the high or low market price, and (3) the high and low premium (discount) to net asset value per share on that day.
Price Per Share Applicable Net Asset Value Premium/ Per Share (Discount) to NAV --------------------- -------------------------- ---------------------- Calendar Quarters Ended - ----------------------- High Low High Low High Low ---- --- ---- --- ---- --- December 31, 2002 $ 11.00 $ 8.70 $ 9.93 $ 9.08 10.8% (4.2)% September 30, 2002 10.85 8.70 10.53 9.50 3.0% (8.4)% June 30, 2002 11.50 10.80 10.83 10.70 6.2% 0.9% March 31, 2002 11.05 10.25 11.50 11.08 (3.9)% (7.5)% December 31, 2001 11.05 10.25 11.50 10.97 (3.9)% (6.6)% September 30, 2001 12.25 10.50 11.65 10.97 5.2% (4.3)% June 30, 2001 12.00 11.00 11.70 11.14 2.6% (1.3)% March 31, 2001 11.63 10.75 11.69 10.59 (0.5)% (1.5)% December 31, 2000 12.25 10.75 13.18 12.42 (7.1)% (13.4)% September 30, 2000 11.26 10.41 13.07 12.75 (13.9)% (18.3)% June 30, 2000 10.63 9.56 12.69 12.33 (16.3)% (22.5)% March 31, 2000 9.93 8.61 10.86 10.79 (8.5)% (20.2)% December 31, 1999 9.24 8.50 11.23 10.96 (17.7)% (22.5)% September 30, 1999 10.20 9.14 11.27 10.49 (9.5)% (12.9)% June 30, 1999 9.99 9.14 11.18 11.09 (10.7)% (17.6)% March 31, 1999 9.30 8.71 10.77 10.48 (13.7)% (16.8)%
On January 9, 2003, the net asset value per share was $9.32 and the high sale price was $10.60, which represents a premium of 13.7% from the net asset value. Like most closed-end investment companies, since the Fund's inception its shares have generally traded on the market for an amount less than their net asset value. The Fund cannot predict whether its shares will trade in the future at a premium or discount to net asset value, and if so, the level of such premium or discount. 8 INVESTMENT OBJECTIVE AND POLICIES The investment objective of the Fund is long-term growth utilizing the concept of "total return" for selecting investments. The Fund's investment objective may only be changed by the affirmative vote of a majority of the Fund's outstanding common stock. The Fund attempts to achieve its objective by investing primarily in a diversified portfolio of equity securities. These securities may include common and preferred stocks, securities convertible into common stocks, and securities of "growth" companies and companies that possess "special situation" characteristics. The Fund invests in securities according to the perceived potential, whether those securities have large or small market capitalization. The majority of holdings are in large market capitalization stocks, but the Fund tries to have a balance in large, medium and small companies (as measured by sales or revenues). Foreign securities may be purchased, but special attention is given to the risks associated with such securities. Accordingly, the Fund typically invests in the securities of companies that have price/earnings and debt/equity ratios equal to or lower than the average for companies in the same industry. Other important factors the Investment Adviser takes into consideration are the price of the stock in relation to the value of the underlying assets of the company. In addition, the Fund does not generally invest in senior securities. The Fund may not issue senior securities, purchase any securities on margin or make short sales of securities, borrow money or underwrite securities of other issuers, except under limited circumstances permitted by the Fund's investment guidelines. For further information concerning the Fund's investment guidelines, including the limitations on and exceptions to such guidelines, see the information under the caption "Investment Guidelines" in the Statement of Additional Information. THE INVESTMENT ADVISER Background The Fund's investment adviser is Growth Fund Advisor, Inc. (the "Investment Adviser"), a Michigan corporation that is registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940. The Investment Adviser provides the Fund with investment advisory services and, subject to the authority of the Board of Directors of the Fund, is responsible for the overall management of the Fund. The Fund is the Investment Adviser's only advisory client. The Investment Adviser assumed the role of providing investment advisory services to the Fund on September 1, 1999 from the Fund's former investment adviser, National Association of Investors Corporation ("NAIC"), a Michigan nonprofit corporation. The Investment Adviser is an indirect wholly owned subsidiary of the National Association of Investment Clubs Trust (the "Trust"), which is also the sole shareholder of NAIC. The Trust was formed in 1951 by three investment clubs with the objective of educating investors and promoting the formation of investment clubs. NAIC was organized by the Trust in 1975 to further this objective. Both NAIC and the Trust throughout their respective histories have been integrally involved in educating investors and assisting and encouraging the formation and operation of investment clubs. The Investment Adviser was organized in March 1999 to take over the investment advisory activities of NAIC, as part of a restructuring of NAIC and its various affiliates. NAIC publishes Better Investing, a monthly magazine distributed to its members and other subscribers. Better Investing provides investment and educational services to the public. Prior to the incorporation of NAIC in 1975, Better Investing was published by the Trust. The publication began in 1951 and was originally known as National Association of Investment Clubs News. In 1955, the name was changed to NAIC Bulletin and changed again in 1958 to Investment Club Bulletin. In 1965, the publication name was changed to Better Investing. As of December 31, 2001 Better Investing had over 375,911 subscribers, making Better Investing one of the largest investor magazines in the United States. The Investment Adviser's address is 711 West Thirteen Mile Road, Madison Heights, Michigan 48071. Investment Principles Through their work with investors over several decades in connection with providing educational services, publishing Better Investing magazine, and assisting and promoting the formation of investment clubs, NAIC and the Trust developed an investment philosophy based on certain investment principles. The Trust and NAIC advocate their use in the NAIC Official Guide, Starting and Running a Profitable Investment Club, one of the educational materials prepared by the Trust and the NAIC. These investment principles may be summarized as follows: - Invest Regularly: Money should be invested regularly without thought as to whether the stock market itself is high or low. Forecasting short-term movements in the stock market is very difficult but historically domestic stock prices have generally moved upwards over long periods of time. Also, regular purchases of stocks over a period of time without regard to whether the stock market is high or low will frequently result in a lower average cost per share. 9 - Reinvest Earnings: The reinvestment of earnings provides funds for the purchase of securities and generally builds up net worth. - Invest in "Growth": Buying stocks of companies whose sales and earnings are expected to grow faster than the total economy and faster than their competitors is important because such growth, if it is on a sound basis, is likely to result in higher stock prices. - Diversify: Investments should be diversified, both by the type of industry and size of company. NAIC has also developed a stock study program designed to assist its members in (1) studying an individual company so as to form a judgment as to its potential investment value, (2) comparing several companies and selecting for investment the stocks of companies that best meet their investment objectives, and (3) keeping informed on the stocks currently owned or which they contemplate owning in order to make informed decisions concerning further purchases or sales. The Investment Adviser uses the NAIC's investment principles and the methodology of the NAIC's stock study program in advising the Fund. However, the investment principles and stock study program were developed by the Trust and NAIC primarily for use by NAIC's members, and therefore they are not directly applicable in all cases to the management of the Fund's portfolio. The Investment Adviser may also use other investment principles or methods in managing the Fund's investments. Advisory Fee The Fund and the Investment Adviser, as successor to NAIC, are parties to an Investment Advisory Agreement dated October 2, 1989 (the "Advisory Agreement"). Pursuant to the Advisory Agreement the Fund pays the Investment Adviser an annual advisory fee equal to 0.75% of the weekly net assets of the Fund. However, if the weekly net assets of the Fund are less than $3,800,000 during any week, then no advisory fee is paid or accrued by the Fund to the Investment Adviser for that week. The advisory fee is paid on a monthly basis. The Investment Adviser's predecessor, NAIC, waived all of its advisory fees since the inception of the Fund in 1990 through 1997. The Investment Adviser or its predecessor, as applicable, collected 25% of the fee in 1998, 50% of the fee in 1999, and 75% of the fee in 2000. The Investment Adviser collected all of its advisory fee in 2001 and has advised the Fund it does not intend to waive any of its fees in the future. Payment of Expenses In addition to the advisory fee paid to the Investment Adviser, the Fund pays all of the other costs and expenses of its operation. This includes, among other things, expenses for legal and auditing services, costs of printing proxies, stock certificates and shareholder reports, charges of the custodian and transfer agent, SEC filing fees, fees and expenses of unaffiliated directors, accounting and pricing costs, membership fees and trade association dues, insurance, interest, brokerage costs, taxes, stock exchange listing fees and expenses, expenses of qualifying the Fund's shares for sale in various states, and other miscellaneous expenses properly payable by the Fund. The Advisory Agreement provides that the Fund may not incur annual aggregate expenses in excess of 2% of the first $10,000,000 of the Fund's average net assets, 1.5% of the next $20,000,000 of average net assets, and 1% of the remaining average net assets for any fiscal year. Any excess Fund expenses are the responsibility of the Investment Adviser, and the pro rata portion of the estimated annual excess expenses is offset against the Investment Adviser's monthly advisory fee. In the event such amount exceeds the advisory fee payable to the Investment Adviser in any month, no advisory fees are paid to the Investment Adviser. The Fund will pay the expenses of this offering, other than the sales charges which are payable by the investors, directly from the general assets of the Fund. These costs will not be considered an expense of the Fund for purposes of the expense limitations of the Advisory Agreement. Portfolio Management Kenneth S. Janke is primarily responsible for the investment decisions made by the Investment Adviser on behalf of the Fund. Mr. Janke was also responsible, together with Thomas E. O'Hara, for the investment decisions made on behalf of the Fund by the Investment Adviser's predecessor, NAIC. Accordingly, Mr. Janke has been responsible in whole or in part for the investment decisions made on behalf of the Fund since the Fund's inception. Mr. Janke is a Director and Chairman and Chief Executive Officer of the Investment Adviser. Mr. Janke's principal occupation during the past five years has been President (to February, 2002), Chairman and Chief Executive Officer (from February, 2002 to July, 2002), and Chairman (from July, 2002) of NAIC. Legal Proceedings The Investment Adviser is not a party to any material pending legal proceedings. 10 USE OF PROCEEDS The Fund estimates the net proceeds from the sale of the shares offered hereby will be $46,432,919, based on the Fund's net asset value of $9.32 on January 9, 2003 and a sale price per share of $9.81, as estimated $2,450,000 sales charge, and an estimated $167,081 in expenses, assuming that the offering continues for a two year period and all of the shares are sold in the offering. The Investment Adviser expects to invest the net proceeds in accordance with the Fund's investment objectives and policies. The timing of these investments will depend on when such proceeds are received and the availability at that time of securities meeting the Fund's investment guidelines and policies and other relevant conditions. Pending such investment, it is anticipated that the proceeds will be invested in short-term debt obligations or instruments. Investments in such short-term debt obligations or investments may reduce the Fund's yield. Because of the continuous nature of the offering, the Fund does not expect to encounter difficulties in investing the offering proceeds, and anticipates that the proceeds will be invested within a three- to six-month period after receipt by the Fund. DISTRIBUTION POLICY Dividends will be paid annually on the shares in amounts representing substantially all the net investment income, if any, earned each year. Dividend payments will vary in amount, depending on investment income received and expenses of operation. Substantially all of any taxable net capital gain realized on investments will be paid to shareholders at least annually. The net asset value of each share that you own will be reduced by the amount of the distributions or dividends that you receive from that share. DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN The Fund invites you to join the Dividend Reinvestment and Cash Purchase Plan (the "Plan"), which is provided to give you easy and economical ways of increasing your investment in the Fund's shares. IF YOU HAVE ALREADY ELECTED TO PARTICIPATE IN THE PLAN, YOU DON'T NEED TO DO ANYTHING FURTHER TO MAINTAIN YOUR ELECTION. Participation in the Plan is not automatic and you must affirmatively elect to participate. American Stock Transfer & Trust Company acts as the Plan Agent on behalf of shareholders who are participants in the Plan. A subscriber for shares in this offering (other than a broker or a nominee from a financial institution) who is not currently a shareholder of the Fund, or a person who is currently a shareholder of the Fund who has not previously elected to participate in the Plan, or a shareholder which has terminated its election, may elect to become a participant in the Plan by filling in and signing a form of authorization included as part of the subscription agreement accompanying this prospectus and mailing the form to the Plan Agent, American Stock Transfer & Trust Company, P.O. Box 922, Wall Street Station, New York, New York 10038. The authorization must be signed by each of the registered shareholders of an account. Your participation in the Plan is voluntary and may be terminated or resumed at any time upon written notice from you received by the Plan Agent prior to the record date of the next dividend. Additional information regarding the election may be obtained from the Fund. Dividend payments and other distributions made by the Fund to participants in the Plan are made in one of two ways. They are paid to the Plan Agent either in cash (which then are used to purchase shares in the open market), or by the delivery of newly-issued Fund shares. The option chosen by the Plan Agent is the one that the Plan Agent determines is the most favorable to Plan participants, as described below. The Fund determines the net asset value of the Fund's shares on a date (a "Valuation Date") which is not more than five business days prior to a date fixed for payment of a dividend or other distribution from the Fund. The Plan Agent then compares the determined net asset value per share with the market price per share. For purposes of the Plan, "market price" is the highest price bid at the close of the market by any market maker on the date which coincides with the relevant Valuation Date, or, if no bids were made on such date, the next preceding day on which a bid was made. The market price was $10.60 on January 9, 2003. If the net asset value per share in any such comparison is lower than the market price per share, then the Plan Agent instructs the Fund to satisfy its obligation with respect to any such dividend or other distribution by issuing additional shares to the participants in the Plan. The shares are issued at a price per share equal to the greater of the determined net asset value per share or 95% of the market price per share determined as of the close of business on the relevant Valuation Date. However, if the net asset value per share (as determined above) is higher than the market price per share, then the Plan Agent instructs the Fund to satisfy its obligation with respect to any such dividend or other distribution by a cash payment to the Plan Agent for the account of Plan participants. The Plan Agent uses such cash payment to buy additional shares in the "open market" for the account of the Plan participants. However, the Plan Agent does not purchase shares in the open market at a price in excess of the net asset value per share as of the relevant Valuation Date. If the Plan Agent is unable to complete its acquisition of shares to be purchased in the open market by the end of the first trading day following receipt of the cash payment from the Fund, any remaining funds are used by the Plan Agent to purchase newly issued shares of the Fund's common stock from the Fund. The shares are issued at a price equal to the greater of 11 the determined net asset value per share or 95% of the market price per share as of the date coinciding with or next preceding the date of the relevant Valuation Date. Participants in the Plan have the option of making additional cash payments to the Plan Agent, on a monthly basis, for investment in the Fund's shares. Such payments may be made in any amount from a minimum of $50 to a maximum of $1,000 per month. The Fund may, in its discretion, waive the maximum monthly limit with respect to any participant. At the end of each calendar month, the Plan Agent determines the amount of funds accumulated. Purchases made from the accumulation of payments during each calendar month are made on or about the first business day of the following month ("Investment Date"). These funds are used to purchase shares of the Fund's common stock from the Fund if the net asset value per share is lower than the market price per share as of the Valuation Date which occurs not more than five business days prior to the relevant Investment Date. In such a case, the Fund issues the shares at a price per share equal to the greater of the determined net asset value per share or 95% of the market price per share. If the net asset value per share is higher than the market price per share, then the Plan Agent uses such cash payments to buy additional shares in the open market for the account of the Plan participants. However, the Plan Agent will not purchase shares in the open market at a price in excess of the net asset value as of the relevant Valuation Date. If the Plan Agent is unable to complete its acquisition of shares to be purchased in the open market by the end of the Investment Date, any remaining cash payments are used by the Plan Agent to purchase newly issued shares of the Fund's common stock from the Fund at a price per share equal to the greater of the determined net asset value per share or 95% of the market price per share as of the relevant Valuation Date. All cash payments received by the Plan Agent in connection with the Plan are held without earning interest. To avoid unnecessary cash accumulations, and also to allow ample time for receipt and processing by the Plan Agent, participants that wish to make voluntary cash payments should send such payments to the Plan Agent in such a manner that assures that the Plan Agent will receive immediately available funds by the end of the month. If a voluntary cash payment is not received in time to purchase shares in any calendar month, such payment will be invested on the next Investment Date. A participant may withdraw a voluntary cash payment by written notice to the Plan Agent if the notice is received by the Plan Agent at least 48 hours before such payment is to be invested by the Plan Agent. The Plan Agent performs bookkeeping and other administrative functions, such as maintaining all participants' accounts in the Plan and furnishing written confirmation of all transactions in the accounts, including information needed by shareholders for personal and tax records. Shares in the account of each participant are held by the Plan Agent in noncertificated form in the name of the participant, and each shareholder's proxy includes those shares purchased pursuant to the Plan and of record as of the record date for determining those shareholders who are entitled to vote on any matter involving the Fund. In case of shareholders such as banks, brokers or nominees holding shares for others who are the beneficial owners, the Plan Agent administers the Plan on the basis of the aggregate number of shares certified from time to time by such shareholders as held for the account of beneficial owners who have elected to participate in the Plan. There are no special fees or charges to participants in the Plan other than reasonable transaction fees and a termination fee of $15 plus 10(cent) per share. For purchases by voluntary cash payments under the Plan, the Plan Agent will charge a pro rata share of the brokerage commissions, if any. Brokerage charges for purchasing small blocks of stock for individual accounts through the Plan are expected to be less than the usual brokerage charges for such transactions, as the Plan Agent purchases Shares for all participants in larger blocks and prorating the lower commission rate thus applied. The automatic reinvestment of dividends and distributions does not relieve participants of any associated income tax liability. See "Taxation." The Fund reserves the right to amend or terminate the Plan as applied to any voluntary cash payment received and any dividend or distribution to be paid subsequent to a date specified in a notice of the change sent to all shareholders at least ninety days before such specified date. The Plan may also be terminated on at least ninety days' written notice to all shareholders in the Plan. All correspondence concerning the Plan should be directed to American Stock Transfer & Trust Company, P.O. Box 922, Wall Street Station, New York, New York 10038. TAXATION The Fund has elected to qualify, and intends to remain qualified, as a regulated investment company under Subchapter M of the Internal Revenue Code. The Fund will distribute substantially all of its net investment income and gains to shareholders. Therefore, it is not expected that the Fund will be subject to any federal income tax. These distributions are taxable as ordinary income or capital gains. Shareholders may be proportionately liable for taxes on income and gains of the Fund, but shareholders not subject to tax on their income will not be required to pay tax on amounts distributed to them. Each January you will be sent information on the tax status of any distribution made during the previous calendar year, including information on the amount and nature of the income or gains. 12 Because each shareholder's situation is unique, you should always consult your tax adviser concerning the effect income taxes may have on your individual investment. DESCRIPTION OF SHARES General The Fund's only authorized class of capital stock is common stock, par value $.001 per share, of which 50,000,000 shares are authorized. The shares, upon issuance and payment therefor in accordance with this prospectus, will be fully paid and non-assessable. The shares have no preemptive, conversion or subscription rights and have equal rights as to voting and liquidation. Shareholders' right to elect directors of the Fund is non-cumulative. This means that the holders of a majority of the Fund's outstanding shares can elect all of the directors nominated for election at a meeting called for that purpose if they choose to do so. If this happens, the holders of the remaining shares will not be able to elect any directors. Shares issued in accordance with this prospectus will be held by the Fund's transfer agent in noncertificated form in the name of the investor, unless the investor elects otherwise in the subscription agreement. Each shareholder's proxy includes those shares purchased pursuant to the Plan and of record as of the record date for determining those shareholders who are entitled to vote on any matter involving the Fund. A shareholder may request the transfer agent to issue certificates for its shares. Fractional shares will be held and aggregated with other fractional shares and paid for by check in the event a shareholder requests a certificate. The following table provides certain information about the Fund's common stock as of December 31, 2002.
