SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-CSRS
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-2815
COPLEY FUND, INC.
(Exact name of registrant as specified in charter)
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245 Sunrise Ave.
Palm Beach, FL 33480
(Address of principal executive offices) (Zip code)
Irving Levine, President
245 Sunrise Ave.
Palm Beach, FL 33480
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-561-665-8050
DATE OF FISCAL YEAR END: FEBRUARY 29, 2004
DATE OF REPORTING PERIOD: AUGUST 31, 2004
ITEM 1. REPORTS TO SHAREHOLDERS
Semi-Annual Report
August 31, 2004
COPLEY FUND, INC.
A No-Load Fund
Copley Fund, Inc.
Copley Financial Services Corp. - Investment Manager
PO Box 3287, Fall River, Massachusetts 02722, (508)674-8459
October 2004
Dear Fellow Shareholder:
2004, thus far, has been a most satisfactory year for Copley Fund, Inc.
As of this writing we are up 8.4% for the year. Dividend paying stocks
are in vogue for their safety and income; thus our present increase
in value. All our categories of stocks such as Banking, Energy,
Utilities, Gas, Health Care, etc., have shown solid increases.
The Fed is in the process of slowly raising interest rates.
These gradual increases should not affect the volatility of our
types of holdings.
As you know, Copley does not distribute dividends or capital gains
as all other funds do. Thus our shareholders do not pay taxes unless
they choose to redeem. This means that on average on an after tax
basis we are better than most other funds by approximately 3% which
distribute dividends and capital gains and which an individual is
taxed.
We do hope the SEC and Congress do not put too much of an expense
burden on smaller ethical funds such as ours. The Sarbanes-Oxley Act
will cause Copley to have added expenses from our past expenses.
However, we will try to keep these expenses as small as possible.
Thus we are continuing our same investment approach as of the last
26 years which has resulted in the following performance.
*The record below gives an accurate history of our conservative
approach.
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)
1
1990 -2%
1991 +18%
1992 +18%
1993 +10%
1994 -7%
1995 +26%
1996 + 5%
1997 +25%
1998 +14%
1999 -6.86%
2000 +22.50%
2001 -9.30%
2002 -13.9%
2003 +14.31%
2004 +7.40% (as of September 30, 2004)
Our last letter informed you as to our adding new products in our
operating division. This is starting to result in added volume.
Our thanks to our Board and our many shareholders for their support
throughout our twenty-six years of operation.
Cordially yours,
/s/ Irving Levine
Irving Levine
PRESIDENT
P.S. The Wall Street Journal no longer lists Copley Fund under Mutual
Funds as its minimum assets listing is one hundred million dollars.
However, one can get our net asset value daily over the internet.
2
Copley Fund, Inc. Per Share Value
CALENDAR YEARS ENDED DECEMBER 31, 2003
PERIOD ENDED August 31, 2004
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 34.50
2000 42.26
2001 38.33
2002 32.99
2003 37.71
2004 40.50(As of September 30, 2004)
3
ACCOUNTS REVIEW 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
August 31, 2004, and the related statement of operations, the
statement of cash flows, the statement of changes in net assets,
and the financial highlights for the six months then ended. These
interim financial statements are the responsibility of the Company's
management.
I conducted my review in accordance with the standards of the Public
Company Accounting Oversight Board (United States). A review of
interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible
for financial and accounting matters. It is substantially less
in scope than an audit conducted in accordance with the standards
of the Public Company Accounting Oversight Board, the objective
of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, I do not express such
an option.
Based upon my review, I am not aware of any material modifications
that should be made to the accompanying interim financial
statements for them to be in conformity with U.S. generally
accepted accounting principals.
I have previously audited, in accordance with generally accepted
auditing standards, the statement of assets and liabilities as of
February 29, 2004 and the related financial statements and cash
flows for the year then ended (not presented in full herein); and
in my report dated April 20, 2004, I expressed an unqualified opinion
on those financial statements.
