SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 20 as to 2-60951* /X/
Post-Effective Amendment No. 25 as to 2-55344* /X/
Post-Effective Amendment No. 23 as to 2-61740* /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT /X/
OF 1940
Amendment No. 21* /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 practicabl
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, 1998.
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, 1998
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
2
<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 Year1)
The Information in the table below for the fiscal years ended
February 28, 1992 through 1998 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, 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
28, 1998 28, 1997 29, 1996 28, 1995 28, 1994 28, 1993 29, 1992 28,1991 28, 1990 28, 1989
Investment and
Operating Income $ 1.371 $ 1.368 $ 1.302 $ 1.194 $ 1.099 $ 1.089 $ 1.113 $ 1.079 $ 1.054 $ .866
Expenses (Including
Taxes) .490 .471 .431 .405 .509 .380 .371 .341 .324 .247
Net Investment and
Operating Income .881 .897 .871 .789 .590 .709 .742 .738 .730 .619
Net Realized and
Unrealized Gain
(Loss) on
Investments 4.885 .952 2.840 (.368) (1.130) 3.031 .803 .008 1.437 .068
Change in Accounting
Estimate --- --- --- --- --- 1.150 --- --- --- ---
Net Increase (Decrease)
in Net Asset Value 5.766 1.849 3.711 .421 (.540) 4.890 1.545 .746 2.167 .687
Net Asset Value
Beginning of Year 26.296 24.447 20.736 20.315 20.855 15.965 14.420 13.674 11.507 10.820
End of Year $32.062 $26.296 $24.447 $20.736 $20.315 $20.855 $15.965 $14.420 $13.674 $11.507
Average Annual
Total Return 21.93% 7.56% 17.89% 2.5% (2.6%) 30.6% 10.7% 5.5% 18.8% 6.3%
Ratio to Average
Net Assets:
Investment Expenses
(Excluding
Income Taxes)(2) .95% 1.00% 1.03% 1.09% 1.51% 1.14% 1.38% 1.50% 1.86% 1.38%
Net Investment and
Operating Income(2) 3.00% 3.51% 4.79% 3.84% 2.88% 5.93% 4.86% 5.34% 5.81% 6.45%
Portfolio Turnover 43.01% 9.15% 4.79% 31% 10% 5% 7% 16% 3% 5%
Number of Shares
Outstanding at
End of Year
(in Thousands) 2,546 2,794 3,161 3,686 3,986 1,945 1,981 1,940 2,132 1,836
<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 .32% for
the fiscal year ended February 28, 1989;.29%, .20%, .22%, .15%, .05%,
.08%, .08%, .08% and .08% for the fiscal years 1990 through 1998
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.......................................... .15%
**Total Fund operating expenses.................. .95%
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 $ 51
each period. 10 years $105
_________
*After expense reimbursements of .08%
**This assumes that .95% 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 determined 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
may 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.
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.
Under the provisions of the taxpayer Relief Act of 1997, a small
corporation will not be subject to AMT. For a tax year beginning
in 1998, a corporation that has had average gross receipts of
$5,000,000 or less during the preceding three years will be
a small corporation. Once recognized as a small corporation, a
corporation will continue to be exempt from AMT for so long as
its average annual gross receipts for the prior three-year period
does not exceed $7,500,000. Pending the issue of regulations,
the Fund should qualify under the provision for the tax year
commencing March 1, 1998.
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, 1994 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 28, 1998 equaled $484,084 or .62% 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 .95% for the fiscal year ended February 28,1998, 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, 1998
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
504 Talbot St.
St. Michaels, MD 21663
Auditors
Roy G. Hale, C.P.A.
624 Clarks Run Road
La Plata, MD 20646
<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, 1998,
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, 1998.
<PAGE>
TABLE OF CONTENTS
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.
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, from
April, 1987 till April 1998.
