SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SECURITIES ACT REGISTRATION NO. 2-61740
INVESTMENT COMPANY ACT REGISTRATION NO. 811-13834
FORM N-1A
Post-Effective Amendment No. 26 [ X ]
Registration Statement Under the Investment Company Act of 1940 [ X ]
Amendment No. 25 [ X ]
COPLEY FUND, INC
(Exact Name of Registrant as Specified in Charter)
245 Sunrise Avenue, Palm Beach, FL 3348
(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 his filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[X] on January 18, 2000 pursuant to paragraph (a) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
PROSPECTUS
COPLEY FUND, INC.
Investment Strategy
Accumulation of Dividend Income
, 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 Fund Goals and Strategies
you should know before
investing Main Risks
Fees and Expenses
Financial Highlights
Management
Distributions and Taxes
Year 2000 Problem
Further Information
YOUR ACCOUNT
Information about account Buying Shares
transactions and services
Selling Shares
Account Policies
Questions
FOR MORE INFORMATION
Where to learn more about Back Cover
the Fund
<PAGE>
COPLEY FUND, INC.
GOALS AND STRATEGIES
GOALS
The Fund's investment goals are the generation and accumulation of dividend
income and long- term capital appreciation.
PRINCIPAL 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, while taxable, is used
primarily to pay for expenses of running the Fund. Thus, unless the Federal
accumulated earnings tax is imposed on the Fund, 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' 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 following paragraph will be in bold print (not all caps) in a box in the
left hand margin when printed.
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 invests substantially all of its assets in the
equity securities (stocks) 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 common stocks and preferred stocks entitle the holder to
participate in a company's general operating results. Because of their history
of paying dividends the Fund may, at time, invest a substantial portion of its
assts in public utility companies. See "Main Risks."
In buying, selling and holding portfolio securities the Manager's
primary consideration is strong balance sheets and the payment of dividends.
TEMPORARY INVESTMENTS-- The Manager may take a temporary defensive position
<PAGE>
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, short-term U.S. government
obligations and short term debt securities.
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. THE STOCKS IN WHICH
THE FUND PRINCIPALLY INVEST ARE SUBJECT TO THOSE RISKS.
**The following paragraph will be in bold print (not all caps) in left hand
margin box.
**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.
UTILITIES INDUSTRY -- While the Fund does not INVEST MORE THAN 25% of its assets
in any one industry it may, at times, have a substantial portion of its assets
invested in public 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-related 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 in absorbing utility
debt and equity securities; difficulties in obtaining fuel for electric
generation at reasonable prices; risks associated with the operation of nuclear
power plans; 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.
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.
** The following paragraph will be in bold print in left hand margin box
**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.
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 yea 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.
COPLEY FUND, INC.
ANNUAL TOTAL RETURNS*
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%
<PAGE>
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).
*The following synopsis will be in bold print in left hand margin box.
*Best quarter: quarter ending December 31, 1997, 11.5%
*Worst quarter: quarter ending March 31, 1994, (6.7).
AVERAGE ANNUAL TOTAL RETURNS
For the periods ended December 31, 1998
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%
*All Fund performance assumes reinvestment of dividends and capital gains.
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.
** 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.
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDERS 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
<PAGE>
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%
*This .64% reflects the waiver by the Manager of $60,000 in advisory fees that
otherwise would have been payable. Without such waiver the fee would have been
.74%. The advisor is not contractually obligated to make such waiver in the
future.
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:
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
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.
<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>
<CAPTION>
FEBRUARY 28 FEBRUARY 28 FEBRUARY 28 FEBRUARY 28 FEBRUARY 28
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
NET SHARE DATA:
Net Asset Value,
<S> <C> <C> <C> <C> <C>
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%
<FN>
* These figures reflect a $60,000 annual voluntary advisory fee waiver by the
Advisor. Without such waiver the percentages would be higher. The advisor is not
contractually obligated to make such waiver in the future.
</FN>
</TABLE>
<PAGE>
MANAGEMENT
Copley Financial Services, Inc. (Manager) P.O. Box 3287, Fall River,
Massachusetts, 02722 is th 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. This figure reflects a $60,000 voluntary advisory fee
waiver. Without such waiver the fee would have been .71% of average net assets.
The advisor is not contractually obligated to make such waiver in the future.
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 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. While the IRS, has upheld the
Fund's position in the past there is no guarantee it will do so in the future.
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.
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.
<PAGE>
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).
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 you check payable to the Fund. Include
you 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.
**The following paragraph will be bold print (not all caps) in left hand margin
box.
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 or the expiration
of 15 days, whichever first occurs. A certified or cashier's check may clear in
less time.
