UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-03074
Northeast Investors Growth Fund
(Exact name of registrant as specified in charter)
50 Congress Street, Room 1000
Boston, MA 02109
(Address of principal executive offices) (Zip code)
David Randall
50 Congress St.
Boston MA, 02109
[Name and Address]
(Name and address of agent for service)
Registrant's telephone number, including area code: 617-523-3588
Date of fiscal year end: December 31, 2002
Date of reporting period: June 30, 2003
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of
the information collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection
of information under the clearance requirements of 44 U.S.C. 3507.
Item 1. Reports to Stockholders.
NORTHEAST
INVESTORS
GROWTH FUND
A NO-LOAD FUND
Semi-Annual Report
For the Period Ending
June 30, 2003
Table of Contents
Letter to Shareholders 1
Portfolio Transactions 3
Fund Performance 4
Investment Sectors 6
Schedule of Investments 7
Financial Statements 10
Notes to the Financial Statements 15
Trustees & Officers 18
Dear Fellow Shareholders:
The enclosed sets forth the activity with Northeast Investors Growth Fund for
the first six months of 2003. Although it seems like the distant past, equities
began the year strongly in early January before slumping badly as we moved
toward war with Iraq. There have been two significant market lows in the past
year - October 9, 2002, and March 11 of this year. As of this writing, from the
March 11 low, our price has appreciated 25.07%. And for the entire six-month
period to June 30, we show a strong 10.24% positive return.
Looking back, the equity markets lost about half their value during the
three-year period 2000, 2001, and 2002. The year 2000 appeared to be a necessary
correction to the "Internet bubble" - 2001 a broader recession and profit
slowdown - 2002 scandals that questioned the integrity of financial statements -
and earlier this year - war with Iraq. Throughout these difficult years, we have
not changed our colors - we have not changed our style - we have not changed our
thinking. We have continued to hold, and buy, market leaders in areas when we
feel there are above average opportunities for substantial growth in sales and
earnings. Most importantly, we have continued to look for investments that touch
our daily lives, where there is a first hand knowledge of the product. While
this is not always possible, I, for example, can credit my wife for following
Whole Foods since she, and many of our friends, are placing a growing importance
on eating "healthy".
The changes made within the portfolio as outlined on page 3 of this report
represent "trimmings" and "modifications" - a reflection of money flows in and
out of the fund, and also of a dynamic and ever changing market place.
As I write this letter, "things" feel a lot better. As mentioned to many of you,
the last time the markets were down four years in a row was seventy years ago,
well into the 1930's. As mentioned, equity prices have been about cut in half
over the past three years. During this time corporate America has moved on and
in many ways become stronger. This improved environment will, we believe, be
reflected in improved equity prices going forward.
Northeast Investors Growth Fund is well positioned in our view with fiftytwo
leading companies to move forward, with adjustments consistent with our overall
strategy, in the coming years.
As in the past, please write or call me directly with any questions or comments
you might have. Our daily closing price is the bottom line and of keen concern
to me personally.
Ever sincerely,
William A. Oates, Jr.