ROY G. HALE
Certified Public Accountant
La Plata, Maryland
October 3, 2004
4
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COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 29, 2004
Shares Value
COMMON STOCKS-93.57% ------ ------
BANKING-7.20%
Bank of America Corp 20,000 $ 899,600
J.P Morgan Chase & Company 42,000 1,662,360
KeyCorp 15,000 470,250
PNC Financial Services Group 35,000 1,878,450
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4,910,660
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DIVERSIFIED UTILITY COMPANIES-9.20%
Alliant Energy Corp. 20,000 519,800
Dominion Resources, Inc. 30,000 1,946,700
FPL Group 55,000 3,806,000
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6,272,500
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DRUG COMPANIES-4.91%
Bristol Myers Squibb Co. 100,000 2,373,000
Pfizer, Inc. 30,000 980,100
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3,353,100
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ELECTRIC AND GAS-16.03%
American Electric Power 35,000 1,145,550
Cinergy Corp. 35,000 1,416,800
First Energy Corp. 40,000 1,609,600
Great Plains Energy, Inc. 40,000 1,206,400
Progress Energy, Inc. 40,000 1,755,600
Public Service Enterprise Group 15,000 635,100
SCANA, Corp. 50,000 1,897,000
Sempra Energy, Inc. 35,000 1,265,250
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$ 10,931,300
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See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
5
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COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
August 31, 2004
Shares Value
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ELECTRIC POWER COMPANIES-13.50%
Ameren Corporation 30,000 $ 1,403,700
DTE Energy Company 55,000 2,272,600
Exelon Corporation 23,200 854,920
Nstar 25,000 1,220,000
PP&L Corp. 50,000 2,391,500
Southern Company 35,000 1,062,250
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9,204,970
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GAS UTILITIES & SUPPLIES-12.80%
Delta Natural Gas Co. 20,000 527,600
Energy East Corp. 40,000 974,800
Keyspan Energy Corp. 45,000 1,714,500
New Jersey Resources Corp. 37,500 1,531,875
Northwest Natural Gas Co. 40,000 1,233,200
Peoples Energy Corp. 40,000 1,662,000
WGL Holdings Corp. 38,000 1,088,700
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8,732,675
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HEALTH CARE PRODUCTS-1.05%
*Zimmer Holdings, Inc. 10,000 713,000
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INSURANCE-3.74%
Arthur J. Gallagher & Company 80,000 2,548,800
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OILS-14.74%
BP Amoco PLC. 25,500 1,369,350
Chevron Texaco Corp. 23,100 2,252,250
Exxon-Mobil Corp. 106,086 4,890,565
Sunoco, Inc. 25,000 1,537,500
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$ 10,049,665
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See Accountant's Review Report.
The accompanying notes are an integral part of the financial statements.
6
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COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
August 31, 2004
Shares Value
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RETAIL-1.54%
Wal-Mart Stores, Inc. 20,000 $ 1,053,400
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TELEPHONE-8.86%
Bell South Corp. 20,000 535,200
Citizens Communications Company 20,000 252,600
SBC Communications, Inc. 60,430 1,558,490
Verizon Communications, Inc. 94,232 3,698,606
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6,044,896
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Total Common Stocks (Cost $28,775,762) 63,814,966
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PREFERRED STOCK-0.69%
Franklin PR.(Cost $475,000) 4,750 475,000
Total value of investments
(Cost $29,250,762) 64,289,966
Excess of cash and other assets over liabilities 3,912,462
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NET ASSETS $ 68,202,428
*Non-income producing securities.