- ------------------------------------------------------------------------------------------------------------------ (1) (2) (3) (4) Title Amount Authorized Amount Held by Fund or For its Amount Outstanding of Class Account Exclusive of Amount Shown under (3) - ------------------------------------------------------------------------------------------------------------------ Common stock $0.001 par value 50,000,000 0 2,264,097 shares - ------------------------------------------------------------------------------------------------------------------
The number of the Fund's shareholders of record, as of December 31, 2002, is 2,230. The Investment Adviser held no shares as of such date and NAIC, the Investment Adviser's affiliate, held 29,544 shares as of such date. The number of shares beneficially owned by all Fund officers and directors as a group is 164,834 as of December 31, 2002, of which 7,455 are held in investment clubs with which certain officers and directors are affiliated. Repurchase of Shares The Fund's shareholders do not, and will not, have the right to have their shares redeemed or repurchased by the Fund. The Fund may repurchase its shares, however, from time to time as and when it is deemed advisable by the Board of Directors of the Fund in order to attempt to reduce or eliminate a market discount from the net asset value of the shares. Such repurchases will be made, if at all, only when the shares are trading at a discount of ten percent (10%) or more below the net asset value of the shares, and in accordance with the 1940 Act which provides, in part, that the Fund must notify stockholders of its intention to purchase shares on the open market at some time within the six months preceding the purchase. The Fund may incur debt to finance share repurchase transactions by borrowing from banks and others on an unsecured basis as a temporary measure as described below ("Temporary Borrowings"). Such Temporary Borrowings may not exceed five percent (5%) of the value of the Fund's net assets at the time the loan is made. The Fund may pledge up to ten percent (10%) of the lesser of the cost or value of its total assets to secure Temporary Borrowings. The Fund will not borrow for investment purposes. Immediately after any Temporary Borrowing, the Fund will maintain asset coverage of not less than three hundred percent (300%) with respect to all Temporary Borrowings. The Fund may not enter into Temporary Borrowing transactions with affiliates. The Fund is not required to repurchase shares. Historically, the Fund has not repurchased any of its shares. The Board of Directors, in consultation with the Investment Adviser, will review on a regular basis, at meetings of the Board of Directors, the possibility of open market repurchases of the Fund's shares. Any shares repurchased will be canceled and returned to the status of authorized, but unissued common stock. Any repurchases of shares of the Fund will decrease the total assets of the Fund, thereby increasing the Fund's expense ratio. The shares trade in the open market, so long as any market exists, at a price that is a function of several factors, including their net 13 asset value and yield. The shares of closed-end investment companies generally sell at market prices that vary from their net asset values. If the Fund repurchases its shares at prices below their net asset value, the net asset value of the remaining outstanding shares may be increased, but there can be no assurance that the market price of the remaining outstanding shares will be affected, either positively or negatively. Further, interest on borrowings to finance share repurchase transactions will reduce the Fund's net income. There can be no assurance that any repurchase of the shares will result in the shares trading at a price equal to or greater than their net asset value. Certain Provisions of the Articles of Incorporation and By-laws The Fund presently has provisions in its articles of incorporation and by-laws that could have the effect of limiting the ability of certain entities or persons and their affiliates that beneficially own more than 5% of the outstanding shares of the Fund (a "Principal Shareholder") to acquire control of the Fund or to cause it to engage in certain transactions. The affirmative vote or consent of the holders of sixty-six and two-thirds percent (66 2/3%) of the shares of the Fund is required to authorize the conversion of the Fund from a closed-end to an open-end investment company, and generally to authorize any of the following transactions: - Merger or consolidation of the Fund with or into any Principal Shareholder; - Issuance of any securities of the Fund to any Principal Shareholder for cash; - Sale, lease or exchange of all or any substantial part of the assets of the Fund to any Principal Shareholder (except assets having an aggregate fair market value of less than $500,000); or - Sale, lease or exchange to the Fund, in exchange for securities of the Fund, of any assets of any Principal Shareholder (except assets having an aggregate fair market value of less than $500,000). However, any such vote or consent is not be required with respect to the foregoing transactions if the Board of Directors under certain conditions approves such transaction. Reference is made to the articles of incorporation and by-laws of the Fund on file with the Securities and Exchange Commission for the full text of these provisions. See "Further Information." These provisions could have the effect of depriving shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging a third party from seeking to obtain control of the Fund in a tender offer or similar transaction. DETERMINATION OF NET ASSET VALUE The net asset value of the shares is computed based upon the market value of the securities held by the Fund. Net asset value per share is calculated by dividing the value of all of the securities held by the Fund plus any cash or other assets minus all liabilities, including accrued expenses, by the total number of shares outstanding at such time. It is determined as of the close of business on Thursday of each week. If any Thursday is not a business day, the net asset value is determined as of the close of business on the last business day of the week preceding such Thursday. Portfolio securities are valued at market. Securities and assets for which market quotations are not readily available are valued at fair value by the Investment Adviser in accordance with guidelines established by the Fund's Board of Directors and provided to the Plan Agent. Investments with maturities of 60 days or less are valued at amortized cost. Shares of closed-end investment companies frequently trade at a discount to net asset value, but in some cases trade at a premium. The market price of the shares is determined by factors that are beyond the control of the Fund. These factors include trading volume of such shares, general market and economic conditions. The Fund cannot predict whether its shares will trade at, below or above net asset value. The Fund can, however, repurchase its own shares if they are trading at a discount of ten percent (10%) or more of net asset value. See "Description of Shares." HOW TO INVEST To invest in the Fund, please follow the steps below. This will help avoid any delays in processing your subscription. - Read this Prospectus carefully. - Determine how much you would like to invest. The Fund's minimum investment is $500. The Fund reserves the right to increase the amount of this minimum for certain purchases. Sales charges payable to BDFSC will be deducted from your subscription payment. - Carefully complete and sign the enclosed subscription agreement, including the optional Dividend Reinvestment and Cash Purchase Plan section if you want to participate in the Plan. By joining the Dividend Reinvestment and Cash Purchase Plan now, you can avoid the delay and inconvenience of having to submit an 14 additional application later. - Return the subscription agreement to NAIC Growth Fund, Inc., c/o Growth Fund Advisor, Inc., P.O. Box 220, Royal Oak, Michigan 48068 with your check made payable to "Standard Federal Bank N.A.- Escrow Agent". All subscriptions are subject to acceptance by the Fund and approval by BDFSC. Either the Fund or BDFSC may reject a subscription in its discretion for any reason. Subscriptions may not be revoked by the subscriber once received by the Fund. Shares sold pursuant to this Prospectus will be held by the Fund's transfer agent in noncertificated form in the purchaser's name, unless the purchaser elects otherwise in the Subscription Agreement. If a purchaser elects to receive a certificate for its common shares in the Subscription Agreement, the Fund will not issue fractional shares to the purchaser and will refund the portion of the sales price representing the fractional share, without interest, at the time of delivering the share certificate. Fractional shares will be issued for shares held by the transfer agent in noncertificated form. Such fractional shares will be aggregated with any other fractional shares held by the transfer agent for the purchaser from time to time and will be paid for by check, at the then-prevailing market price, if the purchaser requests a certificate for its shares after the acceptance of the purchaser's subscription in this offering. UNDERWRITING The Fund and Investment Adviser have entered into an Underwriting Agreement with BDFSC, a form of which has been filed as an exhibit to the Registration Statement of which this prospectus is a part. The summary of the Underwriting Agreement contained herein is qualified by reference to the Underwriting Agreement. Subject to the terms and conditions of the Underwriting Agreement, BDFSC will offer on a "best efforts" basis up to 5,000,000 shares of the Fund's common stock. BDFSC may also offer the shares through certain selected dealers. BDFSC is located at 8800 N.W. 62nd Avenue, Johnston, Iowa 50131. The offering will continue until all the shares are sold or until either the Fund or BDFSC terminate the offering on 30 days' notice to the other party. Sales of shares will generally be made on a weekly basis. Subscribers will submit Subscription Agreements and subscription payments as described under "How to Invest." Subscriptions may not be revoked by the subscriber once received by the Fund. The Fund's net asset value is determined as of the close of business each Thursday or, if a Thursday is not a business day, on the business day immediately preceding that Thursday (a "Determination Date"). On the first business day following each Determination Date, the Fund will sell shares at a price equal to the net asset value per share on the Determination Date, plus the applicable sales charge, to each subscriber whose subscription has been accepted by the Fund and approved by BDFSC on or before the Determination Date and whose subscription payment is held by the Escrow Agent in collected funds on or before the Determination Date. The sales price may be determined by the following formula: net asset value divided by (1 minus the applicable sales charge), rounded to the nearest penny. Funds in the escrow account will be held uninvested. Standard Federal Bank N.A. of Detroit, Michigan will act as the Escrow Agent. The minimum investment (inclusive of sales charges) in this offering by any investor is $500. The Fund reserves the right to increase the amount of this minimum for certain purchases. There is no minimum number of shares that must be sold in the offering. There will be a sales charge payable by investors to BDFSC out of their subscription payments for any shares sold pursuant to this prospectus, as follows: - 3.5% of the gross sales price per share sold before a selected broker-dealer enters into a selected dealer agreement with BDFSC; and - 5% of the gross sales price per share sold after any selected broker-dealer enters into a selected dealer agreement with BDFSC. The Fund has paid BDFSC a non-accountable expense allowance of $15,000. In connection with the sale of shares on behalf of the Fund, BDFSC may be deemed to be an underwriter within the meaning of the Securities Act of 1933, as amended, and the compensation of BDFSC may be deemed to be underwriting commissions or discounts. BDFSC has from time to time acted, and may continue to act while principal distributor, as broker in connection with the execution of the Fund's portfolio transactions. See "Portfolio Transactions and Brokerage" in the Statement of Additional Information. The Investment Adviser will provide administrative services to the Fund in connection with the offering of the shares, including processing subscription agreements. No subscription will be effective unless and until it is accepted by the Fund and approved by BDFSC. 15 The Fund and the Investment Adviser have jointly and severally agreed to indemnify BDFSC against certain liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments that BDFSC may be required to make in respect thereof. However, the Underwriting Agreement provides that the Fund will not indemnify BDFSC to the extent that any loss, claim, liability, expense or damage is found in a final judgment by a court of competent jurisdiction to have resulted from the bad faith, willful misconduct or negligence of BDFSCor any selected dealer which has entered into a selected dealer agreement with BDFSC, or the breach by BDFSC or any such selected dealer of its duties and obligations under the Underwriting Agreement. LEGAL MATTERS The legality of the shares offered hereby has been passed on by Bodman, Longley & Dahling LLP, Detroit, Michigan, which serves as counsel to the Fund and to the Investment Adviser. Lewis A. Rockwell is counsel to the law firm of Bodman, Longley & Dahling LLP. Mr. Rockwell is also an officer and director of the Fund and an officer and director of the Investment Adviser. Certain legal matters have been passed on for BDFSC by Dorsey & Whitney LLP, Des Moines, Iowa. REPORTS TO SHAREHOLDERS The Fund issues to its shareholders reports that include annual audited financial statements for each year ended December 31 and unaudited financial statements for each six month period ended June 30. The financial statements include a list of investments held. INDEPENDENT PUBLIC ACCOUNTANTS The audited financial statements included in and incorporated by reference into the Statement of Additional Information have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto. Plante & Moran, LLP replaced Arthur Andersen LLP as the Fund's independent certified public accountants effective May 9, 2002. The address of Plante & Moran, LLP is 27400 Northwestern Highway, Southfield, Michigan 48034. FINANCIAL STATEMENTS The Fund's audited financial statements for the fiscal year ended December 31, 2001 are incorporated into the Statement of Additional Information by reference from the Fund's Annual Reports to Shareholders for the year ended December 31, 2001 and the Fund's unaudited financial statements for the period ended June 30, 2002 are incorporated by reference into the Statement of Additional Information from the Fund's Semi-Annual Report to Shareholders for the period ended June 30, 2002. The Fund will furnish without charge copies of its annual report and semi-annual report and any subsequent annual and semi-annual reports to prospective investors and shareholders upon request to the Fund, 711 West Thirteen Mile Road, Madison Heights, Michigan 48071, telephone (877) 275-6242, extension 331. These reports are also available on the Securities and Exchange Commission's EDGAR database and may also be obtained from the Securities and Exchange Commission. See "Further Information." IMPORTANT NOTICE CONCERNING ARTHUR ANDERSEN LLP Section 11(a) of the Securities Act of 1933 provides that if any part of a registration statement at the time it becomes effective contains an untrue statement of a material fact or an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, any person acquiring a security pursuant to such registration statement, unless it is proved that at the time of such acquisition such person knew of such untruth or omission, may sue, among others, every accountant who has consented to be named as having prepared or certified any part of the registration statement or as having prepared or certified any report or valuation which is used in connection with the registration statement with respect to the statement in such registration statement, report or valuation which purports to have been prepared or certified by the accountant. The Fund's financial statements incorporated by reference in the Statement of Additional Information were audited by the Fund's former independent auditor, Arthur Andersen LLP. However, the Fund has not been able to obtain, after reasonable efforts, the written consent of Arthur Andersen LLP with respect to the inclusion of such financial statements in the Statement of Additional Information. Under these circumstances, Rule 437a under the Securities Act of 1933 permits the Fund to file this registration statement without a consent of Arthur Andersen LLP. As a result, you will not be able to sue Arthur Andersen LLP pursuant to Section 11(a) of the Securities Act and therefore your right of recovery under that section may be limited as a result of the lack of the written consent. STATEMENT OF ADDITIONAL INFORMATION The Fund's Statement of Additional Information contains additional information about the Fund which may be of interest to you. A copy of the Statement of Additional Information is available without charge to any person to whom this Prospectus is delivered, on 16 written or oral request to the Plan Administrator, NAIC Growth Fund, Inc., 711 West Thirteen Mile Road, Madison Heights, Michigan 48071, attention: Statement of Additional Information, telephone (877) 275-6242, extension 331. The table of contents of the Statement of Additional Information is as follows: The Fund............................................................. Additional Investment Guidelines..................................... Directors, Officers and Principal Shareholders....................... Investment Adviser and Investment Advisory Agreement................. Dividend Reinvestment and Cash Purchase Plan......................... Custodian, Transfer Agent and Dividend Disbursing Agent.............. Independent Public Accountants....................................... Portfolio Transactions and Brokerage................................. Taxation............................................................. Financial Statements................................................. FURTHER INFORMATION This Prospectus and the Statement of Additional Information do not contain all of the information set forth in the Registration Statement the Fund has filed with the Securities and Exchange Commission. The complete Registration Statement is available on the EDGAR Database on the Securities and Exchange Commission's Internet site at http://www.sec.gov, and may also be obtained from the Securities and Exchange Commission upon payment of the fee prescribed by its rules and regulations. 17 EXHIBIT 1 FORM OF SUBSCRIPTION AGREEMENT 18 NAIC Growth Fund, Inc. Subscription Agreement CHECKS PAYABLE TO: STANDARD FEDERAL BANK N.A., ESCROW AGENT MAIL SUBSCRIPTION AGREEMENT AND CHECK TO: NAIC Growth Fund, Inc. c/o Growth Fund Advisor, Inc. P.O. Box 220 Royal Oak, MI 48068 Check enclosed for $_______________________ for full and (if applicable) fractional shares at Net Asset Value and related sales charge ($500 minimum) Register these shares exactly as printed below: Owner Name ------------------------------------------------------------- ----------------------------------------------------- (Tax Identification or Social Security Number) Co-Owner(s) (if any) --------------------------------------------------- Address ----------------------------------------------------------------------------------------------------------------------------- City State Zip ---------------------------------------------------------- --------------------- ----------------------- Telephone E-mail ----------------------------------------------------- -------------------------------------------- Citizen of the USA: Yes No If no, which country ----- ------- ----------------------------------------------- Presently shareholder in Fund: Yes No ------ -------
In case of two or more co-owners, the shares will be registered "Joint Tenants with Right of Survivorship" (and not as Tenants in Common) unless otherwise specified. To register shares other than as joint tenants, contact your broker. For owners other than individuals, the above owner is: Corporate HR10 or Keogh Investment Club - --------- --------- --------- IRA or SEP SIMPLE Trust - --------- --------- --------- 401(k) Other (specify) - --------- --------- ----------------------------- See the end of this form for additional required information and signatures applicable to owners other than individuals. I wish to reinvest dividends and capital gains distributions by participating in the Dividend Reinvestment and Cash Purchase Plan. Yes No ------- ------- (If you do not check either line, dividends and capital gains distributions will be paid in cash.) I wish to: Hold shares in noncertificated form at Transfer Agent _________ Receive stock certificate ____________ (Fractional shares will not be issued in certificated form.) (If you do not check either of the above, shares will be held in noncertificated form at Transfer Agent.) I am of legal age in my state of residence, which is __________________________. I am not myself, nor am I related to, an officer, director, or employee of Broker Dealer Financial Services Corp., a Selected Dealer, NAIC Growth Fund, Inc., or the Growth Fund Advisor, Inc., except as stated below: Name of Officer, Director, or Employee ------------------------------------------ Relationship Position ----------------------- ------------------------------ I authorize any instructions contained herein and certify, under penalties of perjury: (1) that the Tax Identification or Social Security Number shown above is correct; and (2) (check which of the following is a true statement) ___________I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to withholding. ___________I am subject to backup withholding because the IRS has notified me. (3) I am a U.S. person (including a U.S. resident alien). I further certify that I have read and understand the Prospectus and related Statement of Additional Information and that the purchase of the shares pursuant to this Agreement is appropriate for me in light of my financial situation, investment objectives and other circumstances. X X --------------------------------- ------------------------------------ (Signature of Owner) (Signature of Co-Owner, if any) FOR OWNERS OTHER THAN INDIVIDUALS OR JOINT TENANTS: If the shareholder is an IRA, SEP, SIMPLE, Keogh, or 401(k), this agreement must be signed be the Fiduciary (Trustee or Custodian). If the shareholder is a corporate or other non-individual entity (including Investment Clubs), enclose a copy of the Corporate Resolution or Partnership Authorization for this account, and a list of beneficial owners certified by authorized officer of partner. If the shareholder is an HR10, Keogh, SIMPLE, 401(k), or other Trust, provide a copy of the trust agreement. If you have any questions, please call, write or e-mail: Broker Dealer Financial Services Corporation 8800 NW 62nd Avenue, PO Box 6240, Johnston, IA 50131 515-286-2970 or 800-352-5634 E-mail: GRF@BDFS.com BDFSC Use Only AE________ SC__________________ Selected Dealer Use Only Transfer Agent Use Only Date Received_____________________________________ Date Mailed to Escrow Agent_________________________ Additional Documents Required______________________ Request Date ____________ Dated Received____________
THE INFORMATION IN THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED JANUARY , 2003 PART B - STATEMENT OF ADDITIONAL INFORMATION NAIC GROWTH FUND, INC. 711 West Thirteen Mile Road Madison Heights, Michigan 48071 STATEMENT OF ADDITIONAL INFORMATION This Statement of Additional Information ("Statement") is not a prospectus. It relates to a prospectus of NAIC Growth Fund, Inc. (the "Fund") dated________ _, 2003 (the "Prospectus"), and should be read together with the Prospectus. This Statement does not include all information that a prospective investor should consider before purchasing shares of the Fund, and investors should obtain and read the Prospectus prior to purchasing shares. This Statement incorporates by reference the entire Prospectus. A copy of the Prospectus, and any document incorporated by reference in this Statement, is available without charge to any prospective investor or shareholder of the Fund upon written or oral request to, NAIC Growth Fund, Inc., 711 West Thirteen Mile Road, Madison Heights, Michigan 48071, attention: Statement of Additional Information, telephone (877) 275-6242, extension 331. TABLE OF CONTENTS
Page ---- The Fund............................................................................................. Additional Investment Guidelines..................................................................... Directors, Officers and Principal Shareholders....................................................... Investment Adviser and Investment Advisory Agreement................................................. Dividend Reinvestment and Cash Purchase Plan......................................................... Custodian, Transfer Agent and Dividend Disbursing Agent.............................................. Independent Public Accountants....................................................................... Portfolio Transactions and Brokerage................................................................. Taxation............................................................................................. Financial Statements.................................................................................
