SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Post-Effective Amendment No. 22 as to 2-60951* /X/
Post-Effective Amendment No. 27 as to 2-55344* /X/
Post-Effective Amendment No. 25 as to 2-61740* /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT /X/
OF 1940
Amendment No. 23* /X/
*See Explanatory and Rules 414 and 429(b) Notes on Inside Facing Page.
COPLEY FUND, INC.
Formerly "Copley Tax Managed Fund, Inc.," "The Copley Trust"
and "Steadman Tax-Sheltered Trust"_______________
(Exact Name of Registrant as Specified in Charter)
245 Sunrise Avenue, Palm Beach, FL 33480
(Address of Registrant's Principal Executive Office (Zip Code)
Registrant's Telephone Number, including Area Code (407) 665-8050
Irving Levine, President
245 Sunrise Avenue, Palm Beach, FL 33480
(Name and Address of Agent for Service)
Copy to:
Thomas C. Henry, Esquire
Roberts & Henry
P. O. Box 1138
St. Michaels, MD 21663
Approximate Date of Proposed Public Offering: As soon as practicable
after this Amendment become effective.
<PAGE>
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/x/ on (4-28-99) 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.
The Notice required by Rule 24f-2 was filed with the Commission
on April 28, 1999.
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>
PROSPECTUS
COPLEY FUND, INC.
Investment Strategy
Accumulation of Dividend
Income
July 1, 1999
LIKE ALL MUTUAL FUND SHARES, THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
CONTENTS
THE FUND
- ---------------
Information about the Goals and Strategies
Fund you should know
before investing Main Risks
Performance
Fees and Expenses
Financial Highlights
Management
Distributions and Taxes
Year 2000 Problem
Further Information
YOUR ACCOUNT
- ----------------------
Information about Buying Shares
account transactions
and services Selling Shares
Account Policies
Questions
FOR MORE INFORMATION
- ----------------------
Where to learn more Back Cover
about the Fund
<PAGE>
COPLEY FUND, INC.
GOALS AND STRATEGIES
GOALS
- -------
The Fund's investment goals are the accumulation of dividend income and
long-term capital appreciation.
STRATEGIES
- -----------
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 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 (see Main Risks).
The Fund's policy of maximizing dividend income together with 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 the shareholder will incur a loss or realize a gain or income
which may be subject to income taxation depending upon per share value at
the time of redemption.
THE FUND IS TAXED AS A CORPORATION, AND DIVIDENDS AND CAPITAL GAINS ARE
NOT DISTRIBUTED BUT RATHER ACCUMULATED WITHIN THE FUND AND ARE ADDED TO
THE VALUE OF EACH SHARE ON A DAILY BASIS.
PRINCIPAL INVESTMENTS The Fund will normally invest substantially all of
its assets in the equity securities of (1) companies with strong balance
sheets and with histories of dividend increases and (2) companies whose
earnings growth potential enhances prospects for future increases in dividend
rates. The Manager expects that more than 80% of the Fund's assets will be
invested in such equity securities. These types of securities generally
entitle the holder to participate in a company's general operating results.
These include common stocks, preferred stocks and convertible securities.
TEMPORARY INVESTMENTS The Manager may take a temporary defensive position
when it believes the markets or the economy are experiencing excessive
volatility or a prolonged general decline, or other adverse conditions exist.
Under these circumstances the Fund may be unable to pursue its investment
goals because it may not invest in equity securities. At
such times, or in the event of exceptional redemption requests, the Fund may
hold cash or cash-equivalents and invest without limit in money market
securities, U.S. government obligations and short term debt securities.
<PAGE>
OPERATING BUSINESS In an effort to enhance its performance and to
preserve and promote its investment goal in the context of adverse tax law
changes more fully discussed under "Main Risks" the Fund has engaged, on a
limited basis, in the luggage and related products business. In order to
maintain the Fund's status as a diversified investment company the value of
the operating business is limited to 24% or less of the Fund's total assets
and the gross profit therefrom is limited to 10% or less of the Fund's total
annual gross income.
MAIN RISKS
- ---------------
STOCKS While stocks have historically outperformed other asset classes over
the long term, they tend to go up and down more dramatically over the shorter
term. These price movements may result from factors affecting individual
companies, industries or the securities market as a whole.
INTEREST RATE When interest rates rise, debt security prices fall. When
interest rates fall, debt security prices go up.
** BECAUSE THE SECURITIES THE FUND HOLDS FLUCTUATE IN PRICE, THE VALUE OF
YOUR INVESTMENT WILL GO UP AND DOWN. THIS MEANS YOU COULD LOSE MONEY OVER
SHORT OR EVEN EXTENDED PERIODS.
Generally, interest rates rise during times of inflation or a growing
economy, and will fall during an economic slowdown or recession. Securities
with longer maturities usually are more sensitive to interest rate changes
than securities with shorter maturities.
UTILITIES INDUSTRY While the Fund does not concentrate its assets in
any one industry it may, at times, have a substantial portion of its assets
invested in utility companies. At such times the Fund's performance is
closely tied to conditions affecting the public utilities industry, which
may change rapidly. Utility company securities are particularly sensitive
to interest rate movements; when interest rates rise, the stock prices of
these companies tend to fall. On-going regulatory changes have led to
greater competition in the industry and the emergence of non-regulated
providers as a significant part of the industry which may make some companies
less profitable. In addition, the industry is subject to risks associated
with the difficulty of obtaining adequate returns on invested capital in spite
of frequent rate increases and of financing large construction programs
during inflationary periods; restrictions on operations and increased costs
due to environmental and safety regulations; difficulties of the capital
markets inabsorbing utility debt and equity securities; difficulties in
obtaining fuel for electric generation at reasonable prices; risks associated
with the operation of nuclear power plants; and the effects of energy
conservation and other factors affecting the level of demand for services.
<PAGE>
OPERATING BUSINESS The Manager believes that the conduct of the operating
business eliminates or, at the least, minimizes the risk that the Fund will
be subject to federal accumulated earnings tax. In the event the Manager's
position is found wrong by the IRS or changes are made to existing tax laws
and regulations the Fund could be held liable for accumulated earnings tax
by the IRS. In this event the Fund's net asset value would be reduced
by any such liability and each shareholder would incur a proportionate
decrease in the value of their account.
FOREIGN SECURITIES
The Fund does not invest in foreign securities.
<PAGE>
YEAR 2000 When evaluating current and potential portfolio positions,
Year 2000 is one of the factors the Fund's Manager considers.
The Manager will rely upon public filings and other statements made by
companies about their Year 2000 readiness. Issuers in countries outside
the U.S., particularly in emerging markets, may not be required to make the
same level of disclosure about Year 2000 readiness as is required in the U.S.
The Manager, of course, cannot audit each company and its major suppliers
to verify their Year 2000 readiness.
If a company in which the Fund is invested is adversely affected by Year
2000 problems, it is likely that the price of its security will also be
adversely affected. A decrease in the value of one or more of the
Fund's portfolio holdings will have a similar impact on the price of the
Fund's shares and the Fund's performance. Please see section on "Year 2000
Problems" for more information.
** Mutual fund shares are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other agency of the
U.S. government. Mutual fund shares involve investment risks, including the
possible loss of principal.
<PAGE>
PERFORMANCE
The bar chart and table shown below provide an indication of risks of
investing in the Copley Fund, Inc. by showing changes in the Fund's
performance from year to year over a 10 year period and by showing how the
Fund's average annual returns for one, five and ten years compare to those
of a broad-based securities market index. How the Fund has performed in the
past is not necessarily an indication of how the Fund will perform in the
future.
<TABLE>
Copley Fund, Inc.
