<PAGE>
File No: 2-34540;
811-1935.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 39 [X]
------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 25 [X]
----------
(Check appropriate box or boxes.)
EAGLE GROWTH SHARES, INC.
- -----------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1200 North Federal Highway, Suite 424, Boca Raton, Florida 33432
- -----------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 561-395-2155
------------
Ronald F. Rohe, Vice President
Eagle Growth Shares, Inc.
1200 North Federal Highway, Suite 424, Boca Raton, Florida 33432
- -----------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering April 1, 2000
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on April 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
EXHIBIT INDEX LOCATED ON PAGE 42
<PAGE> 2
FORM N-1A
CROSS REFERENCE SHEET
(as required by Rule 404)
FORM N-lA PART A ITEM NO. PROSPECTUS LOCATION
- ------------------------- -------------------
Item 1. Front and Back Cover Page Front and Back Cover Page
Item 2. Risk/Return Summary:Investments, Investments, Risks and
Risks and Performance Performance
Item 3. Risk/Return Summary:Fee Table Fees and Expenses of the Fund
Item 4. Investment Objectives, Front Cover Page; Investments
Principle Investment Strategies, Risks and Performance; Investment
and Related Risks Objectives, Policies and Risks;
Item 5. Management's Discussion Annual Report-President's
of Performance Letter; Management of the Fund;
Performance
Item 6. Management, Organization and Management of the Fund;
Capital Structure Fund Service Providers
Item 7. Shareholder Information Purchase of Shares; Repurchase
and Redemption of Shares;
Computation of Net Asset Value;
Dividends, Capital Gains
Distributions and Taxes; Account
Reinstatement Privilege
Item 8. Distribution Arrangements Repurchase and Redemption of
Shares; Computation of Net Asset
Value
Item 9. Financial Highlights Information Financial Highlights
FORM N-1A PART B ITEM NO. LOCATION IN STATEMENT
- ------------------------- OF ADDITIONAL INFORMATION
-------------------------
Item 10. Cover Page and Table of Contents Cover Page and Table of Contents
Item 11. Fund History Prospectus-Investment Objectives,
Policies and Risks
Item 12. Description of the Fund and its Investment Objectives, Policies
Investments and Risks; Options Transactions;
Futures Contracts; Investment
Limitations
Item 13. Management of the Fund Management of the Fund
Item 14. Control Persons and Principal Not Applicable
Holders of Securities
<PAGE> 3
FORM N-1A PART B ITEM NO. LOCATION IN STATEMENT
- ------------------------- OF ADDITIONAL INFORMATION
-------------------------
Item 15. Investment Advisory and Management of the Fund;
Other Services Information about the
Investment Advisor; Underwriters;
Prospectus-Fund Service Providers
Item 16. Brokerage Allocation and Other Management of the Fund
Practices
Item 17. Capital Stock and Other Rights of Ownership
Securities
Item 18. Purchase, Redemption and Pricing Letter of Intent; Right of
of Shares Accumulation; Group Discount
Privilege; Automatic Investment
Plan; Account Reinstatement
Privilege; Check Withdrawal Plan;
Purchase of Shares; Redemption
and Repurchase of Shares; Tax
Sheltered Plans
Item 19. Taxation of the Fund Taxation of the Fund
Item 20. Underwriters Underwriter
Item 21. Calculations of Performance Data Calculation of Performance Data;
Comparisons and Advertisements
Item 22. Financial Statements............. Financial Statements
FORM N-1A PART C ITEM NO. LOCATION IN PART C
- ------------------------- ------------------
Item 23. Exhibits Exhibits
Item 24. Persons Controlled By or Under Persons Controlled by or under
Common Control of the Fund Common Control with Registrant
Item 25. Indemnification Indemnification
Item 26. Business and Other Connections Business and Other Connections
of Investment Advisor of Investment Advisor
Item 27. Principal Underwriters Principal Underwriters
Item 28. Location of Accounts and Records Location of Accounts and Records
Item 29. Management Services Management Services
Item 30. Undertakings Undertakings
<PAGE> 4
[FRONT COVER]
PROSPECTUS
EAGLE
GROWTH [LOGO]
SHARES, INC.
A diversified open-end investment company
seeking growth of capital.
April 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of
this prospectus. Any representation to the contrary is a criminal offense.
[BACK COVER]
EAGLE
GROWTH
SHARES, INC.
1200 North Federal Highway
Suite 424
Boca Raton, Florida 33432
(561) 395-2155
Shareholders may make inquiries regarding the Fund by calling:
-------------------------------------------------------------
| Shareholder Services |
| 1-800-525-6201 |
-------------------------------------------------------------
A Statement of Additional Information (dated April 1, 2000) which includes
additional information about the Fund, is incorporated in this prospectus
by reference.
The Fund's Statement of Additional Information, annual report and semi-
annual report are available, without charge, upon request, by writing to
the above address or by calling:
1-800-749-9933
Additional information about the Fund's investments is available in the
Fund's annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance
during its last fiscal year.
Information about the Fund including the Statement of Additional
Information, can be reviewed and copied at the Commission's Public
Reference Room in Washington D.C. You may obtain information on the
operation of the public reference room by calling the Commission at
1-202-942-8090.
Reports, material incorporated by reference, the Statement of Additional
Information, and other information about the Fund are available on the EDGAR
<PAGE> 5
Database on the Commission's Internet site at http://www.sec.gov. Copies of
this information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing the
Commission's Public Reference Section, Washington, D.C. 20549-0102.
SEC File Nos.: 2-34540 & 811-1935
TABLE OF CONTENTS PAGE
Investments, Risks and Performance............. 6
Fees and Expenses of the Fund.................. 7
Financial Highlights........................... 8
Investment Objectives and Principal Strategies. 8
Policies and Non Principal Strategies.......... 9
Principal Risks................................ 10
Purchase of Shares............................. 11
Computation of Net Asset Value................. 12
Account Reinstatement Privilege................ 14
Tax Sheltered Plans............................ 14
Repurchase and Redemption of Shares............ 14
Dividends, Capital Gains Distributions,
and Taxes................................... 15
Management of the Fund......................... 16
Performance.................................... 16
Fund Service Providers......................... 17
<PAGE> 6
INVESTMENTS, RISKS AND PERFORMANCE
OBJECTIVE
The Fund's investment objective is to achieve growth of capital.
PRINCIPAL STRATEGIES
The Fund will invest primarily in common stocks traded on the major U.S.
security exchanges. Generally, securities are selected on the basis of
their growth potential and are bought and held with long-term goals in
view.
Management considers sales and earnings growth rates, new products or
service innovations, current price earnings ratio compared to sales and
earnings growth rates, product/service demand, research capability,
operating efficiency, the possibility that a disparity exists between the
price of a stock and the value of the underlying assets, good management,
industry position, business strategy, trading liquidity, trading activity of
officers, directors and large stockholders, and protection from competition.
The effects of general market, economic, and political conditions are also
taken into account in the selection of investments.
The Fund often focuses on small and midsize companies in earlier stages of
development with a market value less than $1 billion which may lead to
greater growth potential.
The Fund's portfolio is diversified and usually consists of 20 - 30
different stocks.
The Fund's investment advisor takes into consideration the tax implications
on shareholders by trying to balance capital gains and losses resulting
from portfolio transactions.
PRINCIPAL RISKS
MARKET RISK. Stocks prices rise and decline in response to investors'
perception of the activities of individual companies and general market
and economic conditions. The value of your investment in the Fund will
vary from day to day which means that you could lose money.
DIVERSIFICATION RISK. The price of an individual security may be more
volatile and perform differently from the market as a whole. As the Fund
usually owns 20 - 30 stocks, its performance may be more vulnerable to
changes in the market value of a single company than funds with more stocks in
their portfolios.
GROWTH STOCK RISK. Growth stocks may be more volatile than other types of
stocks and may perform different from the market as a whole.
SMALLER COMPANY RISK. Small and midsize companies carry additional risks
because their earnings tend to be less predictable and they have a lower
survival rate due to smaller financial reserves. Their share prices tend
to be more volatile and their securities less liquid than larger, more
established companies.
<PAGE> 7
The following information provides some indication of the risks of investing
in the Fund by showing changes in the Fund's performance from year to year and
by showing how the Fund's average annual returns for 1, 5, and 10 years
compare with those of a broad measure of market performance. Past performance
is not predictive of future performance.
[Bar chart showing Fund's annual calendar year total returns as follows.]
1990 -20.95%
1991 33.75%
1992 8.80%
1993 1.16%
1994 -15.57%
1995 17.88%
1996 11.04%
1997 14.91%
1998 1.66%
1999 3.53%
Sales loads are not reflected in the bar chart. If these amounts were
reflected, returns would be less than those shown.
During the periods shown in the bar chart, the highest return for a quarter
was 19.32% (quarter ending March 31, 1991) and the lowest return for a
quarter was -20.05% (quarter ending September 30, 1990).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS as of 12/31/99
<S> <C> <C> <C>
1 YEAR 5 YEARS 10 YEARS
Eagle Growth Shares -5.27% 7.69% 3.59%
S & P 500 Index* 21.04% 28.54% 18.20%
*The Standard & Poors 500 (R) Composite Stock Index is a widely recognized
unmanaged index of common stock prices.
</TABLE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed
on Purchases (as a percentage of offering price) ....... 8.50%
<PAGE> 8
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from fund assets)
Management Fee..................... .75%
Other Expenses..................... 2.01%
Administrative Fee.............. .25%
-----
Total Fund Operating Expenses...... 3.01%
=====
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example illustrates the expenses that you would pay on a $10,000
investment for the time periods indicated assuming:
* a 5% annual rate of return
* redemption at the end of each time period
* Fund operating expenses remain the same
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$1,055 $1,633 $2,234 $3,844
FINANCIAL HIGHLIGHTS
The data set forth under the caption "Financial Highlights" in the Annual
Report to Stockholders for the fiscal year ended November 30, 1999 is
incorporated herein by reference. Additional information about the Fund's
investments is available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year. The Fund's annual report and
semi-annual report are available, without charge, upon request, by writing to
the address or by calling the number on the back cover of this prospectus.
INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES
Eagle Growth Shares, Inc. is an open-end, diversified investment company,
established under Maryland law in 1969, whose investment objective is to
achieve growth of capital. This goal will be sought by investing in
securities which appear to have potential for capital appreciation. The
Fund's portfolio will usually be comprised of common stocks of seasoned
companies whose prospects are believed by Management to be above average. In
addition, the Fund may also own securities of newer, less-seasoned companies,
and companies representing so-called "special situations" (see below).
Generally, securities are selected solely on the basis of their growth
potential. Management considers a company as an investment candidate for
the portfolio if its has a substantial growth rate per quarter versus the
same quarter one year earlier, commensurate increases in earnings per share or
<PAGE> 9
a high probability of such exist, a new product or service innovation is
anticipated to impact on sales or earnings, or the price earnings ratio is
less than the growth rate of sales and/or earnings. Each of these criteria
may indicate that a stock has growth potential. The advisor seeks stocks with
as many of these criteria but does not require that all or any are met prior
to investment.
Other factors used in selecting investments include expanding demand for a
company's products or services, new product developments, research
capability, increasing operating efficiency, the possibility that a
disparity exists between the price of a stock and the value of the underlying
assets, good management, industry position, business strategy, trading
liquidity, trading activity of officers, directors, and large stockholders,
and protection from competition. The effects of general market, economic, and
political conditions are also taken into account in the selection of
investments.
The Fund may also own securities of new, less-seasoned companies and companies
representing so-called "special situations." The Fund considers "less-
seasoned companies" to be those which have a record of less than three years
continuous operations, which period may include operations of a predecessor
company, and also considers smaller companies to be "less-seasoned" companies.
There are no limits on the percentage of total assets that may be invested in
special situations. A special situation would involve owning securities that,
in the opinion of the Advisor, should enjoy considerably better investor
reception in the fairly near future because of an essentially non-recurring
development that is either happening or, in the opinion of the Advisor, is
likely to happen. Such developments could include, among others, (1) a change
in management, (2) discovery of a new or unique product or technological
advance with sizable market potential, (3) an acquisition providing unusual
opportunity for market enlargement or for operating savings, (4) the adoption
of new laws that enhance prospects for an important part of the company's
business, or (5) takeovers, restructurings, leveraged buyouts, and
reorganizations.
The Fund's portfolio will be diversified and usually consists of 20 - 30
different stocks which is less than the amount of stocks held by the
typical mutual fund. This strategy stems from the belief that there are a
limited number of investment ideas available and allows the advisor to focus on
companies with the greatest potential for investment return balanced with
minimal risk.
The Fund's investment advisor takes into consideration the tax implications
on shareholders by trying to balance capital gains and losses resulting
from portfolio transactions. Unexpected declines in securities prices
sometimes cause the Advisor to take capital losses. Unexpected increases in
securities prices sometimes cause the Advisor to take capital gains. Both of
these actions are taken with full consideration given to the Fund's current
realized and unrealized gain (loss) position and its tax implications to the
shareholder.
POLICIES AND NON PRINCIPAL STRATEGIES
The Fund may, from time to time, take temporary defensive positions that
are inconsistent with the Fund's principal investment strategies in
attempting to respond to adverse market, economic, political or other
conditions. Under these conditions, the Fund may place some or all of its
<PAGE> 10
assets in cash or cash equivalents in an attempt to preserve capital and avoid
potential losses. However, it is possible the Fund may not achieve
its investment objective under these circumstances .