Federal Tax Information: At August 31, 2004, the net unrealized
appreciation based on cost for Federal income tax purposes of $35,039,204
was as follows:
Aggregate gross unrealized appreciation for
all investments for which there was an
excess of value over cost $ 35,080,404
Aggregate gross unrealized depreciation for
all investments for which there was an
excess of cost over value ( 41,200)
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Net unrealized appreciation $ 35,039,204
============
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
7
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COPLEY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2004
ASSETS
Investments in securities, at fair
value (identified cost $29,250,762)
(Note 1) $ 64,289,966
Cash 4,457,343
Receivables:
Capital Stock Sold $ 32,397
Trade (Notes 5&6) 14,236
Dividends and interest 251,560 298,193
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Inventory (Notes 1, 5 & 6) 171,730
Prepaid Expenses 868
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Total Assets 69,218,100
LIABILITIES
Payables:
Redemptions 46,267
Trade 25,438
Accrued income taxes-current 102,833
Accrued expenses 61,662
Deferred income taxes (Notes 1 & 2) 779,472
Total Liabilities 1,015,672
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Commitments and Contingencies (Note 7)
Net Assets $ 68,202,428
=============
Net assets consist of:
Capital Stock $ 1,711,266
Paid in Capital 3,599,576
Undistributed net investment and
operating income 26,570,141
Accumulated net realized gain on
investment transactions 1,282,241
Net unrealized appreciation in
value of investments (Note 2) 35,039,204
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Total $ 68,202,428
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Net Asset Value, Offering and
Redemption Price Per Share
(5,000,000 shares authorized)
(1,711,266 shares of $1.00 par
value capital stock outstanding) $ 39.86
============
See Accountant's Review Report.
The accompanying notes are an integral part of the financial statements.
8
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COPLEY FUND, INC.
STATEMENT OF OPERATIONS
August 31, 2004
Investment Income (Note 1)
Income:
Dividend $ 1,256,186
Interest 20,107
Other Income 1,207
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Investment Income $ 1,277,500
Expenses:
Investment advisory fee(Note 5) 250,704
Professional fees 44,595
Custodian fees 10,180
Accounting and Shareholding
Services 37,956
Printing 5,478
Postage and shipping 2,353
Directors fees 12,096
Blue Sky fees 4,866
Insurance 50,055
Office expense & miscellaneous 2,284
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420,567
Less:Investment advisory
fee waived 30,000 390,567
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Net investment income before
income taxes 886,933
Operating Profit(Notes 2, 5 & 7)
Gross Profit 24,186
Less: Operating expenses 21,784
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Net operating profit before
income taxes 2,402
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Net Investment and Operating
Income before Income Taxes 889,335
Less provision for income taxes
(Notes 2 and 7) 57,833
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Net investment and operating income 831,502
Realized and Unrealized Gain (Loss)
on Investments (Notes 2 and 4)
Realized gain/loss from investment
transactions during the period 0
Increase in unrealized
appreciation of investments
during current period 159,893
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Net realized and unrealized
gain 159,893
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Net Increase in Net Assets
Resulting from Operations $ 991,395
=============
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
9
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COPLEY FUND, INC.
