SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 18 as to 2-60951* /X/
Post-Effective Amendment No. 23 as to 2-55344* /X/
Post-Effective Amendment No. 21 as to 2-61740* /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT /X/
OF 1940
Amendment No. 19* /X/
*See Explanatory and Rules 414 and 429(b) Notes on Inside Facing Page.
COPLEY FUND, INC.
Formerly "Copley Tax Managed Fund, Inc.," "The Copley Trust"
and "Steadman Tax-Sheltered Trust"_______________
(Exact Name of Registrant as Specified in Charter)
245 Sunrise Avenue, Palm Beach, FL 33480
(Address of Registrant's Principal Executive Office (Zip Code)
Registrant's Telephone Number, including Area Code (407) 665-8050
Irving Levine, President
245 Sunrise Avenue, Palm Beach, FL 33480
(Name and Address of Agent for Service)
Copy to:
Thomas C. Henry, Esquire
Roberts & Henry
P. O. Box 1138
St. Michaels, MD 21663
Approximate Date of Proposed Public Offering: As soon as practicable
after this Amendment become effective.
<PAGE>
It is proposed that this filing will become effective:
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2; however,
pursuant to paragraph (b)(2) of Rule 24f-2, the Registrant need not file a
Rule 24f-2 Notice because it did not sell any securities pursuant to such
declaration during the fiscal year ended February 28, 1996.
-2-
<PAGE>
Explanatory Note
Registrant, on or about March 6, 1978, filed with the Securities and
Exchange Commission ("SEC") a Notification of Registration on Form N-8A under
the Investment Company Act of 1940, as amended (the "1940 Act"). On or about
March 14, 1978, Registrant filed with the SEC its Registration Statement
pursuant to Section 8 of the 1940 Act on Form N-8B-1 and its initial
Registration Statement under the Securities Act of 1933, as amended (the "1933
Act") on Form S-5 (Registration No. 2-60951), hereinafter "Registrant's S-5."
Registration of shares covered by such S-5 Registration Statement was
accomplished as part of Registrant's Form N-1 Registration Statement, declared
effective by order of the Commission on July 1, 1980.
In June 1978, by virtue of resignations of the Trustees of The Copley
Trust (formerly Steadman Tax-Sheltered Trust), a common law business trust
(the "Trust") and an investment company registered under the 1940 Act, the
President of Registrant became the sole trustee of the Trust; and,
subsequently, by action of the Trust's shareholders at a meeting duly called
and held and for which proxies were solicited in accordance with the 1940 Act
Rules 20a-1, 20a-2, and 20a-3, the shareholders re-elected said President as a
trustee as well as other new trustees and took such other action, including
the appointment of auditors, the selection of an investment advisor, etc., as
was necessary to provide for the continuity of the Trust.
On July 23, 1979, the Trust filed with the SEC its initial Registration
Statement on Form N-1, styled as Post-Effective Amendment No. 3 to its 1933
Act Registration Statement on Form S-5 (Registration No. 2-55344), Post-
Effective Amendment No. 1 to its 1933 Act Registration Statement on Form S-5
(Registration No. 2-61740) and Amendment No. 1 to its Registration Statement
pursuant to Section 8 of the 1940 Act on Form N-8B-1 (the "Trust's N-1"). The
Trust's N-1 was included in, and became effective as, a part of Registrant's
Form N-1 Registration Statement, declared effective by order of the Commission
dated July 1, 1980.
On or about February 24, 1980, in connection with the change of domicile
of the Trust, Registrant acquired all of the assets of the Trust and assumed
all of its liabilities pursuant to an Agreement and Plan of Reorganization,
dated as of December 3, 1979 (the "Agreement"), in exchange for that number of
shares of Registrant's common stock (par value $1.00 per share) as was equal
to the aggregate number of outstanding shares of the Trust on the
"Reorganization Date," February 27, 1980. The Trust has since wound up its
business, dissolved and credited or delivered the shares of Registrant to its
shareholders on or as of the Reorganization Date. The Agreement was approved
by the shareholders of the Trust at its annual meeting, duly called and held
on February 14, 1980, and for which proxies were solicited in accordance with
1940 Act Rule 20a-1, et seq.
-3-
<PAGE>
Rule 414 Note
Pursuant to Rule 414 under the 1933 Act, in its Registration Statement on
Form N-1, declared effective by order of the Commission on July 1, 1980,
Registrant adopted as its own registration statements, for all purposes of the
1933 Act and the Securities Exchange Act of 1934, the Trust's Registration
Statement Nos. 2-55344 and 2-61740, and Registrant hereby ratifies and
confirms such adoption.
Rule 429 Note
Registrant, having adopted the Trust's Registration Statements Nos.
2-55344 and 2-61740, intends this Amendment to said Registration Statements to
constitute compliance with the Trust's undertakings to amend such Registration
Statements in lieu of filing separate amendments. Registrant also intends for
this Registration Statement to constitute compliance with its undertakings to
amend its Registration Statement No. 2-60951 in lieu of filing a separate
amendment.
-4-
<PAGE>
COPLEY FUND, INC.
CROSS REFERENCE SHEET
Form N-1A Item
Number and Caption Heading in Prospectus
1. Cover Page Cover Page
2. Synopsis Summary of Fund Expenses
3. Condensed Financial Information Per Share Income and Capital
Changes
4. General Description of Registrant Introduction; Investment
Objectives and Policy
5. Management of the Fund Management of the Fund;
Custodian and Transfer Agent
6. Capital Stock and Other Securities Description of Shares;
Systematic Withdrawal Program;
Investment Objectives and
Policy; Management of the
Fund; Taxes; Shareholder;
Inquiries
7. Purchase of Securities Being Purchase of Shares;
Offered Determination of Net Asset
Value; Investment Objectives
and Policy
8. Redemption or Repurchase How to Redeem Shares;
Systematic Withdrawal Program
9. Legal Proceedings Not Applicable
<PAGE>
COPLEY FUND, INC.
A No-Load Fund
THE FUND IS A NO-LOAD FUND, INVESTMENT OBJECTIVE
WHICH MEANS THERE IS NO
SALES COMMISSION WHEN YOU COPLEY FUND, INC., A FLORIDA CORPORATION
BUY OR REDEEM SHARES (THE "FUND"), HAS AS ITS PRIMARY GOAL THE
ACCUMULATION OF DIVIDEND INCOME WITH
CONSIDERATION GIVEN TO LONG-TERM CAPITAL
APPRECIATION.
PROSPECTUS
June 30, 1996
ABOUT THIS PROSPECTUS
This Prospectus sets forth concisely the
information a prospective investor should
know about the Fund before investing. It
should be retained for future reference.
A Statement of Additional Information
about the Fund, which is incorporated by
reference in this Prospectus, has been
filed with the Securities and Exchange
Commission. It is available, at no charge
by writing the Fund, or you can
call the Fund at (508) 674-8459. The date
of the Statement of Additional Information
is the same as the date of this
Prospectus.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION,
NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Cover Page...................................................... 1
Summary......................................................... 3
Financial Highlights............................................ 4
Summary of Fund Expenses........................................ 5
Investment Objectives and Policies.............................. 6
Taxes........................................................... 8
Federal Taxes-Generally....................................... 8
Alternative Minimum Tax....................................... 9
Accumulated Earnings Tax...................................... 9
State Taxes................................................... 10
Tax Examinations/Open Tax Years............................... 10
Purchase of Shares.............................................. 10
How to Redeem Shares............................................ 11
Systematic Withdrawal Program................................. 12
Determination of Net Asset Value................................ 13
Retirement Plans................................................ 13
Management of the Fund.......................................... 13
Directors..................................................... 13
The Advisor................................................... 13
Expenses...................................................... 14
Custodian and Transfer Agent.................................... 14
Description of Shares........................................... 14
Shareholder Inquiries........................................... 14
Investment Application.......................................... A-1
Systematic Withdrawal Application............................... A-3
<PAGE>
Summary
The Fund
The Copley Fund, Inc. (the "Fund") was organized as a Massachusetts
corporation on February 21, 1978. It was reorganized as a New York Corporation
on September 1, 1987, and as a Florida corporation on May 19, 1994. It is a
no-load, diversified, open-end management investment company which offers
investors the opportunity to own a professionally managed, diversified portfolio
consisting primarily of common stocks without having to become involved with
the research, detailed bookkeeping and operational procedures normally
associated with direct investment in such securities. The Fund changed its name
from the Copley Tax-Managed Fund, Inc., effective March 11, 1987, pursuant to
the approval of its Shareholders.
Investment Objective
The Fund has as its primary goal the accumulation of dividend income with
consideration also given to long-term capital appreciation. See "Investment
Objectives and Policies."
Investment Policies
The Fund invests primarily in companies with strong balance sheets and with
histories of dividend increases and in companies whose earnings growth potential
enhances prospects for future increases in dividend rates. See "Investment
Objectives and Policies."
Tax Considerations and Operating Business
The Fund is taxed as a corporation, and dividends and capital gains are not
distributed but rather are accumulated within the Fund and are added to the
value of each share on a daily basis. In an effort to improve its performance
and the profitability of investments therein and to further these objectives in
the context of certain tax law changes, the Fund is engaging, on a limited
basis, in an operating business, the value of which is includible in the net
asset value of the Fund. See "Federal Taxes-Generally" and "Accumulated Earnings
Tax."
Investment Advisor
Copley Financial Services Corporation ("CFSC") is the Fund's investment
advisor. CFSC is responsible for management of the Fund's assets, exclusive of
the operating business, and receives a fee, paid monthly, from the Fund equal to
1.00% of the first $25,000,000 of average daily net securities assets, .75% of
the next $15,000,000 of average daily net securities assets and .50% of the
average daily net securities assets in excess of $40,000,000. "Net securities
assets" does not include the assets of the operating business. See "Management
of the Fund-The Advisor."
No Sales Commission
The Fund charges no selling commission or "load." Investors who purchase
shares through registered broker-dealers may be subject to fees imposed by those
individuals or entities. See "Purchase of Shares."
Minimum Investment Required
Each initial subscription must be for at least $1,000, except that the
minimum amount may be waived in certain circumstances. After an account is
established, additional investments of $100 or more may be made at any time.
See "Purchase of Shares."
Redemption
Shares may be redeemed at any time, without charge by the Fund, at their
net asset value, except during the occurrence of certain extraordinary events.
See "How to Redeem Shares."
- 3 -
<PAGE>
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Year (1)
The Information in the table below for the fiscal years ended February 28,
1992 through 1996 have been audited by Roy G. Hale, C.P.A. whose report thereon
appears in the Fund's Annual Report. The information for fiscal year ended
February 28, 1991 has been audited by Grant Thornton (formerly Spicer and
Oppenheim), whose report thereon appears in the Fund's Annual Report for that
year. The information for the fiscal years ended February 28, 1987, 1988, 1989,
and 1990 have been examined by Spicer and Oppenheim (formerly Oppenheim, Appel,
Dixon & Company), whose report thereon appears in the Fund's Annual Report for
those years.