Normally, investments in fixed income securities will not be made except
for defensive purposes, and to employ temporarily uncommitted cash
balances. In those situations, the Fund will only invest in fixed income
securities rated at least A by Moody's Investors Service, Inc. or Standard &
Poor's Corporation.
The Fund's investment advisor endeavors to meet the Fund's objectives but
there can be no assurance that the Fund's investments will achieve the
advisor's expectations.
The Fund will not purchase securities of companies if such purchase would
cause more than 25% of the Fund's total assets to be invested in the
securities of companies in any single industry.
The investment objective of the Fund may not be changed without a vote of
the holders of a majority of the Fund's outstanding voting securities.
The Fund's portfolio usually has a low turnover ratio because securities
are bought and held with long-term goals in view and this normally results
in the infrequent replacement of the portfolio's investments. However, the
Fund does not regard the frequency of portfolio transactions as a limiting
factor in its investment decisions.
Portfolio securities may be sold without regard to the length of time held
when management believes that such securities have reached their maximum
performance level, and when the Fund's assets can be more profitably
utilized in other investments. To the extent that short-term capital gains
are realized, such gains will be taxed to the shareholder as ordinary income.
The Fund may buy and sell covered (options on securities owned by the
Fund) and uncovered (options on securities not owned by the Fund) call and
put options which are issued by the Options Clearing Corporation and listed
on national securities exchanges. Generally, options would be used either to
generate income or to limit the downside risk of a portfolio holding.
The Fund may buy and sell financial futures contracts and options on such
contracts. Futures contracts may be used to implement a number of different
hedging strategies.
PRINCIPAL RISKS
MARKET RISK. Stocks prices rise and decline in response to investors'
perception of the activities of individual companies and general market
and economic conditions. The value of your investment in the Fund will
vary from day to day which means that you could lose money. Political
upheaval and social unrest, wars, threat of war, and the numerous factors of
the human race have an impact on economic conditions. In turn, this
influences the decisions to retain different stocks in the portfolio or to
reinvest in the stocks of companies which are better suited to a changing or
changed environment. The portfolio may suffer losses in this replacement
process.
<PAGE> 11
DIVERSIFICATION RISK. The price of an individual security may be more
volatile and perform differently from the market as a whole. As the Fund
usually owns 20 - 30 stocks, its performance may be more vulnerable to
changes in the market value of a single company than funds with more stocks in
their portfolios. For example, a portfolio owning 20 stocks of equal value
will be influenced twice as much by the fortunes or misfortunes of one company
than a portfolio holding 40 stocks of equal value.
GROWTH STOCK RISK. Growth stocks may be more volatile than other types of
stocks and may perform different from the market as a whole. Growth stocks
tend to be valued by the market on the future prospects rather than
financial strength. A dampening of optimism for the future can negatively
effect growth stocks more than other types.
SMALLER COMPANY RISK. Small and midsize companies carry additional risks
because their earnings tend to be less predictable and they have a lower
survival rate due to smaller financial reserves. Their share prices tend
to be more volatile and their securities less liquid than larger, more
established companies. Investments in special situations may pose particular
risks. The market price of such securities may be more volatile to the extent
that the expected benefits from the non-recurring developments do not
materialize. Further, with regard to anticipated corporate restructurings,
included among the non-recurring developments of special situations,
securities issued to finance such restructurings may have special credit risks
due to the highly leveraged conditions of the issuer. In addition, such
issuers may lose experienced management as a result of the restructurings.
PURCHASE OF SHARES
Shares of the Fund are continuously offered at the public offering price,
which is equal to the net asset value of the shares plus the applicable
sales charge (see below). Shares may be purchased by completing the Fund
Account Application Form which should be remitted together with payment for
the shares to Firstar Bank, N.A., P.O. Box 640115, Cincinnati, OH 45264-0115.
Investors who are interested in purchasing shares may also contact the Fund at
1-800-749-9933. Purchases can also be made through investment dealers who
have sales agreements with Baxter Financial Corporation, the Fund's
underwriter. Purchases of shares will be made in full and fractional shares
calculated to three decimal places. In the interests of economy and
convenience, certificates for shares of stock will not be issued except upon
written request of the shareholder. Certificates for fractional shares will
not be issued.
Once an account is established, subsequent investments should be sent to
Firstar Bank, N.A., P.O. Box 640115, Cincinnati, OH 45264-0115. A
confirmation will be mailed to the investor showing the shares purchased, the
exact price paid for the shares, and the total number of shares that are owned.
The minimum initial investment and minimum account balance for the Fund is
$500 and there is no minimum investment amount for subsequent purchases.
The Fund retains the right to waive the minimum initial investment at its
discretion.
Shareholders who participate in the Group Discount Privilege, Automatic
Investment Plan and Check Withdrawal Plan will receive confirmations of
purchases and redemptions of Fund shares on a quarterly basis, not later
than five business days after the end of each calendar quarter in which a
<PAGE> 12
transaction takes place. The confirmation will show the date of each
transaction during the period, number and price paid or received for shares
purchased or redeemed, including dividends and distributions, and total number
of shares owned by the investor as of the end of the period.
COMPUTATION OF NET ASSET VALUE
The price of Fund shares is based on the Fund's net asset value. The Fund's
net asset value is determined using the market price of the Fund's
investment securities .
Net asset value is calculated as of the close of the New York Stock
Exchange, generally 4:00 p.m., New York City time, on each day the New
York Stock Exchange is open for trading.
Your purchase price is made at the public offering price, which is equal to
the net asset value next determined after receipt of a purchase order
together with payment for the shares plus applicable sales charges as
shown in the table below. In addition, new accounts must include a completed
account application. Purchases of $100,000 or more may be made at net asset
value, without the imposition of a sales charge.
The public offering price is computed once daily as of the close of the New
York Stock Exchange for each day the New York Stock Exchange is open.
Orders for shares of the Fund received by dealers prior to the close of
the New York Stock Exchange are confirmed at the offering price next calculated
as of the close of the New York Stock Exchange, provided the order is received
by the underwriter prior to that time. (It is the responsibility of the
dealers to transmit such orders so that they will be received by the
underwriter prior to the close of the New York Stock Exchange). Orders
received by dealers subsequent to that time will be confirmed at the offering
price effective at the close of the New York Stock Exchange on the next
business day.
The following table shows the sales charges applicable to purchases of Fund
shares.
Sales Charge as
a % of the:
-------------------
Amount Offering
Purchases of Invested Price
----------------------------------- -------- --------
$ 9,999 or less.................. 9.29% 8.50%
$ 10,000-$24,999, inclusive....... 8.40 7.75
$ 25,000-$49,999, inclusive....... 6.66 6.25
$ 50,000-$99,999, inclusive....... 4.17 4.00
$ 100,000 or more.................. 0.00 0.00
The above scale is applicable to purchases of Fund shares and combined
purchases of shares of the Fund and Philadelphia Fund, Inc. made at one
time by an individual; an individual, his spouse and children under the age
of 21; and a trustee or other fiduciary of a single trust estate or single
fiduciary account. Employee benefit plans qualified under Section 401 of the
Internal Revenue Code, and organizations exempt from taxation under Sections
501(c)(3) or (13) of the Internal Revenue Code, may purchase shares at one-
half the sales charges listed above.
<PAGE> 13
In addition, lower sales charges may be achieved by using any of the
following special purchase plans:
* Letter of Intent
* Right of Accumulation
* Group Discount Privilege
Also available from the Fund are the following privileges you may wish to
utilize:
* Automatic Investment Plan
This plan enables shareholders to make regular monthly
investments in shares through automatic charges to their bank
checking accounts.
* Check Withdrawal Plan
A convenient method whereby a monthly or a quarterly check
will be mailed to you at no charge.
Complete details regarding these special purchase plans and privileges may
be obtained by writing or calling the Fund, or by obtaining a copy of the
Statement of Additional Information.
Shares of the Fund may also be purchased at net asset value, without sales
charge, by persons who are members of a group which is not organized for
the sole purpose of purchasing shares of the Fund and which meets the
following criteria:
1. Group investments must be sent directly to the fund's
custodian at the address shown under "Purchases of Shares"
by a common remitter which is bonded as well as licensed and
regulated by a state regulatory agency;
2. The group must include at least 750 members or participants;
3. Remittances on behalf of the group must be made at least
once per month; and
4. The common remitter must have a written agreement with each
participant or member of the group governing the remittance
of the investor's funds.
Investments in the Fund on behalf of group participants will be made at the
net asset value of the shares of the Fund calculated next after receipt by
the Fund's custodian of the investors' funds sent by the common remitter.
The Fund's $500 minimum initial investment and minimum account balance
shall be waived for shareholders who are active participants in a group
purchase plan approved by the Fund, since shareholders participating in
such plans generally make smaller investments on a regular basis.
Shareholders with inactive accounts below the $500 minimum account balance
who receive notice of redemption for the first time from the Fund may
purchase shares without the imposition of a sales charge in an amount
sufficient to meet the minimum account balance.
<PAGE> 14
The Fund reserves the right to terminate the privileges to invest in Fund
shares at net asset value without sales charge at any time after 60 days
written notice to the investors affected thereby. The Fund reserves the
right to terminate the policy to waive the Fund's minimum initial investment
and minimum account balance at any time after 60 days written notice to the
investors affected thereby.
ACCOUNT REINSTATEMENT PRIVILEGE
A stockholder may, after he has liquidated any of his shares of the Fund on
written request to the Fund, reinstate his account without payment of any
additional sales charge, at net asset value next calculated after receipt
of the reinstatement request, provided that he meets the qualifications listed
below. The Account Reinstatement Privilege may be exercised only once except
with respect to shares held under an Eagle Growth Shares Investing Program,
and the amount reinvested may not exceed the amount of the redemption proceeds
received on the liquidation of such shares. In addition, the reinstatement
must be completed within thirty days after the liquidation.
A liquidation of Fund shares is considered a sale under the Internal
Revenue Code and the "wash sale" provisions of Section 1091 of the Code
will be applicable to an account reinstatement if the cost of the
liquidated shares exceeds the proceeds of liquidation.
TAX SHELTERED PLANS
The Fund makes available through its underwriter the following Individual
Retirement Accounts (IRA):
* Regular IRA
* Roth IRA
* SIMPLE IRA
* SEP-IRA
For self-employed individuals, partnerships, and corporations there is
available through the Fund a prototype Profit Sharing/Money Purchase
Pension Plan which has been approved by the Internal Revenue Service.
Forms to establish any of the above plans are available from the Fund or
Baxter Financial Corporation.
REPURCHASE AND REDEMPTION OF SHARES
Shares may be resold to the Fund or presented for redemption. Shares for
which certificates have been issued will be repurchased by Baxter
Financial Corporation, the Fund's underwriter, if they are properly
tendered (see below) through an authorized dealer. The repurchase price
received by the investor will be the net asset value of such shares next
calculated after receipt by Baxter Financial Corporation of the repurchase
order. If the order for repurchase of Fund shares is received by the dealer
prior to the close of the New York Stock Exchange and received by Baxter
Financial Corporation prior to that time, the shares will be repurchased at
the price calculated as of the close of the New York Stock Exchange on that
day. Where certificates are tendered for repurchase through a dealer, neither
the Fund nor Baxter Financial Corporation charges any fee on the transaction;
however, the dealer may charge the shareholder a fee for executing the order.
<PAGE> 15
Shares of the Fund for which no certificates have been issued (those held
by American Data Services, Inc. ("ADS") and shares for which certificates have
been issued may be redeemed by mailing a written request for redemption to
American Data Services, Inc., 150 Motor Parkway, Suite 109, Hauppauge, NY
11788. Where certificates have been issued they must accompany the investor's
written redemption request. The value of shares tendered for redemption shall
be equal to the net asset value of such shares next calculated after receipt by
ADS of a proper written redemption request.
Shares for which certificates have been issued which are presented for
redemption or repurchase must be duly endorsed by the registered owner(s)
with signatures guaranteed by a member firm of the New York Stock Exchange
or a regional stock exchange, by a trust company, by a commercial bank, by an
overseas bank with a New York City correspondent, by certain credit unions, or
by certain savings associations. Also, written requests for redemption of
shares for which certificates have not been issued must be signed and have
signatures guaranteed in the same manner. Any questions regarding which
institutions may guarantee signatures should be directed to American Data
Services, Inc. at 1-800-525-6201.
The redemption or repurchase price will depend on the prevailing market
prices of the portfolio securities owned by the Fund (at the time the
applicable redemption proceeds are calculated) and, therefore, may be more
or less than the purchase price. The Fund's policy is to pay promptly when
shares are presented for redemption. Payment will be made within seven days
after the date of tender except when exchanges are closed or an emergency
exists. The Fund has reserved the right to redeem Fund shares in kind rather
than in cash should this be necessary in accordance with the applicable rules
of the Securities and Exchange Commission.
