<PAGE>
PHILADELPHIA FUND, INC.
PRESIDENT'S LETTER - January 8, 1996
Dear Shareholders,
The bond market and the stock markets continued their winning ways in the
second half of our fiscal year. The continued easing of the Federal Reserve
has allowed a continuing decline in interest rates causing a sharp gain in
bond prices and triggering a significant rally in the stock market. The
financial markets have been dynamic in 1995, we think 1996 will be a year
finding good stock selection most important. Interest rates are moving more
slowly now than over the last few months; we continue to watch them carefully.
The smooth throttling of the country's economic engine is a difficult task.
Inflation is under control and, if a danger lurks, a no growth economy is the
bigger threat. Heavy consumer debt, sluggish job growth, and a poor Christmas
selling season are indicators of underlying problems which may result in slow
economic performance in 1996. We shall be watching closely.
We eliminated cyclical stocks Champion International, Aluminum Company of
America, Phelps Dodge, and Cummins Engine because we detected some slowness
creeping into the economy. Later statistics supported this interpretation and
made us happy we had sold.
Your fund paid a capital gain of 79.3 cents per share for 1995 and a dividend
of 5.2 cents per share for the fourth quarter. The Fund's total return was
26.58% over fiscal 1995 in comparison with an increase of 36.93% in the
Standard and Poor's 500 Index*.
We face the new year with caution, but remain alert to opportunities.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
Comparison of the change in value of $10,000 investment in the Philadelphia
Fund and the Standard and Poors 500 Index*
<TABLE>
<CAPTION>
The printed report shows a line graph with the following points.
PHILADELPHIA S&P
FUND INDEX
<S> <C> <C>
5/01/87** $10,000 $10,000
11/30/87 $ 8,423 $ 8,137
11/30/88 $10,006 $10,032
11/30/89 $13,726 $13,124
11/30/90 $11,921 $12,664
11/30/91 $12,361 $15,238
11/30/92 $15,074 $18,049
11/30/93 $17,849 $19,868
11/30/94 $16,569 $20,079
11/30/95 $20,972 $27,495
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns as of 11/30/95
1 YEAR 5 YEARS Since 5/1/87
-----------------------------
<S> <C> <C> <C>
N.A.V. Only 26.58% 11.96% 9.01%
S.E.C. Standardized 26.58% 11.96% 7.89%
</TABLE>
Past performance is not predictive of future performance.
* The Standard & Poors 500 Composite Stock Index is a widely recognized
unmanaged index of common stock prices. Performance figures include the
change in value of the stocks in the index and reinvestment of dividends.
** Mr. Donald H. Baxter became the Fund's portfolio manager on May 1, 1987.
Previous periods during which the Fund was advised by another investment
advisor are not shown.
<PAGE>
PHILADELPHIA FUND, INC.