<TABLE>
Year Ended
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
February February February February February February February February February February
29, 1996 28, 1995 28, 1994 28, 1993 29, 1992 28, 1991 28, 1990 28, 1989 29, 1988 28, 1987
Investment and Operating
Income $ 1.302 $ 1.194 $ 1.099 $ 1.089 $ 1.113 $ 1.079 $ 1.054 $ .866 $ .874 $ .816
Expenses (Including Taxes) .431 .405 .509 .380 .371 .341 .324 .247 .255 .204
Net Investment and Operating Income .871 .789 .590 .709 .742 .738 .730 .619 .619 .612
Net Realized and Unrealized
Gain (Loss) on Investments 2.840 (.368) (1.130) 3.031 .803 .008 1.437 .068 (1.546) 1.099
Change in Accounting Estimate --- --- --- 1.150 --- --- --- --- --- ---
Net Increase (Decrease) in
Net Asset Value 3.711 .421 (.540) 4.890 1.545 .746 2.167 .687 (0.927) 1.711
Net Asset Value
Beginning of Year 20.736 20.315 20.855 15.965 14.420 13.674 11.507 10.820 11.747 10.036
End of Year $24.447 $20.736 $20.315 $20.855 $15.965 $14.420 $13.674 $11.507 $10.820 $11.747
Average Annual Total Return 17.89% 2.5% (2.6%) 30.6% 10.7% 5.5% 18.8% 6.3% (7.9%) 17.0%
Ratio to Average Net Assets:
Investment Expenses
(Excluding Income Taxes)(2) 1.03% 1.09% 1.51% 1.14% 1.38% 1.50% 1.86% 1.38% 1.72% 1.43%
Net Investment and
Operating Income(2) 4.79% 3.84% 2.88% 5.93% 4.86% 5.34% 5.81% 6.45% 5.58% 5.20%
Portfolio Turnover 4.79% 31% 10% 5% 7% 16% 3% 5% 10% 16%
Number of Shares
Outstanding at End of
Year (in Thousands) 3,161 3,686 3,986 1,945 1,981 1,940 2,132 1,836 2,392 2,864
- -------------
<FN>
(1) Based upon average number of shares.
(2) Copley Financial Services Corp. ("CFSC") has waived a portion of its
investment advisory fee on the first $15 million of average net assets. This
reduction decreased the ratio of investment and operating expenses (excluding
income taxes) to average net assets and increased the ratio of net investment
and operating income to average net assets by .25% for the fiscal year ended
February 28, 1987;.26%, .32%, .29%, .20%, .22%, .15%, .08%, and .08% for the
fiscal years 1988 through 1996 respectively. The effect of this waiver is to
increase the per share net asset value of the Fund. CFSC is under no obligation
to waive any part of its investment advisory fee, and there can be no assurance
that it will do so in the future. However, shareholders will be given thirty
days written notice prior to cessation of this practice.
</FN>
</TABLE>
- 4 -
<PAGE>
SUMMARY OF FUND EXPENSES
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees*................................. .62%
12b-1 fees....................................... --
Other expenses:
Professional fees.............................. .09%
Accounting and pricing services................ .05%
Custodian fee.................................. .04%
Other.......................................... .23%
**Total Fund operating expenses.................. 1.03%
EXAMPLE
You would pay the following expenses on a 1 year $ 10
$1,000 investment, assuming (1) 5% annual 3 years $ 31
return and (2) redemption at the end of 5 years $ 59
each period. 10 years $130
_________
* After expense reimbursements of .08%
** This assumes that 1.03% is representative of annual fund
operating expenses expressed as a percentage
of average net assets.
THE PURPOSE OF THE ABOVE TABLE IS TO ASSIST SHAREHOLDERS IN UNDERSTANDING
THE VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER WILL BEAR BY INVESTING IN THE
FUND. THIS IS AN ILLUSTRATION ONLY. ACTUAL EXPENSES AND PERFORMANCE MAY BE MORE
OR LESS THAN SHOWN.
- 5 -
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The primary objective of the Fund is to achieve accumulations of dividend
income and long-term capital growth. The Fund uses its corporate structure to
create dividend income to the Fund by utilizing the Fund's 70% deduction from
Federal income taxes for dividends received. The remaining 30% of the Fund's
income is used primarily to pay for the expenses of running the Fund. The
result, unless the Federal accumulated earnings tax is imposed on the Fund, is
that the Federal income taxes that would otherwise be payable by the Fund are
greatly reduced. This Prospectus contains a more detailed discussion of Federal
income taxation of the Fund under current statutes and regulations under the
heading "Federal Taxes - Generally." In particular, prospective investors should
be aware of the applicability to the Fund of the corporate alternative minimum
tax and of certain Federal income tax contingencies associated with the Fund
and its methods of operation. See "Alternative Minimum Tax" and "Accumulated
Earnings Tax".
The Fund's policy of maximizing dividend income and its structure enable
the Fund's assets to be managed so as to avoid the necessity of making annual
taxable distributions to Shareholders. Dividends and capital gains are not
distributed, but rather are accumulated within the Fund and are added to the
value of each share on a daily basis. Any increase in per share value directly
raises the value of each Shareholder's account. Upon redemption, a Shareholder
may incur a loss or realize a gain or income which may be subject to income
taxation depending upon the per share value at the time of redemption.
In addition to the primary objective, the Fund also adheres generally to
the following objectives:
a) The Fund purchases securities which pay high dividend income.
b) The Fund invests primarily in companies with strong balance sheets and
with histories of dividend increases and in companies whose earnings growth
potential is such that increases in dividend rates may be expected in the
future. Dividend increases enable the Fund to avoid or minimize some of the
adverse effects of inflation on the market performance of that portfolio.
c) The Fund diversifies its investments by industry so as to avoid risk
associated with over-concentration. With the emphasis in stock selection being
on stocks with good earnings fundamentals and attractive dividends and book
values relative to market prices, no particular stocks, segment of the economy
or industry is excluded from consideration for the portfolio.
When economic or market conditions appear to make such action or actions
desirable, or during temporary periods, the Fund may invest its assets in
investment grade bonds, preferred stocks or money market instruments, if
Management determines it is necessary under the circumstances for preservation
of capital. For temporary defensive purposes, the Fund may at times invest more
than 25% of the value of its assets in cash or cash items (including bank demand
deposits); securities issued or guaranteed by the United States government, its
agencies or instrumentalities; or instruments secured by money market
instruments.
In an effort to enhance its performance and the profitability of an
investment therein and to preserve and promote its primary investment objective
in the context of adverse tax law changes more fully discussed herein under the
heading "Accumulated Earnings Tax" the Fund has engaged, on a limited basis, in
the luggage and related products business. To facilitate the conduct of such an
"operating business," the Fund's Shareholders, on February 4, 1987, approved
changes in fundamental policy which expand the Fund's ability to borrow money
and make loans with respect to an active trade or business. The Fund can
- 6 -
<PAGE>
now borrow up to one-third of its total net assets and extend credit to, or act
as surety for, other persons or entities in connection with the conduct of any
active trade or business, so long as the total exposure of the Fund represented
by such extensions of credit or suretyship arrangements, when added to the
aggregate borrowings of the Fund, does not exceed 10% of the value of the Fund's
total net assets. The Shareholders also approved a fundamental policy designed
to maintain the status of the Fund as a diversified investment company by
limiting the value of any trade or business to 24% or less of the Fund's total
assets and limiting the gross profit therefrom to 10% or less of the Fund's
total annual gross income. Investors should note that the fundamental policy
changes do not restrict the types of active trades or businesses into which
the Fund can enter.
The revised borrowings policy allows the Fund to arrange credit for the
effective conduct of the operating business, including the placement of orders
for foreign manufactured products collateralized by letters of credit or similar
documentary drafts. The Fund's ability to extend credit to, or act as surety
for, others affords the Fund the opportunity to joint venture or otherwise
participate in significant importing opportunities with other importers.
Shareholders should be aware that joint ventures and participations, should they
arise, will have risks inherent in them which may be different in character from
normal business risks, such as casualty, breach of purchase contracts, warranty
claims, and similar occurrences, associated with any active trade or business
engaged in the purchase, sale, delivery and redelivery of goods. Thus, for
example, joint ventures or participations will carry with them the risks on non-
performance or inadequacy of the resources of joint venturer or participant. In
addition, a joint venturer or participant, in all likelihood, will not be
familiar with the regulatory aspects of the Fund's business or its fundamental
policies, thereby requiring the Fund to police carefully the activities of other
ventures or participants to assure that activities or commitments binding upon
the Fund are not undertaken by another venturer which interfere with the
attainment of the Fund's primary investment objective or which contravene the
Fund's fundamental policies or the Investment Company Act of 1940, as amended
(the "Act"). (References to the Act herein should not be interpreted or
construed as indicating that the Securities and Exchange Commission has
determine that the Fund's Management has acted in compliance with the provisions
thereof or has, in any way, supervised the Fund's Management or its investment
practices or policies.) In light of the Fund President's 40 years of experience
in the luggage and related products business, including the importation of such
goods, Management believes that the Fund will be successful in formulating
policies and guidelines governing the undertaking of any such ventures or
participations which will ameliorate, if not eliminate, the additional risks to
a degree sufficient to allow the Fund to undertake appropriate joint ventures
or participations with confidence that the risks inherent therein will be
normal and customary and consistent with the Fund's fundamental policies, the
Act and the continued achievement of the Fund's primary investment objectives.
If a joint venture is structured as a partnership, the Fund will not serve as a
general partner and, in serving as a limited partner, will not assume liability
which, in Management's view, is unreasonable in light of the scope of the Fund's
partnership interest. In addition to the risks outlined above, the Fund's
operating business, to the extent that it entails the importation of foreign
products, may be affected by unfavorable monetary exchange rates making foreign
imports less competitive with domestic products and thus less attractive to
American consumers.
Without the Fund's entry into an operating business, Management believes
that the Fund may have been forced to make taxable distributions to its
Shareholders in contravention of its investment objectives in order to avoid or
limit its potential accumulated earnings tax liability. While there can be no
assurance that the conduct of the operating business will either eliminate or
minimize the risk that the Fund will be
- 7 -
<PAGE>
subject to the accumulated earnings tax, management believes that the operating
business will prove lucrative to the Fund given the experience of the Fund's
President in the luggage and related products business and his overall business
acumen.
The Fund's investment policies, discussed above, are subject to further
restrictions which are described in the Statement of Additional Information.
There can be no assurance that the Fund will achieve its investment objectives.
The Fund's investment objectives are not fundamental policies and may be changed
without Shareholder approval.
TAXES
Federal Taxes - Generally
The Fund is taxed as a regular corporation under the Internal Revenue Code
of 1986, as amended (the "Code"). Except to the extent hereinafter discussed,
consistent with its investment policies and objectives, the Fund retains all net
investment income and realized capital gains, if any, to increase the Fund's
assets. Consequently, shareholders are not individually liable for income taxes
associated with the operations of the Fund except upon sale of shares or the
receipt of distributions.
The Fund is taxed, for Federal income tax purposes, on a schedule of rates
ranging from 15% to 34% depending upon its taxable income. However, a 5%
additional tax rate applies to phase out the benefits of the graduated rates if
the Fund's taxable income is between $100,000 and $335,000. Subject to specific
limitations, the Fund is entitled to a deduction in computing its Federal
taxable income equal to 70% of the amount of dividends received by the Fund
from domestic corporations. This dividends received deduction may not exceed
70% of the Fund's taxable income unless the Fund has a net operating loss for a
taxable year, as computed after deducting the dividend received deduction. It
is anticipated, although there can be no assurance, that the Fund's management
fees and other expenses will offset a substantial portion of the remaining 30%
of the dividend income and investment income from other sources during each
taxable year.
The Fund pays income taxes on any net realized capital gain at the
statutory rate noted above. In addition, the Fund will, for financial
statement purposes, accrue deferred income taxes on net unrealized capital gains
that are expected to be realized at the Fund level. The Fund may carry net
capital losses forward for five years as an offset against any net capital gains
realized by the Fund during the current year.
If the Fund is unable to avoid the tax on net income through the use of tax
management techniques, the Fund's management, together with counsel, will
consider limiting the liability for payment of income taxes. A method available
to the Fund is the election to be taxed as a regulated investment company
("RIC"). Should the liability for tax with regard to net income exceed any set
limitation, and provided the Fund meets all applicable Internal Revenue Code
conditions, it is the intent of the Fund to make this election.
The Fund has not in the past elected to be treated as a RIC.
Albeit the election to be treated as a regulated investment company will
shift the income tax liability for net investment income and capital gains from
the Fund to the individual shareholder, the management of the Fund believes that
it is in the shareholder's best interest to avoid double taxation by making this
election. Double taxation results when the Fund pays a tax on the net income,
which reduces the net asset value per share, and the shareholder also pays a
tax on that same gain upon redeeming Fund shares.