The Fund reserves the right, after sending the shareholder at least sixty
(60) days prior written notice, to redeem the shares held by any
shareholder if the shareholder's account has been inactive for a period of six
(6) months preceding the notice of redemption and the total value of the
holder's shares does not exceed the Fund's $500 minimum account balance as of
the proposed redemption date. An account will be considered inactive if no new
purchases have been made (excluding shares purchased through the reinvestment
of dividends and capital gains) within the specified time period. Shareholders
who receive notice of redemption for the first time may purchase shares of the
Fund at net asset value without paying any sales charge, in the amount
necessary to bring the account balance up to the minimum within the required
time period. Any redemptions by the Fund pursuant to this procedure will be at
the net asset value of the shares calculated as of the close of the New York
Stock Exchange on the stated redemption date and a check for the redemption
proceeds will be sent to the shareholder not more than seven (7) days later.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAXES
The Fund's policy is to pay all of its earnings out to shareholders
annually on approximately December 31 each year as dividends and capital
gain distributions.
Dividends, together with distributions of any short-term capital gains, are
taxable as ordinary income. Shareholders pay Federal income taxes at
capital gains rates on realized long-term capital gains which are
distributed to them, whether or not reinvested in the Fund.
<PAGE> 16
Advice as to the tax status of each year's dividends and distributions will
be mailed to shareholders annually. Dividends and capital gains distributed
in January ordinarily will be included in the shareholder's income for the
previous year. Shareholders may elect to receive income dividends and capital
gains distributions in additional shares of the Fund at net asset value, or to
take cash.
Shareholders who sell Fund shares will realize a gain or loss on those
shares based on the difference between the purchase price and the sale
price of each share. For shares held less than one year, your gain or loss
is considered to be short term and is taxable as ordinary income. For shares
held longer than one year, your gain or loss is considered to be long term and
is taxable at your capital gains rate.
MANAGEMENT OF THE FUND
Baxter Financial Corporation ("BFC" or the "Advisor") is employed by the
Fund to furnish investment advisory services to the Fund. Donald H.
Baxter, who is President, Treasurer, Director, and sole stockholder of the
Advisor, is also responsible for selecting brokers and executing Fund
portfolio transactions; and may effect securities transactions with brokers
who have sold shares of the Fund. Mr. Baxter is primarily responsible for
the day to day management of the Fund's portfolio. He has been the Fund's
portfolio manager since May, 1987. Mr. Baxter is also President and Director
of the Fund and of Philadelphia Fund, Inc., a registered investment company.
BFC also serves as investment advisor to institutional and individual
investors, including Philadelphia Fund, Inc.
For the fiscal year ended November 30, 1999, the Fund paid BFC total
advisory fees equal on an annual basis to .75% of the average net assets.
PERFORMANCE
Total return data may from time to time be included in advertisements
pertaining to the Fund. Standardized "total return" of the Fund refers to
the average annual compounded rates of return over certain periods of time
that would equate the initial amount invested at the beginning of a stated
period, from which the maximum sales load is deducted, to the ending
redeemable value of the investment. Standardized total return also includes
reinvestment of dividends and distributions over the period for which
performance is shown. The Fund may advertise total return figures which shall
represent Fund performance over one or more time periods, including (1) one-
year to date, and (2) May 1, 1987 to date, the latter being the date on which
Mr. Donald H. Baxter assumed exclusive portfolio management responsibilities
for the Fund. Non-standardized total return quotations may also be presented
along with standardized figures. Such quotations may reflect investment at
reduced sales charge levels or at net asset value without the imposition of a
sales load. Any quotation of total return would be higher if it does not
reflect the maximum sales charge or any voluntary expense reimbursements.
The Fund may also advertise its investment performance by comparison to
market indices such as the S&P Index and to mutual fund indices such as
those reported by Lipper Analytical Services, Inc. Such indices may group
funds by investment objective (in the Fund's case, typically in the "Growth
Funds" Category) or may involve a more general ranking reflecting the Fund's
overall performance as compared to any number or variety of funds, regardless
of investment objective.
<PAGE> 17
FUND SERVICE PROVIDERS
INVESTMENT ADVISOR, ADMINISTRATOR, AND DISTRIBUTOR
Baxter Financial Corporation
1200 North Federal Highway, Suite 424
Boca Raton, Florida 33432
CUSTODIAN
Firstar Bank, N.A.
P.O. Box 640115
Cincinnati, OH 45264-0115
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
American Data Services, Inc.
150 Motor Parkway
Suite 109
Hauppauge, NY 11788
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young
Great Valley Corporate Center
30 Valley Stream Parkway
Malvern, PA 19355
AUDITORS
Briggs, Bunting & Dougherty, LLP
2 Logan Square, Suite 2121
Philadelphia, PA 19103
<PAGE> 18
PART B
EAGLE GROWTH SHARES, INC.
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 2000
This statement is not a prospectus, but should be read in conjunction with the
Fund's current prospectus (dated April 1, 2000). To obtain the prospectus
please write to Eagle Growth Shares, Inc., 1200 North Federal Highway, Suite
424, Boca Raton, Florida 33432
Or call:
Nationwide 1-800-749-9933
Florida 1-561-395-2155
The information required by Item 11 "Fund History" of this Statement of
Additional Information is incorporated by reference and is located in the
Fund's prospectus under the heading "Investment Objectives and Principal
Strategies". The information required by Item 22 "Financial Statements"
of this Statement of Additional Information is incorporated by reference
and is located in the Fund's Annual Report dated November 30, 1999.
Table of Contents Page
----------------- ----
Investment Objectives, Policies and Risks. . . . . . 19
Options Transactions . . . . . . . . . . . . . . . 20
Futures Contracts . . . . . . . . . . . . . . . . 22
Taxation of the Fund . . . . . . . . . . . . . . . . 23
Investment Limitations . . . . . . . . . . . . . . . 24
Rights of Ownership . . . . . . . . . . . . . . . . 25
Letter of Intent . . . . . . . . . . . . . . . . . . 26
Right of Accumulation . . . . . . . . . . . . . . . 26
Group Discount Privilege . . . . . . . . . . . . . . 27
Automatic Investment Plan . . . . . . . . . . . . . 27
Check Withdrawal Plan . . . . . . . . . . . . . . . 28
Tax Sheltered Plans . . . . . . . . . . . . . . . . 28
Account Reinstatement Privilege. . . . . . . . . . . 29
Computation Of Net Asset Value . . . . . . . . . . . 29
Purchase of Shares . . . . . . . . . . . . . . . . . 29
Redemption and Repurchase of Shares. . . . . . . . . 30
Management of the Fund . . . . . . . . . . . . . . . 30
Officers and Directors . . . . . . . . . . . . . . 30
Brokerage. . . . . . . . . . . . . . . . . . . . . 32
Information about the Investment Advisor . . . . . . 33
Underwriters . . . . . . . . . . . . . . . . . . . . 34
Independent Certified Public Accountants . . . . . . 34
Calculation of Performance Data. . . . . . . . . . . 34
Comparisons and Advertisements . . . . . . . . . . . 36
Financial Statements . . . . . . . . . . . . . . . . 36
<PAGE> 19
INVESTMENT OBJECTIVES, POLICIES AND RISKS
-----------------------------------------
While the following are not considered to be principal policies of the Fund
they may be employed as described herein.
The Fund may, from time to time, invest in restricted securities and may be
deemed to be a statutory underwriter if it distributes any such restricted
securities. Such investments may generally be made at advantageous prices.
The Fund may not resell any such securities unless the Federal and any
applicable state registration requirements respecting such securities are
first satisfied, or an exemption from such registration requirements is
available. The restrictions upon the disposition of such securities may
adversely affect their marketability and the Fund generally may not be able to
dispose of such securities at prices for unrestricted securities of the same
class of the same issuer. The Fund will not purchase restricted securities if
immediately after such purchase more than 10% of the value of the Fund's net
assets would be invested in such securities or other assets for which market
quotations are not readily available. Ordinarily, the Fund does not
expect to have more than 5% of the Fund's total net asset value invested in
restricted securities. If the fair value of restricted securities or other
assets not having readily available market quotations previously purchased
exceeds 10% of the value of the Fund's assets during the period such
securities are held, appropriate steps will be taken in the management of the
balance of the portfolio to achieve adequate liquidity. Restricted securities
are valued at fair value calculated by delegated persons acting in accordance
with methods of valuation determined in good faith by the Board of Directors.
The Board will review the appropriateness of such methods of valuation at
proper intervals. If it becomes necessary to register such securities before
resale with the appropriate federal and state authorities, the Fund may have
to bear part or all of the expenses of any such registration if an agreement
has not been reached with the issuer of the securities to bear part or all of
these costs.
The Fund may also invest in fixed income securities including securities
convertible into common stocks where such investments appear to offer
opportunities for capital appreciation. When the Fund invests in fixed income
securities for this reason, the Fund may purchase such securities which are
rated B-2 or lower by Moody's or B- or lower by Standard & Poor's. These
fixed income debt securities are deemed to involve a higher risk level than
investment grade debt securities. The Fund may also invest in unrated
securities when Baxter Financial Corporation (the "Advisor") believes that the
terms of such securities and the financial condition of the issuer are such
that the protection afforded limits risks to a level similar to that of rated
securities in which the Fund may invest. Fixed income debt securities
offer a potential for capital appreciation because the value of the fixed
income security generally fluctuates inversely with interest rates.
The Fund has authority to invest up to 20% of its assets in the securities of
foreign companies. However, historically the Fund has not invested more than
5% of its assets in foreign securities. Investments in foreign securities
involve risks which are in addition to the usual risks inherent in domestic
investments. There may be less publicly available information about foreign
companies comparable to the reports and ratings published about companies in
the United States. Foreign companies are not generally subject to uniform
accounting, auditing, and financial reporting standards, and auditing
practices and requirements may not be comparable to those applicable to United
States companies. Foreign investments may also be affected by fluctuations in
<PAGE> 20
the relative rates of exchange between the currencies of different nations, by
exchange control regulations, and by indigenous economic and political
developments. There is also the possibility of nationalization or other
government policies or instability which could affect investments in
securities of issuers in those nations.
The Fund has authority to buy securities of companies organized as real estate
investment trusts ("REITS"). REITS pool investors' funds for investment
primarily in income producing real estate or real estate related loans or
interests.
OPTIONS TRANSACTIONS
- --------------------
The Fund may sell covered call options (options on securities owned by the
Fund) and uncovered call options (options on securities not owned by the Fund)
which are issued by the Options Clearing Corporation and listed on national
securities exchanges. This practice may enable the Fund to increase its income
because the buyer of the option pays the Fund a sum of cash (a premium) for the
option whether or not the buyer ultimately exercises the option. The amount of
the premium is determined on the exchange upon which the option is traded, and
will depend on various factors, such as the market price and volatility of the
underlying securities and the expiration date and exercise price of the option.
Ordinarily, call options would be sold on stocks whose market value is not
expected to appreciate above the option exercise price by the expiration date
of the option, or when the premium received plus the exercise price of the
option exceeds the price at which the Advisor expects the underlying
securities to be trading by the expiration date of the option. When the Fund
sells an option it is obligated to deliver the underlying securities until the
expiration date of the option (which may be one, two, three, six or nine
months from the date the option is issued) if the option is exercised. If the
option is exercised, the Fund would deliver the underlying securities to the
buyer if the option was a covered option or buy the underlying securities to
deliver to the purchaser of the option if the option was uncovered.
The sale of covered call options should enable the Fund to increase its
income through the receipt of premium income on the call options it sells.
However, the Fund risks limiting potential gains the Fund would otherwise
realize if the market value of the underlying securities of a covered call
option appreciates above the exercise price of the option because the
purchaser will then exercise the option. In the case of uncovered call
options, the Fund risks a loss upon closing its option position if the market
price of the optioned securities at the time the option is exercised exceeds
the exercise price plus the premium received by the Fund.
The Fund may purchase call options when the Advisor believes that the market
price of the underlying securities will exceed the strike price of the option,
plus the premium the Fund must pay for the option, by the option expiration
date. If the market price of the underlying securities appreciates after the
option is purchased, the price of the option also will appreciate, thereby
affording the Fund the opportunity to resell the option at a profit or, as an
alternative, to purchase the underlying securities at the option exercise
price anytime until or on the expiration date and retain or resell the
underlying securities at their appreciated value. Purchasing call options,
however, entails the risk that the market price of the underlying
securities may decrease and the market value of the call option will also
<PAGE> 21
decrease, and in these circumstances, while the Fund may sell the option, the
transaction is likely to result in a loss.
The Fund may also buy and sell put options. For the sale of a put option the
Fund receives a premium, which is determined on the exchange on which the put
is traded. The amount of the premium is influenced by the same factors as
influence the market price of call options.
The sale of a put option obligates the seller to purchase the underlying
securities at the option exercise price anytime until or on the expiration
date if the option is exercised. Alternatively, the seller may satisfy its
obligation by purchasing an identical put option for delivery to the purchaser
of the put option.
The option will be exercised if the market price of the underlying securities
is less than the strike price of the option on the expiration date of the
option. The Fund may sell put options to obtain premium income on underlying
securities whose market price the Advisor expects to increase or remain
relatively constant for the duration of the option. They may also be sold
when the Advisor believes the underlying securities are an attractive long-
term investment, despite a possible short term decline in their market
value. In these circumstances, the Fund would purchase the underlying
securities pursuant to the option rather than buy an identical put option to
close the transaction, if the option is exercised by the buyer.
