<PAGE>
PHILADELPHIA FUND, INC.
PRESIDENT'S LETTER -- July 6, 1995
Dear fellow shareholders,
The bond market and the stock market have given an impressive
performance during the first half of our fiscal year. After keeping
conditions tight through much of 1994, the Federal Reserve began
easing and this allowed a substantial drop in interest rates causing
a sharp gain in bond prices and triggering a rally in the stock
market.
The Federal Reserve may do the nearly impossible--slow the economy to
an acceptable growth rate without causing a recession and without
starting an inflationary surge. Recent data on housing starts
indicate a likely near term firming of the economy and a lowering of
inventory levels in the manufacturing sector. The Federal Reserve may
still see the need to lower rates slightly. Recent economic data
indicate the much sought after soft landing may occur. Quite an
accomplishment! As interest rates fell we increased our exposure in
the financial sector with purchases of American Express, Bankers
Trust, Federal National Mortgage, Salomon Inc., and PNC Bancorp. As
the cyclical stocks surged upward, we took some profits from Alcoa,
Champion International, Cummins Engine, Phelps Dodge, and Sears in
retail.
Taubman Centers, UST Inc., and Jostens are three new companies to the
portfolio: Taubman Centers provides a good return and possesses a
strong position in shopping centers. UST Inc. and Jostens appear to
be undervalued by the market.
We look forward to the coming months providing us new opportunities
in what has been a truly exciting year. We were 81.5% invested in
common stocks and 17.1% in bonds as of May 31, 1995.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
<PAGE>
PHILADELPHIA FUND, INC.
PORTFOLIO OF INVESTMENTS -- MAY 31, 1995
<TABLE>
<CAPTION>
Shares Value
------ -----------
<C> <S> <C>
COMMON STOCKS--81.5%
BANKS--16.5%
65,000 Bankers Trust NY Inc. ................................... $ 4,078,750
20,000 Intercontinental Bank of Miami, Fla. .................... 480,000
155,000 PNC Bancorp. ............................................ 4,185,000
30,000 Wells Fargo & Co. ....................................... 5,520,000
-----------
14,263,750
-----------
BEVERAGES--6.8%
95,000 Coca Cola Co. ........................................... 5,878,125
-----------
CABLE TELEVISION--1.5%
60,000 *Tele-Communications Inc. Class "A"...................... 1,267,500
-----------
COMMUNICATIONS--10.5%
8,216 Bell Atlantic Corp....................................... 458,042
160,000 Comcast Corp. Class "A".................................. 2,780,000
160,000 Comcast Corp. Special Class "A".......................... 2,800,000
68,000 SBC Communications Inc. ................................. 3,060,000
-----------
9,098,042
-----------
DEFENSE--4.3%
85,000 General Dynamics Corp. .................................. 3,718,750
-----------
ELECTRONICS--.8%
22,500 *Yageo Corp.--GDR........................................ 348,750
24,000 *Yageo Corp.--GDR (Note 6)............................... 372,000
-----------
720,750
-----------
ENVIRONMENTAL--.5%
120,000 *Noxso Corporation....................................... 390,000
-----------
FINANCIAL SERVICES--10.3%
90,000 American Express Corp. .................................. 3,206,250
30,000 Federal National Mortgage Association.................... 2,790,000
70,000 Salomon Inc. ............................................ 2,870,000
-----------
8,866,250
-----------
INSURANCE--9.4%
35,000 American International Group............................. 3,981,250
75,000 GEICO Corp. ............................................. 4,125,000
-----------
8,106,250
-----------
MANUFACTURING/ENGINES--2.1%
40,000 **Cummins Engine Co. .................................... 1,820,000
-----------
METALS--3.4%
10,000 Aluminum Company of America.............................. 465,000
30,000 Phelps Dodge Corp. ...................................... 1,653,750
Shares Value
------ -----------
45,000 Tung Ho Steel Enterprise Corp. .......................... $ 810,000
-----------
2,928,750
-----------
PAPER--3.6%
66,800 Champion Int'l Corp. .................................... 3,097,850
-----------
PUBLISHING--2.6%
30,000 Time-Warner Inc. ........................................ 1,188,750
4,000 Washington Post.......................................... 1,059,000
-----------
2,247,750
-----------
REAL ESTATE INVESTMENT TRUSTS--.7%
60,000 Taubman Centers Inc. .................................... 577,500
-----------
RETAIL--1.0%
15,735 Sears & Roebuck & Co. ................................... 887,061
-----------
SPECIALIZED CONSUMER GOODS--2.6%
110,500 Jostens Inc. ............................................ 2,223,812
-----------
TOBACCO--4.9%
140,000 UST Inc. ................................................ 4,182,500
-----------
Total Value of Common Stocks (cost $52,518,560).......... 70,274,640
-----------
Principal
Amount
---------
CONVERTIBLE BONDS--.7%
ELECTRONICS
$ 750M Kinpo Electronics Note
3% due 7/21/01 (cost
$750,000).............................................. 607,500
-----------
U.S. GOVERNMENT OBLIGATIONS--16.4%
U.S. Treasury Bonds
5,000M 11 5/8% due 11/15/02................................... 6,590,625
5,000M 13 3/4% due 8/15/04.................................... 7,554,680
-----------
Total Value of U.S.