- 8 -
<PAGE>
Corresponding with an election to be treated as a regulated investment
company, the Fund must make a distribution to shareholders, of all earnings
accumulated as a regular corporation. This distribution would result in taxable
income to the shareholders, whether or not the distribution is received in cash
or additional shares of Fund stock. These earnings are estimated to be
approximately $21,686,000 as of February 29, 1996.
Unrealized appreciation (built-in gains) at the point in time the Fund
elects regulated investment company treatment is taxable income to the Fund.
Under current Internal Revenue Code provisions, the Fund may elect to postpone
this built-in gains tax until such time as the security is sold. If the
security is held for at least 10 years after electing regulated investment
company status, the tax will not be assessed against the Fund.
Legislative or regulatory changes in, or interpretations of, applicable
federal tax laws, regulations or rulings may make it impossible for the Fund to
utilize certain of the tax management techniques and strategies described in the
Prospectus. The Fund intends to evaluate continuously the operations of the
Fund under the current federal tax laws as well as various alternatives
available.
Alternative Minimum Tax
The Fund may also be subject to the corporate alternative minimum tax
("AMT"). The Fund will be liable for the AMT to the extent that such tax
exceeds the Fund's regular income tax liability for any taxable year. The
Fund's regular income tax liability for these purposes will not include any
amount paid on account of the accumulated earnings tax discussed below. See
"Accumulated Earnings Tax".
The AMT is equal to 20% of the Fund's alternative minimum taxable income
("AMTI") with certain adjustments. The Fund's AMTI is equal to its regular
taxable income plus certain specified tax preference items. For the fund's tax
year ending February 28, 1991 and thereafter, AMTI will be increased or
decreased by 75% of the difference between adjusted current earnings (ACE") and
AMTI as computed before the adjustment for the dividend received deduction. One
principal difference in the ACE method compared to the book income method is
that net unrealized gains are not included in ACE.
Accumulated Earnings Tax
Since, subject to the limitations discussed above, the Fund accumulates
rather than distributes its income, the Fund may be subject to the imposition
of Federal accumulated earnings tax (the "AET"). The AET is imposed on a
corporation's accumulated taxable income (the "ATI") for each taxable year at
the rate of 39.6%. ATI is defined as the adjusted taxable income of the Fund
minus the sum of the dividends paid deduction and the accumulated earnings
credit (as discussed below). The dividends paid deduction and the accumulated
earnings credit is available only if the Fund is not held to be a "mere holding
or investment company."
In the early part of 1987, the Fund commenced activities in the luggage
and related products trade business. The business is being operated as division
of the Fund, with the value of business assets and the earnings attributable
thereto being included in the net assets of the Fund for all purposes. The
assets of the operating division should not result in the Fund ceasing to be an
open-end investment company under the Act. Management believes, although there
can be no assurance, that under existing law the Fund's operation of its active
trade or business should be sufficient to enable the fund to not be classified
as a "mere
- 9 -
<PAGE>
holding or investment company" for purpose of AET. Under that proposition, the
Fund is entitled to a dividends paid deduction from ATI for that portion of Fund
redemptions representing the amount of undistributed earnings accumulated since
the inception of the fund and through the date of redemption allocable to the
redeemed shares.
The Internal Revenue Service has recently upheld management's position that
the Fund is not a mere holding or investment company since the Fund is
conducting an operating business. Provided the Fund manages accumulated and
annual earnings and profits, in excess of $250,000, in such a manner that
the funds are deemed to be obligated or consumed by capital losses, redemptions
and expansion of the operating division, the Fund will not be held liable for
the accumulated earnings tax by the Internal Revenue Service.
State Taxes
The Fund is qualified and does business in the State of Florida.
Accordingly, the Fund is subject to the Florida State corporate and alternative
minimum tax.
Tax Examinations/Open Tax Years
There are no current federal or state tax examinations. All tax years
through February 28, 1993 have been closed for Federal and state income tax
purposes.
PURCHASE OF SHARES
Shares are continuously offered at current net asset value without payment
of any sales charge or commission. Investors who purchase and redeem Fund
shares through broker-dealers, banks and other institutions may be subject to
fees imposed by those entities with respect to the services they provide.
To make an initial investment, a prospective investor should complete the
investment application which appears at the end of this Prospectus and forward
it with a check for $1,000 or more, made payable to Copley Fund, Inc., c/o
Steadman Security Corp., 1730 K Street, N.W., Washington, D.C. 20006. If the
application is accepted, a confirmation indicating details of the transaction
will be sent to the purchaser directly. If the application is rejected, the
investor's check will be returned to him promptly. Investment checks are
invested at the net asset value next determined after their receipt by the Fund.
The minimum initial investment of $1,000 will be waived when a group of
employees in cooperation with its employer and the Fund purchases shares
through a payroll deduction or other group purchase plan. Once an account
(individual or group) has been established, additional investments of $100 or
more may be made at any time. These minimum amounts also may be waived for
persons investing under the Fund's Keogh Plan or through the medium of an
Individual Retirement Account ("IRA").
AS A CONDITION OF THIS OFFERING, IF A PURCHASE IS CANCELED DUE TO
NONPAYMENT OR BECAUSE A CHECK DOES NOT CLEAR, THE PURCHASER WILL BE
RESPONSIBLE FOR ANY LOSS THE FUND INCURS. If you are already a Shareholder,
the Fund reserves the right to
- 10 -
<PAGE>
redeem shares from your account(s) to reimburse the Fund for any such loss
arising from an attempt to purchase additional shares.
STOCK CERTIFICATES: The Transfer Agent will not issue stock certificates
for your shares unless requested. In order to facilitate redemptions and
transfers, most Shareholders elect not to receive certificates. The stock
certificates are issued at no charge to the purchaser, but if a certificate is
lost, the purchaser may incur an expense to replace it.
CONFIRMATIONS: Upon receipt and acceptance by the Fund of an application
for purchase of shares, the shares will be registered as designated by the
purchaser in an open account. Purchases will be credited to the account in full
and fractional shares, and a confirmation of each purchase will be sent to the
Shareholder indicating the amount of the most recent purchase, the number of new
shares acquired and the total number of shares left in the account. The
confirmation is adequate evidence of the ownership of shares, and redemptions
and transfers of ownership may be accomplished without the use of share
certificates.
HOW TO REDEEM SHARES
An Investor may redeem his shares by sending a written request for redemption
signed by the investor and any co-owners. The request should be sent to Copley
Fund, Inc., c/o Steadman Security Corp., 1730 K St., N.W., Washington, D.C.
20006, and must include the name of the Fund and the investor's account number.
ANY CERTIFICATES INVOLVED IN THE REDEMPTION MUST BE SURRENDERED WITH THE
REQUEST, ENDORSED WITH SIGNATURE(S) GUARANTEED BY A TRUST COMPANY OR A
COMMERCIAL BANK THAT IS A MEMBER OF THE FEDERAL RESERVE SYSTEM OR A
MEMBER FIRM OF A DOMESTIC STOCK EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A SAVINGS BANK OR A SAVINGS AND
LOAN ASSOCIATION OR CREDIT UNION. NOTARIZATIONS BY A NOTARY PUBLIC ARE NOT
ACCEPTABLE. REQUESTS FOR REDEMPTION OF $1,000 OR MORE FROM ACCOUNTS FOR
WHICH NO CERTIFICATES HAVE BEEN ISSUED, OR REDEMPTIONS BY PERSONS ACTING IN
A REPRESENTATIVE CAPACITY, FOR EXAMPLE, CORPORATE OFFICERS, TRUSTEES,
CUSTODIANS, ETC., ALSO MUST INCLUDE SIGNATURE GUARANTEES, AS DESCRIBED
ABOVE. PERSONS ACTING IN A REPRESENTATIVE CAPACITY, FOR EXAMPLE, CORPORATE
OFFICERS, TRUSTEES, CUSTODIANS, ETC., MUST ALSO PRESENT, WITH THEIR
REDEMPTION REQUESTS, EVIDENCE OF APPOINTMENT AND AUTHORITY TO ACT, IN FORM
SATISFACTORY TO THE TRANSFER AGENT. REQUESTS FOR REDEMPTIONS TO THIRD
PARTY PAYEE(S) MUST BE SIGNATURE GUARANTEED REGARDLESS OF THE SIZE OF THE
REDEMPTION REQUEST. Where signature guarantees are necessary, the redemption
will not be effective until the proper guarantees are received, and the
current net asset value applicable to the redemption will be that next computed
after their receipt.
Within three business days after receipt of a properly executed request for
redemption of properly endorsed share certificate, the Fund will redeem the
shares at a price equal to the net asset value next computed after the receipt
of the request. Such current net asset value may be more or less than the
investor's cost.
- 11 -
<PAGE>
The right of redemption may be suspended or the date of payment postponed
during periods; (i) when the New York Stock Exchange is closed, other than on
weekends and holidays; (ii) when an emergency exists, as determined by the
rules of the Securities and Exchange Commission, as a result of which disposal
by the Fund of securities owned by it is not reasonably practicable, or it is
not reasonably practicable for the Fund fairly to determine the value of its
current net assets; (iii) when, under conditions set forth in the rules and
regulations or pursuant to an order of the Securities and Exchange Commission,
trading on the New York Stock Exchange is restricted or suspended; and (iv) as
the Securities and Exchange Commission may by order permit or require for the
protection of investors. In case of a suspension of the right of redemption,
a Shareholder who has tendered a certificate for redemption or, if no
certificate has been issued, has tendered a written request for redemption, may
withdrawal his request for redemption of his certificate from deposit. In the
absence of such a withdrawal, he will receive payment of the current net asset
value next determined after the suspension has been terminated.
The Fund has the right, exercisable at the discretion of the Board of
Directors and at any time after thirty (30) days written notice, to redeem
shares of any Shareholder for their then current net asset value per share if at
such time the Shareholder owns shares having an aggregate net asset value of
less than $500, provided that such reduction in net asset value below $500
is the result of withdrawals and not market fluctuations.
Systematic Withdrawal Program
Each Shareholder owning shares with an aggregate value of $10,000 or more
shall have the right to redeem a portion of his shares in equal dollar amounts
on a monthly basis. Such right may be exercised by delivery of a written
election to so redeem to the Transfer Agent, accompanied by a surrender of all
share certificates then outstanding in the name of such Shareholder, properly
endorsed by him. This plan may, and probably will, involve the use of principal
and, depending on the amount withdrawn, the investor's principal may eventually
be depleted. No additional charge to the Shareholder is made for this service.
A sufficient number of shares will be liquidated at intervals (i.e., monthly or
quarterly) at the then current net asset value attributable to such shares of
the date of liquidation to meet withdrawals specified. Systematic withdrawals
are processed on the twenty-fifth day of the month.
For tax purposes, withdrawal payments may not be considered as yield or
income, and investors are urged to consult their own tax advisors regarding the
tax treatment of withdrawals.
An investor may terminate the plan at any time by delivering written notice
to the Transfer Agent. If all shares held by the investor are liquidated at
any time, the plan will terminate automatically. The Fund or its investment
advisor may terminate the plan at any time after reasonable notice to the
investor.
Investors making the requisite $10,000 investment in shares who wish to
elect redemption under the Systematic Withdrawal Program should complete the
Systematic Withdrawal Application at the end of this Prospectus and forward it
to Copley Fund, Inc., c/o Steadman Security Corp., 1730 K St., N.W., Washington,
D.C. 20006.