The Fund also may buy put options to protect against a decline in the
market value of underlying securities that are held in the Fund's investment
portfolio. In return for paying a premium to the seller of the put option,
the Fund acquires the right to sell the underlying securities to the seller of
the option at the exercise price, thereby protecting itself against a decline
in the market price of the underlying securities. If, however, at the
expiration date of the option, the market value of the underlying securities
has not declined below the option exercise price, the Fund will not exercise
its put option.
Puts and calls also may be used in combination, to hedge investments in
underlying securities. For example, if the Fund has bought a call that
entitles it to purchase underlying securities at a specified strike price, it
may also buy a put, which enables it to sell the same securities at a
specified strike price. Put options, as well as call options, are frequently
available on identical underlying securities with identical expiration dates,
but at different strike prices. In this type of hedging transaction, the Fund
might seek to buy a put option whose strike price is higher than the strike
price of an otherwise identical call option on the same underlying securities,
thereby obtaining the right to buy the underlying securities at a lower price
than the price at which it would have the right to sell the securities.
The success of options transactions depends largely on the ability of the
Advisor to predict future stock and option movements. Further, an option
position may be closed out only on an exchange which provides a secondary
market for an option of the same series. Although the Fund will generally
purchase or sell only those options for which the Advisor believes there is an
active secondary market, there is no assurance that a liquid secondary market
on an exchange will exist for any particular option. The inability to
close-out an option position could result in a loss to the Fund.
When the Fund sells an uncovered call option or a put option, it will be
required to maintain in a segregated account, which will be "marked to market,
<PAGE> 22
" with its custodian bank cash or highly liquid, short-term U.S. government
securities in an amount equal to its obligation under the call or put option.
With respect to a put option this will be an amount equal to the price of the
underlying securities it will be obligated to buy if the option is exercised.
With respect to a call option, it would be the market value of the underlying
securities it is obligated to deliver if the option is exercised.
FUTURES CONTRACTS
- -----------------
The Fund may buy and sell financial futures contracts and options on futures
contracts. Futures contracts provide for the future sale by one party and
purchase by another party of a specified amount of specific securities at a
specified future time and at a specified price. Financial futures contracts
which are standardized as to maturity date and the underlying financial
instruments are traded on national futures exchanges, and include futures
contracts on equity securities, debt securities and foreign currencies.
Although index futures contracts by their terms call for settlement in cash,
in most cases the contracts are closed out before the settlement date.
Closing out an open futures position is done by taking an opposite position
("buying") a contract which has previously been "sold" or "selling" a contract
previously purchased in an identical contract to terminate the position.
Brokerage commissions are incurred when a futures contract is bought or sold.
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Therefore, it might not be possible to close a
futures position. In the event of adverse price movements, the Fund would
continue to be required to make daily cash payments to maintain its required
margin. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily margin requirements at a time when it
may be disadvantageous to do so. In addition, the Fund may be required to
make delivery of the securities underlying futures contracts it holds.
The Fund will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts can be substantial, due to
the low margin deposits required. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss
(as well as gain) to the investor. There is also the risk of loss by the Fund
of margin deposits, in the event of bankruptcy of a broker with whom the Fund
has an open position in the futures contract or related option.
The Fund may use financial futures and options thereon to implement a
number of hedging strategies. For example, because the purchase of a
financial futures contract requires only a relatively small initial margin
deposit, the Fund could remain exposed to the market activity of a broad-based
number of stocks contained in the futures index, while maintaining liquidity
to meet redemptions. Also, the Fund might temporarily invest available cash
in stock index futures contracts or options pending investments in securities.
These investments entail the risk that an imperfect correlation may exist
between changes in the market price of an index futures contract and the value
of the securities that comprise the index.
<PAGE> 23
There are also limited risk strategies that involve combinations of options
and futures positions. For example, the Fund might purchase a futures
contract in anticipation of higher prices while simultaneously buying an
option on a futures contract to protect against the risk of lower prices.
Further, inasmuch as the Fund may purchase foreign securities which are
denominated in foreign currencies, the Fund may purchase foreign currency
futures contracts in order to hedge against fluctuations in foreign currency
exchange rates.
After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
"variation" (additional) margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the Fund. Variation margin payments are made to and from the
futures broker for as long as the contract remains open. The Fund expects to
earn income on its margin deposits. The Fund will not enter into futures
contract transactions to the extent that, immediately thereafter, the sum of
its initial and variation margin deposits on open contracts exceeds 5% of the
market value of the Fund's total assets. Minimum initial margin requirements
are established by the futures exchange and may be changed. Brokers may
establish deposit requirements which are higher than the exchange minimums.
When the Fund has a long position in a futures contract or sells a put option,
it must establish a segregated account with its custodian bank containing cash
or highly liquid, short-term U.S. government securities in an amount equal to
the purchase price of the contract or the strike price of the put option (less
any margin on deposit). When the Fund sells a call option on a futures
contract, it must establish a segregated account with its custodian bank
containing cash or highly liquid, short-term U.S. government securities in an
amount that, when added to the amount of the margin deposit, equals the
market value of the instruments underlying the call option (but are not less
than the strike price of the call option).
TAXATION OF THE FUND
--------------------
The Fund intends to continue to qualify for tax treatment under Subchapter M
of the Internal Revenue Code and to distribute to shareholders all of its net
investment income and realized net capital gains (in excess of any available
capital loss carryovers) to relieve the Fund from all Federal income tax.
Should the Fund not qualify it would be subject to Federal income tax on its
earnings and profits.
Except for transactions the Fund has identified as hedging transactions,
the Fund is required for federal income tax purposes to recognize as income
for each taxable year its net unrealized gains and losses on certain futures
contracts as of the end of the year as well as those actually realized during
the year. In most cases, any gain or loss recognized with respect to a
futures contract is considered to be 60% long-term capital gain or loss and
40% short-term capital gain or loss, without regard to the holding period of
the contract. Furthermore, sales of futures contracts which are intended to
hedge against a change in the value of securities held by the Fund may affect
the holding period of such securities and, consequently, the nature of the
gain or loss on such securities upon disposition.
<PAGE> 24
In order for the Fund to continue to qualify for Federal income tax treatment
as a regulated investment company, at least 90% of its gross income for its
taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, gains from the sale of
securities and other income derived with respect to the Fund's business of
investing in securities.
The Fund will distribute to shareholders annually any net capital gains
which have been recognized for federal income tax purposes, including
unrealized gains at the end of the Fund's fiscal year on futures transactions.
Such distributions will be combined with distributions of capital gains
realized on the Fund's other investments.
INVESTMENT LIMITATIONS
----------------------
The Fund has adopted the following restrictions which are designed to reduce
certain risks inherent in securities investment and which may be changed with
the approval of the lesser of: (i) at least 67% of the voting securities of
the Fund present at a meeting, if the holders of more than 50% of the
outstanding voting securities are present or represented by proxy, or (ii)
more than 50% of the outstanding voting securities of the Fund.
The Fund will not:
Borrow money, except from banks for emergency purposes, and then not in
excess of 5% of the value of its total assets;
Invest more than 25% of the value of its assets in companies in any one
industry;
Purchase securities on margin;
Make any purchase resulting in more than 5% of the value of its assets
being invested in the securities of any one company, except U.S.
Government securities;
Purchase more than 10% of any class of securities of any company. For
this purpose, all debt securities of an issuer and all series of
non-voting preferred stock of an issuer are each considered as one class
of securities;
Purchase commodities or commodity contracts, except the Fund may purchase
and sell financial futures contracts and options thereon;
Purchase interests in real estate, except as may be represented by
securities for which there is an established market;
Purchase securities of another open-end investment company, except in
connection with a plan of merger, consolidation, or acquisition of
assets. It may, however, purchase shares of closed-end investment
companies where such purchase is in the open market and no commission or
profit to a sponsor or dealer results other than a customary broker's
commission. The advisory fee of the Fund will not be reduced for any
assets invested in shares of closed end investment companies;
<PAGE> 25
Make short sales of securities. The Fund does not consider the sale of
uncovered call options or financial futures contracts to be short sales;
Make loans, except through the purchase of debt securities of a type
commonly held by institutional investors;
Issue senior securities, except the Fund may buy and sell options;
Act as an underwriter of the securities of any other issuer, except the
Fund may invest not more than 10% of the value of its net assets at the
time the investment is made in securities which are not readily
marketable because registration under the federal securities laws would
be required ("restricted securities").
Changes in the following policies are not subject to shareholder approval.
The Fund will not purchase securities for which a bona fide market does
not exist (including, but not limited to, "restricted," foreign
securities not listed on a recognized domestic or foreign securities
exchange, and other illiquid securities) if immediately after such
purchase more than 10% of the Fund's net assets will be invested in such
securities.
The Fund may invest in repurchase agreements. Investments in repurchase
agreements involve certain risks. For example, if the seller of the
underlying securities defaults on its obligation to repurchase the
securities at a time when their value has declined, the Fund may incur a
loss upon disposition. If the seller becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws, a
bankruptcy court may determine that the underlying securities are
collateral not within the control of the Fund and, therefore, subject to
sale by the trustee in bankruptcy. Finally, it is possible that the Fund
may not be able to substantiate its interest in the underlying
securities. While management acknowledges these risks, it believes that
they can be controlled through stringent security selection criteria and
careful monitoring procedures.
RIGHTS OF OWNERSHIP
-------------------
Each share of common stock of the Fund has an equal interest in the Fund's
assets, net investment income, any net capital gains, and is entitled to one
vote. The shares are non-assessable, fully transferable, and redeemable at
the option of the holder. They may be sold only for cash or in connection
with mergers, stock distributions and similar transactions. They have no
conversion, pre-emptive or other subscription rights. Shareholders having
questions about the Fund or their accounts may contact the Fund at the address
or telephone number shown on the cover page of this prospectus.
Ordinarily, the Fund does not intend to hold an annual meeting of shareholders
in any year except when required under the Investment Company Act of 1940.
<PAGE> 26
LETTER OF INTENT
----------------
An investor can qualify for a reduced sales charge as set forth in the
prospectus by signing a non-binding Letter of Intent stating his intention to
invest at least $10,000 during a 13 month period. The Letter of Intent is
applicable to the aggregate amount of purchases of shares of the Fund and
combined purchases of shares of the Fund and Philadelphia Fund, Inc. made by
an individual; an individual, his spouse and children under the age of 21; and
a trustee or other fiduciary of a single trust estate or single fiduciary
account, as well as Employee Benefit Plans qualified under section 401 of the
Internal Revenue Code and organizations exempt from taxation under sections
501(c)(3) or (13) of the Code. The Letter must be filed within 90 days after
the first purchase to be included under it. The value of shares of the Fund
and/or Philadelphia Fund Inc., previously purchased, including shares held
under Eagle Growth Shares or Philadelphia Fund Single Payment Investing
Programs and Systematic Investing Programs upon which all scheduled payments
have been made, will be included as a credit toward completion of the Letter
of Intent to the extent that such shares are held during the 13 month period
of the Letter of Intent when the investor so requests. The amount to be
credited will be equal to the offering price of the shares held on the date of
the first purchase under the Letter of Intent. The initial purchase under a
Letter of Intent must be in an amount of at least $1,000 and subsequent
purchases not less than $500.
Five percent of the total dollar amount specified in the Letter of Intent is
held in escrow by Firstar Bank, N.A. in shares. Any dividends or capital gains
distributions on the escrowed shares are credited to the shareholder. Upon
completion of the total dollar amount specified in the Letter the escrowed
shares are released. If total purchases under the Letter are less than the
amount specified therein the shareholder is required to remit to the
underwriter an amount equal to the difference between the dollar amount of
sales charges actually paid and the amount which would have been paid if the
total purchases made under the Letter were made at one time. If the
shareholder does not pay such difference within twenty days after having
received written request from the underwriter, the Custodian is authorized to
redeem so many of the escrowed shares to realize such difference and release
any remaining full shares and cash for any fractional shares to the
shareholder. There is no obligation upon the investor to purchase or the Fund
to sell the full indicated amount.
RIGHT OF ACCUMULATION
---------------------
The reducing scale of sales charges set forth in the prospectus also apply to
subsequent purchases of the Fund's shares by an individual; an individual, his
spouse and children under the age of 21; or a trustee or other fiduciary of a
single trust estate or single fiduciary account where the aggregate
investments in shares of the Fund and/or Philadelphia Fund, Inc., including
shares held under Eagle Growth Shares or Philadelphia Fund Single Payment
Investing Programs and Systematic Investing Programs upon which all scheduled
payments have been made is $10,000 or more. For example, a stockholder who
owns shares of the Fund and/or Philadelphia Fund, Inc. that originally cost
him $5,000 on which he paid an 8.50% sales charge may subsequently purchase an
additional $5,000 of the Fund's shares at a sales charge of 7.75% of such
subsequent purchase or an additional $20,000 of the Fund's shares at a sales
charge of 6.25%. To determine eligibility, the shares currently held by the
<PAGE> 27
investor are valued at the then net asset value or the cost of such shares to
the investor, whichever is greater. The Fund's underwriter, or the Custodian
(if the payment is being made by the investor directly to the Custodian), must
be notified when a sale takes place which would qualify for a reduced sales
charge on the basis of previous purchases, and reduction will be granted when
the aggregate holdings are confirmed through a check of the records of the
Fund. The reduced sales charges described under "Purchase of Shares" in the
prospectus will be applicable to subsequent purchases by an Employee Benefit
Plan qualified under Section 401 of the Internal Revenue Code, and
organizations exempt from taxation under Sections 501(c)(3) or (13) of the
Internal Revenue Code.