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
110 Sunset Avenue
Palm Beach, FL 33480
Eileen F. Joinson* Clerk-Treasurer Clerk-Treasurer of the Fund
315 Pleasant Avenue since 1980; Clerk and Office
Fall River, MA Manager of Stuffco
International, Inc., a
ladies handbag processor,
since 1978.
_______________
*Interested persons, as defined under Section 2(a)(19) of the
Investment Company Act of 1940, as amended.
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, 1998, 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, 1998, aggregated $19,250 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, 1998, there were 2,546,194 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, 1998, as well as
the number of shares owned by the officers and directors of the Fund as a
group without naming them.
Number of Shares
Name and Address of Owned of Record Percent
Beneficial Owner or Beneficially of Class
Irving Levine (1) 206,745 7.40%
120 Hillside Avenue
Rehoboth, MA 02769
All Officers and Directors 232,310 8.31%
as a Group (4 Persons)
______________
(1) Includes 38,986 shares (1.0%) owned by Bernice H. Levine, Mr.
Levine's wife; 26,990 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; 44,748 shares owned
by Stuffco International, Inc. an "affiliate" corporation controlled by
Mr. Levine; and 16,369 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.
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 29, 1996,
February 28, 1997, and February 28, 1998 were $542,694, $531,290 and $544,084
respectively, but CFSC actually received only $482,694, $471,290 and $484,084
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 $14,270, $42,835.30 and
$130,145 in each of its fiscal years ending, February 29, 1996, February
28, 1997 and February 28, 1998 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 1998 by Roy G. Hale, certified public
accountant. 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 20646.
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>
ANNUAL REPORT February 28, 1998
COPLEY FUND, INC.
A No-Load Fund
<PAGE>
Copley
Fund, Inc.
Copley Financial Services Corp. - Investment Manager
P.O. Box 3287, Fall River, Massachusetts 027122, (508) 674-8459
April 6, 1998
Dear Fellow Shareholder:
A new phenomenon is occuring in the Fund industry. Fund institutions
are starting to be concerned about the true net returns to stockholders. Thus,
new so called "tax efficient funds" have been started to deliver the highest
after-tax returns to shareholders.
Copley Fund, Inc. has always been cognizant of net after-tax returns
to its shareholders and has conducted its investments and structure
accordingly. To reiterate, as in previous letters, Copley Fund, Inc. does
not distribute but as an operating corporation pays its own taxes at rates
lower than that 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 comparative average of performance between Copley and
other funds is three percent, i.e., if a fund has a gain of 13% and Copley
10% the two funds are probably equal in after-tax return to the individual.
The Asian crisis caused some institutions to reduce their exposure
to "go go" stocks and to invest in the types of stocks owned by Copley.
This thrust of new investments in our stocks helped us to a net gain of
25% in 1997. As long as new money keeps pouring in to the stock market,
institutions must buy stocks and cause the stock market to keep rising.
We at Copley Fund, Inc. have always been concerned with possible
fall outs of the stock market and we use our dividend yields as our
safety net (a stock cannot decrease in value lower than its safe yield
as compared to interest rates at the time).
Our record on a calendar year basis from 1984 to the present gives
credence to our philosophy of steady and almost sure growth.
1984*.......... +23.9% (Top performing Fund in 1984)
1985........... +25%
1986........... +18%
1987........... - 8%
1988........... +20%
1989........... +16%
1990........... - 2%
*Calendar Years
1
<PAGE>
1991........... +18%
1992........... +18%
1993........... +10%
1994........... - 7%
1995........... +26%
1996........... + 5%
1997........... +25%
1998........... +7.5% (March 31, 1998)
The year 1998 will show a much larger increase in volume and
profitability in our operating division. We forecast our shoe
wholesale volume to have a major impact in our profits and will be a
welcome addition to our net asset value.
We do look forward to continued steady increases in net asset
values and wish to express our appreciation to our Board of Directors
for their confidence and understanding of Copley's concept and structure.
