<PAGE>
PHILADELPHIA FUND, INC.
PRESIDENT'S LETTER - January 6, 2000
Bryan Steamer, Cole, Crow-Elkhart, Davis, Elgin, Ford, Haynes, Marmon,
McFarlan, McGill, Morris-London, Pilot, Premier, ReVere, and Star were among
the names of automobiles being produced at the beginning of the Philadelphia
Fund in 1923, and these names were only from the state of Indiana! In the year
2100 there will be a list of forgotten Internet companies having the same degree
of recognition as these automobiles do today.
Waves of speculation pushing prices of Internet stocks to stratospheric heights
will not last forever. The Internet is a revolutionary tool changing the way
businesses function. Exactly how business will be transformed is uncertain, but
some investors have decided it will be pervasive and without losers. Euphoria
pushing Internet issues to dizzying heights has drawn biotechnology stocks into
the party atmosphere to the delight of their investors.
1999 was a very strange year with technology stocks becoming almost the only
game in town. The result is a split personality in the stock market. The
technology sector of the S & P 500 Index was up a whopping 73%, as investors
threw fundamentals out the window. The only other sector to outperform the
S & P 500 index was capital goods. Though more stocks fell than rose last year,
investors seemed hypnotized by the daily flight of the latest Internet stock's
initial public offering.
This unusual market situation has presented us with an excellent opportunity
to accumulate a number of valuable stocks at prices which we consider bargains.
New positions initiated in the second half of fiscal 1999 include Sara Lee,
a brand name marketer; Annixter International, an electronic components
purveyor; Maytag, the household appliances manufacturer; Washington Mutual,
the largest thrift in the United States; Columbia/HCA Healthcare, the
hospital company; Deluxe Corporation, the check printers; Fleetwood, a
recreational vehicle producer; Brunswick, a sports and recreation company;
Alterra Corporation, a producer of integrated circuits and software; Corn
Products, a basic foods company; and General Motors, the world's largest
automobile manufacturer. We believe these offer well positioned companies at
very reasonable prices.
Your fund paid a long-term capital gain of 77 cents per share. It is our
practice to take gains when a company has fulfilled our expectations. This
was the situation with Golden State Bancorp, SBC Communications and Ball
Corporation. On occasion a stock may be sold to bring the proportion of the
holding into better balance with the rest of the portfolio. This is why
5,000 shares of American International Group, 10,000 shares of Comcast, and
80,000 shares of Cox Communication were sold during the period.
<PAGE>
Some stocks are simply disappointing which was the case with IMC Global,
Ryder Systems, Dole Foods, United Healthcare, and they were sold for that
reason.
Value stocks have under-performed the Standard & Poor's 500 Industrial stocks
index for the last six years. In the past such rotation of favor has been
good for value stocks ultimately, and we hope the year 2000 will see superior
performance for value investing.
A new millennium has begun. We look back with wonder at the incredible advances
of humanity, and believe future generations will look upon this time as an
exceptional period of progress.
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 Poor's 500 Index*
<TABLE>
<CAPTION>
The printed report shows a line graph with the following points.
PHILADELPHIA S&P
FUND INDEX*
<S> <C> <C>
11/30/89 $10,000.00 $10,000.00
11/30/90 $ 8,685.74 $ 9,649.82
11/30/91 $ 9,006.48 $11,610.42
11/30/92 $10,982.90 $13,752.47
11/30/93 $13,004.84 $15,138.61
11/30/94 $12,071.80 $15,299.35
11/30/95 $15,280.30 $20,950.30
11/30/96 $17,731.97 $26,790.81
11/30/97 $22,630.33 $34,424.01
11/30/98 $25,416.28 $42,563.19
11/30/99 $26,930.51 $51,457.11
</TABLE>
Average Annual Total Returns as of 11/30/99
1 Year 5 Years 10 Years
------ ------- --------
5.96% 17.41% 10.41%
The return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be more or less than their original
cost. 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.
2
<PAGE>
PHILADELPHIA FUND, INC.