Government Obligations
(cost $12,934,482)..................................... 14,145,305
-----------
SHORT-TERM CORPORATE NOTES--.4%
370M General Electric Capital
Corp 5.92% due 6/01/95
(cost $370,000)........................................ 370,000
-----------
Total Value of
Investments
(cost $66,573,042)................................. 99.0% 85,397,445
Other Assets, less
Liabilities........................................ 1.0 841,749
------------- -----------
Net Assets.......................................... 100.0% $86,239,194
============= ===========
</TABLE>
*Non-income producing security
**Call options have been written by the Fund against this position (See Note
7).
See notes to financial statements
2
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES -- MAY 31, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value (identified cost
$66,573,042) (Note 1-A)................................. $85,397,445
Cash..................................................... 52,093
Receivables:
Dividends and interest................................... $389,769
Investments sold......................................... 579,232
Capital stock sold....................................... 663
Other assets............................................. 13,543 983,207
-------- -----------
TOTAL ASSETS.......................................... 86,432,745
LIABILITIES
Covered call options written, at value (premiums received
$10,680) (Notes 1B and 7)............................... 12,125
Payable for capital stock repurchased.................... 45,760
Accrued advisory and administrative fees................. 71,919
Other accrued expenses................................... 63,747
--------
TOTAL LIABILITIES..................................... 193,551
-----------
NET ASSETS................................................. $86,239,194
===========
NET ASSETS CONSIST OF:
Capital paid in.......................................... $64,412,791
Undistributed net investment income...................... 838,945
Accumulated net realized gain on investment transactions. 2,164,500
Net unrealized appreciation in value of investments and
call options............................................ 18,822,958
-----------
TOTAL................................................. $86,239,194
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($86,239,194 / 12,281,566 shares outstanding)
30,000,000 shares authorized, $1.00 par value (Note 2).. $7.02
=====
</TABLE>
See notes to financial statements
3
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF OPERATIONS -- SIX MONTHS ENDED MAY 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest.............................................. $ 991,887
Dividends............................................. 536,424
---------
TOTAL INCOME....................................... $ 1,528,311
Expenses:
Investment advisory fee (Note 4)...................... 309,223
Distribution plan expenses (Note 5)................... 106,874
Administration fee (Note 4)........................... 103,074
Transfer agent and dividend disbursing agent's fees
and expenses......................................... 45,280
Professional fees..................................... 38,335
Director fees and expenses............................ 30,571
Custodian fees........................................ 23,365
Fund accounting expense............................... 16,032
Insurance............................................. 10,221
Registration fees..................................... 6,350
Reports and notices to shareholders................... 6,047
Other expenses........................................ 12,644
---------
TOTAL EXPENSES..................................... 708,016
-----------
NET INVESTMENT INCOME............................. 820,295
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE
3):
Net realized gain on investment securities............ 2,573,010
Net unrealized appreciation (depreciation):
Investment securities................................. 6,754,671
Call options written.................................. (1,445)
---------
Net unrealized appreciation of investment securities
and call options..................................... 6,753,226
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.... $10,146,531
===========
</TABLE>
See notes to financial statements
4
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
May 31, November 30,
1995 1994
----------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income................................ $ 820,295 $ 1,614,071
Net realized gain (loss) on investment securities.... 2,573,010 (78,025)
Net unrealized appreciation (depreciation) of