Cordially yours,
/s/ Irving Levine
Irving Levine
PRESIDENT
P.S. We thought the enclosed New York Times article of January 11 would
be of interest.
2
<PAGE>
<TABLE>
<CAPTION>
Copley Fund, Inc. Per Share Value
CALENDAR YEARS ENDED DECEMBER 31,1997
PERIOD ENDED FEBRUARY 28, 1998
<S> <C>
1981 4.53
1982 5.43
1983 6.06
1984 7.51
1985 9.36
1986 11.00
1987 10.11
1988 12.12
1989 14.28
1990 14.06
1991 16.47
1992 19.38
1993 21.35
1994 19.71
1995 24.85
1996 26.05
1997 32.58
As of March 31,
1998 34.97
</TABLE>
3
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Shareholders and Board of Directors
Copley Fund, Inc.
Palm Beach, Florida
I have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Copley Fund, Inc., as of February
28, 1998, 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 28, 1998, by correspondence with
the custodian. An audit also included 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 28, 1998, 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.
ROY G. HALE
Certified Public Accountant
La Plata, Maryland
April 22, 1998
4
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 28, 1998
<S> <C> <C>
Number of
Shares Value
Common Stocks--99.11%
DIVERSIFIED UTILITY COMPANIES - 14.65%
Dominion Resources, Inc. 30,000 $ 1,196,250
Eastern Utilities Associates 5,000 119,687
Florida Progress 35,000 1,354,063
FPL Group 55,000 3,193,438
GPU, Inc. 35,000 1,406,562
LG & E Energy Corp 80,000 1,915,000
Montana Power Co. 15,000 480,000
Pacificorp 25,000 604,687
Texas Utilities Co. 25,000 1,010,938
WPL Holdings 20,000 637,500
___________
11,918,125
ELECTRIC AND GAS - 17.89%
American Electric Power 55,000 2,640,000
Carolina Power & Light Co. 60,000 2,505,000
Delmarva Power & Light Co. 22,500 483,750
Enova Corporation 45,000 1,147,500
First Energy Corp 40,000 1,157,500
Kansas Ciry Power & Light Co. 40,000 1,205,000
New Century Energy, Inc. 45,000 2,098,125
SCANA, Corp 70,000 2,012,500
UtiliCorp United, Inc. 25,000 900,000
Western Resources, Inc. 10,000 410,000
___________
14,559,375
ELECTRIC POWER COMPANIES - 12.33%
Allegheny Energy, Inc. 45,000 1,375,313
Ameren Corporation 50,000 1,921,875
Atlantic Energy 20,000 407,500
Boston Edison 22,000 853,875
DTE Energy Co. 55,000 2,021,250
New England Electric System 35,000 1,474,375
Pennsylvania Power & Light Co. 50,000 1,118,750
PECO Energy Co. 11,600 229,100
Potomac Electric Power Co. 25,000 628,125
___________
$10,030,163
Continued
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 28, 1998
(Continued)
Number of
Shares Value
--------- -----
GAS UTILITIES & SUPPLIES - 11.95%
Colonial Gas Co. 50,000 1,415,625
Connecticut Energy Corp 20,000 590,000
CTG Resources, Inc. 27,000 702,000
Delta Natural Gas Co. 15,000 266,250
Keyspan Energy Corp 40,000 1,422,500
New Jersey Resources Corp 25,000 912,500
Northwest Natural Gas Co. 30,000 845,625
Peoples Energy Corp. 25,000 903,125
Washington Gas Light Co. 28,000 754,250
Wicor, Inc. 40,000 1,912,500
___________
9,724,375
HYDRO ELECTRIC - 1.29%
Idaho Power Co. 30,000 1,048,125
___________
DRUG COMPANIES - 7.25%
Bristol Myers Squibb Co. 50,000 5,009,375
Pfizer, Inc. 10,000 885,000
___________
5,894,375
BANKING - 3.52%
Morgan J.P. & Co. 10,000 1,195,000
PNC Bank Corporation 30,000 1,665,000
___________
2,860,000
MANUFACTURING - CONSUMER GOODS - 2.33%
Coca Cola Co. 10,000 686,875
Gillette Co. 5,000 539,375
Hewlett Packard Co. 10,000 670,000
-----------
1,896,250
MANUFACTURING - CAPITAL GOODS - 3.75%
Allied Signal, Inc. 10,000 425,625
International Paper Co. 10,000 466,250
Masco Technology, Inc. 38,200 792,650
VF Corp 10,000 476,875
Xerox Corp 10,000 886,875
-----------
$ 3,048,275
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 28, 1998
(Continued)