STATEMENT CHANGES IN NET ASSETS
Six Months
Ended Year Ended
8/31/04 2/29/04
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Increase (Decrease)in Net Assets
from Operations
Net investment and operating
income $ 831,502 $ 1,539,087
Net realized gain/loss on
investment transactions 0 ( 308,205)
Net change in unrealized
appreciation on investments 159,893 13,130,685
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Increase (decrease)in net assets
resulting from operations 991,3957 14,361,567
CAPITAL SHARE TRANSACTIONS
(Note 3)
Increase (decrease) in net
assets resulting from capital
share transactions ( 2,261,943) (2,532,428)
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Total increase (decrease)
in net assets (1,270,548) 11,829,139
NET ASSETS
Beginning of Period 69,472,976 57,643,837
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End of Period (including
undistributed net investment
and operating income of
$26,570,141 and $27,799,949
respectively $ 68,202,428 $ 69,472,976
============ ============
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
10
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COPLEY FUND, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ending August 31, 2004
Increase (Decrease) in Cash
Cash flows from operating activities
Dividends and interest received $ 1,220,733
Proceeds from disposition of long-term
portfolio investments 0
Receipts from customers 81,204
Payments of taxes, net ( 55,712)
Expenses paid ( 385,408)
Purchase of long-term portfolio investments ( 293,800)
Payments to suppliers ( 77,848)
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Net cash provided by operating activities 489,169
============
Cash flows provided by financing activities
Fund shares sold 177,254
Fund shares repurchased ( 2,425,327)
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Net cash used by financing activities ( 2,248,073)
=============
Net decrease in cash ( 1,758,904)
Cash at beginning of year 6,216,247
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Cash as of August 31, 2004 $ 4,457,343
=============
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Net increase in net assets
resulting from operations $ 991,395
------------
Increase in investments ( 453,693)
Increase in dividends and interest receivable ( 55,723)
Decrease in receivables from customers 3,161
Decrease in inventory 4,095
Increase in income taxes payable 48,269
Decrease in payables to customers ( 4,588)
Decrease in deferred income taxes payable ( 45,000)
Increase in other assets ( 760)
Increase in accrued expenses 2,013
------------
Total adjustments ( 502,226)
------------
Net cash provided by operating activities $ 489,169
============
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
11
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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 accounting principles generally
accepted in the United States of America.
Security Valuations
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
distributed 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. By not distributing the income gains to shareholders,
the Fund is subject to federal and state income taxes on the current
taxable income and realized gains. The income taxes paid by the Fund
are part of the operating expenses of the Fund and, accordingly,
serve to reduce the net asset value of the Fund.
Inventory
Inventory represents the value of marketable goods held by the Fund's
operating division. Inventory is valued at the lower of cost
(determined by the first in/first out method) or market value. The
method of valuing the inventory is an annual count whereby inventory
items are valued at original cost based upon a first in/first out
method; those items that are damaged or no longer marketable at
full value are written down to estimated market value.
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
12
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COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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.
2. Federal and State Income Taxes
The income tax provision included in the financial statements is
as follows:
Regular tax liability............... $ 57,833
Deferred tax liability.............. 45,000
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$ 102,833
=========
The Fund provides deferred taxes for unrealized appreciation on its
investment portfolio to the extent that management anticipates that a
liability may exist based upon the Fund being a going-concern
entity. If the Fund's income tax liability should exceed the amount
of current and deferred income taxes, for some unforeseen reason,
the Fund's Board of Directors is prepared to take the necessary
steps to convert the Fund to a Regulated Investment Company (RIC).
Income tax obligations associated with the conversion to RIC status
will be recognized when the Board of Directors directs that a
conversion be implemented. It is not the intent of management or
the Board of Directors to convert to RIC status in the foreseeable
future.
The amount of deferred taxes currently available to the Fund is
$779,472. 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
is no longer subject to the alternative minimum tax. The Fund
qualifies as a small corporation as set forth in Internal Revenue Code,
The Fund has $2,348,310 in accumulated capital loss carry forwards
which expire as follows: $418,498 on February 28, 2007 and $1,621,607
on February 28, 2008; and $308,205 on February 28, 2009.
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.
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
13
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COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
3. Capital Stock
At August 31, 2004 there were 5,000,000 shares of $1.00 par value
capital stock authorized. Transactions in capital shares were as follows:
Six Months Ended Year Ended
8/31/04 2/29/04
Shares Amount Shares Amount
Shares sold 3,952 $ 177,254 42,038 $ 1,496,347
Shares repurchased ( 62,189) ( 2,439,197) (112,226) ( 4,033,417)
--------- ------------ --------- ------------
Net Change ( 58,237) $ (2,261,943) ( 70,188) $(2,537,070)
========= ============ ========= =============
4. Purchases and Sales of Securities
Purchases of securities, other than United States government
obligations and short-term notes, were $293,800. The Fund did not
sell securities during this accounting period.