investment securities and call options.............. 6,753,226 (8,017,723)
----------- -----------
Net increase (decrease) in net assets resulting
from operations................................... 10,146,531 (6,481,677)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................ (678,313) (1,695,567)
Net realized gain on investments..................... (330,486) (7,744,588)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting from cap-
ital share transactions (Note 2).................... (3,123,862) 1,865,068
----------- -----------
Net increase (decrease) in net assets.............. 6,013,870 (14,056,764)
NET ASSETS
Beginning of period.................................. 80,225,324 94,282,088
----------- -----------
End of period (including undistributed net investment
income of $838,945 and $696,963, respectively)...... $86,239,194 $80,225,324
=========== ===========
</TABLE>
See notes to financial statements
5
<PAGE>
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The Fund is registered under the Investment Company Act of 1940, as a
diversified open-end management investment company.
A. Security Valuation - securities listed on national exchanges or the
NASDAQ National Market System are valued at the closing sales price on May 31,
1995. Securities traded over-the-counter and securities not traded that day
are valued at the prevailing quoted bid price. Quotations of foreign
securities in foreign currency are translated to U.S. dollar equivalents using
the foreign exchange quotation in effect. Short-term obligations are stated at
cost which when combined with interest receivable approximates fair value.
B. Option Accounting Principles - when the Fund sells an option, an amount
equal to the premium received by the Fund is included as an asset and an
equivalent liability. The amount of the liability is marked-to-market to
reflect the current market value of the options written. The current market
value of a traded option is the last sale price. When an option expires on its
stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss, if the cost of a closing
purchase transaction exceeds the premium received when the option was sold)
without regard to any unrealized gain or loss on the underlying security, and
the liability related to such option is extinguished. If a call option is
exercised, the premium is added to the proceeds from the sale of the
underlying security in determining whether the Fund has a realized gain or
loss.
C. Federal Income Taxes - no provision has been made for Federal income
taxes on net income or capital gains, since it is the policy of the Fund to
continue to comply with the special provisions of the Internal Revenue Code
applicable to investment companies and to make sufficient distributions of
income and capital gains to relieve it from all, or substantially all, such
taxes.
D. Other - the Fund distributes its net investment income quarterly and net
realized gains annually. Security transactions are accounted for on the date
the securities are purchased or sold. Cost is determined, and gains and losses
are based, on the identified cost basis for both financial statement and
Federal income tax purposes. Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income and estimated expenses
are accrued daily.
2. CAPITAL STOCK
At May 31, 1995 there were 12,281,566 shares outstanding. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended Year Ended
May 31, 1995 November 30, 1994
--------------------- ----------------------
Shares Amount Shares Amount
-------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Capital stock sold.............. 38,995 $ 258,229 124,152 $ 829,140
Capital stock issued in rein-
vestment of distributions from
net investment income and real-
ized gain on investments....... 149,972 959,427 1,299,334 9,001,187
Capital stock redeemed.......... (664,256) (4,341,518) (1,200,127) (7,965,259)
-------- ----------- ---------- ----------
Net increase (decrease)....... (475,289) $(3,123,862) 223,359 $1,865,068
======== =========== ========== ==========
</TABLE>
6
<PAGE>
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 1995, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $25,446,109 and $8,562,887 respectively. Purchases and sales of
long-term United States Government obligations aggregated $12,926,085 and
$25,564,063 respectively.
At May 31, 1995, the cost of investments for Federal income tax purposes was
$66,573,042. Accumulated net unrealized appreciation on investments was
$18,824,403 consisting of $19,189,203 gross unrealized appreciation and
$364,800 gross unrealized depreciation.