Number of
Shares Value
--------- --------
OILS - 7.48%
Atlantic Richfield Corp. 10,000 777,500
Exxon Corp. 24,000 1,533,000
Mobil Corp. 22,000 1,593,625
Occidental Petroleum Corp. 20,000 511,250
Texaco, Inc. 30,000 1,674,375
-----------
6,089,750
RETAIL - 2.52%
Penny (J.C.), Inc. 15,000 1,060,312
Sears Roebuck & Co. 10,000 530,625
Wal-Mart Stores, Inc. 10,000 463,125
-----------
2,054,062
TELEPHONE - 14.15%
American Information Technologies 53,920 2,247,790
American Telephone & Telegraph 15,000 913,125
Bell Atlantic Corp. 47,116 4,228,661
Bell South Corp. 10,000 610,000
SBC Communications, Inc. 29,258 2,212,636
U S West, Inc. 25,000 1,301,563
-----------
$11,513,775
CONVERTIBLE PREFERRED STOCK - .89%
Sun, Inc., Preferred "D" 20,000 727,500
-----------
Total value of investments (Cost $45,472,451) 81,364,150
Excess of cash and other assets over liabilities 1,348,779
-----------
NET ASSETS $82,712,929
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1998
<S> <C> <C>
Assets
Investments in securities, at value
(identified cost $45,472,451)(Note 1) $ 81,364,150
Cash 1,524,581
Receivables:
Subscriptions $ 48,030
Trade (Notes 5 & 6) 8,497
Dividends and interest 210,510 267,037
----------
Inventory (Notes 1, 5, & 6) 163,696
Other Assets 1,792
------------
Total Assets 83,321,256
Liabilities
Payables:
Trade 1,185
Stock Redemptions 12,800
Accrued income taxes - current 249,658
Accrued expenses 66,196
Deferred income taxes (Notes 1 & 2) 278,488
----------
Total Liabilities 608,327
Commitments and Contingencies (Note 7)
Net Assets $ 82,712,929
============
Net assets consist of:
Capital paid in $ 19,991,779
Undistributed net investment and
operating income 27,928,685
Accumulated net realized loss on
investment transactions (1,099,234)
Net unrealized appreciation in value
of investments (Note 2) 35,891,699
------------
Total $ 82,712,929
============
Net Asset Value, Offering and Redemption
Price Per Share (2,546,194 shares of
$1.00 par value capital stock outstanding) $ 32.48
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
STATEMENT OF OPERATIONS
For the Year Ended February 28, 1998
<S> <C> <C>
INVESTMENT INCOME (Note 1)
Income
Dividends $ 3,489,547
Interest 156,026
-----------
Investment income $ 3,645,573
Expenses
Investment advisory fee (Note 5) 544,084
Professional fees 66,671
Custodian fees 34,343
Shareholder servicing costs 39,078
Printing 20,935
Postage and shipping 10,198
Accounting and pricing service costs 40,500
Directors fees 19,250
Blue Sky fees 11,590
Telephone 14,333
Insurance and miscellaneous 6,842
-----------
Investment expenses 807,824
Less: Investment advisory
fee waived 60,000 747,824
----------- -----------
Net investment income
before income taxes 2,897,749
OPERATING PROFIT (Notes 2, 5, & 7)
Gross profit 48,054
Less: Operating expenses 32,355
-----------
Net operating profit before
income taxes 15,699
NET INVESTMENT AND OPERATING INCOME
BEFORE INCOME TAXES 2,913,448
Less provision for income taxes (Notes
2 and 7) 559,658
-----------
Net investment and operating
income 2,353,790
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Notes 2 and 4)
Realized loss from investment transactions
during the year (1,440,880)
Increase in unrealized appreciation of
investments during current year 14,483,463
-----------
Net realized and unrealized gain/loss
on investments 13,042,583
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $15,396,373
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<S> <C> <C>
Year Ended Year Ended
February 28, February 28,
1998 1997
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment and operating income $ 2,353,790 $ 2,672,815
Net realized gain (loss) on investment