ANNUAL TOTAL RETURNS*
<S> <C>
Year Percent
1989 17.82%
1990 (1.54%)
1991 17.14%
1992 17.67%
1993 10.17%
1994 (7.68%)
1995 26.08%
1996 4.83%
1997 25.07%
1998 13.69%
</TABLE>
During the 10 year period shown in the bar chart the highest return for a
quarter was 11.5% (quarter ending December 31, 1997) and the lowest return
for a quarter was -6.7% (quarter ending March 31, 1994).
<TABLE>
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
<S> <C> <C> <C>
Past 1 Past 5 Past 10
Year Years Years
Copley Fund, Inc. 13.69% 11.65% 11.82%
S&P 500** 26.67% 22.5% 17.7%
<FN>
* All Fund performance assumes reinvestment of dividends and capital
gains.
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 its financial statements include
provisions for current and deferred income taxes.
** Source: Standard & Poor's Micropal. The S&P 500 Index is an
unmanaged group of widely held common stocks covering a variety
of industries. It includes reinvested dividends. One cannot
invest directly in an index, nor is an index representative
of the Fund's portfolio.
</FN>
</TABLE>
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay
if you buy and hold shares of the Fund.
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum sales charge (load) *
as a percentage of offering price None
Load imposed on purchases None
Maximum Deferred Sales Charge (load) None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES (expenses deducted from Fund assets)
Management fees .64%
Distribution and Service (12b-1) fees None
Other Expenses .33%
Total annual Fund operating expenses ** .97%
EXAMPLE
This example can help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The example assumes you invest $10,000 for the periods shown and
then sell all of your shares at the end of those periods. The
example also assumes your investment has a 5% return each year
and the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions
your cumulative costs would be:
<TABLE>
<S> <C> <C> <C> <C>
1 year 3 Years 5 Years 10 Years
Assuming you sold your
shares at the end of
the period $ 102 $ 321 $ 562 $ 1,278
Assuming you stayed in
the Fund 102 321 562 1,278
<FN>
NOTE: This example should not be considered a representation of past or
future expenses. Actual expenses may be greater or less than those
shown above.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides information about the Fund's financial
performance for the past five years. It is based upon a single share
outstanding throughout each fiscal year (which ends on the last day
of February). This information has been audited by Roy G. Hale, CPA.
<TABLE>
<S> <C> <C> <C> <C> <C>
February 28 February 28 February 28 February 29 February 28
1999 1998 1997 1996 1995
NET SHARE DATA:
Net Asset Value, beginning
of year 32.062 26.296 24.447 20.736 20.315
Investment & operating income 0.995 0.881 0.897 0.871 0.789
Net realized & unrealized
gain (loss) on investments 0.722 4.885 0.952 2.840 -0.368
Total from investment
operations 1.717 5.766 1.849 3.711 0.421
Dividends from investment
operations 0.000 0.000 0.000 0.000 0.000
Distributions from net
realized gains 0.000 0.000 0.000 0.000 0.000
Total distributions 0.000 0.000 0.000 0.000 0.000
NAV end of period 33.779 32.062 26.296 24.447 20.736
Total return 5.36% 21.93% 7.56% 17.89% 2.50%
RATIOS/SUPPLEMENTAL DATA:
Net Assets 87,091,669 82,712,929 74,297,725 77,902,305 76,689,845
Ratio to average net assets:
Investment expenses 0.97% 0.95% 1.00% 1.03% 1.09%
Net investment &
operating income 2.98% 3.00% 3.51% 4.79% 3.84%
Portfolio turnover 2.49% 43.01% 9.15% 4.79% 31.00%
</TABLE>
<PAGE>
MANAGEMENT
Copley Financial Services, Inc. (Manager) P.O. Box 3287, Fall River,
Massachusetts, 02722 is the Fund's investment manager.
Mr. Irving Levine is responsible for the Fund's management. He is president
of the Manager and has managed the Fund since its inception in 1978.
For its services the Manager received a fee of .64% of average net assets
during the last fiscal year.
DISTRIBUTIONS AND TAXES
- -------------------------
The Fund does not normally make income or capital gains distributions. It
is taxed as a regular corporation under the Internal Revenue Code.
Accordingly, the Fund retains all net investment income and realized
capital gains, if any, to increase the Fund's net 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 35% 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 to
the extent that management anticipates that a liability may exist.
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.
<PAGE>
ACCUMULATED EARNINGS TAX Since the Fund accumulates rather than
distributes its income, the Fund may be subject to the imposition of the
Federal accumulated earnings tax (the "AET"). The AET is imposed on a
corporation's accumulated taxable income (the "ATT") 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. 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
a division of the Fund. The value of business assets and their earnings
are included in the net assets of the Fund. 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 that under existing law the
Fund's operation of its active trade or business prevent the Fund from
being classified as a "mere holding or investment company" for purpose of the
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 the Manager'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.
YEAR 2000 PROBLEM
- --------------------
The Fund's business operations depend on a worldwide network of computer
systems that contain date fields, including securities trading systems,
securities transfer agent operations and stock market links. Many of the
systems currently use a two digit date field to represent the date, and
unless these systems are changed or modified, they may not be able to
distinguish the Year 1900 from the Year 2000 (commonly referred to as the
Year 2000 problem. In addition, the fact that the Year 2000 is a non-
standard leap year may create difficulties for some systems.
<PAGE>
When the Year 2000 arrives, a fund's operations could be adversely affected
if the computer systems used by the Manager, its service providers and
other third parties it does business with are not Year 2000 ready. For
example, the Fund's portfolio and operational areas could be impacted,
including securities trade processing, interest and dividend payments,
securities pricing, shareholder account services, reporting, custody
functions and others. The Fund could experience difficulties in effecting
transactions if any of its foreign markets are not ready for Year 2000.
The Fund's Manager and its affiliated service providers are making a
concerted effort to take steps they believe are reasonably designed to
address their Year 2000 problems. Of course, the Fund's ability to reduce
the effects of the Year 2000 problem is also very much dependent upon the
efforts of third parties over which the Fund and its Manager may have no
control.
FURTHER INFORMATION
- ---------------------
More detailed information about the Fund and its policies can be found in the
Fund's Statement of Additional Information (SAI).
<PAGE>
YOUR ACCOUNT
- ----------------
ACCOUNT APPLICATION AND BUYING SHARES
If you are opening a new account, please complete and sign the enclosed
account application. To save time, you can sign up now for services you may
want on your account by completing the appropriate sections of the application
(see next page).
BUYING SHARES
Through your investment representative:
Opening an account - contact your investment representative
Adding to an account - contact your investment representative
By Mail:
Opening an account - Make your check payable to the Copley Fund, Inc.
Mail the check and your signed application to the
Fund at 1730 K St., NW, Washington, DC 20006
Adding to an account - Make your check payable to the Fund. Include
your account number on the check.
Fill out the deposit slip from your account
statement. If you do not have a slip, include a
note with your name, the Fund name, and your
account number.
Mail the check and deposit slip or note to the Fund
at 1730 K St., NW, Washington, DC 20006
By Wire:
1-800-424-8570
Opening an account - Call to receive instructions.
Adding to an account - Call to receive a wire control number and wire
instructions.
<PAGE>
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 Manager at (508) 674-8459. Fleet charges fees both to
maintain such plans and to purchase or sell Fund shares.
SELLING SHARES
You can sell your shares at any time.
SELLING SHARES IN WRITING.
Requests to sell $1,000 or less can be made over the phone or with
a simple letter. However, to protect you and the Fund we will
need written instructions signed by all registered owners, with a signature
guarantee for each owner, if:
You are selling more than $1,000 worth of shares
You want your proceeds paid to someone who is not a registered owner
You want to send your proceeds somewhere other than the address of
record, or preauthorized bank or brokerage firm account
You have changed the address on your account by phone within the last
15 days.
