UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-00505
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Philadelphia Fund, Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432
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(Address of principal executive offices) (Zip code)
Baxter Financial Corporation
1200 North Federal Highway, Suite 424, Boca Raton, FL 33432
- ------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (561) 395-2155
---------------------------
Date of fiscal year end: November 30, 2005
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Date of reporting period: December 1, 2004 - November 30, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
PHILADELPHIA FUND, INC.
PRESIDENT'S LETTER - January 9, 2006
Dear shareholders,
The action of the U.S. stock market in 2005 can best be called indecisive.
The economy performed well under the influence of our President's tax cuts and
the Federal Reserve's historically low interest rates. The last half of the
year saw the Fed continue to gradually increase interest rates, holding the
nation's economic horses to a trot, avoiding the risk of a stampede.
The Conference Board, a private business research group, stated its consumer
confidence index rose to 103.6 in December. This is the highest reading since
August. Growth in jobs, declining gasoline prices, and a robust United States
economy have given consumers an upbeat outlook. The consumer's mood is now as
sunny as it was before the 2005 hurricane season darkened the horizon.
We look for economic growth of less than the 3.6% increase in Gross Domestic
Product experienced in 2005. We suspect the Fed is near the end of its
program of interest rate increases. While the housing price balloon appears
to be leaking air, the enormous amounts of cash held by corporations should
help offset softening real estate prices.
The global economic outlook is positive, with China and India exhibiting
strong growth. Europe is essentially flat, while the economies of Latin
America are mixed, with Brazil holding promise. These are some of the cross
currents in this age of globalization.
We took profits in our portfolio during the second half of the fiscal year.
Energy holdings were reduced based on our expectation that oil had hit a short
term peak. We still have 13.3% of our portfolio in energy stocks and 17.6% in
utilities.
Our fund is 32.6% invested in short term instruments quickly available to
invest in the opportunities we expect in 2006.
Very truly yours,
/s/ Donald H. Baxter
Donald H. Baxter
President
Comparison of the change in value of $10,000 investment in Philadelphia Fund
and the Fund's benchmark, the Standard & Poor's 500 Composite Stock Index*
The printed report shows a line graph with the following points.
PHILADELPHIA S&P 500
FUND INDEX*
11/30/95 $10,000 $10,000
11/30/96 $11,604 $12,786
11/30/97 $14,810 $16,432
11/30/98 $16,633 $20,320
11/30/99 $17,624 $24,566
11/30/00 $17,293 $23,530
11/30/01 $16,908 $20,653
11/30/02 $15,493 $17,243
11/30/03 $17,473 $19,845
11/30/04 $21,567 $22,397
11/30/05 $23,634 $24,288
Average Annual Total Returns as of 11/30/05
1 Year 5 Years 10 Years
------ ------- --------
9.59% 6.45% 8.98%
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. Returns
shown do not reflect the deduction of taxes that a shareholder would pay
on fund distributions or the redemption of shares.
* The Standard & Poor's 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.
PORTFOLIO SUMMARY BY INDUSTRY - NOVEMBER 30, 2005
% of % of
Net Assets Net Assets
---------- ----------
Short-Term Corporate Notes 32.6% Health Care Plans 4.9%
Electric Utilities 17.6 Natural Gas Utilities 4.6
Food Processing 11.7 Retail Specialty 3.5
Banks 11.2 Publishing 2.6
Oil & Gas Operations 8.7 Conglomerate 2.1
-----
Total Investments 99.5
Other Assets, less Liabilities .5
-----
100.0%
=====
2
PHILADELPHIA FUND, INC.