transactions (1,440,880) 835,195
Net change in unrealized appreciation
on investments 14,483,463 2,000,178
----------- -----------
Increase (decrease) in net assets
resulting from operations 15,396,373 5,508,188
NET EQUALIZATION (DEBITS) CREDITS (Note 1) (1,369,107) (4,026,026)
CAPITAL SHARE TRANSACTIONS (Note 3)
Increase (decrease) in net assets
resulting from capital share transactions (5,612,062) (5,086,742)
------------ ------------
Total increase (decrease) in net
assets 8,415,204 (3,604,580)
NET ASSETS
Beginning of year 74,297,725 77,902,305
----------- -----------
End of Year (including undistributed
net investment and operating income
of $27,928,685 and $25,600,604,
respectively) $82,712,929 $74,297,725
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
STATEMENT OF CASH FLOWS
For the Year Ended February 28, 1998
<S> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities
Dividends and interest received $ 3,623,560
Proceeds from disposition of long-term
portfolio investments 31,942,485
Receipts from customers 345,874
Payments of taxes, net (667,033)
Expenses paid (749,399)
Purchase of long-term portfolio investments (31,414,969)
Payments to suppliers (187,105)
------------
Net cash provided by operating activities 2,893,413
============
Cash flows provided by financing activities
Fund shares sold 2,731,751
Fund shares repurchased (9,652,106)
------------
Net cash used by financing activities (6,920,355)
============
Net decrease in cash (4,026,942)
Cash at beginning of year 5,551,523
------------
Cash as of February 28, 1998 $ 1,524,581
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net increase (decrease) in net assets resulting
from operations $15,396,373
-----------
Increase in investments (12,659,275)
Decrease in dividends and interest receivable 46,425
Decrease in receipts from customers 15,245
Decrease in inventory 109,225
Decrease in income taxes payable-current (106,078)
Increase in other assets 380
Increase in accrued expenses 91,118
-----------
Total adjustments (12,502,960)
-----------
Net cash provided by operating activities $ 2,893,413
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<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 sale 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.
12
<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.......... $ 294,484
Alternative minimum tax-federal........ 180,136
State tax liability.................... 85,038
----------
$ 559,658
==========
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 $2,086,037, consisting of $278,488 accumulated general liability
and a cumulative alternative minimum tax carryover of $1,807,549. 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 $1,608,688 in accumulated capital loss carryforwards which
expires as follows: $167,808 on February 29, 2000 and $1,440,880 on February
28, 2003.
For the year February 28, 1998, 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 28, 1998 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 28, 1998 February 28, 1997
Shares Amount Shares Amount
Shares sold 89,125 2,553,200 124,421 $ 3,165,394
Shares repurchased (366,912) (9,508,660) (491,128) (12,278,162)
--------- ------------ --------- -------------
Net Change (277,787) $6,955,460 (366,707) $(9,112,768)
========= ============ ========= =============
</TABLE>
13
<PAGE>
(Continued)
4. Purchases and Sales of Securities
Purchases and sales of securities, other than United States govern-
ment obligations and short-term notes, aggregated $31,414,969 and $31,942,485,
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 28, 1998, the fee for investment
advisory service totaled $484,084, less fees of $60,000 voluntarily waived.