5. Investment Advisory Fee and Other Transactions with Related Parties
Copley Financial Services Corporation (CFSC), a Massachusetts
corporation, serves as investment advisor to the Fund. Irving Levine,
Chairman of the Board of the Fund, is the owner of all of the
outstanding common stock of CFSC and serves as its President,
Treasurer and a member of its Board of Directors.
Under the Investment Advisory Contract, CFSC is entitled to an annual
fee, payable monthly at the rate of 1.00% of the first $25 million
of the average daily net assets; .75% of the next $15 million; and
..50% on average daily net assets over $40 million.
Since September 1, 1978, in order to encourage the growth of the net
asset value of the Fund by keeping expenses to a minimum, CFSC has
waived a portion of the investment advisory fee on the first $15
million of average net assets. CFSC has made no commitment to
continue this policy.
For the six months ended August 31, 2004, the fee for investment
advisory service totaled $250,704, less fees of $30,000
voluntarily waived. Also, during the period unaffiliated directors
received $12,096 in directors' fees.
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
14
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COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
The Fund's operating division, which imports merchandise for resale,
places a portion of its merchandise on consignment with a company
controlled by Irving Levine. The Fund invoices the consignee when
the merchandise is ultimately sold. Results of the operating division
during this period are as follows:
Sales.............................. $ 75,625
Cost of goods sold................. (53,857)
----------
Gross profit....................... 21,768
General & administrative expenses.. (21,784)
----------
Net loss from operation............ ( 16)
Other income (dividends & interest. 2,418
----------
Net income......................... $ 2,402
==========
6. Notes Payable
A $3,000,000 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
15% for years commencing after December 31, 2002.
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 are available only if the Fund is not held to be a
mere holding or investment company.
The Internal Revenue Service has, during examinations of the Fund's
federal income tax returns, upheld management's position that the
Fund is not a mere holding or investment company since the Fund is
This finding by the Internal Revenue Service is always subject to
review by the Service and a finding different from the one issued
in the past could be made by the Service.
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 should not be held liable for the
accumulated earnings tax by the Internal Revenue Service.
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
15
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ABOUT THE FUND'S DIRECTORS AND OFFICERS
The Fund is governed by a Board of Directors that meet to review
investments, performance, expenses and other business matters, and is
responsible for protecting the interests of shareholders. The majority
of the Fund's directors are independent of Copley Financial Services
Corp.; the only "inside" director is an officer and director of Copley
Financial Services Corp. The Board of Directors elects the Fund's
officers, who are listed in the final table. The business address of
each director and officer is 245 Sunrise Ave., Palm Beach, FL 33480.
INDEPENDENT DIRECTORS
Name
(Date of Birth) Principal Occupations(s) During Past 5
Year Elected and Other Directorships of Public Companies
- ---------------------------------------------------------------------------
Albert Resnick, M.D. Physician Since 1948
(March 23, 1922)
1978
Kenneth Joblon President, Brittany Dyeing & Printing Corp.
(February 28, 1946) New Bedford, MA
1996
Burton S. Stern Private Investor
(March 24, 1926)
1978
INSIDE DIRECTORS
Name
(Date of Birth)
Year Elected
(Number of Copley Principal Occupations(s) During Past 5 years
Portfolios Overseen) and Other Directorships of Public Companies
Irving Levine President, Treasurer and a Director of Copley
(September 25, 1921) Financial Services Corp. since 1978; a Director
1978 of Franklin Capital Corp. (an operating
[1] investment company) since March, 1990; Chairman
of the Board and Treasurer of Stuffco
International, Inc., a ladies handbag processor
and retail chain operator, since February 1978;
Director of US Energy Systems, Inc. since 2000.
OFFICERS
Name
(Date of Birth) Principal Occupations(s) During Past 5
Title and Other Directorships of Public Companies
Irvine Levine See Above
(September 25, 1921)
Chairman of the Board of
Directors and President
Eileen Joinson Clerk-Treasurer of the Fund since 1980; Clerk
(March 14, 1948) and Office Manager of Stuffco International,
Clerk Inc., a ladies handbag processor, since 1978.