- 12 -
<PAGE>
DETERMINATION OF NET ASSET VALUE
The current net asset value of the shares is determined by taking the total
value of the Fund's assets, deducting total liabilities and dividing the
difference by the number of shares then outstanding. Specifically, portfolio
securities listed on securities exchanges or in the NASDAQ National Market are
valued at the last sale price. If there has been no sale, or the securities are
unlisted, the mean between the closing bid price and the closing asked price is
used. Securities for which no market is available and other assets are
appraised at fair value, as determined in good faith by the Fund's Board of
Directors. For the current fiscal year, the assets of the operating business
are valued at the lower of cost or market at the end of each month, except when
such day is a holiday, in which case the assets are valued on the preceding
business day. The value so determined is included in the net asset value of the
Fund for the following month and is viewed by the Board of Directors as the
"fair value" of such operating business assets. The current net asset value is
computed once daily, Monday through Friday, at 4:15 p.m. prevailing Eastern
Time as of the close of the New York Stock Exchange and becomes effective as of
such time, except that no such computation is made on days which are business
holidays, as determined by the closure of the New York Stock Exchange on
such days.
RETIREMENT PLANS
The Fund does not directly sponsor any retirement plans. However,
shareholders may fund their own self-directed IRA or Keogh plans with Copley
Fund shares. Alternatively, Fleet Investment Services makes available such
plans for Fund shareholders. You may request information about the plans by
calling the Fund's advisor at (508) 674-8459. Fleet charges both to maintain
such plans and to purchase or sell Fund shares.
MANAGEMENT OF THE FUND
DIRECTORS
The management of the Fund's business and affairs is the responsibility of
the Fund's Board of Directors. The Board will conduct the operating business
without any advice or assistance from the Fund's investment advisor (discussed
below).
THE ADVISOR
Since September 1, 1978, the date the Fund commenced its present
operations, Copley Financial Services Corp., ("CFSC"), a Massachusetts
corporation, whose address is P.O. Box 3287, Fall River, Massachusetts 02722,
has served as the Fund's investment advisor pursuant to an Investment Advisory
Contract. CFSC provides the Fund with investment advice, research and
statistical and other factual information and manages and supervises the Fund's
portfolio of investments. The compensation paid to CFSC during the fiscal year
ending February 29, 1996 equaled $482,694 or .006% of the Fund's average net
assets. Because CFSC has no role in the management or operation of the
operating business, the value of the assets of the operating business is not
considered when calculating the fees payable to CFSC under its Investment
Advisory Contract with the Fund.
The advisor's sole stockholder is Irving Levine. He is also the Fund's
President and Chairman of the
- 13 -
<PAGE>
Board of Directors, and is responsible for the day-to-day management of the
Fund's portfolio. Mr. Levine has been a director, consultant and employee of
investment companies and investment advisory firms for approximately 25 years.
He is a control person, within the meaning of Section 2(a)(9) of the Investment
Company Act of 1940, as amended, for both the Fund and CFSC.
EXPENSES
The Fund bears all expenses of its operations. In particular, the Fund
pays: investment advisory fees; shareholder servicing fees and expenses;
custodian and transfer fees and expenses; legal and auditing fees; expenses of
preparing prospectuses and shareholder reports; registration fees and expenses;
proxy and annual meeting expenses; and directors' fees and expenses. The ratio
of the Fund's operating expenses to its average net assets was 1.03% for the
fiscal year ended February 29,1996, including the waiver by the Advisor of a
portion of its Advisory fee.
CUSTODIAN AND TRANSFER AGENT
Fleet Investment Services, Providence, R.I. serves as the Fund's
Custodian. Steadman Security Corporation, 1730 K Street, N.W., Washington, D.C.
20006, serves as the Fund's transfer agent, registrar, dividend disbursing
agent, dividend reinvestment agent, accounting and pricing agent, and agent for
the administration of shareholder account.
DESCRIPTION OF SHARES
The Fund has 5,000,000 authorized common shares (par value $1.00 per
share). These shares, upon issuance are fully paid and nonassessable, are
entitled to one vote per share and a fractional vote equal to the fractional
share held, are freely transferable and, in liquidation of the Fund, are
entitled to receive the net assets of the Fund. Shareholders have no
preemptive, conversion or cumulative voting rights. On June 29, 1983, the
Shareholders approved a 1 for 3 reverse stock split for all shares outstanding
at the close of business on such day.
SHAREHOLDER INQUIRIES
Information about the Fund may be obtained by writing to the Fund's
advisor, Copley Financial Services Corp., P.O. Box 3287, Fall River, MA 02722
or calling (508) 674-8459.
- 14 -
<PAGE>
COPLEY FUND, INC. PROSPECTUS
June 30, 1996
1730 K Street, N.W.
Washington, D.C. 20006
Investment Advisor
Copley Financial Services Corp. COPLEY FUND, INC.
P.O. Box 3287 A No-Load Fund
Fall River, Massachusetts 02722
(508) 674-8459
Custodian
Fleet Investment Services
111 Westminster Street
Providence, Rhode Island
Transfer Agent
Steadman Security Corp.
1730 K Street, N.W.
Washington, D.C. 20006
General Counsel
Roberts & Henry
Auditors
Roy G. Hale, C.P.A.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
COPLEY FUND, INC.
(The "Fund")
A No-Load Fund
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Fund's Prospectus, dated June 30, 1996,
which may be obtained free of charge by any potential investor by writing
the Fund at 1730 K Street, N.W., Washington, D.C. 20006 or calling the Fund
at (800) 424-8570. It should be retained for future reference.
The date of this Statement of Additional Information is June 30, 1996.
<PAGE>
TABLE OF CONTENTS
Page
Introduction .............................................. 3
Investment Objectives and Policies ........................ 3
Fundamental Policies ...................................... 4
Directors and Officers of the Fund ........................ 6
Remuneration of Management and Others ..................... 7
Control Persons and Principal Holders of Securities ....... 8
Investment Adviser ........................................ 8
The Adviser ............................................ 8
Advisory Services and Fees ............................. 9
Brokerage Allocation ................................... 10
Legal Counsel ............................................. 10
Independent Auditors ...................................... 10
Performance Information ................................... 11
Additional Information .................................... 12
Financial Statements ...................................... Appended
- 2 -
<PAGE>
INTRODUCTION
The Fund was organized as a Massachusetts corporation on February 21,
1978 under the name of the Copley Fund, Inc. On June 30, 1982, the
Shareholders of the Fund approved a change of its name to the Copley Tax
Managed Fund, Inc. The name was changed back to the Copley Fund, Inc.,
effective March 11, 1987, pursuant to approval of the Shareholders on February
4, 1987. The Fund was reorganized as a New York corporation on September 1,
1987 and as a Florida Corporation on May 19,1994. The Fund is a no-load,
diversified, open-end management investment company which seeks to invest in
securities with the potential for favorable dividend returns and capital
appreciation.
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the discussion of the Fund's
investment objectives and policies discussed in the Prospectus.
The primary investment objective of the Fund is to achieve accumulation
of dividend income and long-term capital growth. Income is sought primarily
through investing in equity securities, primarily common stocks (including
those listed on national securities exchanges and those traded in the national
over-the-counter market), which are deemed to offer a possibility of
attractive dividend returns. The risk associated with the Fund's investment
in stocks is that the performance of the Fund will be affected by the stock
market's overall performance to a greater degree than other mutual funds which
do not invest primarily in equity securities.
Management intends that assets of the Fund will be kept fully invested,
except for reasonable amounts held in cash to meet current expenses or for
temporary periods pending investment. However, when economic or market
conditions warrant, the Fund, as a temporary defensive position, may invest
part or all of its portfolio in investment grade bonds, securities issued by
the U.S. Government and its agencies or instrumentalities, bankers'
acceptances or certificates of deposit. The Fund may invest its cash reserves
in short-term municipal obligations, including tax, bond and revenue
anticipation notes, construction loan and project financing notes, tax-exempt
commercial paper and other municipal securities with maturities of less than
365 days. The Fund's policy is to invest at least 75% of the value of its
total assets in cash and cash items (including receivables), government
securities and other securities, while not investing an amount greater than 5%
of the value of its total assets in any one issuer and not owning more than
10% of the outstanding voting securities of any one issuer. There is no
assurance that the Fund's investment objectives can be achieved.
Purchases will be made for investment and not for short-term trading
purposes; however, freedom of action will be reserved to make such changes in
the portfolio as may be considered necessary by Management to effectuate the
Fund's policies with respect to security investments. It is estimated that
the Fund's portfolio turnover rate (under normal market conditions) will not
exceed 100%
- 3 -
<PAGE>
annually. "Portfolio turnover rate" for a given fiscal year is defined as the
ratio of the lesser of purchases or sales of portfolio securities divided by
the monthly average value of portfolio securities (excluding all securities
which had maturities of one year or less at the time they were acquired by the
Fund).
In accordance with the Fund's desire to enhance its profitability and to
lessen the likelihood that the Fund will be deemed "a mere holding or
investment company" for purposes of the accumulated earnings tax, the Fund has
entered into the luggage and related products business, a business in which
the Fund's President has 40 years of experience. (For a discussion of the
importance of entering the operating business for tax purposes see
"Accumulated Earnings Tax" and "Accumulated Earnings Tax/Operating Company" in
the Prospectus.) To enable the Fund to accomplish its goals, the Fund's
Shareholders, on February 4, 1987, approved changes in the Fund's fundamental
policies that permit the Fund to borrow up to one-third of the value of its
total net assets and to extend credit to, or act as surety for, other persons
or entities in connection with the conduct of any active trade or business.
At the same time, the Shareholders approved a fundamental policy limiting the
value of the operating business to 24% or less of the value of the Fund's
total assets and the gross profit (gross revenues less cost of goods sold)
therefrom to 10% or less of the Fund's total gross income for any taxable
year. These restrictions on the scope of the operating business enable the
Fund to remain classified as a diversified investment company under the
Investment Company Act of 1940, as amended (the "Act").
FUNDAMENTAL POLICIES
The fundamental policies set forth below cannot be changed without the
approval of the holders of at least a majority of the Fund's outstanding
shares. The Fund may not:
(1) Issue any senior securities;
(2) Except for (a) temporary, extraordinary or emergency purposes, or
(b) in connection with the conduct of any active trade or business at any time
conducted by the Fund consistent with Fundamental Policy 13 of the Fund,
borrow money, and then only from banks (for purposes of the foregoing clause
(b), including but not necessarily limited to the establishment and
maintenance of credit facilities, e.g., letters of credit, documentary drafts,
or demands for payment) and in amounts not in excess of 33 1/3% of the value
of its total net assets taken at the lower of cost or market. If, due to
market fluctuations or other reasons, the value of the Fund's assets falls
below 300% of its borrowings, the Fund, within three (3) days (not including
Sundays or holidays) will reduce its borrowings to the extent that its asset
coverage of such borrowings shall be at least 300%. This borrowing provision
is not for investment leverage per se but solely to facilitate orderly
operation of any active trade or business of the Fund at any time being
operated consistent with Fundamental Policy 13 and to facilitate management of
the portfolio by enabling the Fund to meet redemption requests at times when
the liquidation of portfolio securities is inconvenient or disadvantageous;
- 4 -
<PAGE>
(3) Act as underwriter, except to the extent that, in connection with
the disposition of portfolio securities, the Fund may be deemed to be an
underwriter under certain Federal securities laws;
(4) Concentrate its investment in any particular industry, but, if
deemed consistent with the Fund's investment objectives, up to 25% of its
assets may be invested in any one industry. However, for temporary defensive
purposes, the Fund may at times invest more than 25% of the value of its
assets in cash or cash items (including bank demand deposits); securities
issued or guaranteed by the United States government, its agencies or
instrumentalities, or instruments secured by money market instruments;
(5) Engage in the purchase or sale of interests in real estate;
(6) Purchase or sell commodities or commodities future contracts;
(7) Make loans to other persons; provided, however, that (i) the
purchase of a portion of an issue of publicly distributed bonds or debentures
and money market instruments (within the limits described in Fundamental
Policy 4) will not be considered the making of a loan; and (ii) the Fund, in
connection with any trade or business of the Fund at any time conducted
consistent with Fundamental Policy 13, may extend credit to, or act as surety
for, any other person, so long as the total exposure of the Fund represented
by such extensions of credit or suretyship arrangements, when added to the
aggregate borrowings of the Fund, does not at any one time exceed 10% of the
value of the Fund's total net assets; and provided further that in applying
Fundamental Policy 2, the Fund shall treat any extensions of credit or
suretyship arrangements at the time outstanding as a borrowing subject to the
limitations of Fundamental Policy 2.
