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 28, 2005
DATE OF REPORTING PERIOD: AUGUST 31, 2005
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ITEM 1. REPORTS TO SHAREHOLDERS
Semi-Annual Report
August 31, 2005
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
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COPLEY FUND, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD ENDING
AUGUST 31, 2005
TABLE OF CONTENTS
Title Page
Management's Letter to Shareholders
and Discussion of Fund Performance......... 1
Per Share Value Graph........................ 3
Accountant's Review Report................... 4
Portfolio of Investments..................... 5
Statement of Assets and Liabilities.......... 8
Statement of Operations...................... 9
Statement of Changes in Net Assets........... 10
Statement of Cash Flows...................... 11
Notes to Financial Statements................ 12
Financial Highlights......................... 16
Disclosure of Fund Expenses.................. 17
Supplemental Data............................ 18
About the Fund's Directors and Officers...... 20
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COPLEY FINANCIAL SERVICES CORP. - Investment Manager
P.O. Box 3287 * Fall River, Massachusetts 02722 * (508)674-8459
October 6, 2005
Dear Fellow Shareholder:
Our steady increases in net asset values are continuing. Our gain for the
first nine months of 2005 is 10.91%. In contrast, most other important
averages are either at losses or barely profitable. We reached a new high
in this quarter and finished at $47.26 (the first month ever that we reached
$47.00 per share).
Lately we have been reminiscing with a number of our original investors as to
the start of our concept 27 years ago at $3.00 per share and the present
resulting net gains. Our structure of dividend paying stocks with constant
increases in these dividends has brought us to the present. The present has
not altered our concept and instead is enhancing it. We believe the future
holds the same promise (i.e., the Fund receives dividends in ever increasing
amounts, the stocks react accordingly to these increases, the Fund pays its
own taxes and does not distribute). Thus, the future should see the same
type of gain as in the past.
During this period the Fund's gains were attributable primarily to our
exposure in energy stocks and utilities. We had neutral performances in our
financial, drugs, telephone, and insurance stocks, contributions to the net
asset value.
This period is a continuation of a rather neutral general market which has
continued its neutrality despite the recent hurricanes, the Iraq War, the
increase in interest rates, the price of gasoline and the increase in our
National debt. However, sectors of the market such as energy stocks and
many dividend paying stocks were able to move ahead. Fortunately, we have
many of these.
As we wrote in our last letter, Congress and the powers that be have put
extra expense burdens on all mutual funds. These expenses are unimportant
to larger institutions from a percentage standpoint, but we smaller funds
are subject to the same oversight rules with a much smaller base. We are
making every effort to keep our expenses in line.
Our operating division is constantly seeking new avenues of expansion and we
hope in the next half year to achieve this expansion.
1
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It is gratifying that our philosophy has proven itself in that from $3.00 per
share in 1978 we are now more than $47.00 per share with a structure that we
feel has low investment risk combined with growth. The following is our
resulting performance from 1984 till now.
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%
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 +12.99%
2005 +10.91% (as of September 30, 2005)
The performance data quoted represents past performance and investment
return. Principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
Please remember that past performance does not guarantee future results and
current performance may be higher or lower than the performance data quoted.
Our thanks to our Board and our many shareholders for their support during
our twenty seven years of operation.
Cordially yours,
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
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Copley Fund, Inc. Per Share Value
CALENDAR YEAR ENDED DECEMBER 31, 2004
PERIOD ENDED AUGUST 31, 2005
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 42.61
2005 47.26 (AS OF SEPTEMBER 30, 2005)
3
Shareholders and Board of Directors
Copley Fund, Inc.
Palm Beach, Florida
ACCOUNTANT'S REVIEW REPORT
I have reviewed the accompanying statement of assets and liabilities,
including the portfolio of investments, of Copley Fund, Inc., as of August
31, 2005, 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 opinion.
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 principles.
I have previously audited, in accordance with generally accepted auditing
standards, the statement of assets and liabilities as of February 28, 2005
and the related financial statements and cash flows for the year then ended
(not presented in full herein) and in my report dated April 19, 2005, I
expressed an unqualified opinion on those financial statements.