PORTFOLIO OF INVESTMENTS - NOVEMBER 30, 2005
Shares Value
- ------- -------------
Common Stocks - 66.9%
Banks - 11.2%
80,000 AmSouth Bancorporation ............................... $ 2,127,200
80,000 Bank of America Corp. ................................ 3,671,200
50,000 National City Corp. .................................. 1,695,500
40,000 Wachovia Corp. ....................................... 2,136,000
------------
9,629,900
------------
Conglomerate - 2.1%
70,000 Hawaiian Electric Industries, Inc. ................... 1,850,800
------------
Electric Utilities - 17.6%
30,000 American Electric Power Co., Inc. .................... 1,096,200
80,000 Cinergy Corp. ........................................ 3,286,400
40,000 FirstEnergy Corp. ................................... 1,878,400
65,000 Public Service Enterprise Group, Inc. ................ 4,076,800
80,000 Southern Company ..................................... 2,776,800
20,000 TXU Corp. ............................................ 2,052,600
------------
15,167,200
------------
Food Processing - 11.7%
100,000 Conagra Foods, Inc. ... .............................. 2,150,000
40,000 Corn Products International, Inc. .................... 890,000
100,000 H. J. Heinz Co. ...................................... 3,472,000
80,000 Kellogg Co. .......................................... 3,525,600
------------
10,037,600
------------
Health Care Plans - 4.9%
70,000 United Health Group Incorporated. .................... 4,190,200
------------
Natural Gas Utilities - 4.6%
90,000 Sempra Energy ........................................ 3,955,500
------------
Oil & Gas Operations - 8.7%
35,000 ChevronTexaco Corp. .................................. 2,005,850
45,000 Marathon Oil Corp. ................................... 2,668,050
35,000 Occidental Petroleum Corp. ........................... 2,775,500
------------
7,449,400
------------
Shares Value
- ------- -------------
Publishing - 2.6%
3,000 Washington Post Co. Class "B" ........................ $ 2,211,000
------------
Retail Specialty - 3.5%
60,000 Costco Wholesale Corp. ............................... 2,998,800
------------
Total Value of Common Stocks (cost $33,824,335) ................ 57,490,400
------------
Principal
Amount
- ---------
Short-Term Corporate Notes - 32.6%
$4,200M American Express Corp., 3.9576%, due 12/01/2005 ....... 4,200,000
2,800M American General Corp., 3.9775%, due 12/05/2005 ....... 2,798,780
4,000M BMW US Capital Corp., 3.9576%, due 12/01/2005 ......... 4,000,000
4,200M Citicorp Funding Group, 3.9466%, due 12/01/2005 ....... 4,200,000
4,300M General Electric Capital Corp., 3.9775%, due 12/05/2005 4,298,127
4,300M Prudential Funding LLC Corp., 3.9775%, due 12/05/2005.. 4,298,127
4,300M U.S. Bancorp., 3.943%, due 12/05/2005 ................. 4,300,000
------------
Total Value of Short-Term Corporate Notes (Cost $28,095,034) ... 28,095,034
------------
Total Value of Investments (cost $61,919,369)#............ 99.5% 85,585,434
Other Assets, less Liabilities ........................... .5 398,158
----- ------------
Net Assets................................................100.0% $ 85,983,592
===== ============
# Aggregate cost for tax purposes is $61,919,369.
% Represents percentage of net assets.
See notes to financial statements
3
PHILADELPHIA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - NOVEMBER 30, 2005
ASSETS
Investments in securities, at value
(identified cost $61,919,369) (Note 1A)....... $ 85,585,434
Cash............................................ 284,553
Dividends and interest receivable............... 228,563
Other assets.................................... 7,227
------------
TOTAL ASSETS................................. 86,105,777
LIABILITIES
Payable for fund shares sold.................... $ 15,884
Accrued advisory, administrative and 12b-1 fees. 82,401
Other accrued expenses.......................... 23,900
----------
TOTAL LIABILITIES............................ 122,185
------------
NET ASSETS............................................ $ 85,983,592
============
NET ASSETS CONSIST OF:
Capital paid in................................. $ 53,594,887
Undistributed net investment income ............ 432,540
Accumulated net realized gain on investments.... 8,290,100
Net unrealized appreciation in value of
investments................................... 23,666,065
------------
NET ASSETS for 10,701,863 shares outstanding $ 85,983,592
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE ($85,983,592 / 10,701,863 shares)......... $ 8.03
======
See notes to financial statements
4
PHILADELPHIA FUND, INC.