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 1995
<TABLE>
<CAPTION>
Shares Value
- ------- -----------
COMMON STOCKS - 71.3 %
<C> <S> <C>
BANKS - 16.3 %
55,000 Bankers Trust NY Inc. ............................... $ 3,568,125
20,000 Intercontinental Bank of Miami, Fla................... 597,500
155,000 PNC Bancorp. ......................................... 4,533,750
30,000 Wells Fargo & Co. ................................... 6,307,500
-----------
15,006,875
-----------
BEVERAGES - 7.8 %
95,000 Coca Cola Co.......................................... 7,196,250
-----------
CABLE TELEVISION - 1.2 %
60,000 *Tele - Communications Inc. Class "A"................... 1,110,000
-----------
COMMUNICATIONS - 10.5 %
8,216 Bell Atlantic Corp. ................................... 517,608
140,000 Comcast Corp. Class"A"................................. 2,686,250
140,000 Comcast Corp. Special Class "A"........................ 2,765,000
68,000 SBC Communications Inc. ............................... 3,672,000
-----------
9,640,858
-----------
DEFENSE - 5.5 %
85,000 General Dynamics Corp.................................. 5,068,125
-----------
ENTERTAINMENT - .4 %
15,000 *Liberty Media Group.................................... 420,000
-----------
FINANCIAL SERVICES - 9.4 %
100,000 American Express Corp.................................. 4,250,000
40,000 Federal National Mortgage Association.................. 4,380,000
-----------
8,630,000
-----------
INSURANCE - 5.1 %
52,500 American International Group........................... 4,711,875
-----------
METALS - .5 %
49,286 *Tung Ho Steel Enterprise Corp. (Note 6) ............... 443,574
-----------
PUBLISHING - 6.5 %
40,000 Dun & Bradstreet....................................... 2,495,000
30,000 Readers Digest......................................... 1,507,500
Shares Value
- ------- -----------
20,000 Time - Warner Inc...................................... $ 800,000
4,000 Washington Post........................................ 1,216,000
-----------
6,018,500
-----------
REAL ESTATE INVESTMENT TRUSTS - .1 %
15,000 Taubman Centers Inc.................................... 140,625
-----------
SPECIALIZED CONSUMER GOODS - 3.0 %
110,500 Jostens Inc............................................ 2,734,875
-----------
TOBACCO - 5.0 %
140,000 UST Inc................................................ 4,567,500
-----------
Total Value of Common Stocks (cost $45,105,766)........ 65,689,057
-----------
Principal
Amount
- ---------
U.S. GOVERNMENT OBLIGATIONS - 8.3 %
$5,000M U.S. Treasury Bond, 13 3/4% due 08/15/04
(cost $6,814,003)...................................... 7,687,500
-----------
SHORT-TERM CORPORATE NOTES - 19.3 %
2,700M American Express Credit Corp 5.70% due 12/28/95........ 2,700,000
3,050M Chevron Capital Corp 5.55% due 12/21/95 .............. 3,050,000
3,140M Ford Motor Credit Corp 5.74% due 12/14/95 ............ 3,140,000
2,900M General Electric Credit Corp 5.65% due 1/04/96 ....... 2,900,000
3,170M Heller Credit Corp 5.65% due 12/14/95 ................ 3,170,000
2,800M Texaco Credit Corp 5.65% due 12/07/95 ................ 2,800,000
-----------
Total Value of Short-Term Corporate Notes
( cost $17,760,000) ................................... 17,760,000
-----------
Total Value of Investments (cost $69,679,769)........... 98.9% 91,136,557
Other Assets, less Liabilities.......................... 1.1 967,801
------ -----------
Net Assets............................................. 100.0% $92,104,358
====== ===========
</TABLE>
* Non-income producing security
See notes to financial statements
2
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 1995
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $69,679,769) (Note 1A)..... $91,136,557
Cash.......................................... 209,260
Receivables:
Investments sold .......................$1,000,555
Dividends and interest ................. 303,072
Capital stock sold ..................... 9,855
Other assets.................................. 6,821 1,320,303
---------- ------------
TOTAL ASSETS............................... 92,666,120
LIABILITIES
Payables:
Investments purchased .................. 449,050
Capital stock redeemed ................. 8,581
Accrued advisory and administrative fees...... 75,308
Other accrued expenses........................ 28,823
----------
TOTAL LIABILITIES.......................... 561,762
------------
NET ASSETS.......................................... $92,104,358
============
NET ASSETS CONSIST OF:
Capital paid in............................... $60,750,519
Undistributed net investment income .......... 605,605
Accumulated net realized gain on
investment transactions..................... 9,291,446
Net unrealized appreciation in value of invest 21,456,788
------------
TOTAL...................................... $92,104,358
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
($92,104,358 / 11,786,414 shares outstanding)
30,000,000 shares authorized, $1.00 par value
(Note 2)..................................... $7.81
=====
</TABLE>
See notes to financial statements
3
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Interest.............................. $1,611,861