We may also require a signature guarantee on instructions we receive from an
agent, not the registered owners, or when we believe it would protect the
Fund against potential claims based on the instructions received.
A SIGNATURE GUARANTEE HELPS PROTECT YOUR ACCOUNT AGAINST FRAUD. YOU CAN
OBTAIN A SIGNATURE GUARANTEE AT MOST BANKS AND SECURITIES DEALERS. A
NOTARY PUBLIC CANNOT PROVIDE A SIGNATURE GUARANTEE.
SELLING RECENTLY PURCHASED SHARES
If you sell shares recently purchased with a check or draft, we may delay
sending you the proceeds until your check or draft has cleared, which may
take seven business days or more. A certified or cashier's check may clear
in less time.
REDEMPTION PROCEEDS
Your redemption check will be sent within seven business days after we receive
your request in proper form. We are not able to receive or pay out cash in
the form of currency. Redemption proceeds may be delayed if we have not yet
received your signed account application.
SELLING SHARES
To sell some or all of your shares
Through your investment representative - Contact your investment
representative
By Mail - Send written instructions and endorsed share certificates (if
you have share certificates) to the Fund at 1730 K St., NW,
Washington, DC 20006, partnership or trust accounts may need
to send additional information.
Specify the account number and the dollar value or number of
shares you wish to sell. Be sure to include all necessary
signatures and additional documents, as well as signature
guarantees if required.
A check will be mailed to the name(s) and address on the account,
or otherwise according to your instructions.
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 Ameritor Financial Corp., 1730 K St., N.W.,
Washington, D.C. 20006.
ACCOUNT POLICIES
CALCULATING SHARE PRICE
The Fund calculates the net asset value per share (NAV) each business day at
the close of trading on the New York Stock Exchange (normally 4:00 p.m. New
York time). NAV is calculated by dividing net assets by the number of
shares outstanding.
The Fund's assets are generally valued at their market value. If market
prices are unavailable, or if an event occurs after the close of the trading
market that materially affects the values, assets may be valued at their
fair value. If the Fund holds securities listed primarily on a foreign
exchange that trades on days when the Fund is not open for business, the
value of your shares may change on days that you cannot buy or sell shares.
Requests to buy and sell shares are processed at the NAV next calculated
after we receive your request in proper form.
**WHEN YOU BUY SHARES, YOU PAY THE OFFERING PRICE. THE OFFERING PRICE IS THE
NAV.
WHEN YOU SELL SHARES, YOU RECEIVE THE NAV.
<PAGE>
ACCOUNTS WITH LOW BALANCES
If the value of your account falls below $500 because you sell some of
your shares, we may mail you a notice asking you to bring the account back
up to its applicable minimum investment amount. If you choose not to do
so within 30 days, we may close your account and mail the proceeds to the
address of record.
STATEMENT AND REPORTS
You will receive confirmations and account statements that show your account
transactions. You will also receive the Fund's financial reports every six
months.
If there is a dealer or other investment representative of record on your
account, he or she will also receive confirmations, account statements and
other information about your account directly from the Fund.
JOINT ACCOUNTS
Unless you specify a different registration, accounts with two or more
owners are registered as "joint tenants with right of survivorship" (shown
as "Jt Ten" on your account statement). To make any ownership changes to
a joint account, all owners must agree in writing, regardless of the law
in your state.
ADDITIONAL POLICIES
Please note that the Fund maintains additional policies and reserve certain
rights, including:
The Fund may refuse any order to buy shares.
At any time, the Fund may change its investment minimums or waive
or lower its minimums for certain purchases.
You may only buy shares of the Fund where it is eligible for sale
in your state or jurisdiction.
In unusual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities
laws.
For redemptions over a certain amount, in the case of an emergency
or if payment by check would be harmful to existing shareholders,
the Fund reserves the right to make payments in securities or other
assets of the Fund.
QUESTIONS
If you have any questions about the Fund or your account, you can write to
us at 1730 K Street, N.W., Washington, DC 20006. You can also call us
at 1-800-424-8570. For your protection and to help ensure we provide you
with quality service, all calls may be monitored or recorded.
<PAGE>
INVESTMENT APPLICATION
COPLEY FUND, INC.
1730 K Street, N.W.
Washington, DC 20006 Please type or print
Make check payable to Copley Fund, Inc.
Amount of Investment $___________ Account number________________
($500 minimum) FOR FUND USE ONLY
INDIVIDUAL AND JOINT ACCOUNTS Joint Accounts must complete both lines
1 and 2
1. INDIVIDUAL________________________________________________________
First Name Middle Initial Last Name Individual's
Social Security
Number
2. JOINT OWNER - Joint accounts may be registered as
"AND" (for which both signatures are
required for every transaction), or
as "OR" (for which either signature
will be acceptable).
(Check one) ___"AND" ___"OR" _______________________________________
First Middle Last
Name Initial Name
Joint ownership will be "JOINT TENANTS WITH RIGHTS OF SURVIVORSHIP" and
not "TENANTS IN COMMON" unless otherwise specified.
CORPORATIONS, ORGANIZATIONS, TRUSTS, AND PERSONS ACTING AS FIDUCIARIES
_______________________________________________________________________
Legal Name Tax Identification Number
_______________________________________________________________________
Name of Authorized Officer Title
Partner, Trustee, etc.
_______________________________________________________________________
Name of Authorized Officer Title
Partner, Trustee, etc.
_______________________________________________________________________
Name of Authorized Officer Title
Partner, Trustee, etc.
_______________________________________________________________________
Name of Authorized Officer Title
Partner, Trustee, etc.
GIFTS TO MINORS (CUSTODIAL ACCOUNTS)
There may be only one custodian and one minor for each account.
____________________________ Custodian for__________________________
First Middle Last First Middle Last
Name Initial Name Name Initial Name
under the ________________ Uniform Gifts to Minors Act.________________
Donor's State Minor's Social
of Residence Security Number
MAILING ADDRESS TELEPHONE NUMBERS
__________________________ Home: ( )____________
Street address Office: ( )____________
__________________________
City, State and Zip Code
<PAGE>
SYSTEMATIC WITHDRAWAL APPLICATION
Systematic Withdrawal Program: A shareholder whose Copley Fund, Inc. shares
have a current value of $10,000 or more may initiate a program which provides
for monthly payment of a fixed sum realized from the liquidation of shares.
See Prospectus for detailed explanation.
(PLEASE PRINT OR TYPE)
SYSTEMATIC WITHDRAWAL AMOUNT $_____________________________
MONTH TO BEGIN_____________________________________________
(Circle One) Monthly Quarterly Semi-Annually Annually
Check is to be made payable and sent to:
___________________________________________________________
Name
___________________________________________________________
Number and Street
___________________________________________________________
City State Zip
Sign Here __________________________ ______________________________
Signature of Individual Signature of Joint Tenant
Shareholder, Corporate
Officer, Trustee,
Custodian, etc.
Signatures
__________________________ Guaranteed_____________________
Title of Corporate Officer Authorized Signature
or Capacity of Fiduciary
NOTE: If this application is being completed by a person or persons acting
in a representative or fiduciary capacity or if the systematic withdrawal
amount selected is $1,000.00 or more, the signature(s) must be guaranteed by
a trust company or a commercial bank that is a member of the Federal Reserve
System or by 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. Applications filed by a person(s) acting in a
representative capacity, e.g., corporate officers, trustees, executors, etc.,
must accompany this application with evidence of their appointment and
authority to act in form satisfactory to the Fund's transfer agent.
MAIL COMPLETED APPLICATION TO:
COPLEY FUND, INC.
c/o Ameritor Financial Corp.
1730 K Street, N.W.
Washington, DC 20006
<PAGE>
FOR MORE INFORMATION
You can learn more about the Fund in the following documents:
ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Includes a discussion of recent market conditions and Fund strategies,
financial statements, detailed performance information, portfolio
holdings, and the auditor's report.