President
August 1, 2003
<table>
<s> <c> <c> <c>
Portfolio Transactions (unaudited)
January 1, 2003 - June 30, 2003
Additions to Existing Holdings
Additions Now Own
Citigroup, Inc. 71,500 115,500
Microsoft Corp. 72,000 186,000
New Holdings
Now Own
Barr Laboratories, Inc. 28,200
Boston Scientific Corp. 25,000
Comcast Corp., Class A 36,000
Corning, Inc. 354,000
eBay, Inc. 12,000
Gilead Sciences, Inc. 38,000
Home Depot, Inc. 31,000
Iron Mountain, Inc. 26,250
Zimmer Holdings, Inc. 23,800
Eliminations/Reductions of Holdings
Sold Now Own
3M Co. 4,000 27,700
American International Group, Inc. 31,800 21,769
Analog Devices, Inc. 11,000 25,000
Bristol-Myers Squibb Co. 21,000 48,800
Chubb Corp. 32,500 0
Eaton Vance Corp. 84,000 113,000
First Data Corp. 13,000 94,000
Fifth Third Bancorp 20,000 59,050
Intel Corp. 26,000 128,400
International Business Machines Corp. 13,000 41,800
John Hancock Financial Services, Inc. 51,000 97,000
Johnson & Johnson 9,000 52,400
Lowe's Companies, Inc. 46,500 0
Merck & Co., Inc. 19,000 41,400
Pfizer, Inc. 34,000 121,731
Schering-Plough Corp. 61,600 40,000
Sysco Corp. 16,000 56,000
United Parcel Service, Inc. 8,000 29,500
Viacom, Inc., Class A 46,000 0
Wal-Mart Stores, Inc. 21,000 76,600
Walt Disney Co. 81,000 180,000
Zions Bancorporation 17,000 74,400
</table>
Average Annual Total Return (unaudited)
One year ended June 30, 2003 (0.65)%
Five years ended June 30, 2003 (3.18)%
Ten years ended June 30, 2003 9.61%
The following graph compares the cumulative total shareholder return on the
Northeast Investors Growth Fund shares over the ten preceding years to the
cumulative total share return on the Standard & Poor's 500 Index. Assuming an
investment of $10,000 in both at their closing prices on January 1, 1993 and
reinvestment of dividends and capital gains. For management's discussion of the
Growth Fund's 2003 performance, including strategies and market conditions which
influenced such performance, see the President's letter to shareholders.
tableomitted
<table>
<s> <c> <c>
Performance Graph
(01/01/1993 - 06/30/2003) (unaudited)
Six Months
Ended
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 06/30/03
Northeast
Investors
$10,244 $10,237 $13,969 $17,406 $23,894 $31,861 $41,142 $34,987 $28,987 $22,415 $24,711
Growth
Fund
Standard
& Poor's $10,992 $11,133 $15,265 $18,727 $24,926 $31,990 $38,721 $35,197 $31,016 $24,161 $27,003
500 Index
Page 4
Performance Graph
(01/01/1993 - 06/30/2003) (unaudited)
</table>
<table>
<s> <c> <c> <c>
Returns and Per Share Data
Six Months
Year Ended December 31, Ended
June 30, 2003
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 (unaudited)
Net Asset Value 8.37 8.13 10.59 12.15 15.84 20.47 26.08 20.23 15.43 11.91 13.13
Income Dividend 0.07 0.06 0.07 0.05 0.06 0.05 0.02 0.00 0.00 0.02 0.00
Capital Gains Dist. 1.49 0.17 0.44 0.98 0.77 0.55 0.31 2.05 1.44 0.00 0.00
NEIG Return (%) 2.44 -0.07 36.46 24.60 37.28 33.34 29.13 -14.96 -17.15 -22.67 10.24
S&P 500 Return (%) 9.92 1.28 37.12 22.68 33.10 28.34 21.04 -9.10 -11.88 -22.10 11.76
</table>
table omitted
<table>
<s> <c> <c> <c>
Ten Largest Investment Holdings (unaudited)
June 30, 2003
Ten Largest Investment Holdings
Market
Cost Value
State Street Corp. $4,629,307 $5,334,760
General Electric Co. 6,238,135 4,984,586
Citigroup, Inc. 4,178,969 4,943,400
Microsoft Corp. 7,157,161 4,769,040
Exxon Mobil Corp. 4,943,843 4,664,062
Mellon Financial Corp. 5,458,615 4,315,125
FleetBoston Financial Corp. 4,714,864 4,267,366
Pfizer, Inc. 4,628,401 4,157,113
Wal-Mart Stores, Inc. 3,329,831 4,111,122
First Data Corp. 2,994,157 3,895,360
Investment Sectors As a Percentage of Net Assets (unaudited)
Integrated Oil & Gas 8.23%
Financial Services 14.92%
Biotechnology 3.63%
Banks 14.57%
Other 38.21%
Conglomerate 6.64%
Computer Software & Services 4.65%
Pharmaceuticals/Drug 13.33%
Medical Products 4.93%
Multi-Line Insurance 3.67%
Market value of securities equals 112.78% of Net Assets.