The Prospectus and this Statement omit certain of the information contained in the registration statement filed with the Securities Exchange Commission (the "Commission"), Washington, D.C. The registration statement may be obtained from the Commission upon payment of the fee prescribed, or inspected at the Commission's office at no charge. The registration statement is also available on the Commission's website (www.sec.gov). This Statement of Additional Information is dated _______ _, 2003 THE FUND NAIC Growth Fund, Inc. (the "Fund") is a diversified closed-end management investment company. The Fund's investment objective is long-term growth utilizing the concept of "total return" for selecting investments. "Total return" for purposes of this Statement of Additional Information ("Statement") is the total of all income derived from, and the capital appreciation in value of, a particular investment. The Fund tries to achieve total return by investing in those equity securities with growth potential and that also may be expected to increase cash dividends on a regular basis. While the Fund does not attempt to purchase equity securities that have a high yield, relative to the popular stock averages, a record of increased cash dividends is one of the factors taken into consideration when selecting equity securities for the Fund's portfolio. The Fund seeks to achieve its investment objective through investment in a diversified portfolio of equity securities. These securities may include those that possess "special situation" characteristics. The Fund's Investment Adviser is Growth Fund Advisor, Inc. (the "Investment Adviser"), an indirect subsidiary of the National Association of Investment Clubs Trust. ADDITIONAL INVESTMENT GUIDELINES The investment objective, policies and restrictions of the Fund are described in the Prospectus under "Investment Objective and Policies." In addition, the Fund operates under the following additional guidelines. These guidelines constitute fundamental policies that cannot be changed without the affirmative vote of the holders of a majority of the Fund's outstanding common stock. All percentage limitations set forth below apply immediately after a purchase or initial investment. Any subsequent change in any applicable percentage resulting from market fluctuations does not require elimination of any security from the portfolio. The Fund may not: - Issue senior securities, as defined in the Investment Company Act of 1940 (the "1940 Act"), or mortgage, pledge, hypothecate or in any manner transfer, as security for indebtedness, any securities owned or held by the Fund except as may be necessary in connection with the borrowings mentioned in bullet three below. Any such mortgaging, pledging or hypothecating may not exceed 10% of the Fund's total assets, taken at the lesser of cost or market value. - Purchase any securities on margin or make short sales of securities, except as follows. The Fund may (i) obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio securities, and (ii) make short sales of securities so long as at all times during which a short position is open, the Fund owns an equal amount of such securities or, by virtue of ownership of securities, has the right without payment of further consideration to obtain an equal amount of the securities sold short (i.e., immediately convertible securities). No more than 15% of the Fund's total assets taken at current value will be held to cover such short sales at any one time. - Borrow money, except that the Fund may borrow from banks and others on an unsecured basis as a temporary measure to finance the repurchase of its shares, or for other extraordinary or emergency purposes. For further information, see the Prospectus under the caption "Description of Shares - Repurchase of Shares." While there is no limit on the amount which the Fund may borrow, the Fund has never borrowed any money. - Underwrite securities of other issuers, except insofar as the Fund may be deemed an underwriter under the Securities Act of 1933, as amended, in selling portfolio securities. - With respect to 50% of its net assets, invest in securities of any one issuer if immediately thereafter, as a result of such investment, more than 5% of the total assets of the Fund would be invested in the securities of such issuer. This restriction does not apply to investments in United States government securities. - Purchase more than 10% of the outstanding voting securities of any one issuer. - Invest more than 25% of its net assets, taken at market value at the time of each investment, in the securities of issuers of any particular industry. This restriction does not apply to investments in United States government securities. - Invest in oil, gas or mineral leases. - Invest in real estate or real estate limited partnerships. - Invest in general and limited partnership interests. 1 - Invest in options. - Invest more than fifteen percent 15% of net assets in illiquid assets, including but not limited to, commodities or commodity contracts, futures contracts, puts, calls, straddles, spreads, foreign securities, and included within this 15% limitation no more than 10% of net assets in companies with less than three years of operating history, nor more than 5% of net assets in restricted securities. - Invest more than 5% of net assets in warrants valued at the lower of cost or market of which at least 3% must be listed on the NYSE or AMEX. - Make loans of money or securities. - Purchase securities of other investment companies, except in connection with a merger, consolidation, acquisition, or reorganization or during Temporary Periods, if more than 10% of the market value of the Fund's total assets would be invested in securities of other investment companies, more than 5% of the market value of the Fund's total assets would be invested in the securities of any one investment company, or the Fund would own more than three percent 3% of any other investment company's securities. See the information in the Prospectus under the caption "Investment Objective and Policies." - Engage in short-term trading resulting in portfolio turnover greater than 50% annually. - Effect brokerage transactions in its portfolio securities with any broker-dealer affiliated directly or indirectly with its investment adviser, unless such transactions (including the frequency thereof, the receipt of commissions payable in connection therewith and the selection of the affiliated broker-dealer affecting such transaction) are not unfair or inequitable to the shareholders of the Fund. See "Portfolio Transactions and Brokerage." DIRECTORS, OFFICERS AND PRINCIPAL SHAREHOLDERS The business of the Fund is managed under the direction of its Board of Directors. The directors and officers of the Fund, their principal occupations for at least the last five years and other pertinent information are set forth below. The address of each is the address of the Fund. DIRECTORS WHO ARE INTERESTED PERSONS OF THE FUND AND OFFICERS
- ------------------------------------------------------------------------------------------------------------------------------------ NAME, Position(s) Term of Principal Occupation(s) During Number of Other ADDRESS Held with Office and Past 5 Years Portfolios in Directorships AND Fund Length of Fund Complex Held by AGE* Time Served Overseen by Director Director** (PUBLIC COMPANIES) - ------------------------------------------------------------------------------------------------------------------------------------ Thomas Chairman of Term of office Chairman Emeritus of the Board One None. E. the Board and one year. and Trustee of the National O'Hara Director Served as a Association of Investors Age 86 director since Corporation, a nonprofit 1989. corporation engaged in investment education ("NAIC") and Chairman Emeritus and Director of Growth Fund Advisor, Inc., the Fund's investment adviser (the "Investment Adviser"), from February, 2002 to present. Chairman and Trustee of NAIC and Chairman and Director of the Investment Adviser to February, 2002. - ------------------------------------------------------------------------------------------------------------------------------------
2
- ------------------------------------------------------------------------------------------------------------------------------------ NAME, Position(s) Term of Principal Occupation(s) During Number of Other ADDRESS Held with Office and Past 5 Years Portfolios in Directorships AND Fund Length of Fund Complex Held by AGE* Time Served Overseen by Director Director** (PUBLIC COMPANIES) - ------------------------------------------------------------------------------------------------------------------------------------ Kenneth Director, Term of office Chairman and Trustee of NAIC One Director, AFLAC S. Janke President and one year. and Chairman, Chief Executive Age 67 Treasurer Served as a Officer and Director of the director since Investment Adviser from July, 1989. 2002. Chairman, Chief Executive Officer and Trustee of NAIC and Chairman, Chief Executive Officer and director of the Investment Adviser from February, 2002 to July 2002. President and Trustee of NAIC and President and Director of the Investment adviser to February, 2002. - ------------------------------------------------------------------------------------------------------------------------------------ Lewis A. Director and Term of office Counsel to the law firm of One None Rockwell Secretary one year. Bodman, Longley & Dahling LLP, Age 83 Served as a counsel to the Fund, NAIC and the director since Investment Adviser; Trustee and 1989. Secretary of NAIC; Director and Secretary of the Investment Adviser. - ------------------------------------------------------------------------------------------------------------------------------------ Peggy L. Director Term of office Adult Education Teacher; Trustee One None. Schmeltz one year. of NAIC; Director of Bowling Age 74 Served as a Green State University Foundation director since Board; former member of NYSE 1989. Advisory Committee. - ------------------------------------------------------------------------------------------------------------------------------------
*The address of each is the address of the Fund. Messrs. O'Hara, Janke and Rockwell and Mrs. Schmeltz are interested persons of the Fund within the meaning of Section 2(a)(19) of the Investment Company Act of 1940. Mr. O'Hara is an interested person because he is a trustee of NAIC and a director of the Investment Adviser. Messrs. Janke and Rockwell are interested persons because they are trustees and officers of NAIC and directors and officers of the Investment Adviser, as noted above. Mrs. Schmeltz is an interested person because she is a trustee of NAIC. **The Fund is not part of any fund complex. 3 DIRECTORS WHO ARE NOT INTERESTED PERSONS OF THE FUND
- ------------------------------------------------------------------------------------------------------------------------------------ NAME, Position(s) Term of Principal Occupation(s) During Number of Other ADDRESS Held with Office and Past 5 Years Portfolios in Directorships AND AGE* Fund Length of Fund Held by Time Served Complex Director Overseen by (Public Director** Companies) - ------------------------------------------------------------------------------------------------------------------------------------ Carl A. Director Term of office President and Director, Greater One None. Holth one year. Detroit Capital Corporation; Age 69 Served as a Financial Consultant and President director since of Carl A. Holth & Associates, Inc. 1989. (a private financial consulting and business appraisal firm); Director, Sunshine Fifty, Inc., and Harrison Piping Supply, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Benedict Director Term of office Retired; Director and Treasurer, One None. J. Smith one year. Detroit Executive Service Corps; Age 81 Served as a Director, Vista Maria (a nonprofit director since charitable organization); Trustee, 1989. Henry Ford Health System, Behavioral Services. - ----------------------------------------------------------------------------------------------------------------------------------- James M. Director Term of office Retired; Director, Wheaton One Chateau Lane one year. College, William Tyndale College, Communities, Age 73 Served as a Baseball Chapel, Inc. and Christian Inc. (owner and director since Camps, Inc. operator of 1996. manufactured home communities) - ------------------------------------------------------------------------------------------------------------------------------------ Luke E. Director Term of office Partner in the law firm of Foley & One LaCrosse Sims of one year. Lardner. Director, Wilson-Hurd Footwear, Inc. Age 52 Served as a Mfg. Co. and Notre Dame Middle (manufacturer director since School, Inc. and marketer of 2002. sporting and industrial footwear) - ------------------------------------------------------------------------------------------------------------------------------------
*The address of each is the address of the Fund. **The Fund is not part of any fund complex. No person is known by the Fund to own of record or beneficially 5% or more of its outstanding shares of common stock. The Fund has no standing nominating or compensation committees of the Board of Directors, or committees performing similar functions. The Fund has a Management Proxy Committee comprised of Messrs. O'Hara and Janke to cast votes represented by properly executed proxies. The Management Proxy Committee met one time during the Fund's fiscal year ended December 31, 2001. The Fund also has an Audit Committee comprised of Messrs. O'Hara, Holth and Smith. The Audit Committee reviews the services provided by the Fund's independent accountants and consults with the accountants. The Audit Committee met 1 time during the Fund's fiscal year ended December 31, 2001. The following tables set forth the dollar range of the Fund's common stock, par value $0.001 per share, which is the Fund's only equity security, owned by each director, valued at the market price per share of $10.75 as of December 31, 2001. 4 DIRECTORS WHO ARE INTERESTED PERSONS OF THE FUND
- ------------------------------------------------------------------------------------------------------------------------------------ NAME OF DIRECTOR DOLLAR RANGE OF EQUITY SECURITIES IN AGGREGATE DOLLAR RANGE OF EQUITY THE FUND SECURITIES IN ALL FUNDS OVERSEEN OR TO BE OVERSEEN BY DIRECTOR OR NOMINEE IN FAMILY OF INVESTMENT COMPANIES* - ------------------------------------------------------------------------------------------------------------------------------------ Thomas E. O'Hara $50,001 - $100,000 $50,001 - $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Kenneth S. Janke Over $100,000 Over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Lewis A. Rockwell Over $100,000 Over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------ Peggy L. Schmeltz Over $100,000 Over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------
*The Fund is not part of a family of investment companies. DIRECTORS WHO ARE NOT INTERESTED PERSONS OF THE FUND
- ------------------------------------------------------------------------------------------------------------------------------------ NAME OF DIRECTOR DOLLAR RANGE OF EQUITY SECURITIES IN AGGREGATE DOLLAR RANGE OF EQUITY THE FUND SECURITIES IN ALL FUNDS OVERSEEN OR TO BE OVERSEEN BY DIRECTOR OR NOMINEE IN FAMILY OF INVESTMENT COMPANIES* - ------------------------------------------------------------------------------------------------------------------------------------ Carl A. Holth $10,001 - $50,000 $10,001 - $50,000 - ------------------------------------------------------------------------------------------------------------------------------------ Benedict J. Smith $10,001 - $50,000 $10,001 - $50,000 - ------------------------------------------------------------------------------------------------------------------------------------ James M. Lane $10,001 - $50,000 $10,001 - $50,000 - ------------------------------------------------------------------------------------------------------------------------------------ Luke E. Sims Over $100,000 Over $100,000 - ------------------------------------------------------------------------------------------------------------------------------------
*The Fund is not part of a family of investment companies. No director, nor any of their immediate family members, owns any securities beneficially or of record in the Fund's Investment Adviser or any of its affiliates, or in the Fund's principal underwriter or any of its affiliates. The following tables set forth the aggregate compensation paid to all directors in 2001. Directors who are affiliated with the Investment Adviser or the Investment Adviser's affiliates do not receive any compensation for service as a director. The Chairman and President are not compensated by the Fund, except for reimbursement for out-of-pocket expenses relating to attendance at meetings and other operations of the Fund. No other officer of the Fund received compensation from the Fund in 2001 in excess of $60,000. 5 DIRECTORS WHO ARE INTERESTED PERSONS OF THE FUND
- --------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON, Aggregate Pension or Estimated Annual Total Compensation POSITION Compensation from Retirement Benefits Benefits Upon From Fund and Fund* Accrued as Part of Retirement Fund Complex Paid Fund Expenses to Directors** - --------------------------------------------------------------------------------------------------------------------------------- Thomas E. O'Hara, None None None None Chairman and Director - --------------------------------------------------------------------------------------------------------------------------------- Kenneth S. Janke, None None None None President, Treasurer and Director - --------------------------------------------------------------------------------------------------------------------------------- Lewis A. Rockwell, None None None None Secretary and Director - --------------------------------------------------------------------------------------------------------------------------------- Peggy L. Schmeltz, $ 1900 None None $ 1900 Director - ---------------------------------------------------------------------------------------------------------------------------------
*All amounts shown are for service as a director. **The Fund is not part of any fund complex. DIRECTORS WHO ARE NOT INTERESTED PERSONS OF THE FUND
- --------------------------------------------------------------------------------------------------------------------------------- NAME OF PERSON, Aggregate Pension or Estimated Annual Total Compensation POSITION Compensation from Retirement Benefits Benefits Upon From Fund and Fund* Accrued as Part of Retirement Fund Complex Paid Fund Expenses to Directors** - --------------------------------------------------------------------------------------------------------------------------------- Cynthia P. Charles, $ 1900 None None $ 1900 Director *** - --------------------------------------------------------------------------------------------------------------------------------- Carl A. Holth, $ 1900 None None $ 1900 Director - --------------------------------------------------------------------------------------------------------------------------------- James M. Lane, $ 1900 None None $ 1900 Director - --------------------------------------------------------------------------------------------------------------------------------- Benedict M. Smith, $ 1900 None None $ 1900 Director - ---------------------------------------------------------------------------------------------------------------------------------
*All amounts shown are for service as a director. **The Fund is not part of any fund complex. ***Mrs. Charles resigned as a director on April 18, 2002. INVESTMENT ADVISER AND INVESTMENT ADVISORY AGREEMENT The Fund's Investment Adviser is Growth Fund Advisor, Inc., a Michigan corporation (the "Investment Adviser"). The Investment Adviser is a wholly owned subsidiary of N.A.I.C. Holding Corporation, a Michigan corporation which conducts no business activities. The National Association of Investors Corporation, a Michigan nonprofit corporation ("NAIC") and N.A.I.C. Holding Corporation are each wholly owned subsidiaries of the National Association of Investment Clubs Trust (the "Trust"). Mr. O'Hara is the Chairman Emeritus and a Trustee of the Trust; Mr. Janke is the Chairman and a Trustee of the Trust; 6 and Mr. Rockwell is the Secretary and a Trustee of the Trust. The Fund is the Investment Adviser's sole advisory client. The Trust was formed in 1951 by three investment clubs with the objective of educating investors and promoting the formation of investment clubs. NAIC was organized by the Trust in 1975 to further this objective. Both NAIC and the Trust throughout their respective histories have been integrally involved in educating investors and assisting and encouraging the formation and operation of investment clubs. The Investment Adviser was organized in March 1999 to take over the investment advisory activities of NAIC, as part of a restructuring of NAIC and its various affiliates. For further information concerning the Investment Adviser, see the information in the Prospectus under the caption "The Investment Adviser." Affiliated Persons The following persons are "affiliated persons" of the Fund who are also "affiliated persons" with respect to the Investment Adviser, as defined by the 1940 Act:
-------------------------------------------------------------------------------------------------------- Individual Position with Investment Adviser -------------------------------------------------------------------------------------------------------- Thomas E. O'Hara (1) Chairman Emeritus of the Board and Director Kenneth S. Janke (2) Chairman, Chief Executive Officer and Director Lewis A. Rockwell (3) Secretary, Director --------------------------------------------------------------------------------------------------------