STATEMENT OF OPERATIONS - NOVEMBER 30, 2005
INVESTMENT INCOME
Dividends............................. $1,984,737
Interest.............................. 753,383
----------
Total income.................... $ 2,738,120
EXPENSES: (Notes 3 and 5)
Investment advisory fee .............. 650,552
Administrative fee ................... 216,847
Distribution plan expenses ........... 130,108
Professional fees..................... 80,125
Transfer agent and dividend disbursing
agent's fees and expenses........... 48,747
Director fees and expenses............ 46,822
Fund accounting agent's fees.......... 37,371
Custodian fees........................ 29,306
Other expenses........................ 77,708
----------
Total expenses...................... 1,317,586
Less: Fees paid indirectly.......... 5,154
----------
Net expenses ................ 1,312,432
----------
Net Investment Income............... 1,425,688
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Note 4):
Net realized gain on investments...... 8,299,341
Net unrealized depreciation of
investments......................... (1,714,605)
----------
Net gain on investments............. 6,584,736
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS............................... $ 8,010,424
===========
See notes to financial statements
5
PHILADELPHIA FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS - YEARS ENDED NOVEMBER 30, 2005 AND 2004
2005 2004
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Investment income-net.......................... $ 1,425,688 $ 1,247,075
Net realized gain on investments............... 8,299,341 4,092,728
Net unrealized appreciation (depreciation)
of investments.............................. (1,714,605) 11,351,233
------------- -------------
Net increase in net assets
resulting from operations................. 8,010,424 16,691,036
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income
($0.11 and $0.125 per share, respectively).. (1,203,546) (1,396,454)
Net realized gain on investments
($0.375 and $0.08 per share, respectively)... (4,075,346) (906,366)
CAPITAL SHARE TRANSACTIONS
Decrease in net assets resulting from
capital share transactions (Note 2).......... (1,622,850) (3,642,382)
------------- -------------
Net increase in net assets................... 1,108,682 10,745,834
NET ASSETS
Beginning of year.............................. 84,874,910 74,129,076
------------- -------------
End of year (including undistributed net
investment income of $432,540 and $210,398,
respectively)................................. 85,983,592 $ 84,874,910
============= =============
See notes to financial statements
6
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 are valued
at the closing sales price on November 30, 2005, while securities trading on
the NASDAQ National Market are valued at the NASDAQ Official Closing Price. If
market quotations are not readily available, securities will be valued at their
fair values as determined in accordance with procedures approved by the Board
of Directors. Short-term obligations acquired at par are stated at cost which,
when combined with interest receivable, approximates fair value. Short-term
obligations acquired at a discount are stated at amortized cost which
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 the Fund from all, or substantially all,
such taxes.
C. Distributions to Shareholders - the Fund distributes its net investment
income quarterly and net realized gains annually. Income and capital gain
distributions which are determined in accordance with income tax regulations
are recorded on the ex-dividend date.
D. Use of Estimates - the preparation of the financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the reporting
period. Actual amounts could differ from those estimates.
E. Other - the Fund records security transactions on the trade date.
Dividend income is recognized on the ex-dividend date. Interest income is
recognized on the accrual basis and includes accretion of discounts and
amortization of premiums. Estimated expenses are accrued daily.
The Fund indemnifies its officers and directors for certain liabilities that
might arise from the performance of their duties to the Fund. Additionally, in
the normal course of business, the Fund enters into contracts that contain a
variety of representations and warranties and which provide general
indemnification. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
and/or its affiliates that have not yet occurred. However, based on experience,
the Fund expects the risk of loss to be remote.