Dividends............................. 1,375,839
----------
TOTAL INCOME.................... $ 2,987,700
Expenses: (Notes 4 and 5)
Investment advisory fee .............. 644,614
Distribution plan expenses ........... 221,237
Administrative fee ................... 214,871
Transfer agent and dividend disbursing
agent's fees and expenses........... 65,426
Professional fees..................... 59,715
Director fees and expenses............ 49,699
Fund accounting expense............... 38,245
Custodian fees........................ 37,135
Insurance............................. 19,618
Registration fees..................... 12,000
Reports and notices to shareholder.... 9,586
Other expenses........................ 20,610
----------
TOTAL EXPENSES...................... 1,392,756
Less: Custodian fees paid indirectly 2,082
----------
NET EXPENSES ................ 1,390,674
----------
INVESTMENT INCOME-NET............... 1,597,026
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Notes 3 and 7):
Net realized gain on investment
securities.......................... 9,292,398
Net unrealized appreciation of
investment securities............... 9,387,056
----------
Net gain on investments............. 18,679,454
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $20,276,480
===========
</TABLE>
See notes to financial statements
4
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS - Years Ended November 30, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income............................. $ 1,597,026 $ 1,614,071
Net realized gain (loss) on investment securities. 9,292,398
(78,025)
Net unrealized appreciation (depreciation)
investment securities........................... 9,387,056 (8,017,723)
----------- -----------
Net increase (decrease) in net assets
resulting from operations.................. 20,276,480 (6,481,677)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................. (1,280,825) (1,695,567)
Net realized gain on investments.................. ( 330,486) (7,744,588)
CAPITAL SHARE TRANSACTIONS
Increase (decrease) in net assets resulting from
capital share transactions (Note 2)............. (6,786,135) 1,865,068
----------- -----------
Net increase (decrease) in net assets........ 11,879,034 (14,056,764)
NET ASSETS
Beginning of year................................. 80,225,324 94,282,088
----------- -----------
End of year (including undistributed net
investment income of $1,013,164 and $696,963,
respectively.................................... $92,104,358 $80,225,324
=========== ===========
</TABLE>
See notes to financial statements
5
<PAGE>
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Philadelphia Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as a diversified open-end management investment company.
The Fund's investment objective is to achieve long term growth of capital and
income. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
A. Security Valuation - securities listed on national exchanges or
the NASDAQ National Market System are valued at the closing sales price on
November 30, 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. 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.
C. 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 November 30, 1995 there were 11,786,414 shares outstanding. Transactions
in capital stock were as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- ----------------------
Shares Amount Shares Amount
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Capital stock sold... 54,667 $ 373,567 124,152 $ 829,140
Capital stock issued
in reinvestment of
distributions ....... 219,149 1,467,768 1,299,334 9,001,187
Capital stock
redeemed............. (1,244,257) (8,627,470) (1,200,127) (7,965,259)
----------- ---------- ---------- -----------
Net increase
(decrease)........... (970,441) $(6,786,135) 223,359 $ 1,865,068
=========== ============ ========== ===========
</TABLE>
3. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 1995, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $32,112,185 and $29,528,237 respectively. Purchases and sales of
long-term United States Government obligations aggregated $12,846,660 and
$32,177,344 respectively.
6
<PAGE>
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At November 30, 1995, the cost of investments for Federal income tax
purposes was $69,679,769. Accumulated net unrealized appreciation on
investments was $21,456,788 consisting of $21,824,765 gross unrealized
appreciation and $367,977 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 the Fund's month-end net asset values.
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 year ended November 30, 1995, no
reimbursement was required.
During the year ended November 30, 1995, directors of the Fund who are not
affiliated with BFC received directors fees aggregating $36,725 and the fund
paid legal fees of $1,288 to Parson & Brown. Donald P. Parson, a partner of
the firm, is a director of the Fund. Thomas J. Flaherty a director and former
officer of the Fund receives a monthly pension from the Fund which amounted to
$12,500 for the year ended November 30, 1995.