(1) Mr. O'Hara is also the Chairman of the Board of Directors of the Fund. (2) Mr. Janke is primarily responsible for the investment decisions made on behalf of the Fund by the Investment Adviser. Mr. Janke is also the President and a Director of the Fund. (3) Mr. Lewis A. Rockwell is counsel to the law firm of Bodman, Longley & Dahling LLP, which acts as counsel for the Investment Adviser as well as the Fund. Mr. Rockwell is also the Secretary and a Director of the Fund. Advisory Agreement The Advisory Agreement between the Investment Adviser, as successor to NAIC, and the Fund dated October 2, 1989 (the "Advisory Agreement") provides that, subject to the direction of the board of directors of the Fund, the Investment Adviser is responsible for the actual management of the Fund's portfolio. The responsibility for making decisions to buy, sell or hold a particular security rests with the Investment Adviser, subject to review by the board of directors of the Fund. The Investment Adviser is not dependent on any other party in providing the investment advisory services required in the management of the Fund. The Investment Adviser may, however, consider analyses from other various sources, including broker-dealers with which the Fund does business. The Investment Adviser is also obligated to perform certain administrative and management services for the Fund and is obligated to provide all of the office space, facilities, equipment and personnel necessary to perform its duties under the Advisory Agreement. Code of Ethics The Fund and the Investment Adviser have adopted a Code of Ethics under Rule 17j-1 of the Investment Company Act of 1940. This Code of Ethics permits personnel subject to its provisions to invest in securities, including securities that may be purchased or held by the Fund. The Code of Ethics may be reviewed and copied at the Commission's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the Commission at 1-202-942-8090. The Code of Ethics is also available on the EDGAR Database on the Commission's internet site at http://www.sec.gov. Copies of the Code of Ethics may be obtained, after paying a duplicating fee, by electronic request at: publicinfo@sec.gov or by writing the Commission's Public Reference Section, Washington, D.C. 20549-0102. Advisory Fee For the services provided by the Investment Adviser under the Advisory Agreement, the Fund will pay to the Investment Adviser a monthly advisory fee at an annual rate of three-quarters of one percent (0.75%) of the weekly net assets of the Fund. However, if the weekly net assets of the Fund are below $3,800,000, then no advisory fee is paid or accrued by the Fund to the Investment Adviser for that month. The Investment Adviser's predecessor, NAIC, waived the advisory fee from the Fund's inception through 1997. The Investment Adviser or its predecessor, as applicable, collected 25% of the fee ($35,883) in 1998, 50% of the fee ($80,336) in 1999, and 75% of the fee ($139,978) in 2000. The Investment Adviser collected all of the fee in 2001($182,924) and has advised the Fund it intends to collect all of the fee thereafter. 7 Payment of Expenses In addition to the advisory fee, the Fund pays all of the other costs and expenses of its operation. These include, among other things, expenses for legal and auditing services, costs of printing proxies, stock certificates and shareholder reports, charges of the custodian and transfer agent, Commission filing fees, fees and expenses of unaffiliated directors, accounting and pricing costs, membership fees and trade association dues, insurance, interest, brokerage costs, taxes, stock exchange listing fees and expenses, expenses of qualifying the Fund's shares for sale in various states, and other miscellaneous expenses properly payable by the Fund. The Advisory Agreement provides that the Fund may not incur annual aggregate expenses in excess of 2% of the first $10,000,000 of the Fund's net assets, 1.5% of the next $20,000,000 of the net assets, and 1% of the remaining net assets of the Fund for any fiscal year. Any excess expenses are the responsibility of the Investment Adviser, and the pro rata portion of the estimated annual excess expenses is offset against the Investment Adviser's monthly advisory fee. In the event such amount exceeds the advisory fee payable in any month, no fees are collected by the Investment Adviser at such time. The Fund will pay all expenses of this offering, other than sales charges which are payable by the investors, directly from the general assets of the Fund. These costs will not be considered an expense of the Fund for purposes of the expense limitations of the Advisory Agreement. Duration and Termination; Approval The Advisory Agreement became effective on July 2, 1990. It has been approved by a vote of the majority of the Board of Directors of the Fund and by the vote of a majority of the Directors who are not parties to the Advisory Agreement or interested persons of any such party (as defined in the 1940 Act). The Advisory Agreement will continue in effect only so long as such continuance is specifically approved at least annually by the Board of Directors of the Fund or by a vote of the majority of the outstanding voting securities of the Fund. Under the 1940 Act, this is the vote (a) of 67% or more of the shares of the Fund present at an annual or special meeting if the holders of more than 50% of the outstanding shares are present or represented by proxy, or (b) of more than 50% of the outstanding shares, whichever is less. The Advisory Agreement is not assignable. The Advisory Agreement may be terminated at any time without the payment of any penalty by the Board of Directors of the Fund or by a vote of the majority of the outstanding voting securities of the Fund. The Investment Adviser may terminate the Advisory Agreement upon sixty days written notice to the Fund. The continuance of the Advisory Agreement has been approved annually by the Board of Directors of the Fund since its inception. It was last approved by the Board of Directors of the Fund at its meeting on December 5, 2002. The Board of Directors, in approving the continuance of the Advisory Agreement, took into consideration that the Investment Adviser principally uses the NAIC's investment principles and the methodology of the NAIC's stock study program in advising the Fund, which is consistent with the Fund's investment objective. The Board of Directors also regularly reviews the performance of the Fund in comparison to other closed end growth funds and based upon this review, and taking into account the amount of the advisory fee, has determined that it is in the best interest of the Fund to continue the Advisory Agreement. Use of Name The National Association of Investors Corporation ("NAIC"), the predecessor to the Investment Adviser, has become well known through its educational activities and publications. The Fund had no prior operating history and therefore at the time of the initial public offering of the Fund's shares was not well known. As a result, NAIC consented to allow the Fund to use NAIC as part of the Fund's name. The Fund acknowledges that NAIC may withdraw from the Fund the use of its name. However, if it does so, the Investment Adviser has agreed to submit the question of continuing the Investment Advisory Agreement to a vote of the Fund's shareholders at that time. Pursuant to the Advisory Agreement NAIC may grant the use of its name in whole or in part to another investment company or business enterprise. However, the Investment Adviser has agreed to submit the question of continuing the Advisory Agreement to the vote of the Fund's shareholders at that time. 8 DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN The Fund's Dividend Reinvestment and Cash Purchase Plan (the "Plan") allows participating shareholders to reinvest all dividends and capital gain distributions in additional shares of the Fund. The Plan also allows participants to make optional cash investments monthly through American Stock Transfer & Trust Company, the Plan Agent, in amounts ranging from a minimum of $50 to a maximum of $1,000. With the Fund's permission, participating shareholders may also make optional cash investments in excess of the monthly maximum. Shares purchased by Plan Participants in connection with the reinvestment of dividends or optional cash investments may be issued by the Fund if the Fund's shares are trading at a premium to net asset value. If the Fund's shares are trading at a discount to net asset value, shares purchased under the Plan will be purchased on the open market. Shares issued by the Fund under the Plan will be issued at the greater of (i) net asset value or (ii) a discount of 5% to the market price. Shareholders in the Fund may elect to participate in the Plan by notifying American Stock Transfer & Trust Company, P.O. Box 922, Wall Street Station, New York, New York 10038. Additional information about the Plan may be obtained from the Fund at (877) 275-6242, extension 331. For additional information, See "Dividend Reinvestment and Cash Purchase Plan" in the Prospectus. CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Standard Federal Bank N.A. ("SFB") acts as Custodian for the Fund. SFB is a national banking association whose address is 2600 West Big Beaver Road, Troy, Michigan 48084. American Stock Transfer & Trust Company acts as the Transfer Agent and Dividend Disbursing Agent for the Fund. American Stock Transfer & Trust Company's address is P.O. Box 922, Wall Street Station, New York, New York 10038. INDEPENDENT PUBLIC ACCOUNTANTS The annual financial statements included in and incorporated by reference in the Prospectus and Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report with respect thereto. Arthur Andersen LLP did not perform any other services for the Fund during the year ending December 31, 2001. Plante & Moran, LLP replaced Arthur Andersen LLP as the Fund's independent certified public accountants effective May 9, 2002. PORTFOLIO TRANSACTIONS AND BROKERAGE Subject to the policies established by the Board of Directors of the Fund, the Investment Adviser is primarily responsible for the execution of the Fund's portfolio transactions and the allocation of brokerage. In executing such transactions, the Investment Adviser seeks to obtain the most favorable execution and price taking into account such factors as price, size of order, difficulty of execution and operation of facilities of the firm involved and the firm's risk in positioning a block of securities. The Investment Adviser and the Fund have no obligations to deal with any broker or group of brokers in executing transactions in portfolio securities. The Investment Adviser is also authorized to consider, in selecting brokers or dealers with which such orders may be placed, certain statistical, research and other information or services furnished to the Investment Adviser by brokers or dealers (the terms "statistical, research and other information or services" include advice as to the value of securities and the responsibility of investing in, purchasing, or selling securities; the availability of securities or purchasers or sellers of securities; and the furnishing of analyses and reports concerning issuers, industries, securities, economic factors and trends, and portfolio strategy in the performance of accounts). The Investment Adviser may pay a broker a commission in excess of that which another broker might charge in recognition of the value of the statistical, research and other information provided by such broker. The Investment Adviser also makes recommendations as to the manner in which voting rights, rights to consent to corporate action, or other rights pertaining to the Fund's portfolio securities will be exercised. A substantial portion of the securities in which the Fund invests may be traded in the over-the-counter markets, and the Fund deals directly with the dealers who make markets in the securities involved, except in those circumstances where better prices and execution are available elsewhere. Under the 1940 Act, persons affiliated with the Fund are prohibited from dealing with the Fund as principal in the purchase and sale of securities. Since transactions in the over-the-counter market usually involve transactions with dealers acting as principal for their own account, the Fund does not deal with affiliated persons in connection with such transactions. However, affiliated persons of the Fund may serve as its broker in the over-the-counter market and other transactions conducted on an agency basis. 9 The Board of Directors of the Fund has adopted certain policies incorporating the standards of Rule 17e-1 issued by the Commission under the 1940 Act, which require that the commissions paid to affiliates of the Fund, or to affiliates of such persons, must be reasonable and fair compared to the commissions, fees or other remuneration received or to be received by other brokers in connection with comparable transactions involving similar securities during a comparable period of time. The rule and procedures also contain review requirements and require the Investment Adviser to furnish reports to the Board of Directors of the Fund and to maintain records in connection with such reviews. After consideration of all factors deemed relevant, the Board of Directors of the Fund will consider from time to time whether the advisory fee will be reduced by all or a portion of the brokerage commission given to brokers that are affiliated with the Fund. The aggregate dollar amount of brokerage commissions paid by the Fund during the fiscal years ending December 31, 1999, 2000, 2001 was $15,053, $19,294 and $5,884, respectively. The lower amount of brokerage commissions paid in 2001 was primarily due to a decrease in the Fund's portfolio turnover rate. During the Fund's fiscal year ending December 31, 2001, 100% of the brokerage commissions paid by the Fund were paid to Broker Dealer Financial Services Corp. ("BDFSC"), the Fund's principal underwriter, for 100% of the Fund's aggregate dollar amount of transactions involving the payment of commissions effected through such broker such year. The rate of total portfolio turnover of the Fund through its fiscal year ending December 31, 2001 was 1.77%. TAXATION Other Tax Consequences In addition to the federal income tax consequences described in the Prospectus applicable to an investment in the Fund, the Fund may be subject to state or local taxes in jurisdictions in which the Fund may be deemed to be doing business. Also, there may be other federal, state, or local tax considerations applicable to the circumstances of a particular investor. Prospective shareholders are therefore urged to consult their tax advisers with respect to the effects of this investment on their own tax situation. FINANCIAL STATEMENTS The Fund's statement of assets and liabilities, including the portfolio of investments, as of December 31, 2001, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the last five years, are hereby incorporated by reference to the Fund's Annual Report to Shareholders for the year ended December 31, 2001. The Fund's statement of assets and liabilities, including the portfolio of investments, as of June 30, 2002, and the related statement of operations for the period then ended, the statements of changes in net assets for the period then ended, and the financial highlights for the period then ended, are hereby incorporated by reference to the Fund's Semi-Annual Report to Shareholders for the period ended June 30, 2002. 10 PART C - OTHER INFORMATION Item 24. Financial Statements and Exhibits. (1) Financial Statements Contained in Part A: Financial Highlights for the years ended December 31, 2001, 2000, 1999, 1998, 1997, 1996, 1995, 1994, 1993, and 1992. Contained in Part B: Financial Statements are incorporated in Part B by reference to the Registrant's December 31, 2001 Annual Report and Semi-Annual Report for the period ended June 30, 2002. (2) Exhibits (a) Articles of Incorporation, as amended (incorporated by reference to Exhibit 1 to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 33-28506, Investment Company Act File No. 811-5807, Amendment No. 1, dated July 14, 1990). (b) By-laws, as amended (incorporated by reference to Exhibit 2(b) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 333-99689, Investment Company Act File No. 811-05807, dated September 17, 2002). (c) Not Applicable (d) Not Applicable (e) Dividend Reinvestment and Cash Purchase Plan (incorporated by reference to Exhibit 1OA to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 33-38825, Investment Company Act File No. 811-5807, Amendment No. 1, dated March 29, 1991) (f) Not Applicable (g) Investment Advisory Agreement between the Fund and the Investment Adviser (incorporated by reference to Exhibit (g) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 33-38825, Post-Effective Amendment No. 1, Investment Company Act File No. 811-5807, Amendment No. 7, dated August 3, 1993) (h)(i) Amended Form of Underwriting Agreement by and among the Fund, the Investment Adviser, NAIC and BDFSC. (ii) Form of Selected Dealer Agreement (incorporated by reference to Exhibit 2(h)(ii) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 333-99689, Investment Company Act File No. 811-05807, dated September 17, 2002). (i) Not Applicable (j) Custodial Agreement between the Fund and Standard Federal Bank, N.A., as successor to Michigan National Bank (incorporated by reference to Exhibit 2(j) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 333-99689, Investment Company Act File No. 811- 05807, dated September 17, 2002). (k) Amended Form of Escrow Agreement. (1) Opinion of Bodman, Longley & Dahling LLP regarding legality of the securities being offered and consent ( to be filed by amendment). (m) Not Applicable (n) Consent of Arthur Andersen LLP (omitted in reliance on Rule 437a under the Securities Act of 1933). (o) Not applicable (p) Not Applicable (q) Not Applicable (r) Code of Ethics of NAIC Growth Fund, Inc. and Growth Fund Advisor, Inc. (incorporated by reference to Exhibit 2(r) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 333-99689, Investment Company Act File No. 811-05807, dated September 17, 2002). C-1 Item 25. Marketing Arrangements None. Item 26. Other Expenses of Issuance and Distribution The following table sets forth the estimated expenses expected to be incurred in connection with the offering described in this Registration Statement. These estimates assume that the offering will continue for a period of two years. Registration fees $ 4,591 Trustees' and transfer agents' fees $ 0 Printing and engraving $ 50,000 Fees and expenses of qualification under state securities laws (excluding fees of counsel) $ 19,000 Accounting fees and expenses $ 20,500 Legal fees and expenses $ 50,000 NASD filing fees $ 5,490 Chicago Stock Exchange listing fee $ 7,500 Miscellaneous $ 10,000 -------- Total $167,081 ========
Item 27. Persons Controlled by or Under Common Control Not applicable. Item 28. Number of Holders of Securities
Title of Class Number of Record Holders -------------- ------------------------ Common stock, $0.001 par value 2,230 as of December 31, 2002
Item 29. Indemnification. The Maryland General Corporation Law ("MGCL") of the State of Maryland provides in general that a Maryland corporation, such as the Fund, may indemnify any director made a party to any proceeding by reason of service as a director unless it is established that the act or omission was material and was committed in bad faith or was the result of active dishonesty; the director received an improper personal benefit; or in the case of any criminal proceeding, the director had reasonable cause to believe that the act or omission was unlawful. Indemnification may be against judgments, penalties, fines, settlements, and reasonable expenses actually incurred by the director in connection with the proceeding. However, in the case of an action by or in the right of the corporation, indemnification may not be made if the director has been adjudged to be liable to the corporation. The MGCL also generally permits the advancement of reasonable expenses, including payments authorized by a charter or bylaw provision. In general, an officer of the corporation is entitled to indemnification and advancement of expenses to the same extent as a director. Under Article XII of the Registrant's Articles of Incorporation and Article XIII of the Registrant's Bylaws, any past or present director, officer, employee or agent of the Registrant will be indemnified, and will be advanced expenses to the fullest extent permitted by law, but not in violation of Section 17(h) of the Investment Company Act of 1940. Article VIII of the Investment Advisory Agreement between the Registrant and the Investment Adviser provides that the Investment Adviser shall not be liable for any error in judgment or mistake of law or for any loss arising out of any investment or any act or omission in the execution and management of the Registrant or its portfolio of securities, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder. Insurance is maintained on a regular basis (and not specifically in connection with this offering) against liabilities arising on the part of directors and officers out of their performance in such capacities or arising on the part of the Fund out of its foregoing indemnification provisions, subject to certain exclusions and to the policy limits. C-2 The Fund and Investment Adviser have jointly and severally agreed to indemnify Broker Dealer Financial Services Corp. against certain liabilities in connection with the offering of shares in the Fund, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments that BDFSC may be required to make in respect thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court or appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 30. Business and Other Connections of Investment Adviser Growth Fund Advisor, Inc. (the "Investment Adviser") was organized on March 31, 1999 and has not been engaged in any business activities other than acting as investment adviser to the Fund. The following is a list of each officer and director of the Investment Adviser indicating each business, profession, vocation or employment of a substantial nature in which each such person has been engaged since January 1, 1999, for his own account or in the capacity of a director, officer, employee, partner or trustee.