7
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
2. CAPITAL STOCK
As of November 30, 2005, 30,000,000 shares of $1.00 par value capital
stockwere authorized. Transactions in shares of capital stock were as follows:
2005 2004
------------------------ ---------------------
Shares Amount Shares Amount
---------- ----------- --------- ----------
Shares sold . . . . . . . . 169,520 $ 1,341,335 60,428 $ 443,508
Shares issued in
reinvestment of
distributions . . . . . . . 576,392 4,378,125 275,561 1,889,730
Shares redeemed . . . . . . (930,748) (7,342,310) (843,804) (5,975,620)
---------- ----------- --------- -----------
Net decrease . . . . . . . (184,836) $(1,622,850) (507,815) $(3,642,382)
========== =========== ========= ===========
3. INVESTMENT ADVISORY AND OTHER TRANSACTIONS WITH AFFILIATES
Baxter Financial Corporation (BFC) is the investment advisor and the
administrator of the Fund. Certain officers and a director of the Fund are also
officers and a director of BFC.
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, 2005, directors of the Fund who are not
affiliated with BFC received directors' fees aggregating $32,250, and the
Fund's custodian provided credits in the amount of $5,154 against custodian
charges based on the uninvested cash balances 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 2005.
Keith Edelman serves as the Fund's Chief Compliance Officer (CCO). Mr.
Edelman is also an employee of BFC and a Vice President of the Fund. For the
year ended November 30, 2005, the Fund's CCO salary expense for Mr. Edelman
amounted to $10,325.
4. INVESTMENT TRANSACTIONS
For the year ended November 30, 2005, purchases and sales of securities
(other than U.S. Government obligations and short-term notes) aggregated
$17,847,505 and $37,831,707, respectively. Purchases and sales of U.S.
Government securities amounted to $23,085 and $9,668,164, respectively. The
specific identification method is used to determine tax cost basis when
calculating realized gains and losses.
8
PHILADELPHIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. DISTRIBUTION PLAN
Pursuant to an amended Distribution Plan adopted under rule 12b-1 of the
Investment Company Act of 1940, 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 include advice and information regarding:
share accounts; applications; use of the prototype retirement plans of the
Fund; assistance with questions regarding the Fund's transfer agent, as well as
other information and services. At 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 12b-1 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.
Until further notice, BFC has agreed to reduce the Fund's 12b-1 fees to
..15% of the Fund's average net assets.
6. DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS
The tax character of distributions paid during the years ended November 30,
2005 and 2004 were as follows:
2005 2004
---------- ----------
Distributions paid from:
Ordinary income . . . . . . . . . . . . . . $1,203,546 $1,396,454
Long-term capital gains . . . . . . . . . . 4,075,346 906,366
---------- ----------
$5,278,892 $2,302,820
========== ==========
As of November 30, 2005, the components of net assets on a tax basis were
as follows:
Undistributed income . . . . . . . . . . . . . . . . . . . $ 432,540
Undistributed long-term gain . . . . . . . . . . . . . . . 8,290,100
Gross unrealized appreciation . . . . . . . . . . . . . . 23,770,033
Gross unrealized depreciation . . . . . . . . . . . . . . (103,968)
Capital paid-in . . . . . . . . . . . . . . . . . . . . . 53,594,887
----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $85,983,592
==========
7. 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
$.821 per share, consisting of $.78 from realized gains and $.041 from ordinary
income, was declared on December 12, 2005. The distribution is payable on
December 28, 2005 to shareholders of record on December 27, 2005.
9
PHILADELPHIA FUND, INC.