GROUP DISCOUNT PRIVILEGE
------------------------
Any purchaser, including his spouse and children under the age of 21, who is a
member of a qualified group, such as a trade association, church group, union,
social or fraternal organization, who wishes to have the advantage of an
individually lower sales charge through either a Letter of Intent or a Right
of Accumulation, may do so if he, in conjunction with other members of that
group, wishes to purchase shares of the Fund so that the entire purchases by
the group will afford a lower sales charge to each individual participant.
Group purchases must be made through a common remitter. The Fund will send
the common remitter, at or before the completion of each purchase of shares
for group members, written notice of receipt of the total amount received by
the Fund on the group's behalf. Also, if in a current calendar quarter, a
payment is not received by the Fund on behalf of a group member on whose
behalf a purchase was made in the preceding calendar quarter, the Fund will
send the investor written notice that a current payment has not been received
in his or her behalf. Further, if the Fund does not receive a payment from
the common remitter on behalf of the group within ten days on the date
specified for delivery of the payment, the Fund will send each group member a
written confirmation of his or her next three succeeding investments promptly
after they are made.
AUTOMATIC INVESTMENT PLAN
-------------------------
The Automatic Investment Plan enables shareholders to make regular monthly
investments in shares through automatic charges to their bank checking
accounts. With shareholder authorization and bank approval, Firstar Bank, N.A.
will automatically charge the bank account for the amount specified, which
will be automatically invested in shares at the public offering price on the
date specified by the shareholder. Bank accounts will be charged on the day
or a few days before investments are credited, depending on the bank's
capabilities, and shareholders will receive a quarterly confirmation statement
showing the transactions during the calendar quarter.
Participation in the plan will begin within 30 days after receipt of a
completed section 7 of the Account Application and a voided check from your
checking account. If your bank account cannot be charged due to insufficient
funds, a stop-payment order, or the closing of your bank account, the plan may
be terminated and the related investment reversed. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing
to American Data Services, Inc.
<PAGE> 28
CHECK WITHDRAWAL PLAN
---------------------
An investor with a minimum account balance of $5,000 who is not currently
participating in the Automatic Investment Plan may have sufficient shares
automatically redeemed at regular monthly or quarterly intervals to provide
payments of $25 or more. This minimum amount is not necessarily a recommended
amount. This privilege may be exercised by a written request to American Data
Services, Inc. specifying the amount of the check to be received each month
(or each quarter as desired). Share certificates cannot be issued while the
Plan is in effect. With the Custodian's approval, payment amounts may be
revised at any time by the investor. All shares owned or purchased will be
credited to the Check Withdrawal Plan and a sufficient number of shares will
be sold from the investor's account to meet the requested withdrawal payments.
All income dividends and capital gains distributions on shares held will be
reinvested in additional shares at net asset value on the ex-dividend date.
Since the withdrawal payments represent the proceeds from the sales of shares,
there will be a reduction of invested capital to the extent that withdrawal
payments exceed the income dividends and capital gains distributions paid and
reinvested in shares held in the account. While no charge is contemplated on
each withdrawal payment at present, the right is reserved at any future time
to deduct $1.00 from each withdrawal payment. At present, the expenses
incurred in connection with this privilege are paid by the Fund. This Plan,
upon written notice to the Custodian, may be terminated at any time without
penalty. Any subsequent investments in this Plan must be $1,000 or more.
However, making additional purchases while the Plan is in effect may be
inadvisable due to sales charges and tax liabilities.
TAX SHELTERED PLANS
-------------------
For self-employed individuals, partnerships, and corporations, there is
available through the Fund a prototype Profit Sharing/Money Purchase Pension
Plan which has been approved by the Internal Revenue Service. The Profit
Sharing Plan permits an employer to make tax deductible investments in the
Fund on behalf of each participant up to the lesser of 15% of each
participant's earned income (or compensation), or $30,000. The Money Purchase
Pension Plan permits an employer to make tax deductible contributions on
behalf of each participant up to the lesser of 25% of earned income (or
compensation), or $30,000. If an employer adopts both the Profit Sharing Plan
and the Money Purchase Pension Plan, deductible contributions to both plans in
the aggregate may be made on behalf of each participant up to the lesser of
25% of earned income (or compensation), or $30,000. Also, the Fund makes
available an Individual Retirement Account (IRA) which permits annual tax
deductible investments in the Fund up to $2,000 per year by certain taxpayers.
All taxpayers may make nondeductible IRA contributions up to $2,000 whether or
not they are eligible for a deductible contribution. Dividends and capital
gains distributions paid on Fund shares held in a retirement plan or an IRA
will be reinvested at net asset value and accumulate free from tax until
withdrawn.
The Fund also makes available a "Roth IRA" - which permits nondeductible
investments in the Fund by certain taxpayers up to $2,000 per tax year. If
the Roth IRA is maintained for at least a five-year period beginning with the
first tax year for which a contribution to the Roth IRA was made,
distributions from the Roth IRA after age 59-1/2 or under certain other
circumstances will be completely tax free.
<PAGE> 29
An annual limit of $2,000 applies to contributions to regular and Roth IRAs.
For example, if a taxpayer contributes $2,000 to a regular IRA for a year, he
or she may not make any contribution to a Roth IRA for that year.
Forms to establish an IRA or a Profit Sharing/Money Purchase Pension Plan
are available from Baxter Financial Corporation or your investment dealer.
ACCOUNT REINSTATEMENT PRIVILEGE
-------------------------------
A stockholder may, after he has liquidated any of his shares of the Fund on
written request to the Fund, reinstate his account without payment of any
additional sales charge, at net asset value next calculated after receipt of
the reinstatement request, provided that he meets the qualifications listed
below. The Account Reinstatement Privilege may be exercised only once except
with respect to shares held under an Eagle Growth Shares Investing Program,
and the amount reinvested may not exceed the amount of the redemption proceeds
received on the liquidation of such shares. In addition, the reinstatement
must be completed within thirty days after the liquidation.
A liquidation of Fund shares is considered a sale under the Internal Revenue
Code and the "wash sale" provisions of Section 1091 of the Code will be
applicable to an account reinstatement if the cost of the liquidated shares
exceeds the proceeds of liquidation.
COMPUTATION OF NET ASSET VALUE
------------------------------
The Fund's net asset value per share is the value of the Fund's securities
investments plus cash and other assets minus its liabilities divided by the
number of the Fund's outstanding shares (adjusted to the nearest cent).
Portfolio securities traded on a securities exchange or the NASDAQ National
Market System are valued at the closing sales price on the market on which
they are principally traded. Securities traded over-the-counter, except those
that are quoted on the NASDAQ National Market System, are valued at the
prevailing quoted bid prices. Other assets (including restricted securities)
and securities for which no quotations are readily available are valued at
fair value as determined in good faith by the Board of Directors or a
delegated person acting pursuant to the directions of the Board. The method
of valuing assets and securities for which no quotations are available,
including restricted securities, will be reviewed at appropriate intervals by
the Board. Initial valuations of such assets will be made in good faith by the
Board of Directors. Net asset value is calculated as of the close of the New
York Stock Exchange, generally 4:00 p.m., New York City time, on each day the
New York Stock Exchange is open for trading.
PURCHASE OF SHARES
------------------
The Fund calculates the offering price and net asset value at the close
of the New York Stock Exchange generally 4:00 p.m., on days when the New York
Stock Exchange is open. On other days, the Fund will generally be closed and
pricing calculations will not be made. The New York Stock Exchange is
scheduled to be open Monday through Friday throughout the year except for New
Year's Day, Martin Luther King Jr. Day, President's Day, Good Friday, Memorial
<PAGE> 30
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Orders
for redemption and purchase will not be processed if received when the Fund is
closed.
REDEMPTION AND REPURCHASE OF SHARES
-----------------------------------
Payment for shares redeemed may be postponed, or the right of redemption may
be suspended, for any period during which the New York Stock Exchange is
closed other than customary weekend and holiday closings, or periods during
which, by rule of the Securities and Exchange Commission, trading on the New
York Stock Exchange is deemed restricted; or for any period during which an
emergency as determined by order of the Commission exists as a result of
which, disposal by the Fund of securities owned by it is not reasonably
practicable; or it is not reasonably practicable for the Fund fairly to
determine the value of its net assets; or for such other periods as the
Commission may, by order, permit for the protection of security holders of the
Fund.
The Fund has reserved the right to redeem Fund shares in kind, rather than in
cash, should this be necessary. However, by filing an appropriate election
under Rule 18f-1 pursuant to the Investment Company Act of 1940, the Fund has
obligated itself upon a request for redemption to redeem shares solely for cash
up to the lesser of $250,000 or 1% of the net asset value of the Fund in
compliance with a request for redemption by any one shareholder during any 90
day period.
MANAGEMENT OF THE FUND
----------------------
Officers and Directors
- ----------------------
The Board of Directors, guided by the recommendations of the Advisor,
establish the broad investment policy and, under Maryland law, are responsible
to oversee the management of the Fund.
Purchases may be made at net asset value by officers, directors, and employees
of the Fund, as well as by employees of broker-dealer firms which maintain
effective selling dealer agreements with the Fund's underwriter. From time to
time the Fund may offer its shares at net asset value to certain classes of
potential investors which have been identified by management and ratified by
the Board of Directors. Prior to such offering, the Fund, in compliance with
applicable federal securities laws, will supplement or revise the prospectus
to identify the class.
The names, ages, addresses of the officers and directors of the Fund, and
their principal business occupations for the past five years are listed below.
All officers and directors serve the Fund and Philadelphia Fund, Inc., a
registered investment company, in identical capacities. Each Director who is
an "interested person" of the Fund, as defined in the Investment Company Act
of 1940, is indicated by an asterisk. All of the officers and directors
aggregately own 5.0% of the securities of the Fund.
<PAGE> 31
Kenneth W. McArthur, Director (64)
93 Riverwood Parkway, Toronto, Ontario, Canada M8Y 4E4
Chairman, Shurway Capital Corp. (private investment company); formerly, Vice
President and Director, Nesbitt Investment Management; formerly, President,
Chief Executive Officer and Director, Fahnestock & Co. Inc. (securities
broker); formerly Senior Vice President and Chief Financial Officer, Nesbitt
Thomson Inc. (holding company).
Thomas J. Flaherty, Director (75)
400 Ocean Road, House No. 175, Vero Beach, FL 32963
Retired. Formerly Executive Vice President, Philadelphia Fund, Inc.; formerly,
President Eagle Growth Shares, Inc.; formerly, President and Director,
Universal Programs, Inc. and Eagle Advisory Corporation (investment advisors).
Donald P. Parson, Director (58)*
c/o Satterlee Stephens Burke & Burke LLP, 230 Park Avenue, New York, NY 10169
Counsel, Satterlee Stephens Burke & Burke LLP; Director, Home Diagnostics, Inc.
(medical device company); Chairman of Board, Syracuse University College of
Law; formerly,Partner, Parson & Brown, Attorney at Law; formerly, Director,
ITSN, Inc. (interactive satellite kiosks); formerly, Partner, Whitman & Ransom,
Attorney at Law.
Donald H. Baxter, Director and President* (56)
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432
Director, President, and Treasurer, Baxter Financial Corporation; Director,
Sunol Molecular Corp. (biotechnology); formerly, Director, Great Eastern Bank;
formerly Managing Member, Crown Capital Asia Limited Liability Company (private
investment company); formerly Managing Member, Baxter Biotech Ventures Limited
Company (private investment company); formerly Portfolio Manager, Nesbitt
Thomson Asset Management Inc.
Robert L. Meyer, Director (59)
c/o Ehrlich Meyer Associates, Inc.,
25 Griffin Avenue, Bedford Hills, NY 10507
President, Ehrlich Meyer Associates, Inc.; formerly Principal Officer,
Convergent Capital Corporation (holding company); formerly Director, Vice
President, and Senior Vice President, Fahnestock & Co. Inc.
James Keogh, Director (83)
202 West Lyon Farm Drive, Greenwich, CT 06831
Writer/Editor; Retired. formerly Executive Editor, TIME (newsmagazine);
formerly, Director, United States Information Agency; formerly, Executive
Director, The Business Round Table.
<PAGE> 32
Ronald F. Rohe, Vice President, Secretary, and Treasurer (57)
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432
Chief Operating Officer and Marketing Director, Baxter Financial Corporation;
formerly Registered Representative, Paine Webber Incorporated.
Each director, except Donald H. Baxter, receives $50 from Eagle Growth Shares
for each quarterly Board of Director's meeting they attend. Donald P. Parson, a
director of the Fund, is of counsel with the firm Satterlee Stephens Burke &
Burke which handles miscellaneous New York litigation for the Fund. In
addition, each director receives from the Philadelphia Fund a $2,000 annual fee
and $1,150 for each quarterly Board of Director's meeting they attend. Donald
H. Baxter does not receive any annual or meeting fees as a director from either
fund.