- ------------------------------------------------------------------------------------------------------------------------------------ NAME POSITION WITH OTHER SUBSTANTIAL BUSINESS, PROFESSION, INVESTMENT ADVISER VOCATION OR EMPLOYMENT - ------------------------------------------------------------------------------------------------------------------------------------ Thomas E. O'Hara Chairman Emeritus of the Board Chairman Emeritus of the Board and Trustee of NAIC, 711 West Thirteen Mile Road, Madison Heights, Michigan 48071 - ------------------------------------------------------------------------------------------------------------------------------------ Kenneth S. Janke Chairman, Chief Executive Officer Chairman and Trustee of NAIC, 711 West and Director Thirteen Mile Road, Madison Heights, Michigan 48071 - ------------------------------------------------------------------------------------------------------------------------------------ Lewis A. Rockwell Secretary and Director Attorney and Counsel to the law firm of Bodman, Longley & Dahling LLP, 100 Renaissance Center, 34th Floor, Detroit, Michigan 48243 - ------------------------------------------------------------------------------------------------------------------------------------
Item 31. Location of Accounts and Records (a) American Stock Transfer & Trust Company, P.O. Box 922, Wall Street Station, New York, New York 10038 (records relating to dividend disbursing agent and transfer agent); (b) Standard Federal Bank N.A., 2600 West Big Beaver Road, Troy, Michigan 48084 (records relating to custodian); (c) Growth Fund Advisor, Inc., 711 West Thirteen Mile Road, Madison Heights, Michigan 48071 (records relating to functions as Investment Adviser); and (d) Bodman, Longley & Dahling LLP, 100 Renaissance Center, 34th Floor, Detroit, Michigan 48243 (Registrant's Articles of Incorporation, By-Laws and Minute Books). Item 32. Management Services Except as described in Part A of this Registration Statement under the caption "Investment Advisory Agreement," the Registrant is not a party to any management-related service contract. Item 33. Undertakings C-3 1. The Registrant undertakes to suspend offering of its shares until it amends its prospectus if (1) subsequent to the effective date of this Registration Statement, the Registrant's net asset value declines more than 10 percent from its net asset value as of the effective date of the Registration Statement or (2) the net asset value increases to an amount greater than its net proceeds as stated in the prospectus. 2. The Registrant undertakes: a. to file, during any period in which offers or sales are being made, a post-effective amendment to the registration statement: (1) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (2) to reflect in the prospectus any facts or events after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (3) to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. b. that, for the purpose of determining any liability under the 1933 Act, each such post-effective amendment shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of those securities at that time shall be deemed to be the initial bona fide offering thereof; and c. to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 3. The Registrant undertakes to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written or oral request, any Statement of Additional Information. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Madison Heights and State of Michigan on the 17th day of January, 2003. NAIC GROWTH FUND, INC. By: /s/Kenneth S. Janke ------------------------------------- Kenneth S. Janke Its: President and Treasurer Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates listed. * ---------------------------------------- Thomas E. O'Hara, Director and Chairman Date: January 17, 2003 /s/ Kenneth S. Janke ---------------------------------------- Kenneth S. Janke, Director, President and Treasurer Date: January 17, 2003 * ------------------------------------------- Lewis A. Rockwell, Director and Secretary Date: January 17, 2003 * ------------------------------------------- Peggy L. Schmeltz, Director Date: January 17, 2003 * ------------------------------------------- Luke E. Sims, Director Date: January 17, 2003 * ------------------------------------------- Carl A. Holth, Director Date: January 17, 2003 * ------------------------------------------- Benedict J. Smith, Director Date: January 17, 2003 * ------------------------------------------- James M. Lane, Director Date: January 17, 2003 *By his signature below, Kenneth S. Janke, pursuant to duly executed powers of attorney filed with the Securities and Exchange Commission, has signed this Registration Statement on Form N-2 on January 17, 2003 on behalf of the above-listed persons designated by asterisks, in the capacities set forth by their respective names. /s/ Kenneth S. Janke -------------------------------------- Kenneth S. Janke, Attorney-in-Fact POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That the undersigned officers and directors of NAIC Growth Fund, Inc., a Maryland corporation (the "Fund"), do hereby constitute and appoint Thomas E. O'Hara, Kenneth S. Janke, Lewis A. Rockwell, and each of them, the lawful attorneys and agents or attorney and agent, with power and authority to do any and all acts and things and to execute any and all instruments which said attorneys and agents, and any one of them, determine may be necessary or advisable or required to enable said corporation to comply with the Securities Act of 1933 as amended, and the Investment Company Act of 1940, as amended, and any rules or regulations or requirements of the Securities and Exchange Commission in connection with a Registration Statement on Form N-2 relating to the offer and sale of 5,000,000 shares of common stock of the Fund. Without limiting the generality of the foregoing power and authority, the powers granted include the power and authority to sign the names of the undersigned officers and directors in the capacities indicated below to the Registration Statement, to any and all amendments, both pre-effective and post-effective, and supplements to the Registration Statement, and to any and all instruments or documents filed as part of or in conjunction with the Registration Statement or amendments or supplements thereto, and each of the undersigned hereby ratifies and confirms all that said attorneys and agents or any of them shall do or cause to be done by virtue hereof. This Power of Attorney may be signed in several counterparts. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date indicated by his or her name. /s/ Thomas E. O'Hara - ---------------------------------------------------- Thomas E. O'Hara, Director and Chairman Date: April 18, 2002 /s/ Kenneth S. Janke - ---------------------------------------------------- Kenneth S. Janke, Director, President and Treasurer Date: April 18, 2002 /s/ Lewis A. Rockwell - ---------------------------------------------------- Lewis A. Rockwell, Director and Secretary Date: April 18, 2002 /s/ Peggy L. Schmeltz - ---------------------------------------------------- Peggy L. Schmeltz, Director Date: April 18, 2002 /s/ Luke E. Sims - ---------------------------------------------------- Luke E. Sims, Director Date: April 18, 2002 /s/ Carl A. Holth --------------------------------------------------- Carl A. Holth, Director Date: April 18, 2002 /s/ Benedict J. Smith - ---------------------------------------------------- Benedict J. Smith, Director Date: April 18, 2002 /s/ James M. Lane - ---------------------------------------------------- James M. Lane, Director Date: April 18, 2002 EXHIBIT INDEX (a) Articles of Incorporation, as amended (incorporated by reference to Exhibit 1 to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 33-28506, Investment Company Act File No. 811-5807, Amendment No. 1, dated July 14, 1990). (b) By-laws, as amended (incorporated by reference to Exhibit 2(b) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 333-99689, Investment Company Act File No. 811-05807, dated September 17, 2002). (c) Not Applicable (d) Not Applicable (e) Dividend Reinvestment and Cash Purchase Plan (incorporated by reference to Exhibit 1OA to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 33-38825, Investment Company Act File No. 811-5807, Amendment No. 1, dated March 29, 1991) (f) Not Applicable (g) Investment Advisory Agreement between the Fund and the Investment Adviser (incorporated by reference to Exhibit (g) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 33-38825, Post-Effective Amendment No. 1, Investment Company Act File No. 811-5807, Amendment No. 7, dated August 3, 1993) (h)(i) Amended Form of Underwriting Agreement by and among the Fund, the Investment Adviser, NAIC and BDFSC. (ii) Form of Selected Dealer Agreement (incorporated by reference to Exhibit 2(h)(ii) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 333-99689, Investment Company Act File No. 811-05807, dated September 17, 2002). (i) Not Applicable (j) Custodial Agreement between the Fund and Standard Federal Bank, N.A., as successor to Michigan National Bank (incorporated by reference to Exhibit 2(j) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 333-99689, Investment Company Act File No. 811- 05807, dated September 17, 2002). (k) Amended Form of Escrow Agreement. (1) Opinion of Bodman, Longley & Dahling LLP regarding legality of the securities being offered and consent ( to be filed by amendment). (m) Not Applicable (n) Consent of Arthur Andersen LLP (omitted in reliance on Rule 437a under the Securities Act of 1933). (o) Not applicable (p) Not Applicable (q) Not Applicable (r) Code of Ethics of NAIC Growth Fund, Inc. and Growth Fund Advisor, Inc. (incorporated by reference to Exhibit 2(r) to the Registrant's Form N-2 Registration Statement, Securities Act Registration No. 333-99689, Investment Company Act File No. 811-05807, dated September 17, 2002).
EX-99.H(I) 3 k74079a1exv99whxiy.txt AMENDED FORM OF UNDERWRITING AGREEMENT EXHIBIT h (i) NAIC GROWTH FUND, INC. 5,000,000 SHARES COMMON STOCK UNDERWRITING AGREEMENT __________________, 2003 Broker Dealer Financial Services Corp. 8800 NW 62nd Avenue P.O. Box 6240 Johnston, Iowa 50131 Gentlemen: NAIC Growth Fund, Inc., a Maryland corporation (the "Fund") and Growth Fund Advisor, Inc., a Michigan corporation (the "Investment Adviser"), each confirms its agreement (the "Agreement") with Broker Dealer Financial Services Corp., an Iowa corporation (the "Underwriter"), as follows: 1. Description of Securities. The Fund, proposes to issue and sell through the Underwriter up to 5,000,000 shares (the "Maximum Amount") of common stock, par value $0.001 per share (the "Common Shares"), on the terms set forth in Section 3 hereof. 2. Representations and Warranties of the Fund, the Investment Adviser and the Underwriter. (a) The Fund and the Investment Adviser (collectively, the "Representing Parties") jointly and severally represent and warrant to, and agree with, the Underwriter as of the date hereof and as of each Closing Date (as hereinafter defined) (each such date being hereinafter referred to as the "Representation Date") that: (i) The Fund has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form N-2 (No. 333-99689) and a related preliminary prospectus for the registration of the Common Shares under the Securities Act of 1933, as amended (the "1933 Act"), and the Investment Company Act of 1940, as amended (the "1940 Act"), and has filed such amendments to such registration statement on Form N-2, if any, and such amended preliminary prospectuses as may have been required prior to each Representation Date. The Fund will prepare and file such additional amendments thereto and such amended prospectuses as may hereafter be required. The Fund previously filed a notification on Form N-8A of registration of the Fund as an investment company under the 1940 Act and the rules and regulations of the Commission under the 1940 Act (together with the rules and regulations under the 1933 Act, the "Rules and Regulations"). The registration statement, and the prospectus (including the statement of additional information) constituting a part thereof, each as from time to time amended or supplemented pursuant to the 1933 Act or 1940 Act, are herein referred to as the "Registration Statement" and the "Prospectus," respectively, except that if any revised prospectus shall be provided to the Underwriter by the Fund for use in connection with the offer of the Common Shares (the "Offer") that differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective, the term "Prospectus" shall refer to each such revised prospectus, including the statement of additional information, from and after the time it is first provided to the Underwriter for such use. (ii) At the time the Registration Statement becomes effective and at each Representation Date, the Registration Statement will comply in all material respects with the requirements of the 1933 Act, the 1940 Act and the Rules and Regulations and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. From the time the Registration Statement becomes effective through the termination of this Underwriting Agreement (the "Termination Date"), the Prospectus (unless the term "Prospectus" refers to a prospectus that has been provided to the Underwriter by the Fund for use in connection with the Offer which differs from the Prospectus on file with the Commission at the time the Registration Statement becomes effective, in which case from the time such prospectus is first provided to the Underwriter for such use) will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or Prospectus made in reliance upon and in conformity with information relating to the Underwriter furnished to the Fund by the Underwriter in writing for use in the Registration Statement or Prospectus. (iii) The accountants who certified the financial statements included in the Registration Statement were at the time of such certification independent public accountants as required by the 1933 Act, the 1940 Act and the Rules and Regulations. (iv) The financial statements included in the Registration Statement present fairly the financial position of the Fund as of the dates indicated and the results of its operations for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles consistently applied; and the other financial and statistical information and data included in the Registration Statement and Prospectus is accurately presented in all material respects and prepared on a basis consistent with such financial statements and the books and records of the Fund. (v) Since the respective dates as of which information is given in the Registration Statement and in the Prospectus, except as otherwise stated therein, 2 (A) there has been no material adverse change in the condition, financial or otherwise, of the Fund, or in the earnings, business affairs or business prospects of the Fund, whether or not arising in the ordinary course of business, (B) there have been no transactions entered into by the Fund that are material to the Fund other than those in the ordinary course of business and (C) there has been no dividend or distribution of any kind declared, paid or made by the Fund on any class of its shares of capital stock, other than dividends or distribution made in the ordinary course of business or made for the purpose of maintaining the Fund's qualification as a regulated investment company under Subchapter M ("Subchapter M") of the Internal Revenue Code of 1986, as amended (the "Code"). (vi) The Fund has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Maryland with power and authority to own its own properties and conduct its business as described in the Registration Statement; the Fund is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which the failure to so qualify, either individually or in the aggregate, would have a material adverse effect upon the operations or financial condition of the Fund; and the Fund has no subsidiaries. (vii) The Fund is registered with the Commission under the 1940 Act as a closed-end, diversified management investment company, and no order of suspension or revocation of such registration has been issued or proceedings therefor initiated or, to the knowledge of the Representing Parties, threatened by the Commission. No person is serving or acting as an officer of the Fund who is ineligible to serve in such office under the 1940 Act, and no person is acting or serving as a director of the Fund except in accordance with the provisions of the 1940 Act. (viii) The Fund owns or possesses or has obtained all material governmental licenses, permits, consents, orders, approvals and other authorizations necessary to lease or own, as the case may be, its properties and to carry on its businesses as contemplated in the Prospectus, and the Fund has not received any notice of proceedings relating to the revocation or modification of any such licenses, permits, covenants, orders, approvals or authorizations. (ix) The authorized, issued and outstanding Common Shares as of the date hereof is as set forth in the Prospectus under the caption "Description of Shares", except for any Common Shares that may have been issued under the Fund's Dividend Reinvestment and Cash Purchase Plan (the "Cash Purchase Plan") or pursuant to this Agreement; the outstanding Common Shares have been duly authorized by all requisite corporate action on the part of the Fund and are validly issued and fully paid and non-assessable by the Fund; the Common Shares to be sold pursuant to this Agreement have been duly authorized by all requisite corporate action on the part of the Fund for issuance pursuant to the terms of this Agreement and, when issued and delivered by the Fund pursuant to the terms of this Agreement against payment of consideration therefor, will be validly issued 3 and fully paid and non-assessable by the Fund; the Common Shares conform in all material respects to the description thereof set forth in the Prospectus under the caption "Description of Shares"; and the issuance of each of the Common Shares is not subject to preemptive rights. (x) (A) The Fund is not in violation of its Articles of Incorporation, as amended from time to time (the "Articles"), or its by-laws as amended from time to time (the "By-Laws") or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which it is a party or by which it or its properties may be bound; (B) (i) the execution and delivery of each of this Agreement, the Investment Advisory Agreement dated October 2, 1989, as amended (the "Investment Advisory Agreement"), between the Fund and the Investment Adviser, as successor to the National Association of Investors Corporation, a Michigan nonprofit corporation ("NAIC"), the Custodial Agreement dated May 15, 1997 between the Fund and Standard Federal Bank N.A., as successor to Michigan National Bank (the "Custodian Agreement"), the Certificate of Appointment of American Stock Transfer & Trust Company dated November 14, 2001 between the Fund and American Stock Transfer & Trust Company (the "Transfer Agency Agreement"), and the Escrow Agreement dated ____________, 2003 among the Fund, the Underwriter and Standard Federal Bank N.A. (the "Escrow Agreement") (the Investment Advisory Agreement, Custodian Agreement, Transfer Agency Agreement, and Escrow Agreement are collectively referred to herein as the "Fund Agreements") and the consummation of the transactions contemplated herein and therein have been duly authorized by all necessary corporate action of the Fund and will not conflict with or constitute a breach of, or, with or without giving notice or the lapse of time or both, a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Fund pursuant to any contract, indenture, mortgage, loan agreement, note, lease or other instrument to which the Fund is a party or by which it may be bound or to which any of the property or assets of the Fund is subject, nor will such action result in any violation of the provisions of the Articles or By-Laws or any law, administrative regulation or administrative or court decree applicable to the Fund, and no consent, approval, authorization or order of any court or governmental authority or agency is required for the consummation by the Fund of the transactions contemplated by this Agreement except such as has been obtained under the 1940 Act and the 1933 Act or as may be required under the state securities or Blue Sky laws or foreign securities laws in connection with the sale of Common Shares pursuant to this Agreement, (ii) each of this Agreement and the Fund Agreements complies with all applicable provisions of the 1940 Act, and (iii) each of this Agreement and the Fund Agreements is in full force and effect and constitutes a valid and binding obligation of the Fund, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, or other similar laws relating to or affecting creditors' rights generally and to general principles of equity. 4 (xi) There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Representing Parties, threatened against or affecting, the Fund, which might result in any material adverse change in the condition, financial or otherwise, business affairs or business prospects of the Fund, or might materially and adversely affect the properties or assets of the Fund. (xii) There are no contracts or documents which are required to be described in the Registration Statement or the Prospectus or to be filed as exhibits thereto which have not been so described and filed as required. (xiii) The Fund owns or possesses adequate rights necessary to conduct its business as described in the Registration Statement, and the Fund has not received any notice of infringement of or conflict with asserted rights of others with respect to any trademarks, service marks or trade names which, singly or in the aggregate, if the subject of a decision, ruling or finding of infringement by the Fund, would materially adversely affect the conduct of the business, operations, financial condition or income of the Fund. (xiv) Since the date of its incorporation, the Fund has qualified as a regulated investment company under Subchapter M of the Code and will continue so to qualify. In addition, the Fund will invest the proceeds of the Offer in such a manner as to comply with the requirements of Subchapter M of the Code. (xv) The outstanding stock of the Fund is listed on the Chicago Stock Exchange ("CHX"). The Common Shares have been approved for listing, subject to official notice of issuance, on the CHX. (xvi) The Fund has not, directly or indirectly, (i) taken any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Fund to facilitate the sale or resale of the Common Shares or (ii) except for sales pursuant to the Cash Purchase Plan, since the filing of the Registration Statement, (A) sold, bid for, purchased, or paid anyone any compensation for soliciting purchases of, the Common Shares or (B) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Fund (except for the sale of Common Shares under this Agreement). (xvii) [Intentionally omitted.] (xviii) The Fund has not distributed and, prior to the completion of the distribution of the Common Shares, will not distribute any offering material in connection with the offering and sale of the Common Shares other than the Registration Statement, the Prospectus or other materials, if any, permitted by the 1933 Act, the 1940 Act, the Rules and Regulations or the Conduct Rules of the National Association of Securities Dealers, Inc. (the "NASD"). 