Also, during the period unaffiliated directors received $19,250 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 $335,143 during the period. An amount of $8,497 is receivable
in respect of these sales as of February 28, 1998.
6. Notes Payable
A $5,000,000 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 dividends 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.
14
<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 eight 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.
<TABLE>
<CAPTION>
Nine Year Cumulative Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Copley Fund, Inc. 10,000 12,628 13,323 14,749 19,262 18,761 19,230 22,670 24,384 29,731
S&P 500 Index 10,000 11,200 14,224 13,228 16,667 17,334 18,588 24,928 30,349 40,475
Lipper Analytical Serv. 10,000 11,900 14,637 13,759 17,474 19,396 21,934 28,505 34,126 43,326
</TABLE>
Assumes $10,000 invested on January 1, 1988 in each of (i) the Fund's Stock;
(ii) the S&P 500 Composite Stock Index and (iii) the Lipper Analytical
Securities Corporation-Growth & Income Index.
The above comparisons do not reflect net amounts after taxex to shareholders.
Copley Fund, Inc. files its tax returns as a regular corporation and
accordingly the financial statements include provisions for current and
deferred income taxex.
15
<PAGE>
COPLEY FUND, INC.
FINANCIAL HIGHLIGHTS
The following table presents 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> <C>
February February February February February February February February
28, 1998 28, 1997 29, 1996 28, 1995 28, 1994 28, 1993 29, 1992 28,1991
Investment and
Operating Income $ 1.371 $ 1.368 $ 1.302 $ 1.194 $ 1.099 $ 1.089 $ 1.113 $ 1.079
Expenses (Including
Taxes) .490 .471 .431 .405 .509 .380 .371 .341
Net Investment and
Operating Income .881 .897 .871 .789 .590 .709 .742 .738
Net Realized and
Unrealized Gain
(Loss) on
Investments 4.885 .952 2.840 (.368) (1.130) 3.031 .803 .008
Change in Accounting
Estimate --- --- --- --- --- 1.150 --- ---
Net Increase (Decrease)
in Net Asset Value 5.766 1.849 3.711 .421 (.540) 4.890 1.545 .746
Net Asset Value
Beginning of Year(1) 26,296 24.447 20.736 20.315 20.855 15.965 14.420 13.674
End of Year(1) $32.062 $26.296 $24.447 $20.736 $20.315 $20.855 $15.965 $14.420
Average Annual
Total Return 21.93% 7.56% 17.89% 2.5% (2.6%) 30.6% 10.7% 5.5%
Ratio to Average
Net Assets:
Investment Expenses
(Excluding
Income Taxes) .95% 1.00% 1.03% 1.09% 1.51% 1.14% 1.38% 1.50%
Net Investment and
Operating Income 3.00% 3.51% 4.79% 3.84% 2.88% 5.93% 4.86% 5.34%
Portfolio Turnover 43.01% 9.15% 4.79% 31% 10% 5% 7% 16%
Number of Shares
Outstanding at
End of Year
(in Thousands) 2,546 2,794 3,161 3,686 3,986 1,945 1,981 1,940
</TABLE>
(1) Based upon average number of shares.
16
<PAGE>
COPLEY FUND, INC. Annual Report
A No-Load Fund February 28, 1998
Investment Adviser
Copley Financial Services Corp.
P.O. Box 3287
Fall River, Massachusetts 02722
Custodian
Fleet Investment Services
111 Westminster Street
Providence, Rhode Island 02903
Transfer Agent
Steadman Security Corp.
1730 "K" St., N.W.
Washington, D.C. 20006 COPLEY FUND, INC.