<PAGE>
REDEMPTION PROCEEDS
Your redemption check will be sent within THREE business days after we receive
your request. 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, partner ship or trust accounts may need to send
additional inform ation.
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.
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
<PAGE>
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 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
Coplay 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.
Assets of the operating division consist of inventory and are valued at their
fair value as determined by the Board of Directors.
Requests to buy and sell shares are processed at the NAV next calculated after
we receive your request. NAV is generally calculated as of the close of trading
in the New York Stock Exchange (4:00 p.m. Eastern Time).
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 INITIAL investment amount OF $1,000. If you choose not to do
so within 30 days, we may close your account and mail the proceeds to the
address of record.
<PAGE>
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 per SEC regulations, 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 usual circumstances, we may temporarily suspend redemptions, or
postpone the payment of proceeds, as allowed by federal securities laws
and regulations.
For redemptions over a certain amount or, in the case of an emergency
the fund reserves the right to make payments in securities or other
assets of the Fund. In such event shareholders may incur brokerage
costs and are subject to securities risks and tax consequences.
To the extent that the Fund and its agents use reasonable proceedures
neither the Fund nor the agents will be liable for any losses or
expenses realized.
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 1,000 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 transactions), or as "OR" (for which either
signature will be acceptable).
(Check one)____ "AND" ____ "OR" _______________________________________________
First Name Middle Initial Last 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.
- - ------------------------------------------------------------------------------
<PAGE>
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 of Residence Minor's Social
Security
Number
MAILING ADDRESS TELEPHONE NUMBERS
__________________________ Home: ( )____________
Street address Office: ( )____________
- - ---------------------------
City, State and Zip Code
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 provide 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 ormore, 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.
<PAGE>
MAIL COMPLETED APPLICATION TO:
COPLEY FUND, INC.
c/o Ameritor Financial Corp.
1730 K Street, N.W.
Washington, DC 20006
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
The Fund presently has no website or E-Mail address.
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.
The Fund's SEC Investment Company Act File is No. 811-13834
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
COPLEY FUND, INC.
JANUARY 16, 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 January 16, 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 4
Fundamental Policies 6
Directors and Officers of the Fund 8
Remuneration of Management and Others 9
Control Persons and Principal Holders of Securities 9
Investment Adviser 10
The Adviser 10
Advisory Services and Fees 10
Portfolio Transactions 11
Capital Stock 12
Custodian and Transfer Agent 12
Legal Counsel 12
Independent Auditors 12
Purchase, Redemption and
Pricing of Shares 13
Performance 16
Additional Information 18
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 names of 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.
INVESTMENT GOALS AND STRATEGIES
The primary investment goal of the Fund is the accumulation of dividend income
and long-term capital appreciation. 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 is
diversified meaning that it does not concentrate its investments in any one
industry.
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.
REPURCHASE AGREEMENT RISK -- These agreements are considered loans under the
Investment Company Act of 1940. 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
3
<PAGE>
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 avalable 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 creasing 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.
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.
4
<PAGE>
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 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 $100,0900 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 state 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 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 in the
context of the federal tax laws the Fund has engaged, on a limited basis, int he
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
5
<PAGE>
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 consistent with the Fund's fundamental policies, the
Act and the continued achievement of the Fund's primary investment objectives.
If a joint venture is structured as a partnership, the Fund will not serve as a
general partner and, in serving as a limited partner, will not assume liability
which, in Management's view, is unreasonable in light of the scopoe 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.
6
<PAGE>
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
Coplay 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 of (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.
THE FUND MAY NOT:
(1) Issue any senior securities;
(2) Except for (a) temporary, extraordinary or emergency purposes, or
(b) in connection with the conduct of any active trade or business at any time
conducted by the Fund consistent with Fundamental Policy 13 of the Fund, borrow
money, and then only from banks (for purposes of the foregoing clause (b),
including but not necessarily limited to the establishment and maintenance of
credit facilities, e.g., letters of credit, documentary drafts, or demands for
payment) and in amounts not in excess of 33 1/3% of the value of its total net
assets taken at the lower of cost or market. If, due to market fluctuations or
other reasons, the value of the Fund's assets falls below 300% of its
borrowings, the Fund, within three (3) days (not including Sundays or holidays)
will reduce its borrowings to the extent that its asset coverage of such
borrowings shall be at least 300%. This borrowing provision is not for
investment leverage per se but solely to facilitate orderly operation of any
active trade or business of the Fund at any time being operated consistent with
Fundamental Policy 13 and to facilitate management of the portfolio by enabling
the Fund to meet redemption requests at times when the liquidation of portfolio
securities is inconvenient or disadvantageous;
(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;
(5) Engage in the purchase or sale of interests in real estate;
7
<PAGE>
(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.