FINANCIAL HIGHLIGHTS
(For A Share of Capital Stock Outstanding Throughout Each Year)
Year Ended November 30,
---------------------------------------
SELECTED PER SHARE DATA 2005 2004 2003 2002 2001
- ----------------------- ------ ------ ------ ------ ------
Net Asset Value, Beginning of Year.. $ 7.80 $ 6.51 $ 6.06 $ 6.89 $ 7.73
------ ------ ------ ------ ------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income............... 0.13 0.11 0.12 0.08 0.12
Net Realized & Unrealized
Gains (Loss) on Investments....... 0.59 1.39 0.62 (0.63) (0.24)
------ ------ ------ ------ ------
Total From Investment Operations.... 0.72 1.50 0.74 (0.55) (0.12)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net Investment Income............... 0.11 0.13 0.12 0.07 0.16
Net Realized Gains.................. 0.38 0.08 0.17 0.21 0.56
------ ------ ------ ------ ------
Total Distributions................. 0.49 0.21 0.29 0.28 0.72
------ ------ ------ ------ ------
Net Asset Value, End of Year........ $ 8.03 $ 7.80 $ 6.51 $ 6.06 $ 6.89
====== ====== ====== ====== ======
TOTAL RETURN (%).................... 9.59 23.43 12.78 (8.37) (2.23)
- ------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net Assets, End of Year
(in thousands).....................$85,984 $84,875 $74,129 $71,543 $84,956
Ratio to Average Net Assets:
Expenses (%)....................... 1.52 1.52 1.54 1.48 1.50
Net Investment Income (%).......... 1.64 1.56 1.99 1.17 1.68
Portfolio Turnover Rate (%).......... 26 44 52 140 119
See notes to financial statements
10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of
Directors of Philadelphia Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Philadelphia Fund, Inc., as of November 30,
2005, 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, 2005 and financial highlights for each of the five years in
the period then ended. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2005, 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, 2005, the results of its operations,
the changes in its net assets and its financial highlights for each of the
years presented, in conformity with accounting principles generally accepted in
the United States of America.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
December 16, 2005 (Except for Note 7
as to which the date is December 28, 2005)
11
PHILADELPHIA FUND, INC.
INFORMATION ABOUT YOUR FUND'S EXPENSES - For the six months ended November 30,
2005
As a shareholder of the Fund, you incur ongoing costs, including management
fees and other Fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with ongoing costs of investing in other mutual funds. The example is
based on an investment of $1,000 made at the beginning of the period and held
for the entire semi-annual period, June 1, 2005 through November 30, 2005.
This table illustrates the Fund's costs in two ways:
ACTUAL FUND RETURN: This section helps you to estimate the actual expenses that
you paid over the period. The "Ending Account Value" shown is derived from the
Fund's actual return for the past six month period, the "Expense Ratio" column
shows the period's annualized expense ratio, and the "Expenses Paid During
Period" column shows the dollar amount that would have been paid by an investor
who started with $1,000 in the Fund at the beginning of the period. You may use
the information here, together with your account value, to estimate the
expenses that you paid over the period. To do so, simply divide your account
value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6),
then multiply the result by the number given for the Fund in the first line
under the heading entitled "Expenses Paid During Period."
HYPOTHETICAL 5% RETURN: This section is intended to help you compare the Fund's
costs with those of other mutual funds. It assumes that the Fund had an annual
return of 5% before expenses, but that the expense ratio is unchanged. In this
case, because the return used is not the Fund's actual return, the results do
not apply to your investment. This example is useful in making comparisons to
other mutual funds because the Securities and Exchange Commission requires all
mutual funds to provide examples of expenses calculated and based on an assumed
5% annual return. You can assess the Fund's costs by comparing this
hypothetical example with the hypothetical examples that appear in shareholder
reports of other funds.
Please note that the expenses shown in the table are meant to highlight and
help you compare your ongoing costs only and do not reflect any transactional
costs such as sales charges (loads), redemption fees, or exchange fees. The
Philadelphia Fund does not charge any sales loads, redemption fees, or exchange
fees, but these fees may be present in other funds to which you compare the
Fund. Therefore, the hypothetical portions of the table are useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds.
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSE EXPENSES PAID
06/01/05 11/30/05 RATIO DURING PERIOD#
------------- ------------- ------- --------------
Actual Fund Return* . . . $1,000 $1,039.80 1.52% $7.77
Hypothetical 5% Return. . $1,000 $1,017.45 1.52% $7.69
* The actual total return for the six-month period ended November 30, 2005 was
3.98%. The actual total return figure assumes the reinvestment of all
dividends and capital gain distributions, if any.