STATEMENT OF ADDITIONAL INFORMATION
Contains more information about the Fund, its investments and
policies. It is incorporated by reference (is legally a part
of this prospectus).
For a free copy of the current annual/semiannual report or SAI, please
call us at the number below.
Copley Fund, Inc.
1-800-424-8570
You can also obtain information about the Fund by visiting the SEC's
Public Reference Room in Washington, DC (phone 1-800-SEC-0330) or by
sending your request and a duplicating fee to the SEC's Public Reference
Section, Washington, DC 20549-6009, or you can visit the SEC's internet
website at http://www.SEC.gov.
Investment Company Act File No. 2-60951
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
COPLEY FUND, INC.
June 30, 1999
This Statement of Additional Information (SAI) is not a prospectus.
It contains information in addition to the information in the Fund's
prospectus. The Fund's prospectus, dated June 30, 1999, which may be amended
from time to time, contains the basic information you should know before
investing in a fund. You should read the SAI together with the Fund's
prospectus.
The audited financial statements and auditor's report in Copley Fund,
Inc.'s Annual Report to Shareholders for the fiscal year ended February 28,
1999 are incorporated by reference (are legally a part of this SAI).
For a free copy of the current prospectus or annual report call the
Fund at (800) 424-8570.
<PAGE>
TABLE OF CONTENTS
Page
Fund History .............................................. 3
Investment Goals and Strategies............................. 3
Risks ...................................................... 3
Taxation of the Fund ...................................... 5
Fundamental Policies........................................ 7
Directors and Officers of the Fund ........................ 9
Remuneration of Management and Others ..................... 10
Control Persons and Principal Holders of Securities ....... 10
Investment Adviser ........................................ 11
The Adviser ............................................ 11
Advisory Services and Fees ............................. 11
Portfolio Transactions .................................... 12
Capital Stock............................................... 13
Custodian and Transfer Agent................................ 13
Legal Counsel ............................................. 13
Independent Auditors ...................................... 13
Purchase, Redemption and
Pricing of Shares......................................... 14
Performance ................................................ 17
Additional Information .................................... 20
Financial Statements ...................................... Appended
2
<PAGE>
FUND HISTORY
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 GOALS AND STRATEGIES
The primary investment goal 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.
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 goals can be achieved.
RISKS
The value of your shares will increase as the value of the securities owned
by the Fund increases and will decrease as the value of the Fund's investments
decrease. In this way, you participate in any change in the value of the
securities owned by the Fund. In addition to the factors that affect the
value of any particular security that the Fund owns, the value of Fund shares
may also change with movements in the stock and bond market as a whole.
INTEREST RATE RISK. To the extent the Fund invests in debt securities,
changes in interest rates will affect the value of the Fund's portfolio and
its share price. Rising interest rates, which often occur during times of
inflation or a growing economy, are likely to have a negative effect on the
value of the Fund's shares. Of course, interest rates throughout the world
have increased and decreased, sometimes very dramatically, in the past.
These changes are likely to occur again in the future at unpredictable times.
3
<PAGE>
REPURCHASE AGREEMENT RISK. The use of repurchase agreements involves certain
risks. For example, if the other party to the agreement defaults on its
obligation to repurchase the underlying security at a time when the value of
the security has declined, the Fund may incur a loss upon disposition of the
security. If the other party to the agreement becomes insolvent and subject
to liquidation or reorganization under the bankruptcy code or other laws, a
court may determine that the underlying security is collateral for a loan by
the Fund not within the control of the Fund, and therefore the realization
by the Fund on the collateral may be automatically stayed. Finally, it is
possible that the Fund may not be able to substantiate its interest in the
underlying security and may be deemed an unsecured creditor of the other
party to the agreement. While the Manager acknowledges these risks, it is
expected that if repurchase agreements are otherwise deemed useful to the
Fund, these risks can be controlled through careful monitoring procedures.
UTILITIES RISK. Historically, electric utility companies were required by
state regulators to build and maintain generation plants, transmission and
distribution lines, and other equipment. State regulators set the rates
that the companies could charge customers to pay for these costs, spread
over as much as 30 years. As the various states move away from the
traditional regulatory model toward greater competitiveness among electric
utilities, customers will be able to choose different electricity suppliers
and will no longer pay for the equipment and facilities that were mandated
by regulators, thus creating "stranded costs" for their former electricity
suppliers. If states fail to enact legislation that permits electricity
suppliers to recover their stranded costs, the financial position of these
suppliers could be adversely affected, which could cause the value of the
Fund's holdings in such companies and its net asset value to fall.
TAX RISK. Because the Fund accumulates rather than distributes its income,
the Fund may be subject to the imposition of the Federal accumulated earnings
tax (the "AET")(See "Taxation of the Fund" at page 6. 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 a
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 holding or investment
company" for purpose of the 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.
4
<PAGE>
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.
In the event an accumulated earnings tax would be assessed against the Fund,
such assessment would decrease the net assets of the Fund and have a
proportionate negative affect on each shareholder's account.
TAXATION OF THE FUND
Unlike most all other mutual funds, 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 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 current federal tax laws as well as various alternatives
available.
OPERATING DIVISION
In an effort to enhance its performance and the profitability of an
investment therein and to preserve and promote its primary investment
objective
5
<PAGE>
in the context of the federal tax laws 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 now borrow up to one-third of the value 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 of 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 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
6
<PAGE>
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 subject to the
accumulated earnings tax, management believes that the operating business
will prove lucrative to the Fund.
FUNDAMENTAL POLICIES
Copley Fund has adopted the following restrictions as fundamental policies.
This means that they may only be changed if approved by (i) more than 50%
of the Fund's outstanding shares or (ii) 67% or more of the Fund's shares
present at a shareholder meeting if more than 50% of the Fund's shares are
represented at the meeting in person or by proxy, whichever is less.
(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;
(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
instrumentality's, or instruments secured by money market instruments;
7
<PAGE>
(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
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.
8
<PAGE>
DIRECTORS AND OFFICERS OF THE FUND
Copley Fund, Inc. has a board of directors. The board is responsible for
overall management of the Fund, including general supervision and review of
the Fund's investment activities. The board, in turn, elects the officers
who are responsible for administering the day to day operations. The board
also monitors the Fund to ensure no material conflicts exists.
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,
since April, 1987 until 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.
Kenneth Joblon Director President, Brittany Dying &
1357 E. Rodney French Blvd. Printing Corp., New
New Bedford, MA 02744 Bedford, MA
New Bedford, MA 02744
Burton S. Stern Director Private Investor;
110 Sunset Avenue
Palm Beach, FL 33480
9
<PAGE>
Position(s) held Principal Occupation(s)
Name and Address with the Fund__ During Past Five Years
Eileen F. Joinson* Clerk-Treasurer Clerk-Treasurer of the Fund
315 Pleasant Avenue since 1980; Clerk and
Fall River, MA 02721 Office 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, 1999 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, 1999 aggregated $ 20,996 in
directors' fees.
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 June 1, 1999, there were 2,500,393 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 June 1, 1999, 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) 194,000 7.76%
120 Hillside Avenue
Rehoboth, MA 02769
All Officers and Director 232,310 9.29%
as a Group (4 Persons)
______________
(1) Includes 39,241 shares (1.6%) owned by Bernice H. Levine, Mr.
Levine's wife; 22,500 shares owned by Peter H. Bardach, who has given Mr.
Levine investment and voting power over such shares; 10,591 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; 44,160 shares owned by
Stuffco
10
<PAGE>
International, Inc. an "affiliate" corporation controlled by Mr.
Levine; and 16,663 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
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
11
<PAGE>
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.