16
The following supplemental information is furnished for the six
month period ending August 31, 2004.
Portfolio of Investments
Copley Fund, Inc. will begin filing its complete schedule of
portfolio holdings with the Securities and Exchange Commission
(SEC) for the first and third quarters of each fiscal year on
Form N-Q. This reporting procedure will commence for the Fund for
the third quarter ending November 30, 2004. The Fund has 60 days
after the end of the first and third quarters to file the report
with the SEC. Forms N-Q will be available on the SEC website at
http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied
at the SEC Public Reference Room in Washington, D.C. and information
on the operations of the Public Reference Room may be obtained by calling
1-800-SEC-0330.
A description of the policies and procedures that the Fund used to
determine how to vote proxies relating to portfolio securities is
available without charge, upon request, by calling 1-800-352-9908 and
are available on the SEC website at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to
portfolio securities, during the most recent 12-month period is
available without charge, upon request, by calling 1-800-352-9908 and
are available on the SEC website at http://www.sec.gov.
Shareholder Expenses
As a shareholder of the Fund, you incur ongoing costs, including
management fees and other Fund expenses. The following example is
intended to help you understand your ongoing costs (in dollars) of
investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the
beginning of the period (March 1, 2004 - August 31, 2004).
Actual Expenses
The first line of the table below provides information about actual
account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account
value by $1,000 (for example, an $8,600 account value divided by
$1,000=8.6), then multiply the result by the number in the first
line under the heading entitled "Expenses Paid During Period" to estimate
the expenses you paid on your account during the period.
17
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Hypothetical Example for Comparison Purposes
The second line of the table below provides information about
hypothetical account values and hypothetical expenses based on the Fund's
actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the Fund's actual return. The hypothetical
account values and expenses may not be used to estimate the actual
ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example
with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs, such
as sales charges (loads), redemption fees, or exchange fees.
Therefore, the second line of the table is useful in comparing ongoing
costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs
were included, your costs would have been higher.
It is important to consider that the Copley Fund, Inc. includes federal
and state income taxes paid by the Fund on current earnings in the
expense ratios used in the following table. Most other funds do not pay
income taxes on current earnings but pass the obligations to
shareholders.
Beginning Ending Expenses Paid
Account Value Account Value During Period*
March 1, 2004 August 31, 2004 (3/1/04-8/31/04)
----------------------------------------------------
Actual $1,000 $1,008 $7
Hypothetical $1,000 $1,018 $7
(5% return before
expenses)
*Expenses are equal to the Fund's annualized expense ratio of 1.30%,
multiplied by the average account value over the period, multiplied
by the number of days in the Fund's most recent fiscal half-year
divided by 365 or 366 (to reflect the one-half year period shown).
The actual return for the Fund during the six month period, which is
not annualized, was 1.53%
18
<page>
COPLEY FUND, INC.
FINANCIAL HIGHLIGHTS
The following table presents information about the Fund's financial history.
It is based upon a single share outstanding throughout each fiscal year
(which ends on the last day of February).
Year Ended
August February February February February February
31, 2004 29, 2004 28, 2003 28, 2002 28, 2001 29, 2000
Net asset value,
Beginning of year $39.26 $31.33 $37.66 $39.94 $31.68 $34.22
Income (loss) for
Investment operations:
Net investment income(loss) 0.50 0.85 0.95 0.67 0.97 1.06
Net gains(losses) on securities
(both realized and unrealized) 0.10 7.08 (7.28) (2.95) 7.29 (3.60)
Total investment operations 0.60 7.93 (6.33) (2.28) 8.26 (2.54)
Net asset value, end of year $39.86 $39.26 $31.33 $37.66 $39.94 $31.68
Total Return (a) 1.53% 25.31% -16.81% -5.71% 26.07% -7.42%
Net Assets, last day of
February (in thousands) 68,202 69,473 57,644 76,607 83,573 71,723
Ratio of expenses to average
Net assets (b)(c) 1.01% 1.01% 1.07% 0.98% 1.04% 1.06%
Ratio of net income(loss) to
Average net assets (c) 2.42% 2.42% 2.47% 1.70% 2.66% 3.01%
Portfolio Turnover 0.46% 0.92% 8.65% 3.33% 26.26% 6.77%
Number of shares outstanding
at end of period (in
thousands) 1,711 1,770 1,840 2,034 2,092 2,264
(a) Total return for periods less than one year are not annualized.