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.
8
<PAGE>
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.
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATION(S)
NAME AND ADDRESS WITH THE FUND DURING PAST FIVE YEARS
- - ---------------- ------------- ----------------------
<S> <C> <C>
Irving Levine* (Age 77) Chairman of the President, Treasurer and a Director
315 Pleasant Avenue Board of Directors of Copley Financial Services Corp.
Fall River, MA and President 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. (76)
Director Physician since
1948; Chairman of 5300 Ocean
Blvd. Division of Medicine
of Union Sarasota, FL 34242
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 (51) Director President, Brittany Dying &
1357 E. Rodney French Blvd. Printing Corp., New Bedford, MA
New Bedford, MA 02744
Burton S. Stern (73) Director Private Investor;
110 Sunset Avenue
Palm Beach, FL 33480
Eileen F. Joinson*(51) Clerk-Treasurer Clerk-Treasurer of the Fund since
315 Pleasant Avenue 1980; Clerk and Office Manager
Fall River, MA 02721 Of Stuffco International, Inc., a
ladies handbag processor, since
1978.
<FN>
*Interested persons, a defined under Section 2(a)(19) of the Investment Company
Act of 1940, as amended.
</FN>
</TABLE>
9
<PAGE>
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.
COMPENSATION RECEIVED FROM THE FUND
AS OF FEBRUARY 28, 1999
PENSION OR
AGGREGATE RETIREMENT ESTAMATED
COMPENSATION BENEFITS ANNUAL TOTAL
FROM THE ACCRUED AS BENEFITS COMPENSATION
FUND PART AS PART UPON FROM FUND
OF FUND RETIREMENT
EXPENSES
- - --------------------------------------------------------------------------------
Irving Levine $10,000 0 0 10,000
Albert Resnick 6,000 0 0 6,000
Kenneth Joblan 6,000 0 0 6,000
Burton Stern 6,000 0 0 6,000
Eileen Joinson 0 0 0 0
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.
10
<PAGE>
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 Directors 232,310 9.29%
as a Group (4 Persons)
- - -------------
(1) Includes 38,241 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 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 Ivnestment 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.
11
<PAGE>
ADVISORY SERVICES AND FEES
Under the Investment Advisory Contract between the Fund and CFSC, CFSC provides
the Fund with investment advice, research and statistical and other factual
information and manages and supervises the Fund's portfolio of investments. In
performing these functions, CFSC (i) uses its best efforts to present a
continuing and suitable investment program which is consistent with the
investment objectives of the Fund; (ii) furnishes the Fund with information and
reports regarding the securities in the portfolio and proposed additions to the
portfolio; (iii) supervises the Fund's relationship with its Custodian, Transfer
Agent, auditors, lawyers and any governmental agencies having jurisdiction over
the Fund; and (iv) furnishes the Fund with certain office space and secretarial
and clerical assistance as may be necessary to perform the forgoing functions.
CFSC has no responsibility for advising the Fund as to the conduct of the
operating business, that function being the sole and exclusive province of the
Board of Directors.
CFSC receives an annual investment advisory fee for its services rendered to the
Fund. The fee is based upon a percentage of the Fund's daily net assets computed
without regard to the assets of the operating business (the assets upon which
the fee is computed being hereinafter referred to as the "net securities
assets") and is calculated daily and paid monthly as follows:
(1) 1.00% of the first $25,000,000 of average daily net securities
assets;
(2) 0.75% of the next $15,000,000 of average daily net securities
assets; and
(3) 0.50% of the average daily net securities assets in excess of
$40,000,,000.
In the past CFSC has voluntarily waived up to one-half of the investment
advisory fee charged to the Fund. CFSC is under no obligation to waive any part
of its fee, and there can be no assurance that it will do so in the future.
However, shareholders will be given thirty days written notice prior to
cessation of such practice.
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 (totalling $60,000) 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.
12
<PAGE>
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, it the Manager determines in good faith that the
amount paid is reasonable in relation to the value of the brokerage and research
services its 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.
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.
13
<PAGE>
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 factional 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,
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 wee audited by
Spicer & Oppenheim, certified public accountants. Financial Statements for 1991
were audited by Grant Thornton (formerly Spicer & Oppenheim). The principal
busienss 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 thenet
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 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.
14
<PAGE>
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.
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 received, 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.
15
<PAGE>
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. This expense will be the cost of a
bond which varies depending on the amount of shares involved.