Pursuant to the Investment Advisory Contract, the investment advisory fees
earned by CFSC during the Fund's fiscal years ending February 29, 1997,
February 28, 1998, and February 28, 1999 were $531,290, $544,084, and $601,300
respectively, but CFSC actually received only $471,290, $484,084 and $541,300
respectively. Receipt of the balance of the fees earned was waived.
PORTFOLIO TRANSACTIONS
The Manager selects brokers and dealers to execute the Funds' portfolio
transactions in accordance with criteria set forth in the management
agreement and any directions that the board may give.
When placing a portfolio transaction, the Manager seeks to obtain prompt
execution of orders at the most favorable net price. For portfolio
transactions on a securities exchange, the amount of commission paid is
negotiated between the Manager and the broker executing the transaction.
The determination and evaluation of the reasonableness of the brokerage
commissions paid are based to a large degree on the professional opinions of
the persons responsible for placement and review of the transactions. These
opinions are based on the experience of these individuals in the securities
industry and information available to them about the level of commissions
being paid by other institutional investors of comparable size. The Manager
will ordinarily place orders to buy and sell over-the-counter securities on
a principal rather than agency basis with a principal market maker unless,
in the opinion of the Manager, a better price and execution can otherwise be
obtained. Purchases of portfolio securities from underwriters will include
a commission or concession paid by the issuer to the underwriter, and
purchases from dealers will include a spread between the bid and ask price.
The Manager may pay certain brokers commissions that are higher than those
another broker may charge, if the Manager determines in good faith that the
amount paid is reasonable in relation to the value of the brokerage and
research services it receives. This may be viewed in terms of either the
particular transaction or the Manager's overall responsibilities. The
services that brokers may provide to the Manager include, among others,
supplying information about particular companies, markets, countries, or
local, regional, national or transnational economies, statistical data,
quotations and other securities pricing information, and other information
that provides lawful and appropriate assistance to the Manager in carrying
out its investment advisory responsibilities. These services may not always
directly benefit the Fund.
12
<PAGE>
They must, however, be of value to the Manager
in carrying out its overall responsibilities.
Since most purchases by U.S. Government Securities Series are principal
transactions at net prices, U.S. Government Securities Series incurs little
or no brokerage costs. The Fund deals directly with the selling or buying
principal or market maker without incurring charges for the services of a
broker on its behalf, unless it is determined that a better price or
execution may be obtained by using the services of a broker. Purchases of
portfolio securities from underwriters will include a commission or
concession paid by the issuer to the underwriter, and purchases from dealers
will include a spread between the bid and ask prices. The Fund seeks to
obtain prompt execution of orders at the most favorable net price.
Transactions may be directed to dealers in return for research and
statistical information, as well as for special services provided by the
dealers in the execution of orders.
It is not possible to place a dollar value on the special executions or on
the research services the Manager receives from dealers effecting
transactions in portfolio securities. The allocation of transactions in
order to obtain additional research services allows the Manager to supplement
its own research
and analysis activities and to receive the views and information of
individuals and research staffs of other securities firms. If the Funds'
officers are satisfied that the best execution is obtained, the sale of
Fund shares may also be considered a factor in the selection of
broker-dealers to execute the Fund's portfolio transactions.
CAPITAL STOCK
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.
CUSTODIAN AND TRANSFER AGENT
Fleet Investment Services, Providence, RI serves as the Fund's Custodian.
Ameritor Financial Corp., 1730 K. Street, N.W., Washington DC 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 accounts.
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,
13
<PAGE>
1992 through 1999 by Roy G. Hale, Certified Public Accountant. The
financial statements included in the Prospectus 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.
PRICING, PURCHASE AND REDEMPTION OF SHARES
PRICING SHARES
When you buy shares, you pay the offering price. The offering price is the
net asset value (NAV) per share, calculated to two decimal places using
standard rounding criteria. When you sell shares, you receive the NAV.
The value of a mutual Fund is determined by deducting the Fund's liabilities
from the total assets of the portfolio. The net asset value per share is
determined by dividing the net asset value of the Fund by the number of
shares outstanding.
The Funds calculate the NAV per share of each class each business day at
the close of trading on the New York Stock Exchange (normally 4:00 P.M.
eastern time). The Fund does not calculate the NAV on days the New York
Stock Exchange (NYSE) is closed for trading, which include New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
When determining its NAV, the Fund values cash and receivables at their
realizable amounts, and records interest as accrued and dividends on the
ex-dividend date. If market quotations are readily available for portfolio
securities listed on a securities exchange or on the NASDAQ National Market
System, the Fund values those securities at the last quoted sale price of
the day or, if there is no reported sale, within the range of the most recent
quoted bid and ask prices. The Fund values over-the-counter portfolio
securities within the range of the most recent quoted bid and ask prices.
If portfolio securities trade both in the over-the-counter market and on a
stock exchange, the Fund values them according to the broadest and most
representative market as determined by the Manager.
Other securities for which market quotations are readily available are valued
at the current market price, which may be obtained from a pricing service,
based on a variety of factors including recent trades, institutional size
trading in similar types of securities (considering yield, risk and maturity)
and/or developments related to specific issues.
PURCHASE
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.
14
<PAGE>
To make an initial investment, a prospective investor should complete the
investment application which appears at the end of the prospectus and forward
it with a check for $1,000 or more, made payable to Copley Fund, Inc., c/o
Ameritor Financial Corp., 1730 K Street, N.W., Washington, DC 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 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.
REDEMPTION
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 Ameritor Financial Corp., 1730 K St., N.W., Washington,
DC 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
15
<PAGE>
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.
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 withdraw 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
16
<PAGE>
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 the prospectus and forward it
to Copley Fund, Inc., c/o Ameritor Financial Corp., 1730 K St., N.W.,
Washington, DC 20006.
REDEMPTION IN KIND
It is possible that conditions may exist in the future which would, in the
opinion of the Board of Directors, make it undesirable for the Fund to pay
for redemptions in cash. In such cases the Board may authorize payment to be
made in portfolio securities of the Fund. However, the Fund is obligated
under the 1940 Act to redeem for cash all shares presented for redemption by
any one shareholder up to $250,000 ( or 1% of the Fund's net assets if that
is less) in any 90 day period. Securities delivered in payment of
redemptions are valued at the same value assigned them in computing the net
asset value per share. Shareholder receiving such securities generally will
incur brokerage costs on their sales.
PERFORMANCE
Performance quotations are subject to SEC rules. These rules require the use
of standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by a fund be accompanied by
certain standardized performance information computed as required by the SEC.
Average annual total return and current yield quotations used by the funds
are based on the standardized methods of computing performance mandated by
the SEC. If a Rule 12b-1 plan is adopted, performance figures reflect fees
from the date of the plan's implementation. An explanation of these and
other methods used by the funds to compute or express performance follows.
Regardless of the method used, past performance does not guarantee future
results, and is an indication of the return to shareholders only for the
limited historical period used.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is determined by finding the average annual rates
of return over the periods indicated below that would equate an initial
hypothetical $1,000 investment to its ending redeemable value.
The calculation assumes the maximum initial sales charge is deducted from the
initial $1,000 purchase, and income dividends and capital gain distributions
are reinvested at net asset value. The quotation assumes the account was
completely redeemed at
17
<PAGE>
the end of each period and the deduction of all
applicable charges and fees were made. If a change is made to the sales charge
structure, historical performance information will be restated to reflect the
maximum initial sales charge currently in effect.
When considering the average annual total return quotations, you should keep
in mind that the maximum initial sales charge reflected in each quotation is
a one time fee charged on all direct purchases, which will have its greatest
impact during the early stages of your investment. This charge will affect
actual performance less the longer you retain your investment in the Fund.