(8) Investment in securities of other investment companies, except in
connection with a merger, consolidation, combination or similar transaction
with another investment company;
(9) Make investments on margin, except such short-term credits as are
necessary for the clearance of transactions;
(10) Make short sales of securities;
(11) Make investments for the purpose of exercising control of management;
(12) Purchase or retain, longer than reasonably necessary for proper
disposal thereof, any securities of an issuer if the officers and directors of
the Fund or its adviser, own individually more than one percent of the
securities of such issuer, or together own more than five percent of the
securities of such issuer; or
(13) Engage in one or more active trades or businesses, if the assets
of the Fund constituting such trades or businesses, exceed, in the aggregate,
24% of the value of the Fund's total assets, or during any taxable year of the
Fund, the gross income of the Fund attributable to such active trades or
- 5 -
<PAGE>
businesses represents, in the aggregate, more than 10% of the gross profit
(gross revenues less cost of goods sold) of the Fund for Federal income tax
purposes; provided, however, that if due to market fluctuations or other
reasons, the value of the Fund's assets constituting such active trades or
businesses exceeds 24% of the value of the Fund's total assets or the gross
income of the Fund for any tax year attributable to such active trades or
businesses is reasonably expected to exceed 10% of the gross profit of the
Fund for such tax year, the Fund will take steps to divest itself of, or
otherwise curtail such active trades or businesses, to cause the same to
comply with the foregoing percentages.
DIRECTORS AND OFFICERS OF THE FUND
The following is a list of the Directors and Officers of the Fund, none
of whom are related by family, and their principal occupations during the past
five years.
<TABLE>
<S> <C> <C>
Position(s) held Principal Occupation(s)
Name and Address with the Fund During Past Five Years
Irving Levine* Chairman of the President, Treasurer and a
315 Pleasant Avenue Board of Directors Director of Copley Financial
Fall River, MA and President Services Corp. since 1978;
Treasurer and a Director of
Voyager International, Inc.,
an importer of luggage and
related products (1981-1991);
a Director of Franklin Holding
Corp.(an operating investment
company) since March, 1990; Chairman
of the Board and Treasurer of
Stuffco International, Inc., a
ladies handbag processor, since
February, 1978; a Director of
Rexnord, Inc., a machinery
components manufacturer, since
April, 1987.
Albert Resnick, M.D. Director Physician since 1948; Chair-
5300 Ocean Blvd. man of Division of Medicine
Sarasota, FL 34242 of Union Truesdale Hospital,
Fall River, Massachusetts
from 1976 to February, 1982;
Chairman of Board of Health,
Fall River, Massachusetts
from 1977 to February, 1982;
and Trustee and Member of
Financial Committee of
Charlton Memorial Hospital
since 1986 to 1989.
- 6 -
<PAGE>
Position(s) held Principal Occupation(s)
Name and Address with the Fund During Past Five Years
Kenneth Joblon Director President, Brittany Dying &
1357 E. Rodney French Blvd. Printing Corp., New Bedford,
New Bedford, MA 02744 MA.
Burton S. Stern Director Private Investor; President of
110 Sunset Avenue Amervest Corp., a private Palm Palm
Palm Beach, FL 33480 investment company (1979-1989);
Director of TJX Companies, Inc.
since 1956; Member of Audit
Committee; Director of the Fund
since 1978.
Eileen F. Joinson* Clerk-Treasurer Clerk-Treasurer of the Fund since
315 Pleasant Avenue 1980; Clerk and Office Manager of
Fall River, MA Stuffco International, Inc., a
ladies handbag processor, since
1978.
_______________
<FN>
*Interested persons, as defined under Section 2(a)(19) of the Investment
Company Act of 1940, as amended.
</FN>
</TABLE>
REMUNERATION OF MANAGEMENT AND OTHERS
No officer, director or any affiliated person of the Fund received from
the Fund during the fiscal year ending February 28, 1996, remuneration for
services rendered in any capacity in excess of $60,000. The only
remuneration, direct or indirect, to officers and directors of the Fund during
the fiscal year ended February 28, 1996, aggregated $12,000 in directors'
fees.
- 7 -
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The Fund is controlled by Mr. Irving Levine who is the Chairman of the
Board of Directors and President of the Fund. Mr. Levine is also the sole
stockholder, President, Treasurer and a director of Copley Financial Services
Corporation.
On February 28, 1996, there were 3,160,689 shares of the Fund
outstanding. The following table sets forth certain information regarding
those persons who own of record or are known to the Fund to own of record or
beneficially 5% or more of the shares as of February 28, 1996, as well as the
number of shares owned by the officers and directors of the Fund as a group
without naming them.
<TABLE>
<S> <C> <C>
Number of Shares
Name and Address of Owned of Record Percent
Beneficial Owner or Beneficially of Class
Irving Levine (1) 212,026 6%
120 Hillside Avenue
Rehoboth, MA 02769
All Officers and Director 231,315 7%
as a Group (4 Persons)
______________
<FN>
(1) Includes 38,891 shares (1.0%) owned by Bernice H. Levine, Mr.
Levine's wife; 35,000 shares owned by Peter H. Bardach, who has given Mr.
Levine investment and voting power over such shares; 18,147 shares owned by
Cliff Drysdale who has given Mr. Levine investment and voting power over such
shares; 8,072 shares owned by Jeffrey Josef Steiner, who has given Mr. Levine
investment and voting power over such shares; 41,884 shares owned by Stuffco
International, Inc. an "affiliate" corporation controlled by Mr. Levine; and
15,904 shares owned by Copley Financial Services Corp., a corporation wholly
owned by Mr. Levine, in all of which the exception of those owned by Stuffco
International, Inc. and Copley Financial Services Corp., Mr. Levine disclaims
any beneficial interest.
</FN>
</TABLE>
INVESTMENT ADVISER
THE ADVISER
Copley Financial Services Corporation, a Massachusetts corporation
("CFSC"), 315 Pleasant St., Fall River, Massachusetts 02721, serves as
Investment Adviser to the Fund, pursuant to an Investment Advisory Contract
dated September 1, 1978.
CFSC is registered under the Investment Advisers Act of 1940, as amended,
and it was incorporated in February, 1978. CFSC presently has no investment
advisory clients other than the Fund; however, CFSC may act as an investment
- 8 -
<PAGE>
adviser to other mutual funds in the future. CFSC is controlled by Irving
Levine who is President, Treasurer and Chairman of the Board of Directors of
CFSC, as well as its one hundred percent (100%) stockholder. Mr. Levine also
controls the Fund and serves as the Chairman of the Board of Directors and
President. This dual capacity could lead to conflicts of interest between Mr.
Levine and the Fund or CFSC, as the case may be. It should be understood that
CFSC's resources are limited, and, at the present time, Mr. Levine is its only
employee. All final investment decisions are made by Mr. Levine.
The directors and principal executive officers of Copley Financial
Services Corporation, in addition to Mr. Levine, are: Cliff Drysdale,
Director; Jeffrey J. Steiner, Director; and Stephen L. Brown, Director.
ADVISORY SERVICES AND FEES
Under the Investment Advisory Contract between the Fund and CFSC, CFSC
provides the Fund with investment advice, research and statistical and other
factual information and manages and supervises the Fund's portfolio of
investments. In performing these functions, CFSC (i) uses its best efforts to
present a continuing and suitable investment program which is consistent with
the investment objectives of the Fund; (ii) furnishes the Fund with
information and reports regarding the securities in the portfolio and proposed
additions to the portfolio; (iii) supervises the Fund's relationship with its
Custodian, Transfer Agent, auditors, lawyers and any governmental agencies
having jurisdiction over the Fund; and (iv) furnishes the Fund with certain
office space and secretarial and clerical assistance as may be necessary to
perform the forgoing functions. CFSC has no responsibility for advising the
Fund as to the conduct of the operating business, that function being the sole
and exclusive province of the Board of Directors.
CFSC receives an annual investment advisory fee for its services rendered
to the Fund. The fee is based upon a percentage of the Fund's daily net
assets computed without regard to the assets of the operating business (the
assets upon which the fee is computed being hereinafter referred to as the
"net securities assets") and is calculated daily and paid monthly as follows:
(1) 1.00% of the first $25,000,000 of average daily net securities
assets;
(2) 0.75% of the next $15,000,000 of average daily net securities
assets; and
(3) 0.50% of the average daily net securities assets in excess of
$40,000,000.
In the past CFSC has voluntarily waived up to one-half of the investment
advisory fee charged to the Fund. CFSC is under no obligation to waive any
part of its fee, and there can be no assurance that it will do so in the
future. However, shareholders will be given thirty days written notice prior
to cessation of such practice.
- 9 -
<PAGE>
Pursuant to the Investment Advisory Contract, the investment advisory
fees earned by CFSC during the Fund's fiscal years ending February 28, 1994,
February 28, 1995, and February 28, 1996 were $483,948, $547,125, and $542,694
respectively, but CFSC actually received only $453,948, $487,125, and $482,694
respectively. Receipt of the balance of the fees earned was waived. The
investment advisory fees, before the fee waiver, charged by CFSC are higher
than fees charged by most other investment advisers supplying services similar
to those which CFSC supplies to the Fund.
BROKERAGE ALLOCATION
The Fund paid brokerage commissions of $104,097, $97,377, and $14,270 in
each of its fiscal years ending, February 28, 1994, February 28, 1995 and
February 28, 1996 respectively.
LEGAL COUNSEL
Certain legal matters in connection with the shares offered hereby have
been passed upon for the Fund by Messrs. Roberts & Henry, Washington, D.C.,
Counsel for the Fund.
INDEPENDENT AUDITORS
The financial statements included in the Prospectus and this Statement of
Additional Information have been audited for the fiscal year ended February
28, 1992 through 1996 by Roy G. Hale, certified public accountants. The
financial statements included in the Propectus and Statement of Additional
Information for the fiscal years ended February 28, 1988, 1989 and 1990 were
audited by Spicer & Oppenheim, certified public accountants. Financial
Statements for 1991 were audited by Grant Thornton (formerly Spicer &
Oppenheim). The principal business address of Roy G. Hale is 624 Clarks Run
Road, LaPlata, MD 27646.
- 10 -
<PAGE>
PERFORMANCE INFORMATION
For purposes of quoting and comparing the performance of the Fund to that
of other open-end diversified management investment companies and to stock or
other relevant indices in advertisements or in certain reports to
Shareholders, performance will be stated in terms of total return, rather than
in terms of yield. The total return quotations, under the rules of the
Securities and Exchange Commission, must be calculated according to the
following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods (or
fractional portion thereof).
Under the foregoing formula the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one, five and ten year periods or a shorter period dating from the
commencement of the Fund's operations. In calculating the ending redeemable
value, the maximum sales load is deducted from the initial $1,000 payment and
all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the prospectus on the
reinvestment dates during the period. "T" in the formula above, is calculated
by finding the average annual compounded rates of return over the period that
would equate an assumed initial payment of $1,000 to the ending redeemable
value.