4. INVESTMENT ADVISORY AND OTHER TRANSACTIONS WITH AFFILIATES
Baxter Financial Corporation (BFC), is the Investment Advisor and the
Administrator of the Fund.
As investment advisor, BFC supervises the Fund's investments on a continuous
basis and provides the Fund with investment advice and recommendations for an
annual fee equal to .75% of the first $200 million of net assets, .625% of net
assets between $200 million and $400 million, and .50% of net assets in excess
of $400 million.
As the Fund's administrator, BFC is responsible for providing overall
supervision of the Fund's administrative operations and receives an annual fee
of .25% of the average net assets of the Fund.
Both the investment advisory fee and the administrative fee are payable
monthly, based on month-end net asset values of the Fund.
Pursuant to California regulations, BFC has agreed to reimburse the Fund if
and to the extent that the Fund's aggregate operating expenses (exclusive of
interest, taxes, brokerage commissions, distribution plan expenses and
extraordinary expenses) exceed any limitation on expenses applicable to the
Fund in California. The reimbursement is limited to the yearly total of the
advisory and administrative fees. For the six months ended May 31, 1995, no
reimbursement was required.
During the six months ended May 31, 1995, directors of the Fund who are not
affiliated with BFC received directors fees aggregating $23,825. Thomas J.
Flaherty a director and former officer of the Fund receives a monthly pension
from the Fund which amounted to $6,250 for the six months ended May 31, 1995.
5. DISTRIBUTION PLAN
Pursuant to an amended Distribution Plan adopted under rule 12b-1 of the 1940
Act, the Fund may pay a fee in an amount up to .5% of the Fund's average net
assets calculated monthly.
A component of the 12b-1 fee (.25% of the Fund's average net assets) is paid
to BFC for providing shareholder services, which includes advice and
information regarding: share accounts; applications; use of the prototype
retirement plans of the Fund; assistance with questions or problems
7
<PAGE>
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
regarding the Fund's transfer agent, as well as other information and services.
In its discretion, BFC may make payments to registered broker-dealers and
members of the National Association of Securities Dealers, Inc. for providing
Fund Shareholders with similar services.
The remainder of the fee may be used to pay brokers and dealers which enter
into agreements with BFC or which provide sales, promotional, or advertising
services to the Fund, and to pay for other distribution, advertising,
registration and promotional expenses associated with the sale of Fund shares.
6. RULE 144A SECURITIES
Under Rule 144A, certain restricted securities are exempt from the
registration requirements of the Securities Act of 1933 and may only be resold
to qualified institutional investors. At May 31, 1995, the Fund held one 144A
security with an aggregate value of $372,000 representing less than 1/2 of 1%
of the Fund's net assets. This security is valued as set forth in Note 1A.
7. OPTIONS WRITTEN BY THE FUND
A call option gives the holder the right to buy the underlying stock from the
writer (The Fund) at a specified price within a fixed period of time.
Therefore, the securities held by the Fund against which options are written
may not be traded and are held in an escrow account by the custodian.
The following table sets forth the outstanding call options written by the
Fund as of May 31, 1995.
<TABLE>
<CAPTION>
Unrealized
Premium Market Appreciation
Call Options On Received Value (Depreciation)
--------------- -------- ------- --------------
<S> <C> <C> <C>
2,000 shares Cummins Engine Co.
@45 expires 6-17-95............................ $ 3,170 $ 2,625 $ 545
2,000 shares Cummins Engine Co.
@45 expires 9-16-95............................ 5,465 6,625 (1,160)
2,000 shares Cummins Engine Co.
@50 expires 9-16-95............................ 2,045 2,875 (830)
------- ------- -------
$10,680 $12,125 $(1,445)
======= ======= =======
</TABLE>
The aggregate market value at May 31, 1995 of securities subject to call
options is $273,000, representing less than 1/2 of 1% of the fund's net assets.
At December 1, 1994, the Fund had no option contracts outstanding. During the
six months ended May 31,1995 the Fund wrote 60 option contracts for which it
received premiums aggregating $10,680. These 60 option contracts were all
outstanding at May 31, 1995.