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 Loan Association or
credit union. Notarizations by a Notary Public are not acceptable, requests for
redemption of $1,0-00 or more from accounts for which no certificates have been
issued, or redemptions by persons acting in a representative capacity, for
example, corporate officers, trustees, custodians, etc., must also present, with
their redemption requests, evidence of appointment and authority to act, in form
satisfactory to the transfer agent. Request 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 request for redemption, 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; (ii) 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
16
<PAGE>
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 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 to computing the net asset value per share.
Shareholder receiving such securities generally will incur brokerage costs on
their sales.
17
<PAGE>
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
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 you 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
18
<PAGE>
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
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.
19
<PAGE>
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 int he 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.
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 rating. 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%, 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
CALENDAR YEARS ENDED DECEMBER 31, 1999
PERIOD ENDED FEBRUARY 28, 1999
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.2 8, 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 the 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>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1999
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUES
------ ------
COMMON STOCKS - 100.00%
DIVERSIFIED UTILITY COMPANIES - 14.42%
<S> <C> <C>
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. 32,5000 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 1,825,3131
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
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 1999
(Continued)
NUMBER OF
SHARES VALUES
------ ------
GAS UTILITIES & SUPPLIES - 11.22%
Colonial Gas Co. 50,000 $1,175,625
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 VALUES
------ ------
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 $43,247,445) 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>
COPLEY FUND, INC.
STATEMENT OF ASSETS & LIABILITIES
FEBRUARY 28, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
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>
COPLEY FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
INVESTMENT INCOME (NOTE 1)
<S> <C>
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 9,903
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>
COPLEY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
February 28, February 28,
1999 1998
---- ----
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
<S> <C> <C>
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>
COPLEY FUND, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED FEBRUARY 28, 1999
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH
<S> <C>
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 policies.
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.
-13-
<PAGE>
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 28, 1999 FEBRUARY 28, 1998
----------------- -----------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
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) $6,995,460
===== ====== ========= ==========
</TABLE>
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than United States
government 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 advisory to the Fund. Irving Levin,
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.
-14-
<PAGE>
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
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 operation division, the
Fund will not be held liable for the accumulated earnings tax by the
Internal Revenue Service.
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.
NINE YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
Service 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
<TABLE>
<CAPTION>
February February February February February February February February
28, 1999 28, 1998 28, 1997 28, 1996 28, 1995 28, 1994 28, 1993 28, 1992
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
<FN>
(1) Based upon average number of shares.
</FN>
</TABLE>
-16-
<PAGE>
COPLEY FUND, INC.
A NO-LOAD FUND
ANNUAL REPORT
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
Tel. (202) 223-1000
Tel. (800) 424-8570
General Counsel COPLEY FUND, INC.
A NO-LOAD FUND
Roberts & Henry
1215 Seventeenth St., N.W.
Washington, D.C. 20036
AUDITORS
Roy G. Hale, C.P.A.
624 Clarks Run Road
La Plata, MD 20646
<PAGE>
PART C - OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Part I
Included in Part A: Per Share Income and Capital Changes for each of the five
years in the period ending February 28, 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 Statements 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
(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.
<PAGE>
(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.
(15) None
Item 25. Persons Controlled by or Under Common Control with Registrant
---------------------
Irving Levin
- - ----------------------------- ----------------------
Copley Financial Services, Inc. Stuffco, Inc.
- - -----------------------------
Copley Fund, Inc.
(1) See "Investment Adviser - The Adviser" in the Statement of Additional
Information
<PAGE>
(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 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 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.
<PAGE>
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 of Copley
Treasurer and Director 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.
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 b 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
THE FUND HEREBY UNDERTAKES TO PROVIDE EACH PERSON TO WHOM A
PROSPECTUS IS DELIVERED A COPY OF THE FUND'S LATEST REPORT TO
SHAREHOLDERS UPON REQUEST AND WITHOUT CHARGE. THIS REPORT SHALL
CONTAIN THE INFORMATION REQUIRED BY ITEM 5 OF FORM N1A.
<PAGE>
SIGNATURES
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 14th day of January, 2000.
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 1/14/00
Irving Levine and President, Chief
Financial and Accounting Officer
/s/ Albert Resnick, M.D. Director 1/14/00
Albert Resnick, M.D.
/s/ Burton S. Stern Director 1/14/00
Burton S. Stern
/s/ Kenneth Joblon Director 1/14/00
Kenneth Joblon
ROBERTS & HENRY
504 TALBOT STREET
P.O. BOX 1138
ST. MICHAELS, MD 21663
CONSENT OF LEGAL COUNSEL
Copley Fund, Inc.
245 Sunrise Avenue
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 No.
26 to Registration Statements No. 2-61740 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
January 14, 2000
ROY G. HALE
CERTIFIED PUBLIC ACCOUNTANT
P.O. 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
January 14, 2000
La Plata Maryland
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