Roy G. Hale
Certified Public Accountant
La Plata, Maryland
October 17, 2005
4
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COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
August 31, 2005
COMMON STOCKS - 96.79% Shares Value
BANKING - 6.31%
Bank of America Corp. ............ 20,000 $ 860,600
J.P. Morgan Chase & Company ...... 42,000 1,423,380
KeyCorp. ......................... 15,000 496,800
PNC Financial Services Group ..... 35,000 1,968,050
___________
4,748,830
___________
DIVERSIFIED UTILITY COMPANIES - 10.15%
Alliant Energy Corp. ............. 20,000 601,000
Dominion Resources, Inc. ......... 30,000 2,294,400
FPL Group ........................ 110,000 4,739,900
__________
7,635,300
__________
DRUG COMPANIES - 4.27%
Bristol Myers Squibb Co. ......... 100,000 2,447,000
Pfizer, Inc. ..................... 30,000 764,100
__________
3,211,100
__________
ELECTRIC AND GAS - 16.66%
American Electric Power .......... 35,000 1,301,300
Cinergy Corp. .................... 35,000 1,541,400
First Energy Corp. ............... 40,000 2,041,200
Great Plains Energy, Inc. ........ 40,000 1,243,600
Progress Energy, Inc. ............ 40,000 1,743,600
Public Service Enterprise Group .. 15,000 968,250
Scana, Corp. ..................... 50,000 2,119,500
Sempra Energy, Inc. .............. 35,000 1,568,700
__________
12,527,550
__________
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, 2005
Shares Value
ELECTRIC POWER COMPANIES - 15.02%
Ameren Corporation ............... 30,000 $ 1,647,900
DTE Energy Company ............... 55,000 2,517,350
Exelon Corporation ............... 23,200 1,250,248
Nstar Corp. ...................... 50,000 1,478,000
PP&L Corp. ....................... 100,000 3,196,000
Southern Company ................. 35,000 1,204,000
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11,293,498
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GAS UTILITIES & SUPPLIES - 12.60%
Delta Natural Gas Co. ............ 20,000 563,000
Energy East Corp ................. 40,000 1,048,800
Keyspan Energy Corp. ............. 45,000 1,717,650
New Jersey Resources Corp. ....... 37,500 1,761,750
Northwest Natural Gas Co. ........ 40,000 1,471,200
Peoples Energy Corp. ............. 40,000 1,662,800
WGL Holdings, Inc................. 38,000 1,249,060
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9,474,260
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HEALTH CARE PRODUCTS - 1.09%
*Zimmer Holdings, Inc. ........... 10,000 821,700
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INSURANCE - 3.04%
Arthur J. Gallagher & Company .... 80,000 2,284,800
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OILS - 19.37%
BP Amoco PLC. .................... 25,500 1,743,690
Chevron Texaco Corp. ............. 46,200 2,836,680
Exxon-Mobil Corp. ................ 106,086 6,354,551
Sunoco, Inc. ..................... 50,000 3,635,000
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14,569,921
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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, 2005
Shares Value
RETAIL - 1.19%
Wal-Mart Stores, Inc. ............ 20,000 $ 899,200
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TELEPHONE - 7.09%
Bell South Corp. ................. 20,000 525,800
Citizens Communications Company .. 20,000 272,800
SBC Communications, Inc. ......... 60,430 1,455,154
Verizon Communications, Inc. ..... 94,232 3,082,329
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5,336,083
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Total value of investments (Cost $28,775,762) 72,802,242
Excess of cash and other assets over liabilities 2,411,158
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NET ASSETS................................... $75,213,400
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*Non-income producing securities.