The Fund may also from time to time include in such advertising total
return figures that are not calculated according to the formula set forth
above in order to compare more accurately the Fund's performance with other
measures of investment return. For example, in comparing the Fund's total
return with data published by Lipper Analytical Servicing, Inc., the Fund
calculates its aggregate and average annual total return for the specified
periods of time by assuming the investment of $10,000 in Fund Shares and
assuming the reinvestment of each dividend or other distribution at net asset
value on the reinvestment date. For purposes of other comparisons, the Fund
performs a second alternative computation for its aggregate and average annual
total return by assuming the investment of $10,000 in Fund Shares and assuming
no reinvestment of dividends or other distributions. For these alternative
computations, the Fund assumes that the $10,000 invested in Fund Shares is net
of all sales charges (as distinguished from the computation required by the
SEC where the $1,000 payment is reduced by sales charges before being invested
in Fund
- 11 -
<PAGE>
Shares). The Fund will, however, disclose the maximum sales charges and will
also disclose that the performance data do not reflect sales charges and that
inclusion of sales charges would reduce the performance quoted. Such
alternative total return information will be given no greater prominence in
such advertising that the information prescribed under SEC rules and all
advertisements containing performance data will include a legend disclosing
that such performance data represent past performance and that the investment
return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ADDITIONAL INFORMATION
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement and the exhibits relating
thereto, which the Fund has filed with the Securities and Exchange Commission,
Washington, D.C., under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, to which reference is hereby made.
All references to time in this Statement of Additional Information are to
Eastern Standard or Daylight Savings Time, whichever is then in effect in New
York City.
- 12 -
<PAGE>
Copley
Fund, Inc.
Copley Financial Services Corp. - Investment Manager
P.O. Box 3287 Fall River, Massachusetts 02722 (508) 674-8459
April 15, 1996
Dear Fellow Shareholder:
My last letter to shareholders stressed the fact that perception and not
facts is the underlying principle of the short term direction of the stock
market. At this writing Washington has created the perception that the economy
is booming, new job creation is at an all time high and the Federal Reserve
might increase interest rates. This perception is fed by numbers emanating from
Washington giving no credence to the types of jobs created versus the types of
jobs lost by corporate downsizing caused by governmental taxes and policies
forcing giant corporations to downsize; thus defaulting on their immediate
concept of growth. Keep in mind governmental policies against large
corporations affect small corporations much more (small corporations do not have
the staff or financial muscle to cope with the government) thus eliminating the
one real chance for increased employment.
Our travels around the country visiting the various stores Copley supplies
and observing the shopping habits and comments of middle America lead us to
believe there is very little confidence in the economy and some pessimism for
the near future.
The optimism by Washington has caused institutional money managers to
believe that inflation will reoccur and that interest rates will continue to
rise. As a result various major institutions have sold bonds and interest-
sensitive stocks causing a devaluation of stocks in all industries paying high
dividends. We do not believe this devaluation of quality dividend paying stocks
can be sustained as eventually these cannot go down below the recognized
interest yield of the time and will go up as dividends are increased and
inflation is not recognized as a real danger.
Copley Fund, Inc. was created to purchase stocks that no matter the
perception each initial purchase has a floor to its price simply because of the
dividend yield. A stock could not go below the value of the recognized interest
rate at that time. We created a vehicle of steady growth, small risk and a
compounding effect of the impact of dividends received in ever growing amounts.
We are not subject to the fashion stocks of the moment with their inevitable
changes of perception and value.
We believe the following record gives credence to our philosophy of growth
and safety.
1984* ......... +23.9% (Top performing Fund in 1984)
1985 ......... +25%
1986 ......... +18%
1987 ......... -8%
1988 ......... +20%
1989 ......... +16% (Including a reserve for taxes on unrealized gains.)
*Calendar Years
<PAGE>
1990 ......... -2%
1991 ......... +18%
1992 ......... +18%
1993 ......... +10%
1994 ......... -7%
1995 ......... +26%
1996 ......... -1% (February 29, 1996)
As we explained in our last letter to shareholders, Copley Fund, Inc.
cannot be compared to other funds in terms of performance as all other funds
distribute dividends and capital gains which are subject to individual taxes.
We do not distribute but as an operating corporation we may a tax much lower
than an individual pays. Thus our performance includes a corporate tax and does
not subject the individual to a tax until one redeems. Then one pays a capital
gains tax if there is a gain. Our studies have shown that a good mean average
of performance comparison is 3%, i.e., if a Fund has a gain for the year of 13%
and Copley 10%, the two Funds are probably equal in net performance.
Our merchandising and retail division has taken a most conservative
approach at this time. We have many opportunities for major expansion but in
this retail environment had decided to forego expansion for a time.
In hindsight we have been correct. The retail industry has over-expanded thus
competition has caused profit margins to decrease to the point of losses;
witness the bankruptcies of Caldor, Bradlees, Ames, Macy and possibly, K Mart.
We are still operating profitably but have reduced inventories by 40%. We
are now investigating many opportunities for meaningful expansion of our
operating division and hope to implement some of these opportunities in the near
future.
We do express our appreciation to our shareholders for their confidence and
to our Board of Directors for their invaluable services as we look forward to
the future and the continued steady success of our concept.
Cordially yours,
/s/ Irving Levine
Irving Levine
PRESIDENT
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
Copley Fund, Inc.
Palm Beach, Florida
I have audited the accompanying statements of assets and liabilities,
including the portfolio of investments, of Copley Fund, Inc., as of February 29,
1996, and the related statement of operations, the statement of cash flows, the
statement of changes in net assets, and the supplementary information for the
year then ended. These financial statements and supplementary information are
the responsibility of the Fund s management. My responsibility is to express an
opinion on these financial statements and supplementary information based upon
my audit. All information shown for the years prior to March 1, 1991, was
audited by other auditors whose report, dated April 19, 1991, expressed an
unqualified opinion.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected per
share data and ratios are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. My procedures included confirmation of securities
owned at February 29, 1996, 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. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements and supplementary information
referred to above present fairly, in all material respects, the financial
position of the Copley Fund, Inc. as of February 29, 1996, the results of its
operations and its cash flows, the changes in its net assets, and the
supplementary information for the year then ended, in conformity with generally
accepted accounting principles.
/s/ Roy G. Hale
ROY G. HALE
Certified Public Accountant
La Plata, Maryland
April 23, 1996
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 29, 1996
<S> <C> <C>
Number of
Shares Value
COMMON STOCKS 96.46%
DIVERSIFIED UTILITY COMPANIES 18.69%
Dominion Resources, Inc. 40,000 $ 1,580,000
Florida Progress 35,000 1,238,125
FPL Group 55,000 2,454,375
General Public Utilities Corp. 35,000 1,168,125
LG & E Energy Corp. 40,000 1,720,000
Montana Power Co. 50,000 1,093,750
Pacificorp. 25,000 518,750
Public Service Enterprise Group 35,000 984,375
Texas Utilities Co. 30,000 1,211,250
WPL Holdings 30,000 930,000
12,898,750
ELECTRIC AND GAS 20.11%
American Electric Power 55,000 2,358,125
Carolina Power & Light Co. 60,000 2,190,000
Delmarva Power & Light Co. 55,000 1,216,875
Enova Corporation 45,000 1,040,625
Kansas City Power & Light Co. 40,000 1,015,000
New York State Electric & Gas 25,000 590,625
Ohio Edison Co. 35,000 831,250
Public Service Company of CO 45,000 1,586,250
SCANA, Corp. 70,000 1,925,000
Western Resources, Inc. 35,000 1,120,000
13,873,750
ELECTRIC POWER COMPANIES 19.28%
Allegheny Power Systems, Inc. 45,000 1,310,625
Atlantic Energy 50,000 912,500
Boston Edison 35,000 966,875
DTE Energy Co. 55,000 1,959,375
IPALCO Enterprises, Inc. 25,000 996,875
New England Electric System 35,000 1,351,875
Northeast Utilities 55,000 1,223,750
Pennsylvania Power & Light Co. 50,000 1,243,750
PECO Energy Co. 20,000 565,000
Potomac Electric Power Co. 25,000 659,375
Union Electric Co. 50,000 2,112,500
$ 13,302,500
Continued
The accompanying notes are an integral part of the financial statements.
<PAGE>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 29, 1996
(Continued)
Number of
Shares Value
GAS UTILITIES & SUPPLIES 12.22%
Atlanta Gas Light Co. 40,000 $ 725,000
Brooklyn Union Gas Co. 40,000 1,045,000
Colonial Gas Co. 50,000 1,112,500
Connecticut Energy Corp. 20,000 405,000
Connecticut Natural Gas Corp. 30,000 708,750
Delta Natural Gas Co. 20,000 355,000
New Jersey Resources Corp. 25,000 728,125
Northwest Natural Gas Co. 20,000 660,000
Peoples Energy Corp. 25,000 768,750
Washington Gas Light Co. 28,000 609,000
Wicor, Inc. 40,000 1,320,000
8,437,125
HYDRO ELECTRIC 1.26%
Idaho Power Co. 30,000 870,000
DRUG COMPANIES 3.08%
Bristol Myers Squibb Co. 25,000 2,128,125
BANKING 2.30%
Morgan J.P. & Co. 10,000 818,750
PNC Bank Corporation 25,000 765,625
1,584,375
OILS 6.32%
Atlantic Richfield Co. 5,000 547,500
Exxon Corp. 12,000 954,000
Mobil Corp. 11,000 1,205,875
Occidental Petroleum Corp. 20,000 460,000
Texaco, Inc. 15,000 1,196,250
4,363,625
TELEPHONE 13.19%
American Information Technologies 26,960 1,553,570
Bell Atlantic Corp. 10,000 661,250
Bellsouth Corp. 10,000 398,750
NYNEX, Corp. 35,308 1,818,362
Pacific Telesis Group 40,000 1,130,000
S.C. Communications, Inc. 40,000 2,195,000
U S West, Inc. Media Group Com. 25,000 521,875
U S West, Inc. 25,000 818,750
$ 9,097,557
The accompanying notes are an integral part of the financial statements.