_____________________________________________________________________________
|COMPENSATION TABLE |
|for the fiscal year ended 11/30/99 |
|---------------------------------- Pension or |
| Retirement |
| Benefits Estimated Total |
| Accrued Annual Compensation |
| Aggregate as part Benefits from Fund and|
| Compensation of Fund Upon Philadelphia |
|Name, Position From Fund Expenses Retirement Fund, Inc. |
|_____________________________________________________________________________|
|Thomas J. Flaherty, Director $200 $6,800 |
|-----------------------------------------------------------------------------|
|James Keogh, Director $200 $6,800 |
|-----------------------------------------------------------------------------|
|Kenneth W. McArthur, Director $200 $6,800 |
|-----------------------------------------------------------------------------|
|Robert L. Meyer, Director $200 $6,800 |
|-----------------------------------------------------------------------------|
|Donald P. Parson, Director $200 $6,800 |
|-----------------------------------------------------------------------------|
The Fund and Baxter Financial Corporation, the Fund's investment adviser and
principal underwriter, have adopted codes of ethics under rule 17j-1 of the
Investment Company Act. These codes of ethics permit personnel subject to the
codes to invest in securities, including securities that may be purchased or
held by the Fund provided that the Fund is not at the same time purchasing or
selling or considering purchasing or selling the same securities or the
President of the Fund approves the transactions because there is deemed to
exist only a remote possibility of a conflict of interest.
BROKERAGE
- ---------
Donald H. Baxter, President of Baxter Financial Corporation, the Fund's
investment advisor, is responsible for the selection of brokers to execute
Fund portfolio transactions. Mr. Baxter seeks to obtain the best price and
execution of Fund portfolio transactions and selects brokers with this goal in
mind. Baxter Financial Corporation is authorized to allocate brokerage
transactions to dealers that have sold Fund shares. Such transactions are
subject to the requirement to seek to obtain the best price and execution.
In selecting brokers, Mr. Baxter also considers the commission rate
being paid by the Fund. Commissions on listed securities are based on
<PAGE> 33
competitive rates. Mr. Baxter seeks to assure himself that the commissions
paid by the Fund are reasonable in relation to the rates paid by other similar
institutions which are comparable in size and portfolio characteristics to the
Fund, and commensurate with the services being provided by the broker. To
accomplish this, Mr. Baxter negotiates commission levels with brokers with
whom the Fund does business; compares the quoted commission levels received,
and applies his knowledge regarding the general levels of commissions
prevailing from time to time. Mr. Baxter also considers the value of research
services provided to the Fund by brokers. Mr. Baxter is authorized to permit
the payment of commissions in excess of those which may have been charged by
another broker if he has determined, in good faith, that the amount of such
commission is reasonable in relation to the brokerage or research services
provided by the broker acting for the Fund. During the fiscal year ended
November 30, 1999, the Fund paid total brokerage commissions of $1,730 to
brokers that provided research services.
Receipt of research information, including statistical and market analyses,
economic and financial studies from securities firms, electronic quotation
services, and on-line electronic analysis software, enables Baxter Financial
Corporation to supplement its own research and analysis activities by making
available the views of other securities firms and is a factor considered in
selecting brokers for the Fund. Allocations of brokerage for the receipt of
research and statistical information are made in the best judgment of Mr.
Baxter and not in accordance with any formula.
Baxter Financial Corporation serves as investment advisor to two registered
investment companies, the Fund and Philadelphia Fund, Inc. and manages other
private investment accounts as well. Receipt of research information by
Baxter Financial Corporation may also be of benefit to Philadelphia Fund, Inc.
and these other private accounts.
During the fiscal years ended November 30, 1999, 1998, and 1997, the Fund paid
total brokerage commissions of $38,377, $14,790, and $13,684, respectively.
The increased level of commissions incurred by the Fund in 1999 was due to the
portfolio manager's decision to take profits in a rising market. Rising prices
provided the opportunity for capital gains while other issues provided
desirable alternative investment vehicles. In addition, the portfolio manager
offset some of those gains by realizing losses.
On over-the-counter transactions, the Fund generally deals with the principal
market makers and no commissions are paid to a broker except in situations
where execution through the broker is likely to result in a savings to the
Fund.
INFORMATION ABOUT THE INVESTMENT ADVISOR
----------------------------------------
The current Investment Advisory Agreement between Baxter Financial Corporation
and the Fund was approved by the Fund's shareholders on March 19, 1991 and
became effective on April 1, 1991. The agreement requires Baxter Financial
Corporation to provide the Fund with a continuous review of and
recommendations regarding investment of the Fund's assets. As compensation for
the rendering of advisory services, the Advisor receives an annual fee,
payable monthly, equal to .75 percent of the net assets of the Fund not
exceeding $200,000,000. The rate of this annual fee is reduced to .625
percent on net assets in excess of $200,000,000 but less than $400,000,000,
and to .50 percent of net assets in excess of $400,000,000. The fee is based
<PAGE> 34
on the month-end net asset value of the Fund, and is payable monthly at 1/12th
of the annual fee rate.
During the fiscal years ended November 30, 1999, 1998, and 1997, the Fund
paid investment advisory fees to Baxter Financial Corporation totaling $22,299,
$24,104, and $23,738, respectively.
The current Administration Agreement between the Fund and Baxter Financial
Corporation requires Baxter Financial Corporation to supervise and provide for
the administrative operations of the Fund, including the provision of office
space, utilities, equipment, and clerical, secretarial, and administrative
personnel. The fee payable to Baxter Financial Corporation under the
Administrative Agreement is at the annual rate of .25 percent of the net
assets of the Fund, calculated and payable monthly, at 1/12th the annual
rate.
During the fiscal years ended November 30, 1999, 1998, and 1997, the Fund
paid administrative fees to Baxter Financial Corporation totaling $7,433,
$8,035, and $7,913, respectively.
The Fund pays all of its own operating expenses, including: custodian and
transfer agent fees, insurance premiums, registration fees, cost of Directors'
and stockholders' meetings, distribution expenses, legal and accounting fees,
printing, and postage.
Firstar Bank, N.A. acts as the Fund's custodian. American Data Services,
Inc. acts as transfer agent, and dividend disbursing agent, and also provides
the Fund with certain accounting services.
UNDERWRITERS
------------
Baxter Financial Corporation serves as the principal underwriter of the
Fund's shares, which are offered on a continuous and "best efforts" basis.
During the last three fiscal years of the Fund, Baxter Financial Corporation
retained total underwriting and dealer commissions of $560, $680, and $533, in
1999, 1998, and 1997, respectively, after allowing $48, $53, and $37,
respectively, to dealers who sold Fund shares in each of these years.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
----------------------------------------
Briggs, Bunting & Dougherty, LLP, Philadelphia PA, serve as the independent
certified public accountants of the Fund. As such, that firm conducts an
audit of the Fund's annual and semi-annual reports to stockholders and
prepares the Fund's tax returns.
CALCULATION OF PERFORMANCE DATA
-------------------------------
Following are quotations of the annualized total returns for the one, five,
and ten year periods ended November 30, 1999 using the standardized method of
calculation pursuant to SEC Guidelines:
<PAGE> 35
Average Annual Total Returns
----------------------------
One-Year..................... -6.59%
Five-Year.................... 6.88%
Ten-Year..................... 2.91%
As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000
by the average annual compounded rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period, less any recurring fees charged to a shareholder
account. The results are annualized and presented accordingly. The
calculation assumes that the maximum sales load is deducted from the initial
$1,000 purchase order and that all dividends and distributions are reinvested
at the net asset value on the reinvestment dates during the period. The
quotation assumes that the account was completely redeemed at the end of each
one, five, and ten year period, as well as the deduction of all applicable
charges and fees.
The SEC Guidelines provide that "average annual total return" be computed
according to the following formula:
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeeming value of a hypothetical
$1,000 payment made at the beginning of 1, 5,
or 10 year periods at the end of the 1, 5, or
10 year periods or fractional portions thereof.
Non-standardized performance figures may also be presented in connection with
Fund advertisements. Performance figures calculated in this manner may
exclude charges which might otherwise reduce return figures, including, for
example, the sales load or Fund operating expenses, or such figures may
reflect Fund performance over periods of time other than the one, five, and
ten year periods. Non-standardized total return figures, when furnished,
shall be accompanied by standardized total return figures which shall reflect
Fund performance over the following time periods: (1) one-year to date and May
1, 1987 to date, the latter being the date on which Mr. Donald H. Baxter
assumed exclusive portfolio management responsibilities pertaining to
the Fund, or (2) one, five, and ten year periods as of the most recent fiscal
year end of the Fund. However, notwithstanding the foregoing, standardized
total return figures for one, five, and ten year periods shall always be
presented in the Fund's Statement of Additional Information.
<PAGE> 36
COMPARISONS AND ADVERTISEMENTS
------------------------------
To help investors better evaluate how an investment in the Fund might satisfy
their investment objective, Fund advertisements may discuss total return as
reported by various financial publications, or they may also compare total
return to total return as reported by other investments, indices, and
averages. Without limitation, the following publications, indices, and
averages may be used:
(a) Dow Jones Composite Average or its component averages -- an
unmanaged index presently composed of 30 industrial corporation
stocks (Dow Jones Industrial Average), 15 utility company stocks,
and 20 transportation company stocks. Comparisons of performance
assume reinvestment of dividends.
(b) Standard & Poor's 500 Stock Index or its component indices -- an
unmanaged index presently composed of 400 industrial stocks, 40
financial stocks, 40 utilities stocks, and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends.
(c) The New York Stock Exchange composite or component indices --
unmanaged indices of all industrial, utilities, transportation, and
finance stocks listed on the New York Stock Exchange.
(d) Lipper -- Mutual Fund Performance Analysis and Lipper Mutual Fund
Indices --measures total return and average current yield for the
mutual fund industry. Ranks individual mutual fund performance over
specified time periods assuming reinvestment of all distributions,
exclusive of sales charges.
(e) Financial publications, including Business Week, Changing Times,
Financial World, Forbes, Fortune, Money Magazine, Wall Street
Journal, Barron's, which rate fund performance over various time
periods.
FINANCIAL STATEMENTS
--------------------
The financial statements of the Fund for the fiscal year ended November 30,
1999, including the Portfolio of Investments, Statement of Assets and
Liabilities, Sample Price Computation, Statement of Operations, Statement of
Changes in Net Assets, Notes to Financial Statements, Financial Highlights,
and Independent Auditor's Report, as set forth in the Fund's Annual Report to
Stockholders for fiscal year ended November 30, 1999, are incorporated herein
by reference.
<PAGE> 37
PART C
Other Information
- -----------------
Item 23. Exhibits
(a) Certificate of Incorporation.
Incorporated herein by reference to Exhibit
24 (b) (1) to Post-Effective Amendment No. 36
to the Registration Statement under the
Securities Act of 1933
(b) By-Laws, as amended.
Incorporated herein by reference to Exhibit
24 (b) (2) to Post-Effective Amendment No. 37
to the Registration Statement under the
Securities Act of 1933
(c) Specimen of Certificate of Common Stock.
Incorporated herein by reference to Exhibit
24 (b) (4) to Post-Effective Amendment No. 36
to the Registration Statement under the
Securities Act of 1933
(d) Investment Advisory Agreement.
Incorporated herein by reference to Exhibit
24 (b) (5) to Post-Effective Amendment No. 35
to the Registration Statement under the
Securities Act of 1933
(e)(1) Underwriting Agreement with Baxter Financial
Corporation.
Incorporated herein by reference to Exhibit
24 (b) (6a) to Post-Effective Amendment No. 35
to the Registration Statement under the
Securities Act of 1933
(e)(2) Dealer Selling Agreement.
Incorporated herein by reference to Exhibit
24 (b) (6b) to Post-Effective Amendment No. 35
to the Registration Statement under the
Securities Act of 1933
(f) Not applicable.
(g) Custody Agreement with Star Bank, N.A.
Incorporated herein by reference to Exhibit
24 (b) (8) to Post-Effective Amendment No. 35
to the Registration Statement under the
Securities Act of 1933
<PAGE> 38
(h) Administration Agreement and Amendment to Administration
Agreement.
Incorporated herein by reference to Exhibit
24 (b) (9) to Post-Effective Amendment No. 35
to the Registration Statement under the
Securities Act of 1933
(h)(1) Transfer Agency and Service Agreement with American Data
Services, Inc.
Incorporated herein by reference to Exhibit
24 (b) (9a) to Post-Effective Amendment No. 35
to the Registration Statement under the
Securities Act of 1933
(h)(2) Fund Accounting Service Agreement with American Data
Services, Inc.
Incorporated herein by reference to Exhibit
24 (b) (9b) to Post-Effective Amendment No. 35
to the Registration Statement under the
Securities Act of 1933
(i) Opinion of Counsel
(j) Consent of Briggs, Bunting & Dougherty, LLP
Independent Certified Public Accountants.
(k) None.
(l) None.
(m) None.
(n) Financial Data Schedule
(o) None.
(p) Eagle Growth Shares Code of Ethics
(p)(1) Baxter Financial Corporation Code of Ethics
Item 24. Persons Controlled by or Under Common Control with the Fund
- -------- -------------------------------------------------------------
Not applicable; no person either directly or indirectly is
controlled by or under common control with the registrant.
Item 25. Indemnification.
- -------- ----------------
Section 56 of the Registrant's By-Laws provides for indemnification,
as set forth below.
With respect to the indemnification of the Officers and Directors of the
Corporation:
<PAGE> 39
(a) The Corporation shall indemnify each Officer and Director made
party to a proceeding, by reason of service in such capacity,
to the fullest extent, and in the manner provided, under
section 2-418 of the Maryland General Corporation law: (i)
unless it is proved that the person seeking indemnification did
not meet the standard of conduct set forth in subsection (b)(1)
of such section; and (ii) provided, that the Corporation shall
not indemnify any Officer or Director for any liability to the
Corporation or its security holders arising from the willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such person's office.