Schedule of Investments
June 30, 2003 (unaudited)
Number Market
Common Stocks of Value
Name of Issuer Shares (Note B)
Banks - 14.57%
Bank One Corp. 82,000 $3,048,760
Fifth Third Bancorp 59,050 3,390,651
FleetBoston Financial Corp.* 143,634 4,267,366
Mellon Financial Corp. 155,500 4,315,125
Zions Bancorporation 74,400 3,764,640
----------
18,786,542
Beverage Softdrink - 1.87%
PepsiCo, Inc. 54,100 2,407,450
Beverage Wine/Spirit - 1.39%
Brown-Forman Corp., Class B 22,800 1,792,536
Biotechnology - 3.63%
Amgen, Inc.^ 39,000 2,571,660
Gilead Sciences, Inc.^ 38,000 2,110,900
---------
4,682,560
Broadcast Cable TV - 2.48%
Comcast Corp., Class A^ 36,000 1,086,480
Cox Communications, Inc.#^ 66,000 2,105,400
---------
3,191,880
Computer & Electronics - 1.74%
Best Buy Co., Inc.*^ 51,000 2,239,920
Computer Software & Services - 4.65%
Intuit, Inc.*^ 27,500 1,226,500
Microsoft Corp. 186,000 4,769,040
---------
5,995,540
Computer Systems - 2.67%
International Business Machines Corp. 41,800 3,448,500
Conglomerate - 6.64%
3M Co. 27,700 3,572,746
General Electric Co.* 173,800 4,984,586
---------
8,557,332
Data Process Management - 0.75%
Iron Mountain, Inc.^ 26,250 973,612
Distributors - 1.30%
Sysco Corp. 56,000 1,682,240
Diversified Chemical - 1.83%
Cabot Corp. 82,000 2,353,400
Electronic Semi-Conductor - 2.75%
Analog Devices, Inc. 25,000 870,500
Intel Corp. 128,400 2,672,004
---------
3,542,504
Financial Services - 14.92%
American Express Co. 35,500 1,484,255
Citigroup, Inc. 115,500 4,943,400
Eaton Vance Corp. 113,000 3,570,800
First Data Corp. 94,000 3,895,360
State Street Corp.* 135,400 5,334,760
---------
19,228,575
Food Retail - 2.05%
Whole Foods Market, Inc.#^ 56,200 2,649,268
Home Improvement - Retail - 0.80%
Home Depot, Inc. 31,000 1,026,720
Household Products - 2.75%
Proctor & Gamble Co. 39,800 3,549,364
Integrated Oil & Gas - 8.23%
B P, PLC 51,200 2,151,424
ChevronTexaco Corp. 28,500 2,057,700
Exxon Mobil Corp. 129,882 4,664,062
Royal Dutch Petroleum# 37,200 1,734,264
----------
10,607,450
Internet Retail - 0.97%
eBay, Inc.^ 12,000 1,248,000
Life & Health - 2.31%
John Hancock Financial Services, Inc.^ 97,000 2,980,810
Managed Health - 1.11%
Anthem, Inc.^ 18,500 1,427,275
Medical Products - 4.93%
Barr Laboratories, Inc.#^ 28,200 1,847,100
Boston Scientific Corp.^ 25,000 1,527,500
Medtronic, Inc. 39,800 1,909,206
Zimmer Holdings, Inc.^ 23,800 1,072,190
---------
6,355,996
Movies & Entertainment - 2.76%
Walt Disney Co. 180,000 3,555,000
Multi-Line Insurance - 3.67%
American International Group, Inc.* 21,769 1,201,213
Berkshire Hathaway, Inc., Class B*^ 1,450 3,523,500
---------
4,724,713
Pharmaceuticals/Drug - 13.33%
Abbott Laboratories 73,000 3,194,480
Bristol-Myers Squibb Co. 48,800 1,324,920
Eli Lilly & Co. 36,900 2,544,993
Johnson & Johnson* 52,400 2,709,080
Merck & Co., Inc. 41,400 2,506,770
Pfizer, Inc. 121,731 4,157,113
Schering-Plough Corp. 40,000 744,000
----------
17,181,356
Retail - General - 3.19%
Wal-Mart Stores, Inc. 76,600 4,111,122
Telecom Equipment - 2.03%
Corning, Inc.#^ 354,000 2,616,060
Toiletries/Cosmetics - 2.00%
Gillette Co. 81,000 2,580,660
Transportation - 1.46%
United Parcel Service, Inc. 29,500 1,879,150
Total Common Stocks - 112.78% - (Cost - $142,147,621) $145,375,535
------------
Cash Equivalents+
Dreyfus Cash Management Plus Fund - 1.10174% 173,510
Merrimac Cash Fund-Premium Class - 1.05171% 6,000,000
------------
Total Cash Equivalents - 4.79% (Cost - $6,173,510) $ 6,173,510
------------
Total Investment Portfolio - 117.57% (Cost - $148,321,131) $151,549,045
Net Other Assets - (17.57%) (22,642,105)
------------
Total Net Assets - 100.00% $128,906,940
* All or a portion of this security is pledged to collateralize short-term borrowings
^ Non-income producing security
# Currently out on loan
+ Security held as collateral for securities on loan. The rate quoted is the annualized seven-day yield of the
fund at period end. (See Note H)
The accompanying notes are an integral part of the financial statements.