It is calculated according to the SEC formula:
P(11+T)n = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of
each period at the end of each period
CUMULATIVE TOTAL RETURN
Like average annual total return, cumulative total return assumes the maximum
initial sales charge is deducted from the initial $1,000 purchase, and income
dividends and capital gain distributions are reinvested at net asset value.
Cumulative total return, however, is based on the actual return for a
specified period.
CURRENT YIELD
Current yield shows the income per share earned by a fund. It is calculated
by dividing the net investment income per share earned during a 30-day base
period by the applicable maximum offering price per share on the last day of
the period and annualizing the result. Expenses accrued for the period
include any fees charged to all shareholders of the class during the base
period.
Current Yield is obtained using the following SEC formula:
Yield = 2[(a-b+1)6-1]
______
cd
where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share on the last day
of the period
18
<PAGE>
VOLATILITY
Occasionally statistics may be used to show a fund's volatility or risk.
Measures of volatility or risk are generally used to compare a fund's net
asset value or performance to a market index. One measure of volatility is
beta. Beta is the volatility of a fund relative to the total market, as
represented by an index considered representative of the types of securities
in which the fund invests. A beta of more than 1.00 indicates volatility
greater than the market and a beta of less than 1.00 indicates volatility
less than the market. Another measure of volatility or risk is standard
deviation. Standard deviation is used to measure variability of net asset
value or total return around an average over a specified period of time. The
idea is that greater volatility means greater risk undertaken in achieving
performance.
COMPARISONS
To help you better evaluate how an investment in the Fund may satisfy your
investment goal, advertisements and other materials about the funds may
discuss certain measures of fund performance as reported by various financial
publications. Materials may also compare performance (as calculated above)
to performance as reported by other investments, indices, and averages.
These comparisons may include, but are not limited to, the following examples:
Dow Jones( Composite Average and its component averages - a price-weighted
average of 65 stocks that trade on the New York Stock Exchange. The average
is a combination of the Dow Jones Industrial Average (30 blue-chip stocks
that are generally leaders in their industry), the Dow Jones Transportation
Average (20 transportation stocks), and the Dow Jones Utilities Average
(15 utility stocks involved in the production of electrical energy).
Standard & Poor's( Stock Index or its component indices - a capitalization-
weighted index designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing all
major industries.
The New York Stock Exchange composite or component indices - an unmanaged
index of all industrial, utilities, transportation, and finance stocks listed
on the NYSE.
Lipper - Mutual Fund Performance Analysis and Lipper - Fixed Income Fund
Performance Analysis - measure total return and average current yield for the
mutual fund industry and rank individual mutual fund performance over
specified time periods, assuming reinvestment of all distributions, exclusive
of any applicable sales charges.
CDA Mutual Fund Report, published by CDA Investment Technologies, Inc. -
analyzes price, current yield, risk, total return, and average rate of return
(average annual compounded growth rate) over specified time periods for the
mutual fund industry.
Mutual Fund Source Book, published by Morningstar, Inc. - analyzes price,
current yield, risk, and total return for mutual funds.
19
<PAGE>
Financial publications: The Wall Street Journal, Business Week, Changing
Times, Financial World, Forbes, Fortune, and Money magazines - provide
performance statistics over specified time periods.
Consumer Price index (or Cost of Living Index), published by the U.S. Bureau
of Labor Statistics - a statistical measure of change, over time, in the
price of goods and services in major expenditure groups.
Morningstar - information published by Morningstar, Inc., including
Morningstar proprietary mutual fund ratings. The ratings reflect
Morningstar's assessment of the historical risk-adjusted performance of a
fund over specified time periods relative to other funds within its category.
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.
20
<PAGE>
ANNUAL REPORT February 28, 1999
COPLEY FUND, INC.
A No-Load Fund
<PAGE>
COPLEY FUND, INC.
Copley Financial Services Corp. - Investment Manager
P.O. Box 3287, Fall River, Massachusetts 02722
508-674-8459
April 14, 1999
Dear Fellow Shareholder:
Copley Fund, Inc. for the calendar year 1998 had a steady gain of 14% and
did not participate in the high volatility of the stock market. We have
always strived for comfortable steady performance and 1998 gave further
credence to our philosophy of having stocks with high dividends and constant
increases in these dividends to allay most of the volatility which the rest
of the market had undergone.
The beginning of 1999 seems to have given rise to the favor of "momentum
stocks". These are a certain few stocks that the general public keeps
buying, increasing the momentum of abnormal price rises of these chosen few.
Keep in mind most stocks are lower in value or have not participated at all
in the success of the Dow Jones or NASDAQ stocks. Electric utility stocks
which comprise approximately 40% of our present portfolio have been especially
hard hit creating yields of six, seven and eight percent with constant
increases in their dividends. These fine stocks cannot go down any lower
as their valuable yields floor their prices.
We do look forward to increases again in this group of stocks. Meanwhile
our cash flow from dividends keeps increasing, adding to our net asset value.
We are not in competition with other funds as our structure and philosophy
are entirely different. Our stocks pay us high dividends with constant
increases in their dividends and we leave it to the market to assess these
values. Our record below and our graph clearly demonstrate that we have
been correct and safe in our approach. Do keep in mind that our studies
have shown that a mean comparative average of performance between Copley
and other funds is approximately 3%, i.e., if a Fund has gained 13% and
Copley Fund 10% the two Funds are probably equal in "after-tax return" for
the individual assuming a taxable account.
1984* +23.9%(Top performing Fund in 1984)
1985 +25%
1986 +18%
1987 - 8%
1988 +20%
1989 +16%(Including a reserve for taxes on unrealized gains)
1990 - 2%
1991 +18%
*Calendar Years
1
<PAGE>
1992 +18%
1993 +10%
1994 -07%
1995 +26%
1996 + 5%
1997 +25%
1998 +14%
1999 -7.5% (February 28, 1999)
Many of our stocks are in the midst of mergers and acquisitions waiting to
be approved by the government regulators. We believe most of these mergers
will be completed in 1999 and will result in substantial increases in price
for these stocks. These include Colonial Gas, Exxon, Mobil, Bell Atlantic,
Ameritech, SBC, Kansas City Power & Light, Western Resources, New Century,
Boston Edison, New England Electric, Eastern Utilities, and Atlantic
Richfield. Thus we have built in gains once these mergers are completed.
Our operating division had its most lucrative year to date. We are in the
midst of expanding our handbag distribution to other retailers and are
looking forward to increases in volume as a result. Also, we are exploring
other areas of involvement for this division.
We do look forward to continued steady increases even in this volatile
market environment and wish to express our appreciation to our Board of
Directors for their help and advice and to our shareholders for their
confidence and understanding of Copley's concept and structure.
Cordially yours,
/s/Irving Levine
Irving Levine
PRESIDENT
P.S. As of April 22, 1999 our net asset value was approximately $36.00 per
share.
2
<PAGE>
Copley Fund, Inc. Per Share Value
<TABLE>
CALENDAR YEARS ENDED DECEMBER 31, 1998
PERIOD ENDED FEBRUARY 28, 1999
<S> <C>
Year Per Share Value
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 24.65
1996 26.05
1997 32.58
1998 37.04
1999 34.23 (as of Feb. 28, 1999)
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, 1999,
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.
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, 1999, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. 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, 1999, 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, 1999
4
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
COPLEY FUND, INC.