Federal Tax Information: At August 31, 2005, the net unrealized
appreciation based on cost for Federal income tax purposes of
$44,026,480 was as follows:
Aggregate gross unrealized appreciation for
all investments for which there was an excess
of value over cost........................ $44,047,480
Aggregate gross unrealized depreciation for all
investments for which there was an excess of
cost over value............................ ( 21,000)
------------
Net unrealized appreciation................. $44,026,480
============
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, 2005
ASSETS
Investments in securities, at value
(identified cost $28,775,762) (Note 1) $72,802,242
Cash ................................ 2,893,889
Receivables:
Trade (Notes 5 & 6)................ $ 22,792
Dividends and interest ............ 237,457 260,249
Inventory (Notes 1,5 & 6)............ ---------- 152,600
Prepaid Expenses .................... 27,032
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Total Assets .................... 76,136,012
LIABILITIES
Payables:
Redemptions........................ 14,806
Trade.............................. 4,623
Accrued income taxes-current....... 104,148
Accrued expenses.................... 40,269
Deferred income taxes (Notes 1 and 2) 758,766
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Total Liabilities .............. ( 922,612)
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Commitments and Contingencies (Note 7)
Net Assets ........................ $75,213,400
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Net assets consist of:
Capital paid in ................... $ 3,755,075
Undistributed net investment and
operating income ................. 26,149,604
Accumulated net realized gain on
investment transactions .......... 1,282,241
Net unrealized appreciation in value
of investments (Note 2) ........... 44,026,480
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Total............................. $75,213,400
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Net Asset Value, Offering and Redemption
Price Per Share (5,000,000 shares authorized,
1,624,033 shares of $1.00 par value capital
stock outstanding) $ 46.31
===========
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
For the six months ending August 31, 2005
Investment Income (Note 1)
Income
Dividend........................... $1,333,840
Interest........................... 33,342
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Investment income................ $1,367,182
Expenses:
Investment advisory fee (Note 5)... 264,628
Professional fees.................. 62,575
Custodian fees..................... 10,896
Accounting and Shareholder Services 43,078
Printing........................... 3,484
Postage and shipping............... 1,989
Directors fees..................... 10,424
Blue Sky fees...................... 4,890
Compliance fees.................... 6,181
Insurance.......................... 26,202
Office expense and miscellaneous... 1,387
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435,734
Less: Investment advisory fee waived 30,000 405,734
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Net investment income before income
taxes........................... 961,448
Operating Profit (Notes 2, 5 and 7)
Gross profit....................... 17,618
Less: Operating expenses........... 15,130
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Net operating profit before income
taxes 2,488
--------
Net Investment and Operating Income before
Income Taxes ........................ 963,936
Less provision for income taxes (Notes
2 and 7)........................... 104,148
--------
Net investment and operating income 859,788
Realized and Unrealized Gain (Loss) on
Investments (Notes 2 and 4)
Increase in unrealized appreciation of
investments during current period... 3,083,862
---------
Net realized and unrealized gain..... 3,083,862
---------
Net Increase in Net Assets Resulting from Operations $ 3,943,650
============
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 OF CHANGES IN NET ASSETS
Six months
Ended Year Ended
8/31/05 2/28/05
Increase (Decrease) in Net Assets
from Operations
Net investment and operating income.. $ 859,788 $ 1,651,944
Net realized gain/loss on investment
transactions........................ 0 0
Net change in unrealized appreciation
on investments...................... 3,083,862 6,063,307
----------- -----------
Increase/(decrease) in net assets
resulting from operations........... 3,943,650 7,715,251
Net Equalization (Debits) Credits (Note 1) ( 647,111) ( 4,161,656)
Capital Share Transactions (Note 3)
Increase (decrease) in net assets
resulting from capital share
transactions......................... ( 162,199) ( 947,511)
------------ ------------
Total increase (decrease) in net assets 3,134,340 2,606,084
Net Assets
Beginning of Period................... 72,079,060 69,472,976
----------- ------------
End of Period (including undistributed net
investment and operating income of
$26,149,604 and $25,290,237 respectively) $75,213,400 $72,079,060
=========== ============
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, 2005
Increase (Decrease) in Cash
Cash flows from operating activities
Dividends and interest received................ $ 1,305,588
Proceeds from disposition of long-term
portfolio investments......................... 0
Receipts from customers........................ 96,291
Payments of taxes, net......................... ( 112,871)
Expenses paid.................................. ( 376,265)
Purchase of long-term portfolio investments.... ( 0)
Payments to suppliers.......................... ( 116,247)
------------
Net cash provided by operating activities..... 796,496
============
Cash flows provided by financing activities
Fund shares sold ............................... 726,760
Fund shares repurchased ........................ ( 1,656,776)
------------
Net cash used by financing activities......... ( 930,016)
============
Net decrease in cash.......................... ( 133,520)
Cash at beginning of the year................. 3,027,409
------------
Cash as of August 31, 2005.................... $ 2,893,889
============
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 $ 3,943,650
-------------
Increase in investments ......................... ( 3,083,862)
Increase in dividends and interest receivable ... ( 61,595)
Increase in receivables from customers .......... ( 1,993)
Decrease in inventory ........................... 2,982
Decrease in subscriptions receivable ............ ( 182)
Decrease in income taxes payable ................ ( 8,508)
Decrease in trade payables ...................... 22,713
Increase in other assets ........................ ( 719)
Decrease in accrued expenses .................... ( 15,990)
--------------
Total adjustments ............................. ( 3,147,154)
--------------
Net cash provided by operating activities...... $ 796,496
==============
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 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's 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 tax returns as a regular corporation and accordingly the
financial statements include provisions for current and deferred income
taxes.