Tel. (202) 223-1000 A No-Load Fund
Tel. (800) 424-8570
General Counsel
Roberts & Henry
1215 Seventeenth St., N.W.
Washington, D.C. 20036
Auditors
Roy G. Hale, C.P.A.
624 Clarks Run Road
La Plata, MD 20646
<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, 1998.
Included in Part B: Statement of Assets and Liabilities as of
February 28, 1998; Portfolio of Investments as of February 28,
1998; Statement of Operations for the year ended February 28,
1998; and Statement of Changes in Net Assets for each of the two
years in the period ended February 28, 1998.
(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
(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.
<PAGE>
(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 2/28/98
Common Stock 3,446
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, 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
<PAGE>
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
AND DIRECTORS (INCLUDING COMPANY AND PRINCIPAL
ADDRESS)
Irving Levine, President President, Treasurer and a Director
Treasurer and Director of 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
Director sport's announcer.
Jeffrey Josef Steiner Chairman of the Board of Fairchild
Director Corporation, 110 E. 59th St., New
York, New York 10022.
Stephen L. Brown Chairman of the Franklin Corporation
Director and Chairman of S. L. Brown & Company,
New York, N.Y.
<PAGE>
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 22rd day of June, 1998.
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 Date
/s/ Irving Levine Chairman of the Board 6/22/98
Irving Levine and President, Chief
Financial and Accounting
Officer
/s/ Albert Resnick, M.D. Director 6\22\98
Albert Resnick, M.D.
/s/ Burton S. Stern Director 6\22\98
Burton S. Stern
/s/ Kenneth Joblon Director 6\22\98
Kenneth Joblon
<PAGE>
Roberts & Henry
504 Talbot Street
PO 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. 20, 25, and 23 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
By: /s/ Thomas C. Henry
Thomas C. Henry, Esq.
St. Michaels, MD
June 27, 1998
ROY G. HALE
Certified Public Accountant
PO Box 2634
La Plata, MD 20646
(301) 870-3374
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the inclusion of my report, dated April 22, 1998, in the
Registration Statement being filed under the Securities Act of 1933 and the
Investment Company Act of 1940 by Copley Fund, Inc., relating to the
financial statements, as of February 28, 1998, referred to herein.
I also consent to the reference to my practice as an independent certified
public accountant.
/s/ Roy G. Hale
Roy G. Hale
Certified Public Accountant
April 22, 1998
La Plata, Maryland
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 45472451
<INVESTMENTS-AT-VALUE> 81364150
<RECEIVABLES> 267037
<ASSETS-OTHER> 1690069
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 83321256
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 608327
<TOTAL-LIABILITIES> 608327
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19991779
<SHARES-COMMON-STOCK> 2546194
<SHARES-COMMON-PRIOR> 2793981
<ACCUMULATED-NII-CURRENT> 27928685
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1099234)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 35891699
<NET-ASSETS> 82712929
<DIVIDEND-INCOME> 3489547
<INTEREST-INCOME> 156026
<OTHER-INCOME> 15699
<EXPENSES-NET> 747824
<NET-INVESTMENT-INCOME> 2897749
<REALIZED-GAINS-CURRENT> (1440880)
<APPREC-INCREASE-CURRENT> 14483463
<NET-CHANGE-FROM-OPS> 15396373
<EQUALIZATION> (1369107)
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 89125
<NUMBER-OF-SHARES-REDEEMED> 124421
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8415204
<ACCUMULATED-NII-PRIOR> 25600604
<ACCUMULATED-GAINS-PRIOR> 341646
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 484084
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1307482
<AVERAGE-NET-ASSETS> 78505327
<PER-SHARE-NAV-BEGIN> 26.59
<PER-SHARE-NII> 1.00
<PER-SHARE-GAIN-APPREC> 4.89
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 32.48
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 690377
<AVG-DEBT-PER-SHARE> 0.27
</TABLE>