8
<PAGE>
PHILADELPHIA FUND, INC.
FINANCIAL HIGHLIGHTS
The following table sets forth the per share operating performance data for a
share of capital stock outstanding, total return, ratios to average net assets
and other supplemental data for each period indicated.
<TABLE>
<CAPTION>
Six Months Year Ended November 30,
Ended ----------------------------------------
PER SHARE DATA May 31, 1995 1994 1993 1992 1991 1990
- - -------------- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $6.29 $7.52 $6.52 $5.41 $5.34 $7.23
------- ------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income... .07 .13 .13 .09 .10 .17
Net Gains or Losses on
Securities
(both realized &
unrealized)............ .74 (.61) 1.05 1.09 .10 (.99)
------- ------- ------- ------- ------- -------
Total From Investment
Operations............. .81 (.48) 1.18 1.18 .20 (.82)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net Investment Income... .05 .13 .10 .07 .13 .18
Net Realized Gains...... .03 .62 .08 -- -- .89
------- ------- ------- ------- ------- -------
Total Distributions..... .08 .75 .18 .07 .13 1.07
------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $7.02 $6.29 $7.52 $6.52 $5.41 $5.34
======= ======= ======= ======= ======= =======
TOTAL RETURN (%)........ 13.01(b) (7.17) 18.41 21.94 3.69 (13.14)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (in thousands).. $86,239 $80,225 $94,282 $85,782 $81,758 $87,410
Ratio to Average Net As-
sets:
Expenses (%)........... 1.72(a) 1.67 1.60 1.79 1.61 1.19
Net Investment Income
(%)................... 1.99(a) 1.89 1.81 1.37 1.73 2.95
Portfolio Turnover Rate
(%).................... 44(b) 28 24 39 49 43
</TABLE>
(a) Annualized
(b) Not Annualized
See notes to financial statements
9
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of Directors of Philadelphia Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Philadelphia Fund, Inc., including the portfolio of investments as of May 31,
1995, and the related statement of operations for the six months then ended,
the statement of changes in net assets for the six months ended May 31, 1995
and the year ended November 30, 1994, and financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of May 31, 1995 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Philadelphia Fund, Inc. at May 31, 1995, and the results of its operations,
changes in its net assets and financial highlights for the periods presented,
in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
June 20, 1995
10
<PAGE>
PHILADELPHIA FUND, INC.
OFFICERS
DONALD H. BAXTER, Chairman and President
RONALD F. ROHE, Vice President/Secretary/Treasurer
KEITH A. EDELMAN, Director of Operations
DIANE M. SARRO, Director of Shareholder Services
DIRECTORS
DONALD H. BAXTER
THOMAS J. FLAHERTY
JAMES KEOGH
KENNETH W. McARTHUR
ROBERT L. MEYER
DONALD P. PARSON
ROBERT A. UTTING
PHILADELPHIA FUND, INC.
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432 (407) 395-2155
INVESTMENT ADVISOR, ADMINISTRATOR AND DISTRIBUTOR
BAXTER FINANCIAL CORP.,
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432
CUSTODIAN
STAR BANK, N.A., P.O. Box 640110, Cincinnati, OH 45264-0110
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
AMERICAN DATA SERVICES, INC.
24 West Carver Street, Location #00150, Huntington, NY 11743
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, Malvern, PA
AUDITORS
TAIT, WELLER & BAKER, Philadelphia, PA
11
<PAGE>
[LOGO]
PHILADELPHIA FUND, INC.
1200 NORTH FEDERAL HIGHWAY
SUITE 424
BOCA RATON, FL 33432
(407) 395-2155
You will find important information about PHILADELPHIA FUND -- its investment
policy and management, past record and the method of calculating the per-share
net asset value in the current prospectus. This report is submitted for the
general information of the Fund's shareholders. It is not authorized for dis-
tribution to prospective investors unless preceded or accompanied by an effec-
tive prospectus.
PHILADELPHIA
FUND, INC.
SEMI-ANNUAL
REPORT
MAY 31, 1995
ESTABLISHED 1923