Statement of Assets and Liabilities (unaudited)
- ----------------------------------------------------------------------------------------------------
June 30, 2003
- ----------------------------------------------------------------------------------------------------
Assets
Investments - at market value (including securities loaned of $6,007,575)
(cost $148,321,131) - see note I $151,549,045
Dividends receivable 177,479
Receivable for fund shares sold 9,932
------------
Total Assets $151,736,456
Liabilities
Short-term borrowing $16,460,944
Collateral on securities loaned, at value - see note I 6,173,510
Payable for fund shares repurchased 40,253
Accrued investment advisory fee 62,204
Accrued expenses 92,605
-----------
Total Liabilities 22,829,516
-----------
Net Assets $128,906,940
Net Assets Consist of:
Capital paid-in $141,778,661
Undistributed net investment income 106,385
Accumulated net realized loss (16,206,020)
Net unrealized appreciation of investments 3,227,914
------------
Net Assets $128,906,940
============
Net Asset Value, offering price and redemption price per share
($128,906,940/9,824,770 shares) $13.13
======
The accompanying notes are an integral part of the financial statements.
Statement of Operations (unaudited)
- -----------------------------------------------------------------------------------------------------
Six Months Ended June 30, 2003
- -----------------------------------------------------------------------------------------------------
Investment Income
Dividend income $1,049,223
Other income 2,598
-----------
Total Income 1,051,821
Expenses
Investment advisory fee $356,832
Administrative expenses and salaries 200,408
Interest expense 154,990
Printing, postage, and stationary 56,200
Computer and related expenses 47,925
Legal fees 36,200
Insurance fees 27,100
Audit fees 18,990
Registration and filing fees 13,575
Trustee fees 9,955
Telephone expense 9,050
Commitment fee 8,065
Custodian fees 6,154
Miscellaneous fees 8,145
-----------
Total Expenses 953,589
-----------
Net Investment Income 98,232
Realized and Unrealized Gain (Loss) on Investments
Net realized loss from investment transactions (2,979,750)
Change in unrealized appreciation(depreciation) of investments 15,151,274
-----------
Net realized and unrealized loss on investments 12,171,524
Net Increase in Net Assets Resulting from Operations $12,269,756
===========
The accompanying notes are an integral part of the financial statements.
Statements of Changes in Net Assets
Six Months
Ended Year Ended
June 30, 2003 December 31,
(unaudited) 2002
Increase (Decrease) in Net Assets
From Operations:
Net investment income (loss) $98,232 $259,677
Net realized gain (loss) from investment transactions (2,979,750) (3,378,604)
Change in unrealized appreciation/(depreciation) of investments 15,151,274 (36,690,613)
----------- -------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 12,269,756 (39,809,540)
Distributions to Shareholders
From net investment income - (251,524)
From net realized gains on investments - -
----------- -------------
Total Distributions - (251,524)
From Net Fund Share Transactions (9,348,539) (21,171,251)
------------ -------------
Total Increase (Decrease) in Net Assets 2,921,217 (61,232,315)
Net Assets:
Beginning of Period 125,985,723 187,218,038
------------ ------------
End of Period $128,906,940 $125,985,723
============ ============
The accompanying notes are an integral part of the financial statements.