<PAGE>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 29, 1996
(Continued)
Number of
Shares Value
CONVERTIBLE PREFERRED STOCK 3.54%
Conseco, Inc. Preferred 20,000 $ 1,117,500
Delta Air Lines Preferred 5,000 308,125
International Technology Corp. 35,000 595,000
Mascotech, Inc. 30,000 423,750
2,444,375
Total value of investments (Cost $49,592,094) 69,000,182
Excess of cash and other assets over liabilities 8,902,123
NET ASSETS $ 77,902,305
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996
<S> <C> <C>
Assets
Investments in securities, at value
(identified cost $49,592,124) (Note 1) $ 69,000,182
Cash 9,071,321
Receivables:
Subscriptions $ 43,841
Trade (Notes 5 & 6) 27,783
Dividends and interest 270,251 341,875
Inventory (Notes 1,5 and 6) 268,369
Total Assets 78,681,747
Liabilities
Payables:
Trade 8,062
Stock redemptions 22,489
Accrued income taxes current 337,966
Accrued expenses 31,970
Deferred income taxes (Notes 1 and 2) 378,955
Total Liabilities 779,442
Commitments and Contingencies (Note 7)
Net Assets $ 77,902,305
Net assets consist of:
Capital paid in $ 32,073,973
Undistributed net investment and operating income 26,914,552
Accumulated net realized loss on investment transactions (494,278)
Net unrealized appreciation in value of investments (Note 2) 19,408,058
Total $ 77,902,305
Net Asset Value, Offering and Redemption Price
Per Share, (3,160,689 shares of $1.00 par value
capital stock outstanding) $ 24.65
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
STATEMENT OF OPERATIONS
Year Ended February 29, 1996
<S> <C> <C>
INVESTMENT INCOME (Note 1)
Income
Dividends $ 3,832,267
Interest 613,192
Investment income $ 4,445,459
Expenses
Investment advisory fee (Note 5) 542,694
Professional fees 67,253
Custodian fees 29,187
Shareholder servicing costs 48,315
Printing 21,681
Postage and shipping 17,863
Accounting and pricing service costs 40,500
Directors fees 12,000
Blue Sky fees 15,122
Telephone 11,496
Insurance and miscellaneous 7,312
Investment expenses 813,423
Less: Investment advisory fee waived 60,000 753,423
Net investment income before income taxes 3,692,036
OPERATING PROFIT (Notes 2,5 and 7)
Gross profit 52,849
Less: Operating expenses 42,660
Net operating profit before incomes taxes 10,189
NET INVESTMENT AND OPERATING INCOME BEFORE
INCOME TAXES 3,702,225
Less provision for income taxes (Notes 2 and 7) 722,966
Net investment and operating income 2,979,259
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS (Notes 2 and 4)
Realized gain from investment transactions
during the year, 2,002,648
Increase in unrealized appreciation of
investments during current year 7,720,657
Net realized and unrealized gain/loss on investments 9,723,305
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 12,702,564
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
Year Ended Year Ended
February 29, February 28,
1996 1995
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment and operating income $ 2,979,259 $ 3,025,933
Net realized gain (loss) on investment transactions 2,002,648 (2,043,333)
Net change in unrealized appreciation on investments 7,720,657 631,959
Increase (decrease) in net assets resulting from operations 12,702,564 1,614,559
NET EQUALIZATION (DEBITS) CREDITS (Note 1) (4,853,658) (2,450,658)
CAPITAL SHARE TRANSACTIONS (Note 3)
Increase (decrease) in net assets resulting from capital
share transactions (6,636,446) (3,464,566)
Total increase (decrease) in net assets 1,212,460 (4,300,665)
NET ASSETS
Beginning of Year 76,689,845 80,990,510
End of Year (including undistributed net investment and
operating income of $26,914,552 and $33,551,520,
respectively) $ 77,902,305 $ 76,689,845
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
STATEMENT OF CASH FLOWS
Year Ended February 29, 1996
<S> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities
Dividends and interest received $ 4,473,786
Proceeds from disposition of long-term portfolio investments 5,320,729
Receipts from customers 443,877
Payments of taxes, net (732,968)
Expenses paid (794,512)
Purchase of long-term portfolio investments (3,276,975)
Payments to suppliers (230,364)
Net cash provided by operating activities 5,203,573
Cash flows provided by financing activities
Decrease in notes payable (202,000)
Fund shares sold 2,721,835
Fund shares repurchased (14,305,813)
Net cash used by financing activities (11,785,978)
Net decrease in cash (6,582,405)
Cash at beginning of the year 15,653,726
Cash as of February 29, 1996 $ 9,071,321
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net increase in net assets resulting from operations $ 12,702,564
Increase in investments (8,355,798)
Decrease in dividends and interest receivable 28,327
Decrease in receipts from customers 160,838
Decrease in inventory 179,398
Decrease in brokers and dealers payments 538,557
Decrease in income taxes payable-current (8,713)
Decrease in other assets (511)
Decrease in accrued expenses (41,089)
Total adjustments (7,498,891)
Net cash provided by operating activities (5,203,573)
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies
The Fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management company. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
Security Valuation
Investments in securities traded on a national securities exchange are
valued at the last reported sales price on the last business day of the period;
securities traded on the over-the-counter market and listed securities for which
no sales was reported on that date are valued at the mean between the last
reported bid and asked prices.
Sales of Securities
In determining the net realized gain or loss from sales of securities, the
cost of securities sold is determined on the basis of identifying the specific
certificates delivered.
Equalization
The Fund follows the accounting practice known as equalization by which a
portion of the proceeds from sales and costs of repurchases of capital shares,
equivalent on a per-share basis to the amount of distributable net investment
and operating income on the date of the transaction, is credited or charged to
undistributed net investment and operating income.
Distributions
It is the Fund s policy to manage its assets so as to avoid the necessity
of making annual taxable distributions. Net investment and operating income and
net realized gains are not distributed, but rather are accumulated within the
Fund and added to the value of the Fund shares.
Inventory
Inventory is valued at the lower of cost (determined by the first in/first
out method) or market.
Income Taxes
The Fund files its tax returns as a regular corporation and accordingly the
financial statements include provisions for current and deferred income taxes.
Other
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
Interest income is recorded as earned.
<PAGE>
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. Federal and State Income Taxes
The income tax provision included in the
financial statements is as follows:
Regular federal tax liability $ 378,766
Alternative minimum tax-federal 233,273
State tax liability 110,927
$ 722,966
The Fund provides deferred taxes for unrealized appreciation on its
investment portfolio to the extent that management anticipates that a liability
may exist. The amount of deferred taxes currently available to the Fund is
$1,802,873, consisting of $378,955 accumulated general liability and a
cumulative alternative minimum tax carryover of $1,423,918. The difference
between the effective rate on investment and operating income and the expected
statutory rate is due substantially to the use by the Fund of the dividends
received deduction.
The Fund has $844,265 in accumulated capital loss carryforwards which
expires on February 29, 2000.
For the year ended February 29, 1996, the Fund was subject to the corporate
alternative minimum tax due to differences in recognition of income for book and
tax purposes. The alternative minimum tax is included in current income tax
provisions. The alternative minimum tax is available as a credit against the
regular corporate income tax in any future tax year in which the regular tax is
in excess of the minimum tax liability for that year.
The Fund is qualified and currently conducts business in the State of
Florida. The Fund is subject to Florida corporate and alternative minimum
taxes.
In accordance with FASB-109, Accounting for Income Taxes (applicable for
fiscal years commencing after December 31, 1992), the Copley Fund, Inc. has
adopted the liability method of accounting for current and deferred tax assets
and liabilities. The amount of income tax expense recognized for a period is
the amount of income taxes currently payable or refundable combined with the
amount required to adjust deferred tax assets and liabilities to their
appropriate balances.
3. Capital Stock
At February 29, 1996, there were 5,000,000 shares of $1.00 par value
capital stock authorized. Transactions in capital shares were as follows:
<TABLE>
<S> <C> <C> <C> <C>
Year Ended Year Ended
February 29, 1996 February 28, 1995
Shares Amount Shares Amount
Shares sold 121,122 $ 2,721,835 417,754 $ 8,320,313
Shares repurchased (645,679) (14,305,813) (717,554) (14,235,537)
Net Change (524,557) $ (11,583,978) (299,800) $ (5,915,224)
</TABLE>
<PAGE>
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(Continued)
4. Purchases and Sales of Securities
Purchases and sales of securities, other than United States government
obligations and short-term notes, aggregated $3,093,350 and $4,782,170,
respectively.
5. Investment Advisory Fee and Other Transactions with Related Parties
Copley Financial Services Corporation (CFSC), a Massachusetts corporation,
serves as investment advisor to the Fund. Irving Levine, Chairman of the Board
of the Fund, is the owner of all of the outstanding common stock of CFSC and
serves as its President, Treasurer and a member of its Board of Directors.
Under the Investment Advisory Contract, CFSC is entitled to an annual fee,
payable monthly at the rate of 1.00% of the first $25 million of the average
daily net assets; .75% of the next $15 million; and .50% on average daily net
assets over $40 million.
Since September 1, 1978, in order to encourage the growth of the net asset
value of the Fund by keeping expenses to a minimum, CFSC has waived a portion of
the investment advisory fee on the first $15 million of average net assets.
CFSC has made no commitment to continue this policy.
For the year ended February 29, 1996, the fee for investment advisory
service totaled $542,694, less fees of $60,000 voluntarily waived. Also, during
the period unaffiliated directors received $12,000 in directors' fees.
The Fund's operating division, which imports merchandise for resale, places
substantially all of its merchandise on consignment with a company controlled by
Irving Levine. The Fund invoices the consignee when the merchandise is
ultimately sold. Sales of merchandise to the affiliate amounted to $402,286
during the period. An amount of $27,783 is receivable in respect of these sales
as of February 29, 1996.
6. Notes Payable
A $1,000,000 line of credit has been secured for the operating division
from Fleet National Bank. The assets of the Fund are pledged as security for
this line of credit. The amount currently outstanding on this line is zero.
7. Commitments and Contingencies
Since the Fund accumulates its net investment income rather than
distributing it, the Fund may be subject to the imposition of the federal
accumulated earnings tax. The accumulated earnings tax is imposed on a
corporation s accumulated taxable income at a rate of 39.6% for years commencing
after December 31, 1992.
Accumulated taxable income is defined as adjusted taxable income minus the
sum of the dividend paid deduction and the accumulated earnings credit. The
dividends paid deduction and accumulated earnings credit is available only if
the Fund is not held to be a mere holding or investment company. The Internal
Revenue Service has recently upheld management's position that the Fund is not
a mere holding or investment company since the Fund is conducting an operating
business. Provided the Fund manages accumulated and annual earnings and
profits, in excess of $250,000, in such a manner that the funds are deemed to be
obligated or consumed by capital losses, redemptions and expansion of the
operating division, the Fund will not be held liable for the accumulated
earnings tax by the Internal Revenue Service.
As of February 29, 1995, federal income tax returns for the fiscal years
ending February 29, 1992, February 28, 1993, and February 28, 1994, under
review by the Internal Revenue Service, were released. All issues were cleared
with the Appeals Division of the Internal Revenue Service for these three years
with the exception of accumulated earnings for the fiscal year ending February
28, 1992. A settlement was made with the Internal Revenue Service that was
deemed to be in the best interest of the Fund and its shareholders.
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Fund's Common Stock (consisting solely of stock price performance for the last
six years with the cumulative total return (including the reinvestment of all
dividends) of (i) Standard & Poor s 500 Stock Index and (ii) the Lipper
Analytical Securities Corp. Growth & Income Index. There can be no assurance
that the performance of the Fund will continue into the future with the same or
similar trends depicted in the graph below.
Comparison of Seven-Year Cumulative Return Among the Copley Fund, Inc.
the S&P Index and the Lipper Analytical Securities Corp. Growth & Income Index
Assumes $10,000 invested on January 1, 1988 in each of (1) the Trust s Stock;
(2) the S&P 500 Composite Stock Index and (3) the Lipper Analytical Securities
Corp. Growth & Income Index.
<PAGE>
COPLEY FUND, INC.
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Period (1)
The following table provides information about the Fund s financial history. It
is based upon a single share outstanding throughout each fiscal year (which ends
on the last day of February).
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended
February February February February February February February
29, 1996 28, 1995 28, 1994 28, 1993 29, 1992 28, 1991 28, 1990
Investment and Operating
Income $ 1.302 $ 1.194 $ 1.099 $ 1.089 $ 1.113 $ 1.079 $ 1.054
Expenses (Including Taxes) .431 .405 .509 .380 .371 .341 .324
Net Investment and Operating Income .871 .789 .590 .709 .742 .738 .730
Net Realized and Unrealized
Gain (Loss) on Investments 2.840 (.368) (1.130) 3.031 .803 .008 1.437
Change in Accounting Estimate 1.150
Net Increase (Decrease) in
Net Asset Value 3.711 .421 (.540) 4.890 1.545 .746 2.167
Net Asset Value
Beginning of Period 20.736 20.315 20.855 15.965 14.420 13.674 11.507
End of Period $ 24.447 $ 20.736 $ 20.315 $ 20.855 $ 15.965 $ 14.420 $ 13.674
Average Annual Total Return 17.89% 2.5% (2.6%) 30.6% 10.7% 5.5% 18.8%
Ratio to Average Net Assets:
Investment Expenses (Excluding Taxes) 1.03% 1.09% 1.51% 1.14% 1.38% 1.50% 1.86%
Net Investment and Operating Income 4.79% 3.84% 2.88% 5.93% 4.86% 5.34% 5.81%
Portfolio Turnover 4.79% 31% 10% 5% 7% 16% 3%
Number of Shares
Outstanding at End of
Period (in Thousands) 3,161 3,686 3,986 1,945 1,981 1,940 2,132
- --------------
<FN>
(1) Based upon average number of shares.
</FN>
</TABLE>
<PAGE>
PART C OTHER INFORMATION
Item 24 Financial Statements and Exhibits
(a) Financial Statements:
Part I
Included in Part A: Per Share Income and Capital Changes for each
of the five years in the period ending February 28, 1996.