5 (xix) All advertising and other sales literature (including "prospectus wrappers") approved in writing by the Fund or the Investment Adviser or prepared by the Fund or the Investment Adviser for use in connection with the offering and sale of the Common Shares (collectively, "Sales Material") comply in all material respects with the applicable requirements of the 1933 Act, the 1940 Act, the Rules and Regulations and the rules and written interpretations of the NASD and no such Sales Material contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (xx) Each of the Fund Agreements and the Fund's obligations under this Agreement comply, or will comply, in all material respects with all applicable provisions of the 1933 Act, the 1940 Act, the Rules and Regulations, the Investment Advisers Act of 1940, as amended (the "Advisers Act") and the rules and regulations of the Commission under the Advisers Act (the "Advisers Act Rules and Regulations"). (xxi) Except as disclosed in the Registration Statement and the Prospectus, no officer or director of the Fund is an "interested person" (as defined in the 1940 Act) of the Fund or the Investment Adviser or an "affiliated person" (as defined in the 1940 Act) of the Investment Adviser or the Underwriter. (xxii) There are, and there will be, no material restrictions, limitations or regulations with respect to the ability of the Fund to invest its assets as described in the Prospectus other than as described therein. (xxiii) The Fund and, to the Fund's Knowledge, its Custodian, Dividend Disbursement Agent and Transfer Agent maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with general or specific authorization by the Investment Adviser or the Board of Directors of the Fund and with the applicable requirements of the 1940 Act and the Rules and Regulations thereunder and the Code; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets and to maintain material compliance with the books and records requirements under the 1940 Act and the Rules and Regulations thereunder; (C) access to assets is permitted only in accordance with general or specific authorization by the Investment Adviser or the Board of Directors of the Fund; and (iv) the recorded accounts for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xxiv) The Fund, subject to the Registration Statement having been declared effective and the filing of the Prospectus under Rule 497 under the 1933 Act, if necessary, has taken or will take all required action under the 1933 Act, the 6 1940 Act and the Rules and Regulations to make the offering and consummate the sale of the Common Shares as contemplated by this Agreement. (xxv) The Fund will timely file the requisite copies of the Prospectus with the Commission pursuant to Rule 497(c) or Rule 497(h) under the 1933 Act, whichever is applicable, or, if applicable, will timely file the certification permitted by Rule 497(j) under the 1933 Act and will advise the Underwriter of the time and manner of such filing. (xxvi) The Fund will use its best efforts to perform all of the agreements required of it and discharge all conditions to closing as set forth in this Agreement. (b) The Representing Parties jointly and severally represent and warrant to, and agree with, the Underwriter as of the date hereof and as of each Representation Date as follows: (i) The Investment Adviser has been duly organized as a corporation under the laws of the State of Michigan with corporate power and authority to conduct its business as described in the Prospectus; the Investment Adviser is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which the failure to so qualify, either individually or in the aggregate, would have a material adverse effect upon the operations or financial condition of the Investment Adviser. (ii) The Investment Adviser is duly registered as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act or the 1940 Act, or the rules and regulations under such acts, from acting as Investment Adviser to the Fund under the terms of the Investment Advisory Agreement as contemplated by the Prospectus. (iii) The description of the Investment Adviser in the Prospectus is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and there are no pending legal proceedings that would be required to be described under Item 12 of Form N-2. (iv) Each of this Agreement and the Investment Advisory Agreement has been duly authorized, executed and delivered by the Investment Adviser; each of this Agreement and the Investment Advisory Agreement is in full force and effect and constitutes a valid and binding obligation of the Investment Adviser, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization or other similar laws relating to or affecting creditors' rights generally and to general principles of equity; and neither the execution and delivery of this Agreement nor the performance by the Investment Adviser of its obligation hereunder or under the Investment Advisory Agreement will conflict with, or result in a breach of, any of the terms and 7 provisions of, or constitute, with or without giving notice or lapse of time or both, a material default under any agreement or instrument to which the Investment Adviser is a party or by which the Investment Adviser is bound, or any law, order, rule or regulation applicable to it of any jurisdiction, court, federal or state regulatory body, administrative agency or other governmental body, stock exchange or securities association having jurisdiction over the Investment Adviser or its properties or operations. (v) The Investment Adviser has available to it the financial, personnel and other resources necessary for the performance of its services and obligations as contemplated in the Prospectus. (vi) The Investment Adviser has not, directly or indirectly, (i) taken any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Fund to facilitate the sale or resale of the Common Shares or (ii) except for sales pursuant to the Cash Purchase Plan, since the filing of the Registration Statement, (A) sold, bid for, purchased, or paid anyone any compensation for soliciting purchases of the Common Shares or (B) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Fund. (vii) There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Representing Parties, threatened or contemplated against or affecting the Investment Adviser, which might result in any material adverse change in the condition, financial or otherwise, business affairs or business prospects of the Investment Adviser or materially and adversely affect the properties or assets of the Investment Adviser; and there are no material contracts or documents of the Investment Adviser that are required to be disclosed in the Registration Statement by the 1933 Act, the 1940 Act or by the Rules and Regulations that have not been so disclosed therein. (viii) Except for the need to have the Commission declare the Registration Statement effective, no consent, approval, authorization, notification or order of, or any filing with, any court or governmental agency or body, whether foreign or domestic, is required for the consummation by the Investment Adviser of the transactions contemplated by this Agreement. (ix) Except as disclosed in the Registration Statement and the Prospectus, subsequent to the respective dates as of which such information is given in the Registration Statement and the Prospectus, the Investment Adviser has not incurred any liability or obligation, direct or contingent, or entered into any transaction, not in the ordinary course of business, that is material to the Investment Adviser or the Fund and that is required to be disclosed in the Registration Statement or the Prospectus, and there has not been any material adverse change, or any development, either individually or in the aggregate, 8 involving or which may reasonably be expected to have a material adverse effect upon the operations or financial condition of the Investment Adviser. (x) (A) The Investment Adviser owns or possesses all material governmental licenses, permits, consents, orders, approvals or other authorizations (collectively, "Adviser Permits"), whether foreign or domestic, to enable the Investment Adviser to perform its obligations under the Investment Advisory Agreement; (B) the Investment Adviser has fulfilled and performed all its material obligations with respect to such Adviser Permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or would result in any other material impairment of the rights of the Investment Adviser under any such permit, subject in each case to such qualification as may be set forth in the Registration Statement and Prospectus; and (C) none of such Adviser Permits contains any restriction that is materially burdensome to the Investment Adviser, except where the failure of (A), (B) or (C) to be accurate would not, individually or in the aggregate, have a material adverse effect upon the operations or financial condition of the Investment Adviser or the Investment Adviser's performance of the Investment Advisory Agreement. (xi) The information regarding the Investment Adviser in the Registration Statement and the Prospectus complies and will comply in all material respects with the requirements of Form N-2. (c) The Underwriter represents and warrants to, and agrees with, the Fund and the Investment Adviser, as of the date hereof and as of each Representation Date as follows: (i) The Underwriter is registered as a broker-dealer with the Commission and with the Iowa Division of Insurance, Securities Bureau, and is registered, to the extent registration is required, with the appropriate governmental agency in each state in which it will offer or sell the Common Shares, and is a member of the National Association of Securities Dealers, Inc., and will use its best efforts to maintain such registrations and qualifications and memberships through the term of the Offer. (ii) No action or proceeding is pending or, to the knowledge of the Underwriter, threatened, either in any court of competent jurisdiction, before the Commission or any state securities administrator, concerning the Underwriter's activities as a broker or dealer that would affect the Offer of the Common Shares. (iii) The Underwriter will offer the Common Shares only in those states and in the quantities that are identified in the Blue Sky Memoranda from the Fund's counsel to the Underwriter that the offering of the Common Shares has been qualified for sale under the applicable state statutes and regulations. The Underwriter, however, may offer the Common Shares in other states if (i) the transaction is exempt from the registration requirements in that state, (ii) the Fund's counsel has received notice ten days prior to the proposed sale, and (iii) the Fund's counsel does not object within said ten day period. 9 (iv) The Underwriter is a corporation duly organized, validly existing and in good standing under the laws of the State of Iowa with all requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. (v) This Agreement has been duly authorized, executed and delivered by the Underwriter and is a valid agreement on the part of the Underwriter. (vi) Neither the execution of this Agreement nor the consummation of the transactions contemplated hereby will result in any breach of any of the terms or conditions of, or constitute a default under, the articles of incorporation or bylaws of the Underwriter or any indenture, agreement or other instrument to which the Underwriter is a party or violate any order directed to the Underwriter of any court or any federal or state regulatory body or administrative agency having jurisdiction over the Underwriter or its affiliates. (d) Any certificate signed by any officer of the Fund or the Investment Adviser and delivered to the Underwriter or counsel for the Underwriter shall be deemed a representation and warranty by the Fund or the Investment Adviser, as the case may be, to the Underwriter, as to the matters covered thereby. 3. Sale and Delivery of Securities. (a) On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Fund agrees to issue and sell through the Underwriter, as exclusive underwriter for the sale of Common Shares pursuant to this Agreement or any arrangement similar to that contemplated by this Agreement, and the Underwriter agrees to sell, as underwriter for the Fund, on a "best efforts" basis, up to the Maximum Amount of Common Shares during the term of this Agreement in accordance with the 1933 Act, the 1940 Act, the Securities Exchange Act of 1934 (the "1934 Act"), the Conduct Rules of the NASD and the terms set forth herein; provided, however, that the Underwriter shall not be deemed to be in violation of this sentence if such violation is caused by the failure of the Fund or the Investment Adviser to comply with its agreements and representations contained herein. In connection with the performance of its obligations under this Agreement, the Underwriter may, with the approval of the Fund, use the services of selected broker-dealers ("Selected Dealers") who are members of the NASD. The arrangements, if any, between the Underwriter and any Selected Dealer shall be set forth in a Selected Dealer Agreement in a form attached hereto as Exhibit A, unless the Fund shall consent to other arrangements. (b) The Fund shall calculate the Current Net Asset Value (as such term is used in Section 23(b) of the 1940 Act) per Common Share at the close of business on Thursday each week or if any Thursday is not a business day the business day immediately preceding such Thursday (the "Determination Date") and shall notify the Underwriter of the result of such calculation by 2:00 p.m., New York City time, on the first business day following the Determination Date each week. "Sales Price" in this Agreement means the price equal to the Current Net\ Asset Value per Common Share as of 5:30 p.m., New York City time, on the Determination Date of each week, divided by (1 minus the applicable sales commission), and 10 rounded to the nearest penny, which Sales Price shall be effective until 5:30 p.m., New York City time, on the following Determination Date. (c) The Underwriter, and any Selected Dealer selected by the Underwriter, may offer Common Shares only pursuant to a properly completed and executed Subscription Agreement in the form attached hereto as Exhibit B and in accordance with the terms of the Prospectus. Each person desiring to purchase Common Shares shall be required to (i) complete, manually execute and mail or deliver a Subscription Agreement to the Fund in care of the Investment Adviser and (ii) mail or deliver to the Fund in care of the Investment Adviser a check payable to Standard Federal Bank N.A., as escrow agent (the "Escrow Agent") (each, a "Subscription Payment") in an amount of at least the Minimum Subscription, as defined in paragraph (m) below, in accordance with the terms of the Prospectus. No later than by noon of the first business day following receipt of a completed Subscription Agreement and a Subscription Payment, the Investment Adviser shall (x) forward an electronic image or copy of such Subscription Agreement to the Underwriter and (y) deposit any Subscription Payment it receives with the Escrow Agent. The Investment Adviser will retain all completed and executed subscription documents. No subscription shall be effective unless and until it is (i) accepted on behalf of the Fund by the Investment Adviser and (ii) approved by the Underwriter. The Fund and the Underwriter reserve the right, in their sole discretion, to refrain from accepting or approving any subscription submitted. No person subscribing shall have the right to receive a refund of its Subscription Payment at any time after a Subscription Agreement is received; provided that, if for any reason a subscription is not accepted by either the Fund or the Underwriter, then the Fund will promptly instruct the Escrow Agent to refund such Subscription Payment without interest. (d) The Fund will issue and sell Common Shares, at the Sales Price, to each person for whom (i) the Fund has received an executed Subscription Agreement, (ii) the Subscription Agreement has been accepted on behalf of the Fund by the Investment Adviser and approved by the Underwriter, and (iii) the Subscription Payment is held in immediately available funds by the Escrow Agent; provided, however, that the aggregate number of shares issued and sold under this Agreement will not exceed the Maximum Amount. The Fund and Investment Adviser will cooperate with the Underwriter and if applicable, the Selected Dealers to remedy any incomplete or defective Subscription Agreements. (e) Sales will be made in the manner and at the times specified in the Registration Statement and according to procedures agreed upon from time to time by the Investment Adviser and the Underwriter. Settlement for sales of Common Shares will occur on the first business day following the date on which such sales are made (each a "Closing Date"). The amount of proceeds for such sales to be delivered by the Escrow Agent to the Fund against the receipt of the Common Shares sold shall be equal to the aggregate sales prices at which such Common Shares were sold. (f) Common Shares sold in the Offer will be held by American Stock Transfer & Trust Company or its successor as the Fund's transfer agent (the "Transfer Agent") in noncertificated form in the purchaser's name, unless the purchaser elects otherwise in the Subscription Agreement. If a purchaser elects to receive a certificate for its Common Shares in the Subscription Agreement, the Fund will not issue fractional shares to the purchaser and will refund the portion of the Purchase Price representing the fractional share, without interest, at the 11 time of delivering the share certificate. Fractional shares will be issued for shares held by the Transfer Agent in noncertificated form. Such fractional shares will be aggregated with any other fractional shares held by the Transfer Agent for the purchaser from time to time and will be paid for by check, at the then-prevailing market price, if the purchaser requests a certificate for its shares after the acceptance of the purchaser's subscription in the Offer. (g) On each Closing Date, the Fund and the Investment Adviser and the Underwriter shall each be deemed to have affirmed each representation, warranty, covenant and other agreement contained in this Agreement. At the request of the Fund, the Investment Adviser or the Underwriter, but not more frequently than once each month, the Fund, the Investment Adviser and the Underwriter shall each affirm in writing each representation, warranty, covenant and other agreement contained in this Agreement. The obligation of the Underwriter to use its reasonable efforts to sell the Common Shares shall be subject to the continuing accuracy of the representations and warranties of the Representing Parties herein, to the performance by the Fund and Investment Adviser of their obligations hereunder and to the continuing satisfaction of the additional conditions specified in Section 5 of this Agreement. (h) In connection with the sale of Common Shares under this Agreement, the Underwriter is not authorized by the Fund to give any information or to make any representations in connection with this Agreement other than those contained in the Registration Statement and the Prospectus, and the Underwriter agrees not to give any unauthorized information or to make any unauthorized representations and to cause Selected Dealers to so agree (and use reasonable efforts to enforce such agreement). Except as specifically provided in this Agreement, the Underwriter is not authorized to act as an agent for the Fund, and it agrees not to act or to purport to act as an agent for the Fund. (i) The Underwriter shall be paid out of the Subscription Payments a sales commission for sales of Common Shares at a rate of 3.5% of the gross Sales Price per share of the all Common Shares sold under this Agreement. In the event that the Underwriter enters into a Selected Dealer Agreement with an unaffiliated Selected Dealer, such commission rate shall be permanently increased to a fixed commission rate 5.0% of the gross Sales Price per share of all Common Shares sold thereafter. The compensation payable to the Underwriter for Common Shares sold shall be paid no later than the close of business on the first business day following each Closing Date. (j) The Fund has paid the Underwriter a non-accountable expense allowance of $15,000, and the Underwriter acknowledges receipt of that amount. Except for such non-accountable allowance and as provided in Section 4(f), neither the Fund nor the Investment Adviser shall be responsible for payment or reimbursement of the fees or expenses of Underwriter's counsel. (k) The Underwriter and each Selected Dealer shall be an independent contractor and neither the Underwriter, any Selected Dealer nor any of their directors, officers or employees as such, is or shall be, solely reason of this Agreement, an employee of the Fund. (l) The Underwriter shall have the right, at reasonable times and on reasonable notice, to inspect the records of the Fund, the Investment Adviser and the Escrow Agent relating 12 to the Offer and to discuss such records with appropriate representatives of the Fund, Investment Adviser and Escrow Agent. (m) "Minimum Subscription" means $500, inclusive of the applicable sales commission payable to the Underwriter. The Minimum Subscription may be increased by the Fund for certain purchases, but may not be decreased. 4. Covenants of the Fund. The Fund covenants and agrees with the Underwriter that: (a) The Fund will use its reasonable efforts (i) to cause the Registration Statement to become effective under the 1933 Act, (ii) if required, to cause the issuance of any orders exempting the Fund from any provisions of the 1940 Act, in which case it will advise the Underwriter promptly as to the time at which any such orders are issued, and (iii) to maintain during the term of this Agreement the effectiveness of the Registration Statement under the 1933 Act and of the Fund under the 1940 Act. (b) The Fund will orally notify the Underwriter promptly, and confirm the notice in writing, of the (i) effectiveness of the Registration Statement and any amendment thereto (including any post-effective amendment), (ii) receipt of any comments from the Commission, (iii) request by the Commission for any amendment to the Registration Statement, any amendment or supplement to the Prospectus or additional information, (iv) issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (v) issuance by the Commission of an order of suspension or revocation of the notification on Form N-8A of registration of the Fund as an investment company under the 1940 Act or the initiation of any proceeding for that purpose and (vi) suspension of the qualification of the Common Shares for offering or sale in any jurisdiction. The Fund will make every reasonable effort to prevent the issuance of any stop order described in subsection (iv) hereunder or any order of suspension or revocation described in subsection (v) or subsection (vi) hereunder and, if any such stop order or order of suspension or revocation is issued, to obtain the lifting thereof at the earliest possible moment. (c) The Fund will give the Underwriter notice of its intention to file any amendment to the Registration Statement (including any post-effective amendment) or any amendment or supplement to the Prospectus (including any revised prospectus that the Fund proposes for use by the Underwriter, which differs from the prospectus on file at the Commission at the time the Registration Statement becomes effective), whether pursuant to the 1940 Act, the 1933 Act, or otherwise, and will furnish the Underwriter and counsel for the Underwriter with copies of any such amendment or supplement within a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such amendment or supplement to which the Underwriter or counsel for the Underwriter reasonably shall object. (d) During the period in which a prospectus relating to the Common Shares is required to be delivered under the 1933 Act, the Fund will prepare and file with the Commission, promptly upon the Underwriter's request, any amendments or supplements to the Registration Statement or Prospectus that are required in connection with the distribution of the Common Shares by the Underwriter; and it will furnish to the Underwriter and counsel for the Underwriter 13 at the time of filing thereof a copy of any document that upon filing is deemed to be incorporated by reference in the Registration Statement or Prospectus; and the Fund will cause each amendment or supplement to the Prospectus to be filed with the Commission as required pursuant to the applicable paragraph of Rule 497 of the Rules and Regulations within the time period prescribed. (e) Within the time during which a prospectus relating to the Common Shares is required to be delivered under the 1933 Act, the Fund will comply as far as it is able with all requirements imposed upon it by the 1933 Act and by the Rules and Regulations, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Common Shares as contemplated by the provisions hereof and the Prospectus. If during such period any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend or supplement the Registration Statement or Prospectus to comply with the 1933 Act, the Fund will promptly notify the Underwriter to suspend the offering of Common Shares during such period and the Fund will amend or supplement the Registration Statement or Prospectus so as to correct such statement or omission or effect such compliance. (f) The Fund will use its reasonable efforts to qualify the Common Shares for sale under the securities laws of such jurisdictions as the Underwriter and the Fund mutually agree to continue such qualifications in effect so long as required for the distribution of the Common Shares. The Fund will pay all fees and expenses (including attorney fees) in connection with such qualification. (g) The Fund will furnish to the Underwriter and its counsel (at the expense of the Fund) copies of the Registration Statement, the Prospectus and all amendments and supplements to the Registration Statement or Prospectus that are filed with the Commission during the period in which a prospectus relating to the Common Shares is required to be delivered under the 1933 Act, in each case as soon as available and in such quantities as the Underwriter may from time to time reasonably request. (h) The Fund will make generally available to its security holders as soon as practicable, but in any event not later than 60 days after the close of the period covered thereby, an earnings statement in form complying with the provisions of Rule 158 of the Rules and Regulations covering a 12-month period that satisfies the provisions