Financial Highlights
Year Ended December 31,
Six Months
Ended
June 30,2003
(unaudited) 2002 2001 2000 1999 1998
Per Share Data
Net Asset Value:
Beginning of Period $11.91 $15.43 $20.23 $26.08 $20.47 $15.84
Income From Investment
Operations:
Net investment gain(loss) 0.01 0.02 (0.01) (0.09) 0.01 0.05
Net realized and unrealized gain
(loss) on investment 1.21 (3.52) (3.35) (3.71) 5.93 5.18
----- ------ ------ ------ ---- ----
Total from investment operations 1.22 (3.50) (3.36) (3.80) 5.94 5.23
Less Distributions:
Net investment income 0.00 (0.02) 0.00 0.00 (0.02) (0.05)
Capital gain 0.00 0.00 (1.44) (2.05) (0.31) (0.55)
------ ------ ------ ------ ------ ------
Total Distributions 0.00 (0.02) (1.44) (2.05) (0.33) (0.60)
Net Asset Value:
End of Period $13.13 $11.91 $15.43 $20.23 $26.08 $20.47
Total Return 10.24%* -22.67% -17.15% -14.96% 29.13% 33.34%
Ratios & Supplemental Data
Net assets end of period
(in millions) $128,907 $125,986 $187,218 $272,222 $357,650 $211,259
Ratio of operating expenses to
average net assets (includes interest
expenses) 1.53% 1.31% 1.14% 0.97% 0.85% 0.94%
Ratio of interest expense to
average net assets 0.25% 0.21% 0.14% 0.22% 0.10% 0.12%
Ratio of net investment income
to average net assets 0.16% 0.17% -0.05% -0.34% 0.03% 0.44%
Portfolio turnover rate 21% 26% 30% 33% 31% 19%
# All per share data as of December 31, 1996 and earlier has been restated to
reflect a 3 to 1 stock split effective September 25, 1997
^ Average share method used to calculate per share data
* Not annualized
Financial Highlights
Year Ended December 31,
1997 1996 1995 1994 1993
Net Asset Value:
Beginning of Period $12.15 $10.59 $8.13 $8.37 $9.70
Income From Investment
Operations:
Net investment gain(loss) 0.06 0.05 0.07 0.06 0.07
Net realized and unrealized gain
(loss) on investment 4.46 2.54 2.90 (0.07) 0.16
----- ----- ----- ------ -----
Total from investment operations 4.52 2.59 2.97 (0.01) 0.23
Less Distributions:
Net investment income (0.06) (0.05) (0.07) (0.06) (0.07)
Capital gain (0.77) (0.98) (0.44) (0.17) (1.49)
------ ------ ------ ------ ------
Total Distributions (0.83) (1.03) (0.51) (0.23) (1.56)
Net Asset Value:
End of Period $15.84 $12.15 $10.59 $8.13 $8.37
Total Return 37.28% 24.60% 36.46% -0.07% 2.44%
Ratios & Supplemental Data
Net assets end of period
(in millions) $108,590 $60,275 $48,337 $35,459 $38,694
Ratio of operating expenses to
average net assets (includes interest
expenses) 0.97% 1.21% 1.37% 1.53% 1.45%
Ratios of interest expense to
average net assets 0.02% - - - -
Ratio of net investment income
to average net assets 0.45% 0.47% 0.74% 0.74% 0.62%
Portfolio turnover rate 16% 25% 27% 26% 35%
All per share data as of December 31, 1996 and earlier has been restated to
reflect a 3 to 1 stock split effective September 25, 1997 Average share method
used to calculate per share data
</table>
Notes to Financial Statements (unaudited)
Note A - Organization
Northeast Investors Growth Fund (the "Fund") is a diversified, no-load,
open-end, series-type management investment company registered under the
Investment Company Act of 1940, as amended. The Fund presently consists of one
portfolio and is organized as a Massachusetts business trust.
The Fund's objective is to produce long term growth for its shareholders. Note
B-Significant Accounting Policies
Significant accounting policies of the Fund are as follows:
Valuation of Investments: Investments in securities traded on
national securities exchanges are valued based upon closing prices on the
exchanges. Securities traded in the over-the-counter market and listed
securities with no sales on the date of valuation are valued at closing bid
prices. Repurchase agreements are valued at cost with earned interest included
in interest receivable. Other short-term investments, when held by the Fund, are
valued at cost plus earned discount or interest which approximates market value.