Included in Part B:
Statement of Assets and Liabilities as of February 28, 1996;
Portfolio of Investments as of February 28, 1996; Statement of
Operations for the year ended February 28, 1996; and Statement of
Changes in Net Assets for each of the two years in the period
ended February 28, 1996.
(b) Exhibits:
(1) Articles of Organization of Copley Fund, Inc., together with
an amendment thereto which is filed as Exhibit 1(b)(1)to the
Fund's Pre-Effective Amendment No. 2 to its Registration
Statement 2-60951 and by this reference incorporated herein.
(i) Articles of Amendment of Copley Fund, Inc. filed as
Exhibit 1(b)(1)(i) to the Fund's Post-Effective
Amendment No. 6 to its Registration Statement 2-61740
and by this reference incorporated herein.
(ii) Articles of Amendment of Copley Tax Managed Fund, Inc.
(now Copley Fund, Inc.), effective March 11, 1987,
filed as Exhibit 24(b)(1)(ii) to the Fund's
Post-Effective Amendment No. 8 to its Registration
Statement 2-60951 and by this reference incorporated
herein.
(iii) Articles of Incorporation of the Copley Fund -
Florida, filed as Exhibit (b)(1)(iii) to Post-
Effective Amendment 16 to its Registration Statement
2-60951 and by this reference incorporated herein.
(2) By-Laws of Copley Fund, Inc., filed as Exhibit 1(b)(2) to
the Fund's Pre-Effective Amendment No. 1 to its Registration
Statement 2-60951 and by this reference incorporated herein.
(i) By-Laws of the Copley Fund - Florida, filed as Exhibit
1(b)(2) to Post-Effective Amendment 16 to its
Registration Statement 2-60951 and by this reference
incorporated herein.
(3) None
<PAGE>
(4) Specimen copy of Copley Fund, Inc. common stock (par value
$1.00 per share), filed as Exhibit 1(b)(4) to the Fund's
Pre-Effective Amendment No. 1 to its Registration Statement
2-60951 and by this reference incorporated herein.
(i) Specimen copy of Certificate of Copley Fund - Florida,
filed as Exhibit (1)(b)(4) to the Fund's Post-
Effective Amendment 16 to its Registration Statement
2-60951 and by this reference incorporated herein.
(5) Investment Advisory Contract, dated September 1, 1978, by
and between the Copley Trust (formerly Steadman Tax-
Sheltered Trust and now Copley Fund, Inc.) and Copley
Financial Services Corp., a Massachusetts corporation, filed
as Exhibit 1(b)(5) to the Fund's Post-Effective Amendment
No. 3 to its Registration Statement No. 2-55344 and by this
reference incorporated herein.
(6) None
(7) None
(8) (i) Accounting Services Agreement and Shareholder Services
Agreement between Steadman Security Corp. and Copley Fund,
Inc. filed as Exhibit (8)(i) to its Post-Effective Amendment
No. 13, and by this reference incorporated herein.
(ii) Custodian Agreement, dated December 19, 1991, by and
between Copley Fund and Fleet National Bank, filed as
Exhibit 8 (ii) to its Post Effective Amendment No. 16, and
by this reference incorporated herein.
(9) None
(10) Opinion letter of Messrs. Hirschler, Fleischer, Weinberg,
Cox & Allen, dated April 29, 1980, with respect to the
legality of the securities being registered, filed as
Exhibit 1(b)(10) to the Fund's Pre-Effective Amendment No. 1
to its Registration Statement 2-60951 and by this reference
incorporated herein.
(11) Consent of Legal Counsel and Consent of Roy Hale, CPA are
attached hereto as Exhibit 11.
(12) See Item 24(a) of Part C.
(13) None
<PAGE>
(14) Copley Fund, Inc. Retirement Plan for Self-Employed
Individuals, together with form of Plan Adoption Agreement
and Summary Plan Description, filed as Exhibit 1(b)(14) to
the Fund's Pre-Effective Amendment No. 1 to its Registration
Statement 2-60951 and by this reference incorporated herein.
(15) None
Item 25. Persons Controlled by or Under Common Control With Registrant
________________
Irving Levine
________________________________ ___________________________
Copley Financial Services, Inc. Stuffco, Inc.
(1) (3)
________________________________
Copley Fund, Inc.
(2)
(1) See "Investment Adviser - The Adviser" in the Statement of Additional
Information.
(2) See "Control Persons and Principal Holders of Securities" in the
Statement of Additional Information.
(3) Mr. Levine owns 75% of the outstanding capital stock of this
Massachusetts corporation, which is engaged in the business of processing
ladies handbags, and he also serves as Chairman of the Board of Directors
and Treasurer thereof.
Item 26. Number of Holders of Securities
Title of Number of Record
Class Holders as of 2/28/96
Common Stock 4,132
Item 27. Indeminification
The Articles of Organization of the Fund provide that each director and
officer shall be indemnified by the Fund against liabilities, fines, penalties
and claims imposed upon or asserted against him (including amounts paid in
settlement) by reason of having been such a director or officer, whether or
not then continuing so to be, and against all expenses (including counsel
fees) reasonably incurred by him in connection therewith, except in relation
to matters as to which he shall have been finally adjudicated in any
proceeding guilty of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office. In
the absence of such an adjudication in any such proceeding or in the absence
of a settlement thereof, no indemnification shall be permitted unless there is
first obtained a determination by independent legal counsel to the effect
that, based upon a review of the facts, the officer or director seeking
indemnification is not guilty of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. "Independent legal counsel" shall not include counsel for the Fund,
<PAGE>
its investment adviser, its principal underwriter, if any, or persons
affiliated with the Fund or such adviser or underwriter. "Director" or
"officer" includes every director or officer or former director or officer of
the Fund and every person who may have served at its request as a director or
officer or other official serving in an equivalent capacity for another
corporation or unincorporated business entity in which the Fund owns shares of
stock or has an equity interest or of which it is a creditor or, in the case
of non-stock corporation, to which the Fund contributes. Such terms also
include personal representatives. The indemnity rights granted by the Fund's
Articles of Organization are not deemed to be exclusive of other rights, if
any, which such a director or officer may have under applicable law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any such action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to the court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
Item 28. Business and Other Connections of Investment Adviser
Copley Financial Services Corp., the Fund's investment adviser ("CFSC"),
is engaged in no other business. The following is a list of the directors and
officers of CFSC and their business, profession or employment of a substantial
nature during the past two fiscal years:
BUSINESS, PROFESSION AND EMPLOYMENT
NAME OF OFFICERS DURING PAST TWO FISCAL YEARS (INCLUDING
AND DIRECTORS COMPANY AND PRINCIPAL ADDRESS)
Irving Levine, President President, Treasurer and a Director of
Treasurer and Director Copley Financial Services Corp. since
1978; Chairman of the Board and
Treasurer of Stuffco International,
Inc. a ladies handbag processor, retail
chain operator since February, 1978.
Eric Clifford Drysdale Professional tennis player and sport's
Director announcer.
Jeffrey Josef Steiner Chairman of the Board of Fairchild
Director Corporation, 110 E. 59th St., New York,
New York 10022.
<PAGE>
Stephen L. Brown Chairman of the Franklin Corporation
Director and Chairman of S. L. Brown & Company,
New York, N.Y.
Kenneth Joblon President, Brittany Dyeing & Printing &
Director Corp., New Bedford, MA.
Item 29. Principal Underwriters
None
Item 30. Location of Accounts and Records
With the exception of the minute book of Shareholders and
Directors and files of all advisory material received from the investment
adviser, which are maintained by the Fund at P. O. Box 3287, Fall River,
Massachusetts 02724, all other accounts, books or other documents required to
be maintained by the Fund pursuant to Section 31(a) of the Investment Company
Act of 1940, as amended, and Rules 31a-1 through 31a-3 thereunder, are
maintained by Fleet Bank and Steadman Security Corp., 1730 K Street, N.W.,
Washington, D.C. 20006.
Item 31. Management Services
None
Item 32. Undertakings
None
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(g) under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Fall River, and
Commonwealth of Massachusetts, on the 28th day of June, 1996.
COPLEY FUND, INC.
By: /s/ Irving Levine
Irving Levine, President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to said Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
SIGNATURE TITLE
/s/ Irving Levine Chairman of the Board
Irving Levine and President, Chief
Financial and
Accounting Officer
/s/ Albert Resnick Director
Albert Resnick, M.D.
/s/ Burton S. Stern Director
Burton S. Stern
/s/ Kenneth Joblon Director
Kenneth Joblon
<PAGE>
EXHIBIT INDEX
PAGE
1. Opinion of Roberts & Henry . . . . . . . . . . . . . . . . . EX-99.B10
2. Consent of Roy G. Hale . . .. . . . . . . . . . . . . . . . . EX-99.B11
3. Financial Data Schedules . . . . . . . . . . . . . . . . . . . . EX-27
Roberts & Henry
504 Talbot Street
P.O. Box 1138
St. Michaels, MD 21663
(410) 822-4456
CONSENT OF LEGAL COUNSEL
Copley Fund, Inc.
245 Sunrise Ave.
Palm Beach, FL 33480
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the Prospectus, Part I to be filed as Post-Effective Amendments
Nos. 18, 23 and 21 to Registration Statements Nos. 2-60951, 2-55344 and
2-61740, respectively, which you are filing with the Securities and Exchange
Commission, Washington, D.C., under the Securities Act of 1933, as amended.
ROBERTS & HENRY
/s/ Thomas C. Henry
Thomas C. Henry, Esq.
St. Michaels, MD
June 28, 1996
ROY G. HALE
Certified Public Accountant
301-870-3374 P.O. Box 2634
800-286-4602 LaPlata, MD 20646
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the inclusion of my report, dated April 23, 1996, in the
Registration Statement being filed under the Securities Act of 1933 and the
Investment Company Act of 1940 by the Copley Fund, Inc., relating to the
financial statements, as of February 28, 1996, reffered to therein.
I also consent to the reference to my practice as an independent certified
public accountant.
Roy G. Hale
Certified Public Accountant
April 27, 1996
La Plata, Maryland
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-END> FEB-29-1996
<INVESTMENTS-AT-COST> 49,592,124
<INVESTMENTS-AT-VALUE> 69,000,182
<RECEIVABLES> 341,875
<ASSETS-OTHER> 9,339,690
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 78,681,747
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 779,442
<TOTAL-LIABILITIES> 779,442
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,073,973
<SHARES-COMMON-STOCK> 3,160,689
<SHARES-COMMON-PRIOR> 3,686,199
<ACCUMULATED-NII-CURRENT> 26,914,552
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (494,278)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,408,058
<NET-ASSETS> 77,902,305
<DIVIDEND-INCOME> 3,832,267
<INTEREST-INCOME> 613,192
<OTHER-INCOME> 10,189
<EXPENSES-NET> 1,476,389
<NET-INVESTMENT-INCOME> 2,979,259
<REALIZED-GAINS-CURRENT> 2,002,648
<APPREC-INCREASE-CURRENT> 7,720,657
<NET-CHANGE-FROM-OPS> 12,702,564
<EQUALIZATION> (4,853,658)
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 121,122
<NUMBER-OF-SHARES-REDEEMED> 2,721,835
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,212,460
<ACCUMULATED-NII-PRIOR> 33,551,520
<ACCUMULATED-GAINS-PRIOR> (2,496,926)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 482,694
<INTEREST-EXPENSE> 10,759
<GROSS-EXPENSE> 753,423
<AVERAGE-NET-ASSETS> 77,296,075
<PER-SHARE-NAV-BEGIN> 20.81
<PER-SHARE-NII> 0.94
<PER-SHARE-GAIN-APPREC> 2.90
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.65
<EXPENSE-RATIO> 1.03
<AVG-DEBT-OUTSTANDING> 101,000
<AVG-DEBT-PER-SHARE> 0.03
</TABLE>