Portfolio of Investments
February 28, 1999
<S> <C> <C>
Number of
Shares Value
COMMON STOCKS - 100.00%
DIVERSIFIED UTILITY COMPANIES - 14.42%
Dominion Resources 30,000 $ 1,158,750
Eastern Utilities Associates 5,000 142,187
Florida Progress 35,000 1,404,375
FPL Group 55,000 2,829,063
GPU, Inc. 35,000 1,395,625
Interstate Energy Corp. 20,000 551,250
LG & E Energy Corp. 80,000 1,825,000
Montana Power Co. 15,000 913,125
Pacificorp 25,000 448,438
Texas Utilities Co. 25,000 1,060,938
__________
11,728,751
__________
ELECTRIC AND GAS - 16.39%
American Electric Power 55,000 2,289,375
Carolina Power & Light Co. 60,000 2,392,500
Connectiv, Inc. 32,500 727,188
First Energy Corp. 40,000 1,170,000
Kansas City Power & Light Co. 40,000 1,020,000
New Century Energy, Inc. 45,000 1,825,313
SCANA, Corp. 70,000 1,645,000
Sempra Energy, Inc. 45,000 945,000
UtilCorp United, Inc. 30,000 1,031,250
Western Resources, Inc. 10,000 281,875
___________
13,327,501
-----------
ELECTRIC POWER COMPANIES - 12.51%
Allegheny Energy, Inc. 45,000 1,335,937
Ameren Corporation 50,000 1,865,625
BEC Energy 22,000 801,625
DTE Energy Co. 55,000 2,172,500
New England Electric System 35,000 1,704,063
Pennsylvania Power & Light Co. 50,000 1,275,000
PECO Energy Co. 11,600 411,075
Potomac Electric Power Co. 25,000 609,375
___________
10,175,200
-----------
Continued
The accompanying notes are an integral part of the financial statements.
5
COPLEY FUND, INC.
Portfolio of Investments
February 28, 1999
(Continued)
Number of
Shares Value
_________ ------
GAS UTILITIES & SUPPLIES - 11.22%
Colonial Gas Co. 50,000 $ 1,715,625
Connecticut Energy Corp 20,000 521,250
CTG Resources, Inc. 27,000 621,000
Delta Natural Gas Co. 15,000 266,250
Keyspan Energy Corp 40,000 1,060,000
New Jersey Resources Corp 25,000 873,437
Northwest Natural Gas Co. 30,000 734,040
Peoples Energy Corp. 25,000 848,437
Washington Gas Light Co. 33,000 789,937
Wicor, Inc. 80,000 1,690,000
___________
9,119,976
HYDRO ELECTRIC - 1.15%
Idaho Power Co. 30,000 931,875
___________
DRUG COMPANIES - 7.37%
Bristol Myers Squibb Co. 50,000 6,296,875
Pfizer, Inc. 10,000 1,319,375
___________
7,616,250
BANKING - 3.29%
J.P. Morgan & Co. 10,000 1,114,375
PNC Bank Corporation 30,000 1,561,875
___________
2,676,250
MANUFACTURING - CAPITAL GOODS - 2.07%
Masco Technology, Inc. 38,200 577,775
Xerox Corp. 20,000 1,103,750
-----------
1,681,525
OILS - 7.65%
Atlantic Richfield Corp. 15,000 819,375
Exxon Corp. 24,000 1,597,500
Mobil Corp. 22,000 1,830,125
Sunoco 18,996 578,191
Texaco, Inc. 30,000 1,396,875
-----------
6,222,066
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 28, 1999
(Continued)
Number of
Shares Value
--------- --------
RETAIL - 2.84%
Penny (J.C.), Inc. 40,000 1,445,000
Wal-Mart Stores, Inc. 10,000 863,750
-----------
2,308,750
TELEPHONE - 14.15%
American Information Technologies 53,920 3,525,020
American Telephone & Telegraph 15,000 1,231,875
Bell Atlantic Corp. 94,232 5,412,450
Bell South Corp. 20,000 925,000
SBC Communications, Inc. 58,516 3,094,033
U S West Communications
Group, Inc. 25,000 1,332,812
-----------
$15,521,190
Total value of investments (Cost $43,257,445) 81,309,334
Excess of cash and other assets over liabilities 5,782,335
-----------
NET ASSETS $87,091,669
</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, 1999
<S> <C> <C>
Assets
Investments in securities, at value
(identified cost $43,257,445)(Note 1) $ 81,309,334
Cash 5,833,981
Receivables:
Subscriptions $ 26,019
Trade (Notes 5 & 6) 14,902
Dividends and interest 209,306 250,227
----------
Inventory (Notes 1, 5, & 6) 182,035
Other Assets 414
------------
Total Assets 87,575,991
Liabilities
Payables:
Trade 2,620
Stock Redemptions 44,854
Accrued income taxes - current 15,283
Accrued expenses 47,856
Deferred income taxes (Notes 1 & 2) 373,709
----------
Total Liabilities 484,322
Commitments and Contingencies (Note 7)
Net Assets $ 87,091,669
============
Net assets consist of:
Capital paid in $ 20,714,177
Undistributed net investment and
operating income 30,902,222
Accumulated net realized loss on
investment transactions (2,576,619)
Net unrealized appreciation in value
of investments (Note 2) 38,051,889
------------
Total $ 87,091,669
============
Net Asset Value, Offering and Redemption
Price Per Share (2,546,194 shares of
$1.00 par value capital stock outstanding) $ 34.22
============
</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, 1999
<S> <C> <C>
INVESTMENT INCOME (Note 1)
Income
Dividends $ 3,248,007
Interest 162,991
-----------
Investment income $ 3,410,998
Expenses
Investment advisory fee (Note 5) 601,300
Professional fees 59,856
Custodian fees 35,356
Shareholder servicing costs 35,383
Printing 19,160
Postage and shipping 7,669
Accounting and pricing service costs 40,500
Directors fees 20,996
Blue Sky fees 11,440
Telephone 9,093
Insurance 36,500
Office expense and miscellaneous 3,914
-----------
Investment expenses 881,167
Less: Investment advisory
fee waived 60,000 821,167
----------- -----------
Net investment income
before income taxes 2,589,831
OPERATING PROFIT (Notes 2, 5, & 7)
Gross profit 151,027
Less: Operating expenses 34,580
-----------
Net operating profit before
income taxes 116,447
NET INVESTMENT AND OPERATING INCOME
BEFORE INCOME TAXES 2,706,278
Less provision for income taxes (Notes
2 and 7) 173,900
-----------
Net investment and operating
income 2,532,378
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Notes 2 and 4)
Realized loss from investment transactions
during the year (234,435)
Increase in unrealized appreciation of
investments during current year 2,071,802
-----------
Net realized and unrealized gain/loss
on investments 1,837,367
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $4,369,745
===========
</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,
1999 1998
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment and operating income $ 2,532,378 $ 2,353,790
Net realized gain (loss) on investment
transactions (234,435) (1,440,880)
Net change in unrealized appreciation
on investments 2,071,802 14,483,463
----------- -----------
Increase (decrease) in net assets
resulting from operations 4,369,745 15,396,373
NET EQUALIZATION (DEBITS) CREDITS (Note 1) 7,254 (1,369,107)
CAPITAL SHARE TRANSACTIONS (Note 3)
Increase (decrease) in net assets
resulting from capital share transactions 1,741 (5,612,062)
------------ ------------
Total increase (decrease) in net
assets 4,378,740 8,415,204
NET ASSETS
Beginning of year 82,712,929 74,297,725
----------- -----------
End of Year (including undistributed
net investment and operating income
of $30,902,222 and $27,928,685 ,
respectively) $87,091,669 $82,712,929
</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, 1999
<S> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities
Dividends and interest received $ 3,420,884
Proceeds from disposition of long-term
portfolio investments 4,055,883
Receipts from customers 1,109,872
Payments of taxes, net (322,154)
Expenses paid (839,507)
Purchase of long-term portfolio investments (2,182,225)
Payments to suppliers (942,349)
------------
Net cash provided by operating activities 4,300,404
============
Cash flows provided by financing activities
Fund shares sold 5,345,010
Fund shares repurchased (5,336,014)
------------
Net cash used by financing activities 8,996
============
Net increase in cash 4,309,400
Cash at beginning of year 1,524,581
------------
Cash as of February 28, 1999 $ 5,833,981
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 $ 4,369,745
-----------
Decrease in investments 54,816
Decrease in dividends and interest receivable 10,304
Increase in receipts from customers (6,405)
Increase in inventory (18,339)
Decrease in income taxes payable-current (89,999)
Decrease in other assets (1,378)
Increase in accrued expenses (18,340)
-----------
Total adjustments (69,341)
-----------
Net cash provided by operating activities $ 4,300,404
===========
</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.......... $ 71,869
State tax liability ................... 15,910
Deferred Taxes......................... 86,121
----------
$ 173,900
==========
The Fund provides deferred taxes for unrealized appreciation on its
investment portfolio to the extent that management anticipates that a
liability may exist. The amount of deferred taxes currently available to
the Fund is $1,671,927, consisting of $373,709 accumulated general liability
and a cumulative alternative minimum tax carryover of $1,298,218. 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.