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
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................. $ 104,148
==========
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 an 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 $758,766. The
difference between the effective rate on investment and operating income and
the expected statutory rate is due substantially to the use by the Fund of
the dividends received deduction.
The Fund has $2,348,310 in accumulated capital loss carry forwards which
expire as follows: $418,498 on February 28, 2007; $1,621,607 on February 29,
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 in which the Fund does not pay a federal
alternative minimum tax.
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.
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, 2005, 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
8/31/05 2/28/05
Shares Amount Shares Amount
Shares sold........ 15,931 $ 726,998 10,822 $ 442,939
Shares repurchased. ( 34,565) ( 1,536,308) ( 137,658) ( 5,553,702)
---------- ------------ ----------- -------------
Net Change........ ( 18,634) $( 809,310) ( 126,836) $(5,110,763)
========== ============= =========== ============
4. Purchase and Sale of Securities
There were no purchases and sales of securities, other than United States
government obligations and short-term notes.
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, 2005, the fee for investment advisory
service totaled $264,628 less fees of $30,000 voluntarily waived. Also
during the period unaffiliated directors received $10,424 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
Operating Division
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................................ $ 95,298
Cost of goods sold .................. ( 80,666)
----------
Gross profit ........................ 14,632
General & administrative expenses ... ( 15,130)
----------
Net income from operations .......... ( 498)
Other income (dividends and interest) 2,986
----------
Net Income .......................... $ 2,488
==========
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 conducting an operating
division. 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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<table>
<caption>
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).
<s> Year Ended
<c> <c> <c> <c> <c> <c>
August February February February February February
31, 2005 28, 2005 29,2004 28,2003 28,2002 28,2001
Net asset value, beginning of year $43.88 $39.26 $31.33 $37.66 $39.94 $31.68
Income (loss) for investment
Operations:
Net investment income (loss) 0 .53 0.99 0.85 0.95 0.67 0.97
Net gains (losses) on
securities (both realized
and unrealized) 1.90 3.63 7.08 ( 7.28) ( 2.95) 7.29
Total investment operations 2.43 4.62 7.93 ( 6.33) ( 2.28) 8.26
Net asset value, end of year $46.31 $43.88 $39.26 $31.33 $37.66 $39.94
Total return(a) 5.54% 11.77% 25.31% -16.81% -5.72% 26.07%
Net assets, last day of
August (in thousands) 75,213 72,079 69,473 57,644 76,607 83,573
Ratio of expenses to average
net assets(b)(c) 1.10% 1.01% 1.01% 1.07% 0.98% 1.04%
Ratio of net income (loss)
to average net assets(c) 2.34% 2.33% 2.42% 2.47% 1.70% 2.66%
Portfolio turnover rate 0.00% 0.44% 0.92% 8.65% 3.33% 26.26%
Number of shares outstanding
at end of period (in thousands) 1,624 1,643 1,770 1,840 2,034 2,092
</table>
(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.
16
<page>
Disclosure of Fund Expenses - August 31, 2005
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.
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.
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 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 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 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 obligation to shareholders.