(b) The provisions of clause (i) of paragraph (a) herein
notwithstanding, the Corporation shall indemnify each Officer
and Director against reasonable expenses incurred in connection
with the successful defense of any proceeding to which such
Officer or Director is a party by reason of service in such
capacity.
(c) The Corporation, in the manner and to the extent provided by
applicable law, shall advance to each Officer and Director who
is made party to a proceeding by reason of service in such
capacity the reasonable expenses incurred by such person in
connection therewith.
Item 26. Business and Other Connection of Investment Advisor.
- -------- ----------------------------------------------------
Baxter Financial Corporation is investment advisor to the Fund, to
Philadelphia Fund, Inc., and to other institutional and individual
investment accounts; and acts as underwriter of shares of the Fund
and Philadelphia Fund, Inc.
DONALD H. BAXTER - Director, President, and Treasurer, Baxter Financial
Corporation; President and Director, Philadelphia Fund, Inc. and Eagle Growth
Shares, Inc.; Director, Sunol Molecular Corp. (biotechnology); formerly,
Director, Great Eastern Bank; formerly Managing Member, Crown Capital Asia
Limited Liability Company; formerly Managing Member, Baxter Biotech Ventures
Limited Company.
RONALD F. ROHE - Chief Operating Officer, Baxter Financial Corporation; Vice
President, Philadelphia Fund, Inc. and Eagle Growth Shares, Inc.; formerly
Registered Representative, Paine Webber Inc.
The address of Baxter Financial Corporation, Philadelphia Fund, Inc. and
Eagle Growth Shares, Inc, is 1200 North Federal Highway, Suite 424, Boca
Raton, FL 33432.
Item 27. Principal Underwriters.
- -------- -----------------------
(a) Baxter Financial Corporation, 1200 North Federal Highway, Suite
424, Boca Raton, Florida 33432 serves as principal underwriter
of the Fund. Baxter Financial Corporation also serves as investment advisor to
the Fund and Philadelphia Fund, Inc., and to other private accounts.
<PAGE> 40
(b) See Item 28.
(c) Not applicable
Item 28. Location for Accounts and Records.
- -------- ----------------------------------
All books and records of the Registrant are maintained and are in
the possession of The Fund at 1200 North Federal Highway, Suite 424,
Boca Raton, FL 33432, except those which are kept by Star Bank,
N.A., the Fund's custodian, and American Data Services, Inc., the
Fund's transfer agent, and dividend disbursing agent.
Item 29. Management Services.
- -------- --------------------
NONE
Item 30. Undertakings.
- -------- -------------
Registrant hereby undertakes to furnish to each person to whom a
prospectus is delivered a copy of the registrant's latest Annual
Report to Stockholders and without charge.
<PAGE> 41
Signatures
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, Eagle Growth Shares, Inc.,
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933, and has duly caused this Post-Effective Amendment to its Registration
Statement (Commission File Nos. 2-34540 and 811-1935) to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boca
Raton, and the State of Florida on the 27th day of March, 2000.
Eagle Growth Shares, Inc.
(Registrant)
By: /s/Donald H. Baxter
-----------------------
Donald H. Baxter, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement (File No. 2-34540) has been signed
below by the following persons in the capacity and on the date indicated.
Signature Title Date
- --------- ----- ----
President, Principal
/s/Donald H. Baxter Executive Officer and March 13, 2000
- ----------------------- Director
Donald H. Baxter
/s/Ronald F. Rohe Treasurer, Principal March 13, 2000
- ----------------------- Financial Officer
Ronald F. Rohe
/s/Kenneth W. McArthur Director March 13, 2000
- -----------------------
Kenneth W. McArthur
/s/Donald P. Parson Director March 13, 2000
- -----------------------
Donald P. Parson
/s/Robert L. Meyer Director March 13, 2000
- -----------------------
Robert L. Meyer
/s/James Keogh Director March 13, 2000
- -----------------------
James Keogh
/s/Thomas J. Flaherty Director March 13, 2000
- -----------------------
Thomas J. Flaherty
<PAGE> 42
EXHIBIT INDEX
-------------
PAGE
----
Item 23(i) Opinion of Counsel 43
Item 23(j) Consent of Briggs, Bunting & Dougherty, LLP 44
Item 23(n) Financial Data Schedule 45
Item 23(p) Eagle Growth Shares Code of Ethics 47
Item 23(p)(1) Baxter Financial Corporation Code of Ethics 53
<PAGE> 43
Law Office
STRADLEY, RONON, STEVENS & YOUNG, LLP
30 Valley Stream Parkway
Malvern, Pennsylvania 19355-1481
(610)640-5800
Direct Dial: (610)640-5801
March 24, 2000
Board of Directors
Eagle Growth Shares, Inc.
1200 North Federal Highway
Suite 424
Boca Raton, FL 33432
Gentlemen:
We have examined the Articles of Incorporation ("Articles") of
Eagle Growth Shares, Inc. (the "Fund"), a corporation organized under Maryland
law, and its by-laws, both as amended to date, the registration statement filed
by the Fund under the Securities Act of 1933, as amended ("Registration
Statement"), and such records of the corporate proceedings as we deem material
to this opinion. As of the date hereof, the Fund is authorized to issue an
aggregate of 10,000,000 shares of common stock, of a par value of $.10 per
share.
Based upon the above-described examination, it is our opinion that
as long as the Fund remains a corporation in good standing under the laws of
the state of Maryland, the authorized but unissued shares of stock of the Fund,
when issued for the consideration established by the board of directors, as
described in the Registration Statement, will be, under the law of the state of
Maryland, legally issued, fully-paid, non-assessable outstanding shares of
common stock of the Fund.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to reference therein to us as counsel who have
rendered this opinion.
Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG, LLP
By:/s/Stephen W. Kline
--------------------------------
Stephen W. Kline
SWK/cgm
Doc. #234689
<PAGE> 44
Briggs,
Bunting &
Dougherty, LLP
- -----------------------------------------------------------------------------
Certified Public Accountants and Business Advisors
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information (Part B) of this amended Registration Statement on
Form N-1A of our report dated December 20, 1999 (except for Note 5 as to which
the date is December 28, 1999) relating to financial statements of Eagle Growth
Shares, Inc. for the year ended November 30, 1999. We also consent to the
reference to our report under the heading "Financial Highlights" in such
amended Registration Statement.
/s/BRIGGS, BUNTING & DOUGHERTY, LLP
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
March 20, 2000
P.O. Box 70, Montville, NJ 07045-0070
Tel: (973) 299-5233, Fax: (973) 299-5234
<PAGE> 45
[TYPE] EX-27
[DESCRIPTION] FINANCIAL DATA SCHEDULE PERIOD ENDED 11/30/99
[ARTICLE] 6
[CIK] 0000030912
[NAME] EAGLE GROWTH SHARES, INC.
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1999
[PERIOD-START] DEC-01-1998
[PERIOD-END] NOV-30-1999
[INVESTMENTS-AT-COST] 2,208,528
[INVESTMENTS-AT-VALUE] 2,891,827
[RECEIVABLES] 2,095
[ASSETS-OTHER] 28,035
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 2,921,957
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 15,332
[TOTAL-LIABILITIES] 15,332
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,025,311
[SHARES-COMMON-STOCK] 230,596
[SHARES-COMMON-PRIOR] 239,303
[ACCUMULATED-NII-CURRENT] 3,469
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 193,735
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 684,110
[NET-ASSETS] 2,906,625
[DIVIDEND-INCOME] 67,067
[INTEREST-INCOME] 22,550
[OTHER-INCOME] 0
[EXPENSES-NET] 86,148
[NET-INVESTMENT-INCOME] 3,469
[REALIZED-GAINS-CURRENT] 193,819
[APPREC-INCREASE-CURRENT] (137,012)
[NET-CHANGE-FROM-OPS] 60,276
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 144,520
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 26,706
[NUMBER-OF-SHARES-REDEEMED] 46,601
[SHARES-REINVESTED] 11,188
[NET-CHANGE-IN-ASSETS] (193,510)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 144,436
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 22,299
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 89,505
[AVERAGE-NET-ASSETS] 2,982,505
[PER-SHARE-NAV-BEGIN] 12.95
<PAGE> 46
[PER-SHARE-NII] 0.02
[PER-SHARE-GAIN-APPREC] 0.24
[PER-SHARE-DIVIDEND] 0.00
[PER-SHARE-DISTRIBUTIONS] 0.61
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 12.60
[EXPENSE-RATIO] 3.01
</TABLE>
<PAGE> 47
PHILADELPHIA FUND, INC.
EAGLE GROWTH SHARES, INC.
CODE OF ETHICS
--------------
General
- -------
This Code of Ethics of Philadelphia Fund, Inc. and Eagle Growth
Shares, Inc., which are registered investment companies, is revised as of March
1 , 2000 pursuant to the requirements of Rule 17j-1 under the Investment
Company Act of 1940, as amended (the "1940 Act"). Each reference to "Fund" in
the Code of Ethics shall be deemed to apply to Philadelphia Fund, Inc. and/or
Eagle Growth Shares, Inc. as the context requires. Each reference to the
"Adviser" or "underwriter" means Baxter Financial Corporation.
1. Definitions
-----------
(1) "Access Person" means the Adviser and each officer and director
of the Adviser or the Funds, and any employee of the Adviser or a
Fund who, in connection with such person's regular functions or
duties, or in the ordinary course of business, makes,
participates in, or obtains information regarding the purchase or
sale of "Covered Securities" by a Fund, or whose functions relate
to the making of any recommendations with respect to such
purchases or sales, and any natural
person in a "control" (as defined in section 2(a)(39) of the 1940
Act) relationship with a Fund or the Adviser who obtains
information concerning recommendations made to a Fund with
respect to the purchase or sale of a Covered Security by a Fund.
(2) "Covered Security" shall have the meaning set forth in Section
2(a)(36) of the 1940 Act, and shall include any option or right
to buy or sell a Covered Security and any security convertible
or exchangeable into a Covered Security, including securities
issued in an IPO or Limited Offering, as defined below, but
shall not include securities issued by the Government of the
United States or by federal agencies which are direct
obligations of the United States, bankers' acceptances,
certificates of deposit, commercial paper, high quality, short-
term debt instruments, including repurchase agreements, and
shares of registered open-end investment companies.
(3) "Beneficial ownership" shall be interpreted in the same manner as
it would be under rule 16a-1(a)(2) of the rules under Section 16 of the
2
Securities Exchange Act of 1934, as amended ("1934 Act").
(4) An "Initial Public Offering" ("IPO") means an offering of
securities registered under the Securities Act of 1933 ("1933
Act"), the issuer of which, immediately before the registration,
<PAGE> 48
was not subject to the reporting requirements of sections 13 or
15(d) of the 1934 Act.
(5) A "Limited Offering" means an offering that is exempt from registration
under the 1933 Act pursuant to sections 4(2) or 4(6) or rules 504, 505
or 506 under the 1933 Act.
2. Prohibitions
------------
No Access Person:
(a) In connection with the purchase or sale by such person of a security
held or to be acquired or sold by a Fund :
(i) shall employ any device, scheme or artifice to defraud such Fund;
- ---------------------------
1 As used in this Section 2(a), "Covered Security held or to be acquired by a
Fund" means any Covered Security which within the most recent 15 days (I)
is, or has been, held by a Fund, or (ii) is being or has been considered by
the Adviser for purchase by a Fund.
3
(ii) shall make to such Fund any untrue statement of material fact or
omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
(iii) shall engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon such Fund; or
(iv) shall engage in any manipulative practice with respect to such
Fund;
(b) shall purchase or sell, directly or indirectly, any Covered Security in
which he has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership and which to his actual knowledge at the
time of such purchase or sale:
(i) is being considered by the Adviser for purchase or sale for a Fund;
or
(ii) is then being purchased or sold by the Adviser for a Fund.
(c) No Access Person shall acquire direct or indirect beneficial ownership
of any securities in an IPO
4
or a Limited Offering without first obtaining approval of the President
of the Fund.
3. Exempted Transactions
---------------------
The prohibitions of Section 2(b) of this Code shall not apply to:
(a) purchases or sales effected in any account over which the Access Person
has no direct or indirect influence or control;
<PAGE> 49
(b) transactions that are approved by the President of the Fund because
there is deemed to exist only a remote possibility of a conflict of
interest;
(c) purchases which are part of an automatic dividend reinvestment plan;
(d) purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
4. Procedural Matters
------------------
(a) The President of the Fund shall:
(1) furnish a copy of this Code to each Access Person of a Fund promptly
upon such person's becoming an Access Person; and
5
(2) No less frequently than annually, furnish to each Fund's board of
directors a written report that:
(i) describes any issues arising under the Code of Ethics or
procedures since the last report to the board of directors,
including, but not limited to, information about material
violations of the Code or procedures and sanctions imposed in
response to material violations; and
(ii) certifies that the Fund has adopted procedures reasonably
necessary to prevent Access Persons from violating the Code.