Securities and other assets for which market quotations are not readily
available (including restricted securities, if any) are valued at their fair
value as determined in good faith under consistently applied procedures approved
by the Board of Trustees.
Security Transactions: Investment security transactions are recorded on
the date of purchase or sale. Net realized gain or loss on sales of investments
is determined on the basis of identified cost.
Federal Income Taxes: No provision for federal income taxes is necessary
since the Fund has elected to qualify under subchapter M of the Internal Revenue
Code and its policy is to distribute all of its taxable income, including net
realized capital gains, within the prescribed time periods.
State Income Taxes: Because the Fund has been organized by an Agreement
and Declaration of Trust executed under the laws of the Commonwealth of
Massachusetts, it is not subject to state income or excise taxes.
Distributions and Income: Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America.
These differences are primarily due to differing treatments for capital loss
carryovers and losses deferred due to wash sales. Permanent book and tax
differences relating to shareholder distributions will result in
reclassifications to paid-in-capital. The Fund's distributions and dividend
income are recorded on the ex-dividend date. Interest income, which consists of
interest from repurchase agreements, is accrued as earned.
Net Asset Value: In determining the net asset value per share, rounding
adjustments are made for fractions of a cent to the next higher cent.
Use of Estimates: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Note C - Investment Advisory and Service Contract and Affiliated Expenses
The Fund has its investment advisory and service contract with
Northeast Management & Research Company, Inc. (the "Advisor"). Under the
contract, the Fund pays the Advisor an annual fee at a maximum rate of 1% of
the first $10,000,000 of the Fund's average daily net assets, 3/4 of 1% of the
next $20,000,000 and 1/2 of 1% of the average daily net assets in excess of
$30,000,000, in monthly installments on the basis of the average daily net
assets during the month preceding payment. All trustees except Messrs. John C.
Emery and Michael Baldwin are officers or directors of the Advisor. The
compensation of all disinterested trustees of the Fund is borne by the Fund.
Under the Fund's Investment Advisory Agreement (the "Agreement"),
personnel of the Advisor provide the Fund with advice and assistance in the
choice of investments and the execution of securities transactions, and
otherwise maintain the Fund's organization. The Advisor also provides the Fund
with necessary office space and portfolio accounting and bookkeeping services.
The salaries of all officers of the Fund and of all Directors who are
"affiliated persons" of the Fund or of the Advisor, and all personnel of the
fund or of the Advisor performing services relating to research, statistical
and investment activities are paid by the Advisor.
The Fund pays expenses, including the salaries of employees engaged in
activities, related to its role as transfer, dividend paying and shareholder
servicing agent.
Note D - Purchases and Sales of Investments
The cost of purchases and proceeds from sales of investments, other
than short-term securities, aggregated $14,785,800 and $23,910,625,
respectively, for the six months ended June 30, 2003.
Note E - Shares of Beneficial Interest
At June 30, 2003, there was an unlimited number of shares of beneficial
interest authorized with no par value. Transactions in shares of beneficial
interest were as follows:
<table>
<s> <c> <c> <c>
2003 2002
------------------------ -------------------------
Shares Amount Shares Amount
Shares sold 216,744 $2,636,026 2,325,562 $32,176,655
Shares issued to shareholders in
reinvestment of distributions
from net investment income
and realized gains from
security transactions 0 0 17,697 219,978
------- ---------- --------- ----------
216,744 $2,636,026 2,343,259 $32,396,633
Shares repurchased (976,412) $(11,984,565) (3,894,744) $(53,567,884)
Net increase (759,668) $(9,348,539) (1,551,485) $(21,171,251)
</table>
Note F - Committed Line of Credit
Short-term bank borrowings, which do not require maintenance of
compensating balances, are generally on a demand basis and are at rates equal
to adjusted money market interest rates in effect during the period in which
such loans are outstanding. The Fund has entered an agreement which enables the
Fund to borrow up to $25,000,000 from an unsecured line of credit State Street
Bank and Trust. At June 30, 2003, the Fund had unused lines of credit amounting
to $8,539,056. In addition the Fund pays a commitment fee of 0.12% per annum,
payable at the end of each quarter based on the unused portion of the line of
credit.