Beginning Ending Expenses Paid
Account Value Account Value During Period*
March 1, 2005 August 31, 2005 (3/0/05-8/31/05
Actual
$1,000 $1,050 $5.42
Hypothetical
(5% return before
Expenses) $1,000 $1,045 $5.42
17
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*Expenses are equal to the Fund's annualized expense ratio of 1.10%,
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 this six month period, which is not
annualized, was 5.54%.
SUPPLEMENTAL DATA
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses
to determine how to vote proxies relating to the Fund's portfolio
securities, as well as information relating to how the Fund voted proxies
relating to portfolio securities during the most recent 12 month period
ended February 28, 2005, (i) is available, without charge and upon request,
by calling 1-800-352-9908; and (ii) on the U.S. Securities and Exchange
Commission's website at http://www.sec.gov.
DISCLOSURE OF PORTFOLIO HOLDINGS
The SEC has adopted the requirement that all funds file a
complete schedule of investments with the SEC for their first and third
fiscal quarters on Form N-Q. The Fund's Forms N-Q, reporting portfolio
securities held by the Fund, is available on the Commission's website at
http://www.sec.gov, and may be reviewed and copied at the Commission's Public
Reference Room in Washington, DC. Information on the operation of the public
reference room may be obtained by calling 800-SEC-0330.
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
On March 18, 2005, the Board of Directors of the Fund approved
the continuation of the advisory agreement with Copley Financial Services
Corp. ("CFSC"). Prior to approving the continuation of the advisory
agreement, the Board considered:
* the nature, extent and quality of the services provided by CFSC
* the investment performance of the Fund
* the costs of the services to be provided and profits to be realized
by CFSC from its relationship with the Fund
* the extent to which economies of scale would be realized as the Fund
grows and whether fee levels reflect these economies of scale
* the expense ratio of the Fund
18
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In considering the nature, extent and quality of the services provided
by CFSC, the Board of Directors reviewed the portfolio management,
operating division supervision and regulatory compliance services
provided by CFSC to the Fund. The Board concluded that CFSC was
providing essential services to the Fund. In particular, the Board
concluded that CFSC was providing unique and specialized supervision
of the Fund's operating division.
The Directors compared the performance of the Fund to benchmark
indices over various periods of time. It also examined the Fund's
investment objective and the dividend paying record of the portfolio
securities selected by CFSC. Based upon this the Board concluded that
the performance of the Fund warranted the continuation of the advisory
agreement.
In concluding that the advisory fees payable by the Fund were
reasonable, the Directors reviewed a report of the costs of services
provided by and the profits realized by CFSC from its relationship with the
Fund and concluded that such profits were reasonable and not excessive. The
Directors also reviewed reports comparing the expense ratio and advisory fee
paid by the Fund to those paid by other comparable mutual funds and concluded
that the advisory fee paid by the Fund was equal to or lower than the average
advisory fee paid by comparable mutual funds, but the expense ratio of the
Fund was lower than the average expense ratio of comparable mutual funds.
They noted that this fee also is adjusted downward if economies of scale were
realized during the current contract period as the Fund grew, but did not
consider that factor to be significant in light of the other factors
considered. They did find significant, however, the fact that CFSC had
voluntarily waived the receipt of $60,000 of its advisory fee, a practice it
has engaged in for many years, in an effort to control the Fund's expense
ratio. CFSC can discontinue this practice at any time.
19
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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
INSIDE DIRECTORS
Name
(Date of Birth)
Year Elected
(Number of Copley Principal Occupations(s) During Past 5
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.
20
COPLEY FUND, INC. Semi-Annual Report
A No-Load Fund
August 31, 2005
Investment Adviser
Copley Financial Services Corp.
P.O. Box 3287
Fall River, Massachusetts 02722
Custodian
Bank of America
111 Westminster Street
Providence, Rhode Island 02903
Transfer Agent
Gemini Fund Services, LLC
4020 South 147th Street
Suite 2
Omaha, Nebraska 68137
Tel. (402)493-4603
(877)881-2751
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. SCHEDULE OF INVESTMENTS
Not applicable
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. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to open-end investment management companies.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable to open-end investment
management companies.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 11. 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 12. 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 7, 2005
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 7, 2005