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Shares Value
- ------- -------------
<C> <S> <C>
COMMON STOCKS - 84.7 %
APPLIANCES - 3.0 %
70,000 Maytag Corp....................................... $ 3,338,125
-------------
AUTOMOTIVE - 3.9 %
60,000 General Motors Corp............................... 4,320,000
-------------
BANKS - 10.9 %
140,000 National City Corp............................... 3,491,250
115,000 PNC Bank Corp.................................... 6,411,250
70,000 Washington Mutual Inc............................ 2,030,000
-------------
11,932,500
-------------
CABLE TV - 12.1 %
210,000 *Comcast Corp. Special Class "A".................. 9,489,375
80,000 *Cox Communications Inc. Class "A"................ 3,760,000
-------------
13,249,375 -------------
COMMERCIAL SERVICES - 1.7 %
70,000 Deluxe Corp...................................... 1,833,125
-------------
COMMUNICATIONS - 4.7 %
100,000 SBC Communications Inc........................... 5,193,750
-------------
CONSUMER PRODUCTS - 2.2 %
100,000 Sara Lee Corp.................................... 2,425,000
-------------
ELECTRONICS - 4.0 %
215,000 *Anixter International Inc........................ 4,380,625
-------------
FINANCIAL SERVICES - 15.5 %
20,000 American Express Co.............................. 3,026,250
110,000 Federal National Mortgage Association............ 7,328,750
135,000 SLM Holding Corp................................. 6,690,938
-------------
17,045,938
-------------
Shares Value
- ------- -------------
FOOD - 4.7%
165,000 Corn Products International...................... $ 5,176,875
-------------
FOOD-RETAIL - 1.0%
95,000 Ingles Markets, Inc. Class "A" ................. 1,116,250
-------------
HEALTH CARE PROVIDER - 1.7 %
70,000 Columbia/HCA Healthcare Corp..................... 1,907,500
-------------
HORTICULTURE PRODUCTS - 2.8 %
75,000 *Scott Company Class "A".......................... 3,014,062
-------------
INSURANCE - 4.2 %
45,000 American International Group Inc................. 4,646,250
-------------
MANUFACTURED HOUSING - 0.8 %
40,000 Fleetwood Enterprises............................ 840,000
-------------
PUBLISHING - 3.2 %
20,000 Time Warner Inc.................................. 1,233,750
4,000 Washington Post Co. Class "B".................... 2,286,000
-------------
3,519,750
-------------
RECREATION - 1.4 %
70,000 Brunswick Corp. ................................ 1,526,875
-------------
SEMICONDUCTORS - 6.9 %
140,000 *Altera Corp...................................... 7,542,500
-------------
Total Value of Common Stocks (cost $58,950,943).. 93,008,500
-------------
</TABLE>
3
<PAGE>
PHILADELPHIA FUND, INC.
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 1999 (CONTINUED)
<TABLE>
<CAPTION>
Principal
Amount Value
- ------- -------------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS - 5.9 %
$5,000M U.S. Treasury Bond,
13 3/4% due 08/15/04(cost $6,129,626).............. $ 6,500,000
-------------
SHORT-TERM CORPORATE NOTES - 8.8 %
American Express Corp.,
1,300M 5.465%, due 12/06/1999............................. 1,300,000
Associates Corp,
2,200M 5.434%, due 1/03/2000.............................. 2,200,000
CIT Financial Corp,
3,900M 5.303%, due 12/02/1999............................. 3,900,000
General Electric Capital Corp.,
2,200M 5.489%, due 12/27/1999............................. 2,200,000
-------------
Total Value of Short-Term Corporate Notes
(cost $9,600,000)................................ 9,600,000
-------------
Total Value of Investments (cost $74,680,569)......... 99.4% 109,108,500
Other Assets, less Liabilities........................ 0.6 691,742
----- -------------
Net Assets............................................ 100.0% $ 109,800,242
===== =============
</TABLE>
*Non-income producing security
See notes to financial statements
4
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 1999
<TABLE>
<S> <C> <C>
ASSETS
Investments in securities, at value
(identified cost $74,680,569) (Note 1A)..... $109,108,500
Cash.......................................... 542,483
Dividends and interest receivable............. 278,782
Other assets.................................. 7,007
------------
TOTAL ASSETS............................... 109,936,772
LIABILITIES
Payable for capital shares redeemed...........$ 2,733
Accrued advisory and administrative fees...... 91,497
Other accrued expenses........................ 42,300
----------
TOTAL LIABILITIES.......................... 136,530
------------
NET ASSETS.......................................... $109,800,242
============
NET ASSETS CONSIST OF:
Capital paid in............................... $ 65,645,290