In tax years beginning after 1997, a small corporation will not be
subject to the alternative minimum tax. The Fund qualifies as a small
corporation as set forth in Internal Revenue Code, Section 55(e). The
cumulative alternative minimum tax carryover from prior years may be used
to offset a portion of the regular tax liability. In the current year, the
regular federal tax liability was reduced by $213,229 and the state tax
liability was reduced by $29,127 due to alternative minimum tax carryovers.
The Fund has $2,576,619 in accumulated capital loss carryforwards which
expires as follows: $901,304 on February 29, 2000 and $1,440,880 on February
28, 2003 and $234,435 on February 29, 2004.
The Fund is qualified and currently conducts business in the State
of Florida. The Fund is subject to Florida corporate taxes but is not subject
to alternative minimum tax in any year which the Fund does not pay a federal
alternative minimum tax. Consistent with the federal guidelines, the Fund will
be entitled to a credit against a portion of the regular corporate income tax
for alternative minimum tax paid in prior fiscal years.
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.
3. Capital Stock
At February 28, 1999 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, 1999 February 28, 1998
Shares Amount Shares Amount
Shares sold 154,149 $5,345,010 89,125 2,553,200
Shares repurchased (155,053) (5,336,015) (366,912) (9,508,660)
--------- ------------ --------- -------------
Net Change (904) $ 8,995 (277,787) $6,955,460
========= ============ ========= =============
</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 $2,182,225 and $4,055,883,
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, 1999, the fee for investment
advisory service totaled $604,300, less fees of $60,000 voluntarily waived.
Also, during the period unaffiliated directors received $20,996 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 $113,124 during the period. An amount of $14,902 is receivable
in respect of these sales as of February 28, 1999.
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> <C>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Copley Fund, Inc. 10,000 12,628 13,323 14,749 19,262 18,761 19,230 22,670 24,384 29,731 31,326
S&P 500 Index 10,000 11,200 14,224 13,228 16,667 17,334 18,588 24,928 30,349 40,475 51,269
Lipper Analytical Serv. 10,000 11,900 14,637 13,759 17,474 19,396 21,934 28,505 34,126 43,326 50,085
</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 taxes to shareholders.
Copley Fund, Inc. files its tax returns as a regular corporation and
accordingly its financial statements include provisions for current and
deferred income taxes.
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, 1999 28, 1998 28, 1997 29, 1996 28, 1995 28, 1994 28, 1993 29, 1992
Investment and
Operating Income $ 1.386 $ 1.371 $ 1.368 $ 1.302 $ 1.194 $ 1.099 $ 1.089 $ 1.113
Expenses (Including
Taxes) .391 .490 .47 .431 .405 .509 .380 .371
Net Investment and
Operating Income .995 .881 .897 .871 .789 .590 .709 .742
Net Realized and
Unrealized Gain
(Loss) on
Investments .722 4.885 .952 2.840 (.368) (1.130) 3.031 .803
Change in Accounting
Estimate --- --- --- --- --- --- 1.150 ---
Net Increase (Decrease)
in Net Asset Value 1.717 5.766 1.849 3.711 .421 (.540) 4.890 1.545
Net Asset Value
Beginning of Year(1) 32,962 26,296 24.447 20.736 20.315 20.855 15.965 14.420
End of Year(1) $33,779 $32.062 $26.296 $24.447 $20.736 $20.315 $20.855 $15.965
Average Annual
Total Return 5.36% 21.93% 7.56% 17.89% 2.5% (2.6%) 30.6% 10.7%
Ratio to Average
Net Assets:
Investment Expenses
(Excluding
Income Taxes) .97% .95% 1.00% 1.03% 1.09% 1.51% 1.14% 1.38%
Net Investment and
Operating Income 2.98% 3.00% 3.51% 4.79% 3.84% 2.88% 5.93% 4.86%
Portfolio Turnover 2.49% 43.01% 9.15% 4.79% 31.00% 10.00% 5.00% 7.00%
Number of Shares
Outstanding at
End of Year
(in Thousands) 2,545 2,546 2,794 3,161 3,686 3,986 1,945 1,981
</TABLE>
(1) Based upon average number of shares.
16
<PAGE>
COPLEY FUND, INC. Annual Report
A No-Load Fund February 28, 1999
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
Ameritor Financial 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
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, 1999.
Included in Part B: Statement of Assets and Liabilities as of
February 28, 1999; Portfolio of Investments as of February 28,
1999; Statement of Operations for the year ended February 28,
1999; and Statement of Changes in Net Assets for each of the two
years in the period ended February 28, 1999.
(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 Ameritor Financial 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 6/1/99
Common Stock 3,143
Item 27. Indemnification
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 Ameritor Financial 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 25th day of April, 1999.
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 4/25/99
Irving Levine and President, Chief
Financial and Accounting
Officer
/s/ Albert Resnick, M.D. Director 4/25/99
Albert Resnick, M.D.
/s/ Burton S. Stern Director 4/25/99
Burton S. Stern
/s/ Kenneth Joblon Director 4/25/99
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. 21, 26, and 24 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
April 29, 1999
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, 1999, 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, 1999, 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, 1999
La Plata, Maryland
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 43,257,445
<INVESTMENTS-AT-VALUE> 81,309,334
<RECEIVABLES> 250,227
<ASSETS-OTHER> 6,016,430
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 87,575,991
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 484,322
<TOTAL-LIABILITIES> 484,322
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,714,177
<SHARES-COMMON-STOCK> 2,545,290
<SHARES-COMMON-PRIOR> 2,546,194
<ACCUMULATED-NII-CURRENT> 30,902,222
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,576,619)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 38,051,889
<NET-ASSETS> 87,091,669
<DIVIDEND-INCOME> 3,248,007
<INTEREST-INCOME> 162,991
<OTHER-INCOME> 116,447
<EXPENSES-NET> 995,067
<NET-INVESTMENT-INCOME> 2,532,378
<REALIZED-GAINS-CURRENT> (234,435)
<APPREC-INCREASE-CURRENT> 2,071,802
<NET-CHANGE-FROM-OPS> 4,369,745
<EQUALIZATION> 7,254
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 154,149
<NUMBER-OF-SHARES-REDEEMED> 155,053
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4,378,740
<ACCUMULATED-NII-PRIOR> 27,928,685
<ACCUMULATED-GAINS-PRIOR> (1,099,234)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 541,300
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 995,067
<AVERAGE-NET-ASSETS> 84,902,299
<PER-SHARE-NAV-BEGIN> 32.48
<PER-SHARE-NII> 1.00
<PER-SHARE-GAIN-APPREC> 0.74
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 34.22
<EXPENSE-RATIO> 0.97
[AVG-DEBT-OUTSTANDING] 546,325
[AVG-DEBT-PER-SHARE] 0.22
</TABLE>