(b) Each Fund shall maintain, at its principal place of business, the
following records:
(i) a copy of each Code of Ethics of the Fund that is in effect, or at
any time within the past five years was in effect;
(ii) a record of any violation of the Code of Ethics and of any action
taken as a result of the violation;
(iii) each report made by an Access Person under this Code;
6
(iv) a record of all persons, currently or within the past five years,
who are or were required to make reports hereunder and who are or
were responsible for reviewing such reports;
(v) a copy of each report made to the board of directors of the Funds
provided for in (a) section 4(a)(2) of the Adviser's Code of Ethics
and (b) section 4(a)(2) herein for the past five years; and
(vi) a record of any decision, and the reasons supporting the decision,
to approve the acquisition by an Access Person, directly or
indirectly, of beneficial ownership in any securities in an IPO or a
Limited Offering.
<PAGE> 50
(c) In the event that the President of the Fund must seek approval hereunder
to purchase or sell a Covered Security, he shall not be authorized to
grant such approval to any transaction in which he has any direct or
indirect beneficial interest, but instead the Executive Vice President
of the Fund is authorized to grant approval of such acquisition or sale.
7
5. Reporting
---------
(a) No later than 10 days after a person becomes an Access Person, such
person shall file a report with the Fund containing the following
information:
(i) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
beneficial ownership when the person became an Access Person;
(ii) The name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the
direct or indirect benefit of the Access Person as of the date the
person became an Access Person; and
(iii) The date the report is submitted by the Access Person of the Fund.
(b) Within 10 days after the end of each calendar quarter, every Access
Person shall file a written report with the Fund with respect to any
transactions in a Covered Security in which such Access Person has, or
by reason of such transaction acquires or disposes of, any direct
8
or indirect beneficial ownership in a Covered Security. Each report
shall contain the following information:
(i) The date of the transaction, the title and the number of shares, and
the principal amount of each Covered Security involved, the interest
rate and maturity date, if applicable;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price at which the transaction was effected; and,
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected.
(v) With respect to any account established by an Access Person in which
any securities were held during the quarter for his or her direct or
indirect benefit, the Access Person shall file a report with the
Fund containing the name of the broker, dealer or bank with whom the
Access Person established the account; the date the
9
<PAGE> 51
account was established; and the date the report is submitted by the
Access Person.
(c) Annually, each Access Person shall file a report containing the
following information (which must be current as of a date no more than
30 days before the report is submitted):
(i) the title, number of shares and principal amount of each Covered
Security in which the Access Person has any direct or indirect
beneficial ownership; and
(ii) the name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the direct
or indirect benefit of the Access Person.
(d) Any report made hereunder may contain a statement that the report shall
not be construed as an admission by the person making such report that
he has any direct or indirect beneficial ownership in the security to
which the report relates and all reports shall state that they are made
by an Access Person.
The foregoing provisions of Section 5 notwithstanding, no report need be
filed for
10
transactions effected for, and Covered Securities held in, any account
over which an Access Person has no influence or control.
(e) A director of a Fund who is not an "interested person" of the Fund
within the meaning of Section 2(a)(19) of the 1940 Act and who would be
required to make a report solely by reason of being a Fund director,
need not make an initial holdings report under paragraph 5(a) or an
annual holdings report under paragraph 5(c) and need not make a
quarterly transaction report under paragraph 5(b) herein unless the
director knew or, in the ordinary course of fulfilling his or her
official duties as a Fund director, should have known that during the 15
day immediately before or after the director's transaction in a Covered
Security, a Fund purchased or sold the Covered Security, or a Fund or
the Adviser considered purchasing or selling the Covered Security for a
Fund. Further, no report need be filed pursuant to Section 5(b)(v) if it
would duplicate information contained in broker trade confirmations or
account statements received by the Fund on a timely basis, as required
by
11
Section 5(b)(v) and contains the information required by such section.
6. Violations
----------
Upon being apprised of facts which indicate that a violation of
this Code may have occurred, the President of the Fund shall determine, in
his judgment, whether the conduct being considered did in fact violate the
provisions of this Code. If the President determines that a violation of
the Code has occurred, he shall take such action as he deems appropriate in the
circumstances and shall provide the board of directors of the Fund with a
report thereon, not later than the next meeting of the board of directors.
<PAGE> 52
7. Approvals
---------
This Code of Ethics, and any material change hereto, are subject to
the approval of the board of directors of each Fund. Each board shall base
its approval of the Code, and any material change to the Code, on a
determination that the Code contains provisions reasonably necessary to prevent
Access Persons from engaging in any conduct prohibited by section 2 of the
Code. Prior to approving the Code, the board of directors must receive
certification from the President that the Funds have adopted procedures
reasonably necessary to prevent Access Persons from violating the Code. The
Funds' board must approve the Code of the Funds by September 1, 2000, and must
approve any
12
material change to the Code not later than six months after adoption of such
change.
13
* * * * * *
<PAGE> 53
BAXTER FINANCIAL CORPORATION
CODE OF ETHICS
--------------
General
- -------
This Code of Ethics of Baxter Financial Corporation (the
"Adviser"), an investment adviser of registered investment companies, is
revised as of February 25 , 2000 pursuant to the requirements of Rule 17j-1
under the Investment Company Act of 1940, as amended (the "1040 Act"). Each
reference to "Fund" in the Code of Ethics shall be deemed to apply to
Philadelphia Fund, Inc. and Eagle Growth Shares, Inc. and the term "client"
shall include all clients with whom the Adviser has entered into an investment
advisory agreement, including the Funds.
1. Definitions
-----------
(1) "Access Person" means the Adviser and each officer and director of the
Adviser, and any employee of the Adviser who, in connection with such
person's regular functions or duties, or in the ordinary course of
business, makes, participates in, or obtains information regarding the
purchase or sale of "Covered Securities" by a client, or whose
functions relate to the making of any recommendations with respect to
such purchases or sales, and any natural
person in a "control" (as defined in section 2(a)(39) of the 1940 Act)
relationship with the Adviser who obtains information
concerning recommendations made to a client with respect to the
purchase or sale of a Covered Security by a client.
(2) "Covered Security" shall have the meaning set forth in Section 2(a)(36)
of the 1940 Act, and shall include any option or right to buy or sell a
Covered Security and any security convertible or exchangeable into a
Covered Security, including securities issued in an IPO or Limited
Offering, as defined below, but shall not include securities issued by
the Government of the United States or by federal agencies which are
direct obligations of the United States, bankers' acceptances,
certificates of deposit, commercial paper, high quality, short-term
debt instruments, including repurchase agreements, and shares of
registered open-end investment companies.
(3) "Beneficial ownership" shall be interpreted in the same manner as it
would be under rule 16a-1(a)(2) of the rules under Section 16 of the
Securities Exchange Act of 1934, as amended ("1934 Act").
(4) An "Initial Public Offering" ("IPO") means an offering of securities
registered under the Securities Act of 1933 ("1933 Act"), the issuer
2
of which, immediately before the registration, was not subject to the
reporting requirements of sections 13 or 15(d) of the 1934 Act.
(5) A "Limited Offering" means an offering that is exempt from registration
under the 1933 Act pursuant to sections 4(2) or 4(6) or rules 504, 505
or 506 under the 1933 Act.
<PAGE> 54
2. Prohibitions
------------
No Access Person of the Adviser:
(a) In connection with the purchase or sale by such person of a security
held
1
or to be acquired or sold by a client :
(i) shall employ any device, scheme or artifice to defraud such client;
(ii) shall make to such client any untrue statement of material fact or
omit to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
- ----------------------
1 As used in this Section 2(a), "Covered Security held or to be acquired by a
client" means any Covered Security which within the most recent 15 days (I) is,
or has been, held by a client, or (ii) is being or has been considered by the
Adviser for purchase by a client.
3
(iii) shall engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon such client; or
(iv) shall engage in any manipulative practice with respect to such
client.
(b) shall purchase or sell, directly or indirectly, any Covered Security in
which he has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership and which to his actual knowledge at the
time of such purchase or sale:
(i) is being considered by the Adviser for purchase or sale for a
client; or
(ii) is then being purchased or sold by the Adviser for a client.
(c) No Access Person shall acquire direct or indirect beneficial ownership
of any securities in an IPO or a Limited Offering without first
obtaining approval of the President of the Adviser.
4
3. Exempted Transactions
---------------------
The prohibitions of Section 2(b) of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the Access Person
has no direct or indirect influence or control.
(b) Transactions that are approved by the President of the Adviser because
there is deemed to exist only a remote possibility of a conflict of
interest.
(c) Purchases which are part of an automatic dividend reinvestment plan.
<PAGE> 55
(d) Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
4. Procedural Matters
------------------
(a) The President of the Adviser shall:
(1) Furnish a copy of this Code to each Access Person of the Adviser
promptly upon such person's becoming an Access Person;
5
(2) No less frequently than annually, furnish to each Fund's board of
directors a written report that:
(i) describes any issues arising under the Code of Ethics or
procedures since the last report to the board of directors,
including, but not limited to, information about material
violations of the Code or procedures and sanctions imposed in
response to material violations; and
(ii) certifies that the Adviser has adopted procedures reasonably
necessary to prevent Access Persons from violating the Code.
(b) The Adviser shall maintain, at its principal place of business, the
following records:
(i) a copy of each Code of Ethics of the Adviser that is in effect, or
at any time within the past five years was in effect;
(ii) a record of any violation of the Code of Ethics and of any action
taken as a result of the violation;
6
(iii) each report made by an Access Person under this Code;
(iv) a record of all persons, currently or within the past five years,
who are or were required to make reports hereunder and who are or
were responsible for reviewing such reports;
(v) a copy of each report made to the board of directors of each Fund
provided for in section 4(a)(2) herein for the past five years; and
(vi) a record of any decision, and the reasons supporting the decision,
to approve the acquisition by an Access Person, directly or
indirectly, of beneficial ownership in any securities in an IPO or
a Limited Offering.
(c) In the event that the President of the Adviser must seek approval
hereunder to purchase or sell a Covered Security, he shall not be
authorized to grant such approval to any transaction in which he has
any direct or indirect beneficial interest, but instead the Chief
Operating Officer
7
of the Adviser is authorized to grant approval of such acquisition or
sale.
<PAGE> 56
5. Reporting
---------
(a) No later than 10 days after a person becomes an Access Person, such
person shall file a report with the Adviser containing the following
information:
(i) The title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect
beneficial ownership when the person became an Access Person;
(ii) The name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the
direct or indirect benefit of the Access Person as of the date the
person became an Access Person; and
(iii) The date the report is submitted by the Access Person of the
Adviser.
(b) Within 10 days after the end of each calendar quarter, every Access
Person shall file a written report with the Adviser with respect to any
transactions in a Covered Security in which such
8
Access Person has, or by reason of such transaction acquires or
disposes of, any direct or indirect beneficial ownership in a Covered
Security. Each report shall contain the following information:
(i) The date of the transaction, the title and the number of shares,
and the principal amount of each Covered Security involved, the
interest rate and maturity date, if applicable;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price at which the transaction was effected; and,
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected.
(v) With respect to any account established by an Access Person in
which any securities were held during the quarter for his or her
direct or indirect benefit, the Access Person shall file a report
with the Adviser containing the name of the broker, dealer
9
or bank with whom the Access Person established the account; the
date the account was established; and the date the report is
submitted by the Access Person.
(c) Annually, each Access Person shall file a report containing the
following information (which must be current as of a date no more than
30 days before the report is submitted):
(i) the title, number of shares and principal amount of each Covered
Security in which the Access Person has any direct or indirect
beneficial ownership; and
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(ii) the name of any broker, dealer or bank with whom the Access Person
maintains an account in which any securities are held for the
direct or indirect benefit of the Access Person.
(d) Any report made hereunder may contain a statement that the report shall
not be construed as an admission by the person making such report that
he has any direct or indirect beneficial ownership in the security to
which the report relates and all reports shall state that they are made
by an Access Person.
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The foregoing provisions of Section 5 notwithstanding, no report need
be filed for transactions effected for, and Covered Securities held in,
any account over which an Access Person has no influence or control.
(e) The requirements of Section 5(b) shall not require duplication of
records and reports which the Adviser must maintain in accordance with
Rule 204-2(a)(12) or (a)(13) under the Investment Advisers Act of 1940.
No report need be filed pursuant to Section 5(b)(v) if it would
duplicate information contained in broker trade confirmations or
account statements received by the Adviser on a timely basis, as
required by Section 5(b)(v) and contains the information required by
such section.
6. Violations
----------
Upon being apprised of facts which indicate that a violation of
this Code may have occurred, the President of the Adviser, shall determine, in
his judgment, whether the conduct being considered did in fact violate the
provisions of this Code. If the President determines that a violation of the
Code has occurred, he shall take such action as he deems appropriate in the
circumstances.
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7. Approvals
---------
This Code of Ethics, and any material change hereto, are subject to
the approval of the board of directors of each Fund. Each board shall base
its approval of the Code, and any material change to the Code, on a
determination that the Code contains provisions reasonably necessary to
prevent Access Persons from engaging in any conduct prohibited by section 2 of
the Code. Prior to approving the Code, the board of directors must receive
certification from the Adviser that it has adopted procedures reasonably
necessary to prevent Access Persons from violating the Code. The Funds' board
must approve the Code of the Adviser, which is also the Code of the principal
underwriter of the Funds, by September 1, 2000, and must approve any material
change to the Code not later than six months after adoption of such change.
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