The following information relates to aggregate short-term borrowings during the
six months ended June 30, 2003:
Average amount outstanding (total of daily outstanding principal balances
divided by number of days during the period) $15,205,324
Weighted average interest rate (actual interest expense on short-term borrowing
divided by average short-term borrowings outstanding) 2.11%
Note G - Additional Tax Information
As of December 31, 2002, the components of accumulated earnings (losses) on a
tax basis were as follows:
Undistributed (distributions in excess of) ordinary income - net $ 8,012
Capital loss carryforward (9,087,084)
Timing Differences (post October losses) (4,109,643)
Unrealized gains (losses) - net (11,952,762)
-------------
Total accumulated earnings (losses - net) $(25,141,477)
Capital loss carryforward year of expiration (2009)
At June 30, 2003 the Fund's aggregate security unrealized gains and losses
based on cost for U.S. federal income tax purposes was as follows:
Gross unrealized gain $ 13,979,040
Gross unrealized loss (10,751,126)
------------
Net unrealized security gain (loss) $ 3,227,914
Note H - Securities Lending
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 102% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At June 30,2003, the value of securities loaned and the value of
collateral was $6,007,575 and $6,173,510, respectively. During the six months
ended June 30, 2003, income from securities lending amounted to $1,803. The
value of loaned securities and cash collateral at period end are disclosed on
the Fund's statement of assets and liabilities.
Trustees and Officers
The Trustees of Northeast Investors Growth Fund are William A. Oates Jr.,
Ernest E. Monrad, Robert B. Minturn, John C. Emery, and Michael Baldwin. Under
Massachusetts law, the Trustees are generally responsible for the management of
Northeast Investors Growth Fund. The following table provides certain
information about the Fund's Trustees and Officers:
The Statement of Additional Information (SAI) contains additional information
about the trustees and is available without charge upon request by calling the
Fund at 1-800-225-6704.
<table>
<s> <c> <c> <c> <c> <c>
Principal
Length of Occupation(s) Other
Position(s) Held Time During Directorships
Name, Address and Age with Trust Served(1) Last 5 Years held by Trustee
AFFILIATED TRUSTEES AND FUND OFFICERS
William A. Oates, Jr. President and 22 years Trustee and
50 Congress Street Trustee President of
Boston, MA Northeast Investors
Age 61 Growth Fund
Ernest E. Monrad Trustee 22 years Trustee of the Century Shares
50 Congress Street Northeast Investors Trust
Boston, MA Trust Century Capital
Age 73 Management Trust
The New America
High Income Fund,
Inc.
Northeast Investors
Trust
Gordon C. Barrett Senior Vice 9 years Officer of the
50 Congress Street President and Northeast Investors
Boston, MA Treasurer Growth Fund,
Age 46 Northeast Investors
Trust, Northeast
Investment
Management, Inc.
Robert B. Minturn Trustee, Clerk, 22 years Clerk and Trustee Northeast Investors
50 Congress Street and Vice of the Northeast Trust
Boston, MA President Investors Trust
Age 63
INDEPENDENT TRUSTEES
John C. Emery Trustee 22 years Partner, Law Firm
One Post Office Square of Sullivan &
Boston, MA Worcester
Age 72
Michael Baldwin Trustee 3 years Partner, Baldwin
3 Barnabas Road Brothers, Inc.
Marion, MA
Age 62
(1) The Trustees serve until their resignation or the appointment of a successor and
the officers serve at the pleasure of the Trustees.
</table>
Trustees
William A. Oates, Jr.
Ernest E. Monrad
Robert B. Minturn
John C. Emery
Michael Baldwin
Officers
William A. Oates, Jr., President
Gordon C. Barrett, Senior Vice President & Treasurer
Ernest E. Monrad, Assistant Treasurer
Robert B. Minturn, Vice President & Clerk
Bruce H. Monrad, Vice President
Richard J. Semple, Vice President
David A. Randall, Vice President
Investment Advisors
Northeast Management & Research Company, Inc.