(b) Ratio of expenses presented exclude income taxes.
(c) Annualized for periods less than one year.
See Accountant's Review Report
The accompanying notes are an integral part of the financial statements.
COPLEY FUND, INC. Semi-Annual Report
A No-Load Fund
August 31, 2004
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
Gemini Fund Services
4020 South 147th Street
Suite 2
Omaha, Nebraska 68137
Tel. (402)493-4603
(800)635-3427, ext. 7204
FAX: (402)963-9094
General Counsel
Roberts & Henry
504 Talbot Street
St. Michaels, MD 21663
Auditors
Roy G. Hale, C.P.A.
624 Clarks Run Road
La Plata, MD 20646
<page>
Item 2. CODE OF ETHICS
The registrant has adopted a Code of Ethics that applies to the
registrant's principal executive officer and principal financial
officer. The registrant has not made any amendments to its Code
of Ethics during the covered period. The registrant has not
granted any waivers from any provisions of the Code of Ethics
during the covered period. The registrant undertakes to provide
to any person without charge, upon request, a copy of its Code
of Ethics by mail when they call the registrant toll free at
(800)635-3427.
Item 3. AUDIT COMMITTEE FINANCIAL EXPERT
(a)(1) The registrant's Board of Directors has determined that the
Board's Audit Committee does not have an "audit committee financial
expert", as the Securities and Exchange Commission has defined that
term. After carefully considering all of the factors involved in
the definition of "audit committee financial expert", the Board
determined that none of the members of the audit committee met all
five qualifications in the definition, although some members of the
Audit Committee met some of the qualifications. The Board also
determined that while the Audit Committee members have general
financial expertise, given the size and type of the Copley Fund, Inc.,
(the "Fund") and in light of the nature of the accounting and
valuation issues that the Fund has presented over the past several
years, it did not appear that the Audit Committee members lacked
any necessary skill to serve on the Audit Committee.
Item 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable - only effective for annual report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end investment
management companies.
ITEM 6. (Reserved)
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES
FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment
management companies.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable to open-end investment
management companies.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The certifying officers, whose certifications are
included herewith, have evaluated the registrant's
disclosure controls and procedures within 90 days of
this report. In their opinion, based on their
evaluation, the registrant's disclosure controls and
procedures are adequately designed, and are operating
effectively to ensure, that information required to be
disclosed by the registrant in the reports it files or
submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) There were no significant changes in the registrant's
internal control over financial reporting that occurred
during the registrant's last fiscal half-year that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting.
<page>
ITEM 11. EXHIBITS.
(a)(1) Code of Ethics is attached hereto.
(a)(2) A separate certification for the principal executive
officer and principal financial officer of the registrant as
required by Rule 30a-2(a) under the Investment Company Act of
1940, as amended (17 CFR 270.30a-2(a)) is filed herewith.
(b) Officer certifications as required by Rule 30a-2(b) under
the Investment Company Act of 1940, as amended
(17 CFR 270.30a-2(b)) also accompany this filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Copley Fund, Inc.
By: /s/ Irving Levine
___________________________
Name: Irving Levine
Title: President (Chief
Executive Officer)
Date: November 1, 2004
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940,
this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Irving Levine
___________________________
Name: Irving Levine
Title: President and
Treasurer
(Chief Financial Officer)
Date: November 1, 2004