The Fund's Custodian has provided credits in the amount of $2,082 against
custodian charges based on the uninvested cash balance of the Fund. Had these
cash balances been invested (rather than offsetting custodian charges) they
could have been used to produce income. The Fund maintains cash balances as
part of normal operations to meet shareholder redemptions and other
liabilities.
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.
7
<PAGE>
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 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. YEAR-END DISTRIBUTION
Realized gains from security transactions are distributed to shareholders
in December following the end of the fiscal year. A distribution of $.845 a
share, consisting of $.793 from realized gains and $.052 from ordinary income
was declared on December 11, 1995. The distribution is payable on December 29,
1995 to the shareholders of record on December 26, 1995.
7. OPTIONS WRITTEN BY THE FUND
At December 1, 1994, the Fund had no option contracts outstanding. During
the year ended November 30, 1995 the Fund wrote 60 option contracts for which
it received premiums aggregating $10,680. All 60 option contracts expired
during the year. There were no outstanding options held by the Fund at
November 30, 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, ratio to average net
assets and other supplemental data for each year indicated.
<TABLE>
<CAPTION>
PER SHARE DATA Year Ended November 30,
- -------------- -----------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year... $6.29 $7.52 $6.52 $5.41 $5.34 $7.23 $5.51 $6.38 $9.23 $9.13
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.14 0.13 0.13 0.09 0.10 0.17 0.15 0.08 0.14 0.22
Net Gains or Losses on Securities
(both realized & unrealized) ...... 1.51 (0.61) 1.05 1.09 0.10 (0.99) 1.84 0.92 (0.48) 0.93
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total From Investment Operations..... 1.65 (0.48) 1.18 1.18 0.20 (0.82) 1.99 1.00 (0.34) 1.15
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Investment Income................ 0.10 0.13 0.10 0.07 0.13 0.18 0.11 0.10 0.16 0.22
Net Realized Gains................... 0.03 0.62 0.08 --- --- 0.89 0.16 1.77 2.35 0.83
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions.................. 0.13 0.75 0.18 0.07 0.13 1.07 0.27 1.87 2.51 1.05
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Year......... $7.81 $6.29 $7.52 $6.52 $5.41 $5.34 $7.23 $5.51 $6.38 $9.23
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)..................... 26.58 (7.17) 18.41 21.94 3.69 (13.14) 37.17 18.79 (5.65) 13.67
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year
(in thousands)..................... $92,104 $80,225 $94,282 $85,782 $81,758 $87,410 $110,182 $91,333 $89,009 $109,621
Ratio to Average Net Assets:
Expenses (%)....................... 1.62 1.67 1.60 1.79 1.61 1.19 0.95 0.90 0.87 0.83
Net Investment Income (%).......... 1.86 1.89 1.81 1.37 1.73 2.95 2.02 1.50 1.83 2.37
Portfolio Turnover Rate (%).......... 59 28 24 39 49 43 9 16 152 147
</TABLE>
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 November
30, 1995, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended, and financial highlights for each of the years 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 November 30, 1995 by correspondence with the custodian and
brokers. 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 November 30, 1995, and the results of its
operations, changes in its net assets and financial highlights for the years
presented, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
December 22, 1995
10
<PAGE>
PHILADELPHIA FUND, INC.
OFFICERS
DONALD H. BAXTER, Chairman and President
RONALD F. ROHE, VicePresident/Secretary/Treasurer
ADMINISTRATIVE STAFF
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>
Philadelphia Fund, Inc. PHILADELPHIA
1200 North Federal Highway FUND, INC.
Suite 424
Boca Raton, FL 33432 ANNUAL
REPORT
November 30, 1995
[LOGO]
Established 1923
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. Its is not
authorized for distribution to
prospective shareholder unless preceded
or accompanied by an effective prospectus.