# Expenses are equal to the Fund's annualized expense ratio multiplied by the
average account value over the period, multiplied by the number of days in
the most recent fiscal half-year, then divided by 365.
12
PHILADELPHIA FUND, INC
OFFICERS AND DIRECTORS
The names, ages, length of service, principal business occupations for at least
the past five years and other directorships of the officers and Directors of
the Fund are listed below. In most cases, more than five years of business
experience is included in order to present shareholders with a better awareness
of the Directors' experience. All officers and Directors hold identical
positions with Eagle Growth Shares Inc., a registered investment company also
advised by Baxter Financial Corporation, and with the Fund. The Directors do
not serve a specified term of office. Each Director will hold office until the
termination of the Fund or his resignation, retirement, incapacity, removal or
earlier death. The address of each Director and officer is 1200 North Federal
Highway, Suite 424, Boca Raton, FL 33432. Additional information about the
Board is available in the Fund's Statement of Additional Information which can
be obtained free of charge by calling (800) 749-9933.
INDEPENDENT DIRECTORS
Thomas J. Flaherty, Director (Since 1989) Age: (81)
Audit Committee Member (Since 2001)
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); formerly, Partner, Fahnestock & Co., Inc.
Kenneth W. McArthur, Director (Since 1987) Age: (70)
Audit Committee Chairman (Since 2001)
Chairman, Shurway Capital Corp. (private investment company); Trustee, BMO
Mutual Funds (Canadian registered investment company); Trustee & Investment
Committee Member, Canada Post Pension Fund; Lead Director, Oppenheimer
Holdings, Inc. (financial services holding company); formerly, Vice President
and Director, Nesbitt Investment Management; formerly, President, Chief
Executive Officer, and Director, Fahnestock & Co., Inc. (securities brokerage);
formerly, Senior Vice President and Chief Financial Officer, Nesbitt Thomson
Inc. (holding company).
Robert L. Meyer, Director (Since 1989) Age: (65)
Audit Committee Member (Since 2001)
President, Ehrlich Meyer Associates, Inc. (investment management); Chartered
Financial Analyst; formerly, Principal Officer, Convergent Capital Corporation
(holding company); formerly, Director, Vice President, and Senior Vice
President, Fahnestock & Co., Inc.
Donald P. Parson, Director (Since 1987) Age: (64)
Audit Committee Member (Since 2001)
Counsel, Satterlee Stephens Burke & Burke LLP; Vice Chairman and Director, Home
Diagnostics, Inc. (medical device company); formerly, Chairman of the Board,
Syracuse University College of Law.
13
PHILADELPHIA FUND, INC.
OFFICERS AND DIRECTORS (Continued)
INTERESTED PERSONS
Donald H. Baxter, Director and President (Since 1989) Age: (62)
Director, President, and Treasurer, Baxter Financial Corporation; Director and
President, Universal Programs International Limited (distributor); formerly,
Director, Sunol Molecular Corp. (biotechnology); formerly, Director, Great
Eastern Bank; formerly, Director, Frost Hanna Capital Group (publicly
registered acquisition company); 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.
Ronald F. Rohe, Vice President, Secretary, Age: (62)
and Treasurer (Since 1990)
Chief Operating Officer and Marketing Director, Baxter Financial Corporation;
Secretary, Universal Programs International Limited (distributor); formerly,
registered representative, Paine Webber Incorporated.
Keith A. Edelman, Vice President Age (40)
and Chief Compliance Officer (Since 2004)
Director of Operations and Director of Computer Operations, Baxter Financial
Corporation; Director of Operations, Philadelphia Fund, Inc.; Director of
Operations, Eagle Growth Shares, Inc.
Diane M. Sarro, Vice President (Since 2005) Age (41)
Director of Shareholder Services, Baxter Financial Corporation, Philadelphia
Fund, Inc. and Eagle Growth Shares, Inc.