of Section 11(a) of the Act and Rule 158 of the Rules and Regulations. (i) The Fund, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay all expenses incident to the performance of its obligations hereunder, including, but not limited to, expenses relating to (i) the printing and filing of the Registration Statement as originally filed and of each amendment thereto, (ii) the preparation, issuance and delivery of the Common Shares, (iii) the reasonable fees and disbursements of the Fund's counsel and accountants, (iv) the qualification of the Common Shares under securities laws in accordance with the provisions of Section 4(f) of this Agreement, including filing fees and any reasonable fees or disbursements of counsel for the Underwriter in 14 connection therewith, (v) the printing and delivery to the Underwriter and any Selected Dealer of copies of the preliminary prospectus, of the Prospectus and any amendments or supplements thereto, and of this Agreement, (vi) the fees and expenses incurred in connection with the listing of the Common Shares on the CHX, (vii) the filing fees of the Commission and the National Association of Securities Dealers, Inc., and (viii) the fees and expenses of third party marketing assistance firms if the Fund and the Underwriter agree to use such firms. (j) The Fund will apply the net proceeds from the sale of the Common Shares as set forth in the Prospectus. (k) The Fund will not, directly or indirectly, offer or sell any Common Shares (other than the Common Shares offered pursuant to the provisions of this Agreement) or securities convertible into or exchangeable for, or any rights to purchase or acquire, Common Shares during the period from the date of this Agreement through the final Closing Date for the sale of Shares hereunder without (a) giving the Underwriter at least ten business days' prior written notice specifying the nature of the proposed sale and the date of such proposed sale and (b) suspending sales pursuant to this Agreement for such period of time as may reasonably be determined by agreement of the Fund and the Underwriter; provided, however, that no such notice and suspension shall be required in connection with the Fund's issuance or sale of Common Shares in connection with the Fund's issuance or sale of Common Shares under the terms of the Cash Purchase Plan (as in effect on the date hereof). (l) The Fund will, at any time during the term of this Agreement, as supplemented from time to time, advise the Underwriter immediately after it shall have received notice or obtain knowledge thereof, of any information or fact that would alter or affect any opinion, certificate, letter and other document provided to the Underwriter pursuant to Section 5 herein. (m) Each time that the Registration Statement or the Prospectus shall be amended or supplemented (other than a supplement filed pursuant to Rule 497(h) under the 1933 Act that contains solely information on number of shares sold, sale prices and dates of sale), the Fund shall furnish or cause to be furnished to the Underwriter forthwith a certificate dated the date of filing with the Commission of such amendment or supplement, or the date of effectiveness of amendment, as the case may be, in form satisfactory to the Underwriter to the effect that the statements contained in the certificates referred to in Section 5(f) hereof which were last furnished to the Underwriter are true and correct at the time of such amendment, supplement, filing, as the case may be, as though made at and as of such time (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such time) or, in lieu of such certificates, certificates of the same tenor as the certificates referred to in said Section 5(f), modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such certificate. (n) Each time that the Registration Statement or the Prospectus is amended or supplemented (other than a supplement filed pursuant to Rule 497(h) under the 1933 Act that contains solely information on number of shares sold, sale prices and dates of sale), the Fund shall furnish or cause to be furnished forthwith to the Underwriter and to counsel to the Underwriter a written opinion of Bodman, Longley & Dahling LLP, counsel to the Fund ("Fund 15 Counsel"), or other counsel satisfactory to the Underwriter, dated the date of filing with the Commission of such amendment, supplement or other document and the date of effectiveness of such amendment, as the case may be, in form and substance satisfactory to the Underwriter, of the same tenor as the opinion and additional statement referred to in Section 5(d) hereof, but modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such opinion. (o) Each time that the Registration Statement or the Prospectus shall be amended or supplemented to include additional amended financial information or there is filed with the Commission any document incorporated by reference into the Prospectus which contains additional amended financial information, the Fund shall cause Plante & Moran, LLP or other independent accountants satisfactory to the Underwriter, forthwith to furnish the Underwriter, with a copy to counsel to the Underwriter, a letter, dated the date of effectiveness of such amendment, or the date of filing of such supplement or other document with the Commission, as the case may be, in form satisfactory to the Underwriter, of the same tenor as the letter referred to in Section 5(e) hereof but modified to relate to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter; provided, however, that the Underwriter acknowledges that no such letter shall be required for a supplement filed pursuant to Rule 497(h) under the 1933 Act that contains solely information on number of shares sold, sale prices and dates of sale. (p) The Fund will maintain its qualification as a regulated investment company entitled to the benefits of Subchapter M of the Code. (q) The Fund and the Investment Adviser will not, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Fund to facilitate the sale or resale of the Common Shares or (ii) except for sales pursuant to the Cash Purchase Plan, sell, bid for, purchase, or pay anyone any compensation for soliciting purchases of the Common Shares or pay or agree to pay any person any compensation for soliciting another to purchase any other securities of the Fund (except for the sale of Common Shares under this Agreement). 5. Conditions of Underwriter's Obligations. The obligations of the Underwriter to use its reasonable efforts to sell the Common Shares as provided herein shall be subject to the accuracy, as of the date and hereof, and as of each Closing Date, of the representations and warranties of the Fund and the Investment Adviser contained herein, to the performance by each of them of their respective obligations hereunder and to the following additional conditions: (a) The Registration Statement shall have become effective and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceeding for that purpose shall have been instituted or, to the knowledge of the Fund, the Investment Adviser or the Underwriter, threatened by the Commission, and any request of the Commission for additional information (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the Underwriter's satisfaction. 16 (b) The Underwriter shall not have advised the Fund that the Registration Statement or Prospectus, or any amendment or supplement thereto, contains a statement of fact that in the Underwriter's opinion is untrue and is material, or omits to state a fact that in the Underwriter's opinion is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) Except as contemplated in the Prospectus, subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall not have been any material change in the capitalization of the Fund (other than sales of shares pursuant to this Agreement or the Cash Purchase Plan), or any material adverse change, or any development that may reasonably be expected to cause a material adverse change, in the condition (financial or other), business, prospects, net worth or results of operations of the Fund. (d) The Underwriter shall have received by the first day on which sales are permitted to be made by the Underwriter hereunder (the "Commencement Date") and at every other date specified in Section 4(n) hereof, opinions of Fund Counsel, which opinion may rely, in part as to matters of Maryland law, upon an opinion from other counsel to the Fund, satisfactory to the Underwriter (and upon which the Underwriter shall be entitled to rely to the same extent as Fund Counsel), dated as of the Commencement Date or as of such other date, as applicable, to the effect that: (i) The Fund has been duly established and is validly existing as a corporation in good standing under the laws of the State of Maryland, the Investment Adviser has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Michigan. (ii) Each of the Fund and the Investment Adviser has the corporate power and authority to own, lease and operate its respective properties, to execute, deliver and perform this Agreement and the Fund Agreements to which it is a party, and to conduct its respective business as described in the Registration Statement and the Prospectus. (iii) Each of the Fund and the Investment Adviser is duly qualified as a corporation to transact business and is in good standing in the jurisdiction of its principal place of business and is duly qualified to do business in each jurisdiction where such qualification is required, except where the failure to so qualify would not have a material adverse effect on the condition, financial or otherwise, or the earnings, business affairs or business prospects of the Fund, the Investment Adviser. (iv) The Fund has an authorized, issued and outstanding capitalization as set forth in the Prospectus as of the dates specified therein. All of the outstanding Common Shares have been duly authorized by requisite corporate action on the part of the Fund and validly issued, are fully paid and non-assessable by the Fund and conform to the description thereof in the Prospectus. 17 (v) The Common Shares have been duly and validly authorized, and, when issued and delivered to and paid for by the purchasers thereof pursuant to this Agreement, will be fully paid and nonassessable and conform to the description thereof in the Prospectus; the issuance of the Common Shares is not subject to any preemptive or other rights to subscribe for any of the Common Shares under any indenture, mortgage, deed of trust, lease or other agreement or instrument to which the Fund is a party or by which the Fund or any of its properties are bound, or under the Articles of Incorporation or By-Laws of the Fund, or under the Maryland General Corporation Law; all action required to be taken for the authorization, issue and sale of the Common Shares have been validly and sufficiently taken; the form of certificate, if any, used to evidence the Common Shares is in proper form and complies with all applicable statutory requirements; and the Common Shares are the subject of an effective registration statement permitting their sale in the manner contemplated by this Agreement. (vi) This Agreement has been duly authorized, executed and delivered by the Fund and the Investment Adviser, complies with all applicable provisions of the 1933 Act, the 1940 Act, the Advisers Act and the rules and regulations under such acts and constitutes a valid and binding agreement of the Fund, the Investment Adviser and NAIC, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. (vii) Each of the Fund Agreements have been duly authorized, executed and delivered by the Fund and the Investment Adviser, as the case may be, comply as to form in all material respects with all applicable provisions of the 1933 Act, the 1940 Act, the Advisers Act and the rules and regulations under such acts and constitute the valid and binding obligation of each of the Fund and the Investment Adviser, enforceable in accordance with their terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization and other laws of general applicability relating to or affecting creditors' rights and to general equity principles. (viii) The Registration Statement has become effective under the 1933 Act; to the knowledge of such counsel after due inquiry, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or threatened by the Commission. (ix) The Registration Statement, when it became effective, and the Prospectus and any amendment or supplement thereto, on the date of filing thereof with the Commission (and at each Closing Date on or prior to the date of the opinion), complied as to form in all material respects with the requirements of the 1933 Act, the 1940 Act and the Rules and Regulations. (x) The description in the Registration Statement and Prospectus of statutes, legal and governmental proceedings, contracts and other documents are 18 accurate in all material respects and fairly present the information required to be shown; and such counsel do not know of any statutes or legal or governmental proceedings required to be described in the Prospectus that are not described as required. (xi) To the best of such counsel's knowledge and information, there are no contracts, indentures, mortgages, loan agreements, notes, leases or other instruments of the Fund or the Investment Adviser that are required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those respectively described or referred to therein or filed as exhibits thereto, the descriptions thereof and references thereto are correct in all material respects, and no default exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, loan agreement, note or lease so described, referred to or filed. (xii) No consent, approval, authorization or order of any court or governmental authority or agency is required in connection with the sale of the Common Shares pursuant to this Agreement, except such as has been obtained under the 1933 Act, the 1940 Act or the Rules and Regulations or such as may be required under state securities laws; and the execution, delivery and performance of, and the consummation of the transactions contemplated by, this Agreement and the Fund Agreements by each of the Fund and Investment Adviser, as applicable, will not conflict with, or constitute or result in a breach or violation by the Fund or the Investment Adviser of or a default under, any of the terms or provisions of, (A) any contract, indenture, mortgage, loan agreement, note, lease or other instrument known to such counsel to which the Fund or the Investment Adviser is a party or by which any of them is bound or to which any of their property or assets are subject, (B) the provisions of the Articles of Incorporation or By-Laws of the Fund, or the articles of incorporation or by-laws of the Investment Adviser or (C) any statute, or any order, rule or regulation of any court or governmental agency or body, applicable to the Fund or the Investment Adviser or any of their businesses or properties. (xiii) The Fund is registered with the Commission under the 1940 Act as a closed-end diversified management investment company, and all required action has been taken by the Fund under the 1933 Act, the 1940 Act and the Rules and Regulations to make and consummate the Offer; the provisions of the Articles of Incorporation and By-Laws of the Fund comply in all material respects with the requirements of the 1940 Act and the rules and regulations thereunder; and, to the best of such counsel's knowledge and information, no order of suspension or revocation of such registration under the 1940 Act, pursuant to Section 8(e) of the 1940 Act, has been issued or proceedings therefor initiated or threatened by the Commission. (xiv) The information in the Prospectus (and statement of additional information) under the captions "The Fund", "Investment Objective and Policies," 19 "The Investment Adviser," "Description of Shares," "The Offering" and "Taxation", to the extent that it constitutes matters of law or legal conclusions thereunder, has been reviewed by such counsel and is accurate and correct in all material respects. (xv) The Investment Adviser is duly registered as an investment adviser under the Advisers Act and is not prohibited by the Advisers Act or the 1940 Act, or the rules and regulations under such acts, from acting under the Investment Advisory Agreement for the Fund as contemplated by the Registration Statement and the Prospectus. (xvi) The Fund is a "regulated investment company" as defined in Section 851 of the Code, and the Fund and its shareholders are subject to federal income taxation as provided in Subpart M of the Code. In addition, such counsel shall state that nothing has come to such counsel's attention that would lead them to believe that the Registration Statement (other than the financial statements and other financial information included therein, as to which no belief need be stated), at the time it (including any post-effective amendment) became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus (other than the financial statements and other financial information included therein, as to which no belief need be stated), and any amendments or supplements thereto, on the date of filing thereof with the Commission and at the Commencement Date and at each Closing Date on or prior to the date of the opinion included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (e) At the Commencement Date and at such other dates specified in Section 4(o) hereof, the Underwriter shall have received a "comfort" letter from Plante & Moran, LLP, independent public accountants for the Fund, or other independent accountants satisfactory to the Underwriter, dated the date of delivery thereof, with respect to procedures which have been agreed upon by the Underwriter and the Fund, and otherwise in form and substance satisfactory to the Underwriter. (f) The Underwriter shall have received a certificate, or certificates, signed by the President and Treasurer (which may be one person) or his designee of each of the Fund and the Investment Adviser, dated as of the Commencement Date and dated as of the first day of each month (each a "Certificate Date"), to the effect that, to the best of their knowledge based upon reasonable investigation: (i) the representations and warranties of the Fund and the Investment Adviser in this Agreement are true and correct, as if made at and as of such Certificate Date, and the Fund and the Investment Adviser have each complied with all the agreements and satisfied all the conditions on their part respectively, to be performed or satisfied at or prior to the Certificate Date; 20 (ii) no stop order suspending the effectiveness of the Registration Statement has been issued, and no proceeding for that purpose has been instituted or, to the knowledge of such officer after due inquiry, is threatened, by the Commission; (iii) the Registration Statement and the Prospectus contain all statements that are required to be stated therein in accordance with the 1933 Act, the 1940 Act and the Rules and Regulations and conform in all material respects to the requirements of the 1933 Act, 1940 Act and the Rules and Regulations and the Registration Statement and the Prospectus do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and no action suit or proceeding of law or in equity is pending or, threatened against the Fund or the Investment Adviser, that would be required to be set forth in the Registration Statement and the Prospectus other than as set forth therein; (iv) there has not been, since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material adverse change in the condition, financial or otherwise, of the Fund or the Investment Adviser in their earnings, business affairs or business prospects, whether or not arising in the ordinary course of business, from that set forth in the Registration Statement and Prospectus; (v) the Investment Adviser has the financial, personnel and other resources available necessary for the performance of its services and obligations as contemplated in the Prospectus; and (vi) no proceedings are pending or, to the knowledge of the Fund or the Investment Adviser, threatened against the Fund or the Investment Adviser, before or by any federal, state or other commission, board or administrative agency wherein an unfavorable decision, ruling or finding would materially and adversely affect the business, property, financial condition or income of either the Fund or the Investment Adviser, other than as set forth in the Registration Statement and the Prospectus. In addition, on each Certificate Date the certificate shall also state that the Common Shares to be sold to that date have been duly and validly authorized by the Fund and that all action required to be taken for the authorization, issuance and sale of the Common Shares has been validly and sufficiently taken. (g) At the Commencement Date and on each Closing Date, the Fund shall have furnished to the Underwriter such appropriate further information, certificates and documents as the Underwriter may reasonably request. All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are satisfactory in form and substance to the Underwriter. The 21 Fund will furnish the Underwriter with such conformed copies of such opinions, certificates, letters and other documents as the Underwriter shall reasonably request. 6. Indemnification and Contribution. (a) Each of the Fund and the Investment Adviser, jointly and severally, agrees to indemnify and hold harmless the Underwriter, each Selected Dealer, the directors, officers, employees and agents of the Underwriter and each Selected Dealer and each person, if any, who controls the Underwriter and each Selected Dealer within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act (collectively the "Underwriter Indemnified Persons"), from and against any and all losses, claims, liabilities, expenses and damages (including, but not limited to, any and all investigative, legal and other expenses reasonably incurred in connection with, and any and all amounts paid in settlement of, any action, suit or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), as and when incurred, to which the Underwriter Indemnified Persons may become subject under the 1933 Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities, expenses or damages arise out of or are based on (i) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus, the Registration Statement or the Prospectus or any amendment or supplement to the Registration Statement or the Prospectus, or in any application or other document executed by or on behalf of the Fund or the Investment Adviser or based on written information furnished by or on behalf of the Fund or the Investment Adviser filed in any jurisdiction in order to qualify the Common Shares under the securities laws thereof or filed with the Commission, (ii) the omission or alleged omission to state in any such document a material fact required to be stated in it or necessary to make the statements in it not misleading or (iii) any breach by any of the indemnifying parties of any of their respective representations, warranties and agreements contained in this Agreement; provided that this indemnity agreement shall not apply to the extent that such loss, claim, liability, expense or damage (1) arises from the sale of the Common Shares pursuant to this Agreement and is based on an untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to the Underwriter furnished in writing to the Fund by the Underwriter expressly for inclusion in any document described in clause (a)(i) above, or (2) is found in a final judgment by a court of competent jurisdiction to have resulted from the bad faith, willful misconduct or negligence of the Underwriter or any Selected Dealer or the breach by the Underwriter or any Selected Dealer of its duties and obligations hereunder. This indemnity agreement will be in addition to any liability that the Fund or Investment Adviser might otherwise have. (b) The Underwriter agrees to indemnify and hold harmless the Fund, the Investment Adviser, each person, if any, who controls the Fund, or the Investment Adviser within the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act, each director of the Fund, and the Investment Adviser and each officer, employee and agent to the same extent as the foregoing indemnity from the Fund and the Investment Adviser to the Underwriter, but only insofar as losses, claims, liabilities, expenses or damages arise out of or are based on any untrue statement or omission or alleged untrue statement or omission made in reliance on and in conformity with information relating to the Underwriter furnished in writing to the Fund by the Underwriter expressly for use in any document described in clause (a)(i) above. This indemnity 22 will be in addition to any liability that the Underwriter might otherwise have; provided, however, that in no case shall the Underwriter be liable or responsible for any amount in excess of the commissions received by the Underwriter hereunder. (c) Any party that proposes to assert the right to be indemnified under this Section 6 will, promptly after receipt of notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party or parties under this Section 6, notify each such indemnifying party of the commencement of such action, enclosing a copy of all papers served, but the omission so to notify such indemnifying party will not relieve it from (i) any liability that it might have to any indemnified party otherwise than under this Section 6 and (ii) any liability that it may have to any indemnified party under the foregoing provisions of this Section 6 unless, and only to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any such action is brought against any indemnified party and it notifies the indemnifying party of such commencement, the indemnifying party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying party similarly notified, to assume the defense of the action, with counsel satisfactory to the indemnified party, and after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party will not be liable to the indemnified party, for any legal or other expenses except as provided below and except for the reasonable costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges will be reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party will not be liable for any settlement of any action or claim effected without its written consent (which consent will not be unreasonably withheld). No indemnifying party shall, without the prior written consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated by this Section 6 (whether or not any indemnified party is a party thereto), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising or that may arise out of such claim, action or proceeding. Notwithstanding any other provision of this Section 6(c), if at 23 any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, and (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing paragraphs of this Section 6 is applicable in accordance with its terms but for any reason is held to be unavailable from the Fund, the Investment Adviser or the Underwriter (including the Underwriter Indemnified Persons), the Fund, the Investment Adviser, and the Underwriter will contribute to the total losses, claims, liabilities, expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the Fund, or the Investment Adviser from persons other than the Underwriter, such as persons who control the Fund within the meaning of the 1933 Act, officers of the Fund who signed the Registration Statement and directors of the Fund, who also may be liable for contribution, or any contribution received by the Underwriter from persons other than the Fund or the Investment Adviser) to which the indemnified party may be subject in such proportion as shall be appropriate to reflect the relative benefits received by the Fund and the Investment Adviser on the one hand and the Underwriter on the other. The relative benefits received by the Fund and the Investment Adviser, on the one hand, and the Underwriter, on the other, shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Fund bear to the total commissions received by the Underwriter from the sale of the Common Shares on behalf of the Fund. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Fund and the Investment Adviser, on the one hand, and the Underwriter, on the other, with respect to the action, statements or omissions which resulted in such loss, claim, liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect to such offering. Such relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, or other conduct giving rise to liability, relates to information supplied by the Fund or the Underwriter, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission, and the conduct of the parties. The Fund, the Investment Adviser, and the Underwriter agree that it would not be just and equitable if contributions pursuant to this Section 6(d) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, liability, expense or damage, or action in respect thereof, referred to above in this Section 6(d) shall be deemed to include, for purposes of this Section 6(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6(d), the Underwriter shall not be required to contribute any amount in excess of the commissions received by it under this Agreement and no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) will be 24 entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6(d), any person who controls a party to this Agreement within the meaning of the 1933 Act, will have the same rights to contribution as that party, each officer, director, employee or agent of the Underwriter will have the same rights to contribution as the Underwriter, each officer, director, employee or agent of the Investment Adviser will have the same rights to contribution as that party and each officer, director employee or agent of the Fund Statement will have the same rights to contribution as the Fund, subject in each case to the provisions hereof. Any party entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which a claim for contribution may be made under this Section 6(d), will notify any such party or parties from whom contribution may be sought, but the omission to notify will not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have under this Section 6(d). Except for a settlement entered into pursuant to the last sentence of Section 6(c) hereof, no party will be liable for contribution with respect to any action or claim settled without its written consent (which consent will not be unreasonably withheld). (e) For purposes of this Agreement, the Fund and the Investment Adviser agree that the only written information relating to the Underwriter furnished in writing to the Fund by the Underwriter expressly for inclusion in the preliminary prospectus, Registration Statement or Prospectus is the address of the Underwriter set forth in the second paragraph under the caption "Underwriting" and the identification of counsel to the Underwriter under the caption "Legal Matters" in the preliminary prospectus and Prospectus. 7. Representations and Agreements to Survive Delivery. The indemnity and contribution agreements contained in Section 6 and the representations and warranties of the Fund, the Investment Adviser and the Underwriter contained in this Agreement shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of the Fund, the Investment Adviser, or the Underwriter, as applicable, (ii) acceptance of the Common Shares and payment therefor or (iii) any termination of this Agreement. 8. Termination. (a) The Underwriter shall have the right by giving written notice as hereinafter specified at any time to terminate this Agreement if (i) any material adverse change, or any development that is reasonably expected to cause material adverse change, in the business, financial condition or results of operations of the Fund or the Investment Adviser has occurred which, in the judgment of such Underwriter, materially impairs the investment quality of the Common Shares, (ii) the Fund or the Investment Adviser shall have failed, refused or been unable to perform any agreement on its part to be performed hereunder, (iii) any other condition of the Underwriter's obligations hereunder is not fulfilled, (iv) any suspension or limitation of trading in the Common Shares on the CHX shall have occurred, (v) any banking moratorium shall have been declared by Federal or New York authorities or (vi) an outbreak or material escalation of major hostilities in which the United States is involved, a declaration of war by Congress, any other substantial national or international calamity or any other event or occurrence of a similar character shall have occurred since the execution of this Agreement that, in the judgment of the Underwriter, makes it impractical or inadvisable to proceed with the completion of the sale of and payment for the Common Shares to be sold by the Underwriter on 25 behalf of the Fund. Any such termination shall be without liability of any party to any other party except that the provisions of Section 3(i), Section 4(i), Section 6 and Section 7 hereof shall remain in full force and effect notwithstanding such termination. (b) The Fund shall have the right, by giving thirty days advance written notice, to terminate this Agreement in its sole discretion. The Fund shall further have the right, by giving three days' written notice to the Underwriter, to terminate this Agreement in the event any action or proceeding shall be instituted or threatened against the Underwriter, either in any court of competent jurisdiction, before the Commission, the NASD or any state securities administrator concerning its activities as a broker or dealer that would prevent the Underwriter from acting as such, or if a petition in bankruptcy or insolvency or for reorganization or for the appointment of a receiver or trustee of the Underwriter's assets is filed or if the Underwriter makes an assignment for the benefit of its creditors. Any such termination shall be without liability of any party to any other party except that the provisions of Section 3(i), Section 4(i), Section 6 and Section 7 hereof shall remain in full force and effect notwithstanding such termination. (c) In addition to its rights under Section 8(a), the Underwriter shall have the right, by giving thirty days advance written notice as hereinafter specified, to terminate this Agreement in its sole discretion. Any such termination shall be without liability of any party to any other party except that the provisions of Section 3(i), Section 4(i), Section 6 and Section 7 hereof shall remain in full force and effect notwithstanding such termination. (d) This Agreement shall remain in full force and effect unless terminated pursuant to Sections 8(a), (b) or (c) above or otherwise by mutual agreement of the parties; provided that any such termination by mutual agreement shall in all cases be deemed to provide that Section 3(i), Section 4(i), Section 6 and Section 7 shall remain in full force and effect. (e) Any termination of this Agreement shall be effective on the date specified in such notice of termination; provided that such termination shall not be effective until the close of business on the date of receipt of such notice by the Underwriter or the Fund, as the case may be. 9. Notices. All notices or communications hereunder shall be in writing and if sent to the Underwriter shall be mailed, delivered, telexed or telecopied and confirmed to the Underwriter at Broker Dealer Financial Services Corp., 8800 NW 62nd Avenue, P.O. Box 6240, Johnston, Iowa 50131-6240, facsimile no. (515) 286-2972, attention: E.B. Wright, or if sent to the Fund or the Investment Adviser, shall be mailed, delivered, telexed or telecopied and confirmed to the Fund or the Investment Adviser at 711 West Thirteen Mile Road, Madison Heights, MI 48071, facsimile no. (248)583-4880, attention: Kenneth S. Janke. Each party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose. 10. Parties. This Agreement shall inure to the benefit of and be binding upon the Fund, the Investment Adviser, and the Underwriter (including, with respect to Section 6, the Underwriter Indemnified Persons) and their respective successors and the controlling persons, officers and directors referred to in Section 6 hereof, and no other person will have any right or obligation hereunder. 26 11. Adjustments for Stock Splits, Etc. The parties acknowledge and agree that all share related numbers contained in this Agreement (including, without limitation, the Maximum Amount and the Sales Price) shall be adjusted to take into account any stock split effected or stock dividend with respect to the Common Shares. 12. Entire Agreement. This Agreement constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, among the parties hereto with regard to the subject matter hereof. 13. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF IOWA WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAWS THEREOF. 14. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15. Business Days. For purposes of this Agreement, a "business day" shall refer to any day on which the Investment Adviser and the New York Stock Exchange are open for business and the Fedwire service of the Federal Reserve Board is operational. 27 If the foregoing correctly sets forth the understanding between the Fund, the Investment Adviser, and the Underwriter, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among the Fund, the Investment Adviser, and the Underwriter. Very truly yours, NAIC GROWTH FUND, INC. By:___________________________ Name:_________________________ Title:__________________________ GROWTH FUND ADVISOR, INC. By:___________________________ Name:________________________ Title:_________________________ ACCEPTED as of the date first above written BROKER DEALER FINANCIAL SERVICES CORP. By:________________________ Name:_____________________ Title:______________________ 28 EXHIBIT A Form of Selected Dealer Agreement 29 EXHIBIT B Form of Subscription Agreement 30 EX-99.K 4 k74079a1exv99wk.txt AMENDED FORM OF ESCROW AGREEMENT EXHIBIT k ESCROW AGREEMENT This Escrow Agreement (the "Agreement") is entered into this ____ day of __________, 2003, between NAIC Growth Fund, Inc., a Maryland corporation (the "Fund"), Broker Dealer Financial Services Corp., an Iowa corporation (the "Underwriter"), and Standard Federal Bank N.A., a national banking association (the "Escrow Agent"). RECITALS A. The Fund proposes to issue and sell through the Underwriter up to 5,000,000 shares of its common stock, par value $0.001 per share (the "Shares") in accordance with the terms of an Underwriting Agreement between the Fund, the Underwriter and Growth Fund Adviser, Inc. dated _________, 2003 (the "Underwriting Agreement"). B. The Fund and the Underwriter desire that the payments received from prospective purchasers in the offering be placed in escrow until released to the Fund pursuant to the terms of this Agreement. THEREFORE, it is hereby agreed as follows: 1. Each person desiring to purchase Shares in the offering ("Purchaser") will be required to send the Fund a subscription agreement to subscribe for such Shares ("Subscription Agreement") and a check payable to the Escrow Agent in the amount of the purchase price, including the applicable sales charge, for the Shares the Purchaser desires to purchase (the "Subscription Payment"). 2. The Fund will deposit any Subscription Payment it receives with the Escrow Agent and will provide the Escrow Agent with the following information, with a copy to the Underwriter, with respect to each Subscription Agreement it receives: (a) The name and address of the Purchaser, (b) The date of the Subscription Agreement received by the Fund; and (c) The dollar amount of the Subscription Payment relating to such Subscription Agreement. 3. The Escrow Agent shall provide the Fund with a report by [time] on the first business day following each Determination Date (as hereafter defined). Each report shall be prepared as of 5:30 p.m., local time, of the applicable Determination Date and shall set forth the name of each Purchaser from whom the Escrow Agent has received previously unreported cleared funds and the amount of previously unreported cleared funds for each such Purchaser, as of such date and time. The Fund will provide the Underwriter with a copy of each such report. For purposes of this Agreement, a "business day" shall mean any day on which the Growth Fund Advisor, Inc. and the New York Stock Exchange are open for business and the Fedwire service of the Federal Reserve Board is operational, and "Determination Date" means Thursday of each week, or if any Thursday is not a business day, the business day immediately preceding such Thursday. 4. The Escrow Agent shall hold any Subscription Payments and related investment earnings which it receives in escrow, subject to the provisions of this Agreement. The Escrow Agent shall provide the Fund with a monthly statement of receipts and disbursements made pursuant to this Agreement. The Fund shall provide the Underwriter with a copy of each such statement. 5. The Fund and the Underwriter have each reserved the right, in their sole discretion, to accept or to not accept a Subscription Agreement. If for any reason a Subscription Agreement is not accepted by either the Fund or the Underwriter, the Fund will instruct the Escrow Agent in writing, with a copy to the Underwriter, to refund the related Subscription Payment to the applicable Purchaser, without interest. The Escrow Agent shall refund such Subscription Payments within five business days of receiving such written instruction. 6. Upon acceptance of a Subscription Agreement by the Fund and the Underwriter and sale by the Fund of the related Shares to the applicable Purchaser, the Fund shall notify the Escrow Agent of such acceptance, the settlement date for the sale of such Shares, the amount of the sales charge payable from the Subscription Payment to the Underwriter with respect to such Shares, and the net amount of the Subscription Payment payable to the Fund. The Fund shall provide the Underwriter with a copy of each such notice. The Escrow Agent shall, on the settlement date, deposit the net amount of the Subscription Payment payable to the Fund to the Fund's account no. ___________________ with the Escrow Agent and shall pay the amount of the related sales charge to the Underwriter no later than the close of business on the first business day following such settlement date. 7. The duties and obligations of the Escrow Agent hereunder shall be determined solely by the express provisions of this Agreement. The Escrow Agent shall not be liable or responsible for any act done or step taken or omitted by it or any mistake of fact or law or for anything which it may do or refrain from doing, except for its gross negligence, willful misconduct or willful default in the performance of any obligation imposed upon it hereunder. 8. The Escrow Agent shall not be liable to the Underwriter or to any other person for acting upon any written instruction which it receives from the Fund pursuant to this Agreement. The Escrow Agent is authorized to act in reliance upon the sufficiency, correctness, genuineness or validity of any instrument or document or other writing submitted to it hereunder and shall have no liability with respect to such matters. 9. Any property held by the Escrow Agent under this Agreement shall be held uninvested. 10. The Escrow Agent is not obligated to render any statements or notices of non-performance hereunder to any party to this Agreement but may in its discretion inform any party or its authorized representative of, any matters pertaining to this Agreement. 2 11. The Escrow Agent's fee as set forth in the attached fee schedule shall be paid by the Fund. The Fund agrees to indemnify and hold harmless the Escrow Agent from any costs, damages, expenses or claims, including attorney's fees, which the Escrow Agent may incur or sustain as a result of or arising out of this Agreement or the Escrow Agent's duties relating thereto and will pay them on demand. 12. The Escrow Agent shall be reimbursed by the Fund for all disbursements and expenses made or incurred hereunder and if it shall be required to perform extraordinary services not contemplated herein, it shall receive reasonable additional compensation therefor. The Escrow Agent shall not be required to institute or maintain litigation unless indemnified to its satisfaction for its counsel fees, costs, disbursements and all other costs, expenses and liabilities to which it may in its judgment be subjected in connection with such action. 13. In the event of any disagreement or the presentation of adverse claims or demands in connection with the property deposited pursuant to this Agreement, the Escrow Agent shall, at its option, be entitled to refuse to comply with any such claims or demands during the continuance of such disagreement and may refrain from delivering any item affected thereby, and in so doing, the Escrow Agent shall not become liable to Fund or Underwriter, or either of them, or to any other person, due to its failure to comply with any such adverse claim or demand. The Escrow Agent shall be entitled to continue, without liability, to refrain and refuse to act: (a) Until all the rights of the adverse claimants have been finally adjudicated by a court having jurisdiction of the parties and the items affected thereby, after which time the Escrow Agent shall be entitled to act in conformity with such adjudication; or (b) Until all differences shall have been adjusted by agreement and the Escrow Agent shall have been notified thereof and shall have been directed in writing signed jointly or in counterpart by Fund and Underwriter and by all persons making adverse claims or demands, at which time the Escrow Agent shall be protected in acting in compliance therewith. The parties agree that the Escrow Agent may seek adjudication of any adverse claim or demands in either the Circuit Court for the County of Oakland, Michigan, or the United States Federal District Court for the Eastern District of Michigan, Southern Division, agree to the jurisdiction of either of said Courts over their persons as well as the property deposited pursuant to this Agreement, waive personal service of any process, and agree that service of process by certified or registered mail, return receipt requested, to the address set forth in Section 16 below shall constitute adequate service. 14. The entire agreement of the parties with respect to the subject matter hereof is contained herein, provided that nothing contained herein shall be deemed to supersede, limit or modify the Underwriting Agreement. Any change in terms or conditions herein may only be made in writing signed by all parties hereto. The Escrow Agent shall not be charged with knowledge of any fact, including but not limited to performance or non-performance 3 of any condition, unless it has actually received written notice thereof from one of the parties pursuant to Section 16, such notice clearly referring to this Agreement. 15. The Fund may designate another person to take any actions which are required or permitted to be taken by the Fund under this Agreement. Any such designation shall be in writing and shall be provided to the other parties to this Agreement pursuant to Section 16. Such parties may rely upon such designation until they receive written notice to the contrary from the Fund pursuant to Section 16. 16. All notices or communications hereunder shall be in writing and shall be mailed, delivered, or telecopied and confirmed as follows. Each party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose. If to the Underwriter: Broker Dealer Financial Services Corp. 8800 NW 62nd Avenue P.O. Box 6240 Johnston, Iowa 50131-6240 Attention: E.B. Wright Facsimile no. (515) 286-2972 If to the Fund: NAIC Growth Fund, Inc. (address for mail) P.O. Box 220 Royal Oak, Michigan 48068 (address for delivery) 711 West Thirteen Mile Road Madison Heights, Michigan 48071 Attention: Kenneth S. Janke Facsimile no. (248) 583-4880 If to the Escrow Agent: Standard Federal Bank N.A. 17. This Agreement shall be deemed to have been made under and shall be governed by the laws of the State of Michigan in all respects, including matters of construction, validity and performance. 4 18. The Escrow Agent may resign as such following the giving of thirty days prior written notice to the other parties hereto. Similarly, the Escrow Agent may be removed and replaced following the giving of thirty days prior written notice to the Escrow Agent by the other parties hereto. In either event, the duties of the Escrow Agent shall terminate thirty days after the date of such notice (or as of such earlier date as may be mutually agreeable); and the Escrow Agent shall deliver the balance of the property then in its possession to a successor escrow the Escrow Agent as shall be appointed by the other parties hereto as evidenced by a written notice filed with the Escrow Agent, or if no successor Escrow Agent has been so appointed, the then acting Escrow Agent shall deliver the balance of the escrow deposit then in its possession to the applicable Purchasers as their interests may appear. 19. No waiver of any past agreement or condition hereunder by any party hereto shall operate as a continuing waiver of any agreement or condition under this Agreement. Each party shall have the right to waive and/or nullify, in writing, any condition or term of this Agreement which is for its or his benefit. 20. If any provision or clause in this Agreement or application thereof to any person or circumstances is held invalid or unenforceable, such invalidity or unenforceability shall not affect other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application, and to this end the provisions of this Agreement are declared to be severable. NAIC GROWTH FUND, INC. By: ______________________________________ Its: ______________________________________ BROKER DEALER FINANCIAL SERVICES CORP. By: ______________________________________ Its: ______________________________________ STANDARD FEDERAL BANK N.A. By: ______________________________________ Its: ______________________________________ 5
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