50 Congress Street
Boston, Massachusetts 02109
Custodian
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02205
Legal Counsel
Mintz, Levin, Cohn, Ferris, Glovsky
and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Transfer Agent
Northeast Investors Growth Fund
50 Congress Street
Boston, Massachusetts 02109
This report is prepared for the information of the shareholders of Northeast
Investors Growth Fund and must not be given to others unless preceded or
accompanied by a copy of the current Prospectus by which all offerings of the
Fund shares are made. It should be noted in reading this report and the letter
to shareholders that the record of past performance is not a representation as
to the Fund's future performance, and that the Fund's investments are subject
to market risks.
Shares of the Fund are sold to investors at net asset value by
Northeast Investors Growth Fund
50 Congress Street
Boston, Massachusetts 02109
800-225-6704 )617-523-3588
www.northeastinvestors.com
The share price for Northeast Investors Growth Fund is quoted daily in the
Mutual Funds section of most major newspapers under several abbreviations
including: NE Inv GR, NE Investor.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) The registrant's principal executive and financial officers, after
evaluating the effectiveness of the Company's disclosure controls and
procedures (as defined in Rule 30a-2(c) under the Investment
Company Act of 1940, as amended), have concluded that, based on such
evaluation, the registrant's disclosure controls and procedures were
effective as of a date within 90 days of the filing of this report.
(b) The registrant's principal executive officer and principal
financial officer are aware of no changes in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal half-year that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
Item 10. Exhibits.
(a)(1) Not applicable.
(a)(2) 99.CERT Separate certifications by the registrant's principal
executive officer and principal financial officer, pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a)
under the Investment Company Act of 1940, are attached.
(b) 99.906CERT A certification by the registrant's principal executive
officer and principal financial officer, pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under
the Investment Company Act of 1940, is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Northeast Investors Growth Fund
By (Signature and Title)
William A. Oates, Jr.
President
(Principal Executive Officer)
Date: September 8, 2003
By (Signature and Title)
Gordon C. Barrett
Treasurer
(Principal Financial Officer)
Date: September 8, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)
William A. Oates, Jr.
President
(Principal Executive Officer)
Date: September 8, 2003
By (Signature and Title)
Gordon C. Barrett
Treasurer
(Principal Financial Officer)
Date: September 8, 2003
Exhibit 99.CERT
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
I, William A. Oates, Jr., certify that:
1. I have reviewed this report on Form N-CSR of Northeast Investors Growth Fund;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations, changes in net assets, and
cash flows (if the financial statements are required to include a statement of
cash flows) of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of a date within 90 days prior to the filing date of
this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal half-year (the registrant's second
fiscal half-year in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: September 8, 2003
William A. Oates, Jr.
President
(Principal Executive Officer)
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act
I, Gordon C. Barrett, certify that:
1. I have reviewed this report on Form N-CSR of Northeast Investors Growth Fund;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations, changes in net assets, and
cash flows (if the financial statements are required to include a statement of
cash flows) of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures,
as of a date within 90 days prior to the filing date of this report
based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant's ability to record,
process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves
management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: September 8, 2003
Gordon C. Barrett
Treasurer
(Principal Financial Officer)
Exhibit 99.906CERT
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of section 1350, chapter 63 of title 18, United States Code), each of
the undersigned officers of Northeast Investors Growth Fund, a Massachusetts
business trust (the "Registrant"), does hereby certify, to such officer's
knowledge, that:
The report on Form N-CSR for the period ended June 30, 2003 of the Company
(the "Form N-CSR") fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, and the information contained
in the N-CSR fairly presents, in all material respects, the financial
condition and results of operations of the Registrant.
Dated: September 8, 2003
William A. Oates, Jr.
President
(Principal Executive Officer)
Dated: September 8, 2003
Gordon C. Barrett
Treasurer
(Principal Financial Officer)
The foregoing certification is being furnished solely pursuant to section
906 of the Sarbanes-Oxley Act of 2002 and is not being filed as a separate
disclosure document.
A signed original of this written statement required by Section 906 has
been provided to the Company and will be retained by the Company and furnished
to the Securities and Exchange Commission or its staff upon request.