14
PHILADELPHIA FUND, INC.
OFFICERS
DONALD H. BAXTER, Chairman and President
RONALD F. ROHE, Vice President/Secretary/Treasurer
KEITH A. EDELMAN, Vice President/Chief Compliance Officer
DIANE M. SARRO, Vice President/Director of Shareholder Services
DIRECTORS
DONALD H. BAXTER
THOMAS J. FLAHERTY
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
U.S. BANK, N.A., 425 Walnut Street, Cincinnati, OH 45202
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
UNIFIED FUND SERVICES, INC.
P.O. Box 6110, Indianapolis, IN 46206-6110
LEGAL COUNSEL
STRADLEY, RONON, STEVENS & YOUNG, LLP, Philadelphia, PA
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BRIGGS, BUNTING & DOUGHERTY, LLP, Philadelphia, PA
15
Philadelphia Fund, Inc. PHILADELPHIA
1200 North Federal Highway FUND, INC.
[LOGO] Suite 424
Boca Raton, FL 33432 ANNUAL
(561) 395-2155 REPORT
November 30, 2005
The Fund files its complete schedule
of portfolio holdings with the
Securities and Exchange Commission
(SEC) for the first and third
quarters of each fiscal year on Form
N-Q. The Fund's Forms N-Q are available
on the SEC's website at
http://www.sec.gov, by calling the
Fund at 1-800-749-9933, and may be
reviewed and copied at the SEC's
Public Reference Room. Information on
the operation of the SEC's Public
Reference Room may be obtained by
calling 1-800-SEC-0300.
The Fund's proxy voting policies and
procedures and how the Fund voted
proxies relating to portfolio
securities during the most
recent 12-month period ended
June 30, 2005 are available without
charge (i) upon request, by calling
1-800-749-9933; (ii) by writing to the
Fund at the above address; and (iii) on
the SEC's website at www.sec.gov.
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.
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics that applies to its
principal executive officer and principal financial officer. During
the period covered by the report, no amendments were made to the
provisions of this code of ethics. During the period covered by the
report, the registrant did not grant any waivers, including implicit
waivers, from the provisions of this code of ethics. The registrant
has filed this code of ethics as an exhibit pursuant to Item 12(a)(1)
of this Form N-CSR.
The registrant's Code Of Business Ethics for Principal Executive
and Financial Officers is available, without charge, upon request,
by writing to the above address, or by calling 1-800-749-9933.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that Mr. Kenneth W.
McArthur meets the definition of "audit committee financial expert" as
such term is defined in the instructions to Item 3(a) of Form N-CSR.
In addition, Mr. McArthur is an "independent" member of the Audit
Committee, as defined in the Item 3(a)(2) of Form N-CSR. Mr. McArthur
also serves as the Audit Committee Chairman.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(a) Audit Fees. The aggregate fees billed in each of the last two
fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the
accountant in connection with statutory and regulatory filings
or engagements for those fiscal years are as follows.
For the fiscal year ended 11/30/05: $36,050
For the fiscal year ended 11/30/04: $35,750
(b) Audit-Related Fees. No fees were billed in each of the last two
fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the
audit of the registrant's financial statements and are not
reported under paragraph (a) of this item.
(c) Tax Fees. The aggregate fees billed in each of the last two
fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice and tax planning are as
follows. The preparation of Federal and state income tax returns
and Federal excise tax returns comprised the fees disclosed under
this category.
For the fiscal year ended 11/30/05: $1,400
For the fiscal year ended 11/30/04: $1,300
(d) All Other Fees. No fees were billed in each of the last two
fiscal years for products and services provided by the principal
accountant, other than the services reported in paragraphs (a)
through (c) of this item.