Undistributed net investment income .......... 187,861
Accumulated net realized gain on investments.. 9,539,160
Net unrealized appreciation in value of
investments................................. 34,427,931
------------
TOTAL...................................... $109,800,242
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
($109,800,242 / 12,518,399 shares outstanding)
30,000,000 shares authorized, $1.00 par value
(Note 2)..................................... $ 8.77
======
</TABLE>
See notes to financial statements
5
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF OPERATIONS - YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Income:
Dividends............................. $1,114,113
Interest.............................. 1,423,446
----------
TOTAL INCOME.................... $ 2,537,559
Expenses: (Notes 4 and 5)
Investment advisory fee .............. 851,663
Distribution plan expenses ........... 304,990
Administrative fee ................... 283,888
Professional fees..................... 60,593
Director fees and expenses............ 57,775
Fund accounting expense............... 49,364
Transfer agent and dividend disbursing
agent's fees and expenses........... 46,482
Custodian fees........................ 44,429
Other expenses........................ 56,357
----------
TOTAL EXPENSES...................... 1,755,541
Less: Custodian fees paid indirectly 10,625
----------
NET EXPENSES ................ 1,744,916
----------
INVESTMENT INCOME-NET............... 792,643
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 3):
Net realized gain on investments...... 9,539,160
Net unrealized depreciation of
investments......................... ( 3,431,350)
----------
Net gain on investments............. 6,107,810
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $ 6,900,453
===========
</TABLE>
See notes to financial statements
6
<PAGE>
PHILADELPHIA FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS - YEARS ENDED NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
INCREASE IN NET ASSETS FROM OPERATIONS
Net investment income........................... $ 792,643 $ 1,558,653
Net realized gain on investments................ 9,539,160 22,650,046
Net unrealized depreciation of investments...... (3,431,350) (10,595,653)
------------- -------------
Net increase in net assets resulting from
operations............................... 6,900,453 13,613,046
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................... ( 1,091,524) (1,312,355)
Net realized gain on investments................ (22,650,046) (9,189,061)
CAPITAL SHARE TRANSACTIONS
Increase in net assets resulting from
capital share transactions (Note 2)........... 8,566,736 1,468,841
------------- -------------
Net increase(decrease)in net assets.......... (8,274,381) 4,580,471
NET ASSETS
Beginning of year............................... 118,074,623 113,494,152
------------- -------------
End of year (including undistributed net
investment income of $187,861 and $486,742,
respectively.................................. $ 109,800,242 $ 118,074,623
============= =============
</TABLE>
See notes to financial statements
7
<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 are valued at the closing sales price on
November 30, 1999. 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. Use of Estimates - the preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
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. Premiums on bonds purchased
are amortized over the life of the bonds. Interest income and estimated
expenses are accrued daily.
2. CAPITAL STOCK
At November 30, 1999 there were 12,518,399 shares outstanding.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ----------------------
Shares Amount Shares Amount
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Capital stock sold.... 39,030 $ 337,749 21,758 $ 218,602
Capital stock issued
in reinvestment of
distributions ........ 2,289,896 19,785,412 924,496 8,753,732
Capital stock
redeemed.............. (1,309,259) (11,556,425) (739,553) (7,503,493)
----------- ------------ ----------- ------------
Net increase....... 1,019,667 $ 8,566,736 206,701 $ 1,468,841
=========== ============ =========== ============
</TABLE>
8
<PAGE>
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
3. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 1999, purchases and sales of securities,
other than United States Government obligations and short-term notes,
aggregated $78,197,315 and $77,895,815 respectively. There were no purchases
or sales of long-term United States Government obligations during the year.