(e)(1) The Audit Committee Charter of the Board requires that the
Audit Committee (a) pre-approve, and to recommend to the Board,
the selection, retention or termination of the independent
auditors to provide audit, review or attest services to the
Fund, and, in connection therewith, to evaluate the
independence of the auditors, and, in connection therewith, to
receive the auditors' specific representations as to their
independence; (b) pre-approve all non-audit services to be
provided to the Fund by the independent auditors when, without
such pre-approval, the auditors would not be independent of the
Fund under applicable federal securities laws, rules or
auditing standards; (c) approve all non-audit services to be
provided by the Fund's independent auditors to the Fund's
investment adviser or to any entity that controls, is
controlled by or is under common control with the Fund's
investment adviser and that provides ongoing services to the
Fund, when, without such pre-approval by the Committee, the
auditors would not be independent of the Fund under applicable
federal securities laws, rules or auditing standards; and (d)
establish, if deemed necessary or appropriate as an alternative
to Audit Committee pre-approval of services to be provided by
the independent auditors as required by paragraphs (b) and (c)
above, policies and procedures to permit such services to be
pre-approved by other means, such as by action of a designated
member or members of the Audit Committee, subject to subsequent
Audit Committee review or oversight.
(e)(2) None of the services described in each of paragraphs (b)
through (d) of this Item were approved by the Audit Committee
pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X.
(f) Not applicable.
(g) There were no non-audit fees billed by the registrant's
accountant for services rendered to the registrant other than
those described above. No non-audit fees were billed by the
registrant's accountant for services rendered to the registrant's
investment adviser or any entity controlling, controlled by, or
under common control with the adviser that provides ongoing
services to the registrant for each of the last two fiscal years
of the registrant.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to registrant, which is an open-end management
investment company.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable; full Schedule of Investments filed under Item 1 of
this report.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to registrant, which is an open-end management
investment company.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to registrant, which is an open-end management
investment company.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to registrant, which is an open-end management
investment company.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant's Nominating Committee (the "Committee") is
responsible for selecting and nominating persons for election or
appointment to the registrant's Board of Directors as Board members.
The Committee has adopted a Nominating Committee Charter (the
"Charter"). Pursuant to the Charter, the Committee will consider
recommendations for nominees from "Qualifying Shareholders," so long
as such recommendations are presented with appropriate background
material concerning the nominee, and which demonstrates the
candidate's ability to serve as a Director of the registrant,
including as a Disinterested Board member, in accordance with the
criteria set forth in the Charter.
A "Qualifying Shareholder" is a shareholder that: (i) owns of record,
or beneficially through a financial intermediary, 5% or more of the
registrant's outstanding shares; (ii) has been a shareholder of 5% or
more of the registrant's total outstanding shares for 12 months or
more prior to submitting the recommendation to the Committee; and
(iii) provides a written notice to the Committee containing the
information required by the Charter.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal
financial officer have evaluated the registrant's disclosure
controls and procedures (the "Procedures") within 90 days of the
filing of this report, and have concluded that the Procedures are
effective in providing reasonable assurances that the information
required to be disclosed by the registrant in its reports or
statements filed under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and
Exchange Commission.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940, as amended) that occurred during
the registrant's last fiscal half-year that have materially
affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The registrant's Code Of Business Ethics for Principal Executive
and Financial Officers required by Item 2(a) is attached as an
exhibit hereto.
(2) The certifications required by Rule 30a-2(a) under the
Investment Company Act of 1940, as amended, and Sections 302
and 906 of the Sarbanes-Oxley Act of 2002 are attached as
exhibits hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) Philadelphia Fund, Inc.
--------------------------------------------------------------------
By (Signature and Title)* /s/ Donald H Baxter
-------------------------------------------------------
Donald H. Baxter, Chief Executive Officer
Date January 26, 2006
---------------------
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
By (Signature and Title)* /s/ Donald H. Baxter
-------------------------------------------------------
Donald H. Baxter, Chief Executive Officer
Date January 26, 2006
---------------------
By (Signature and Title)* /s/ Ronald F. Rohe
-------------------------------------------------------
Ronald F. Rohe, Chief Financial Officer
Date January 26, 2006
---------------------
* Print the name and title of each signing officer under his or her signature.