At November 30, 1999, the cost of investments for Federal income tax
purposes was $74,680,569. Accumulated net unrealized appreciation on
investments was $34,427,931 consisting of $34,967,516 gross unrealized
appreciation and $539,585 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.
During the year ended November 30, 1999, directors of the Fund who are not
affiliated with BFC received directors' fees aggregating $37,300. 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.
The Fund's Custodian has provided credits in the amount of $10,625 against
custodian charges based on the uninvested cash balances of the Fund.
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 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.
9
<PAGE>
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
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 Fund's fiscal year. A distribution of $.785
a share, consisting of $.77 from realized gains and $.015 from ordinary income
was declared on December 6, 1999. The distribution is payable on December 31,
1999 to the shareholders of record on December 28, 1999.
10
<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 year indicated.
<TABLE>
<CAPTION>
PER SHARE DATA Year Ended November 30, 1999
- -------------- ---------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Year...$10.27 $10.05 $ 8.00 $ 7.81 $ 6.29
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income................ 0.06 0.13 0.09 0.13 0.14
Net Realized & Unrealized
Gains (Loss) on Investments........ 0.51 1.02 2.10 0.99 1.51
------ ------ ------ ------ ------
Total From Investment Operations..... 0.57 1.15 2.19 1.12 1.65
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Investment Income................ 0.09 0.11 0.11 0.14 0.10
Net Realized Gains................... 1.98 0.82 0.03 0.79 0.03
------ ------ ------ ------ ------
Total Distributions.................. 2.07 0.93 0.14 0.93 0.13
------ ------ ------ ------ ------
Net Asset Value, End of Year.........$ 8.77 $10.27 $10.05 $ 8.00 $ 7.81
====== ====== ====== ====== ======
TOTAL RETURN (%)..................... 5.96 12.31 27.62 16.04 26.58
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year
(in thousands).....................$109,800 $118,075 $113,494 $97,300 $92,104
Ratio to Average Net Assets:
Expenses (%)....................... 1.55 1.53 1.53 1.56 1.62
Net Investment Income (%).......... 0.71 1.32 1.02 1.69 1.86
Portfolio Turnover Rate (%).......... 81 37 17 14 59
</TABLE>
See notes to financial statements
11
<PAGE>
INDEPENDENT AUDITORS 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, 1999, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in
the period ended November 30, 1999 and financial highlights for each of the
three years in the period ended November 30, 1999. 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. The financial highlights for each
of the two years in the period ended November 30, 1996, were audited by other
auditors, whose report, dated December 16, 1996 expressed an unqualified
opinion on those financial highlights.
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, 1999 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 November 30, 1999, and the results of its operations
for the year then ended, the statements of changes in net assets for each of the
two years in the period ended November 30, 1999 and financial highlights for
each of the three years in the period ended November 30, 1999,in conformity
with generally accepted accounting principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
December 20, 1999 (Except for Note 6
as to which the date is December 28, 1999)
12
<PAGE>
PHILADELPHIA FUND, INC.
OFFICERS
DONALD H. BAXTER, Chairman and President
RONALD F. ROHE, Vice President/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
PHILADELPHIA FUND, INC.
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432 (561) 395-2155
INVESTMENT ADVISOR, ADMINISTRATOR AND DISTRIBUTOR
BAXTER FINANCIAL CORP.,
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432
CUSTODIAN
FIRSTAR BANK, N.A., P.O. Box 640110, Cincinnati, OH 45264-0110
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
AMERICAN DATA SERVICES, INC.
Hauppauge Corporate Center, 150 Motor Parkway, Suite 109, Hauppauge, NY 11788
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, Malvern, PA
AUDITORS
BRIGGS, BUNTING & DOUGHERTY, LLP Philadelphia, PA
13
<PAGE>
Philadelphia Fund, Inc. PHILADELPHIA
1200 North Federal Highway FUND, INC.
Suite 424
Boca Raton, FL 33432 ANNUAL
(561) 395-2155 REPORT
November 30, 1999
[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. It is not
authorized for distribution to
prospective investors unless preceded
or accompanied by an effective prospectus.
