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, 2007
DATE OF REPORTING PERIOD: AUGUST 31, 2007
<page>
ITEM 1. REPORTS TO SHAREHOLDERS
Semi-Annual Report
August 31, 2007
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[logo]
COPLEY FUND, INC.
A No-Load Fund
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COPLEY FUND, INC.
FINANCIAL STATEMENTS
FOR THE PERIOD ENDING
AUGUST 31, 2007
Table of Contents
Title Page
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Shareholder Letter and Management's Discussion of Fund Performance ....... 1 - 2
Accountant's Review Report ............................................... 3
Per Share Value Graph .................................................... 4
Portfolio of Investments ................................................. 5 - 7
Statement of Assets and Liabilities ...................................... 8
Statement of Operations .................................................. 9
Statement of Changes in Net Assets ....................................... 10
Statement of Cash Flow ................................................... 11
Notes to Financial Statements ............................................ 12 - 16
Financial Highlights ..................................................... 17
Disclosure of Fund Expenses .............................................. 18
Supplemental Data ........................................................ 19
General ................................................................ 19
Voting Proxies on Portfolio Securities ................................. 19
Disclosure of Portfolio Holdings ....................................... 19
About the Fund's Directors and Officers ........................ Inside Back Cover
Tel: (508) 674-8459
Fax: (508) 672-9348
COPLEY FINANCIAL SERVICES CORP.
Adviser and Administrator to Copley Fund, Inc.
Post Office Box 3287
Fall River, Massachusetts 02722
October 12, 2007
Dear Fellow Shareholder:
The market of 2007 is an enigma to most stock market professionals. We
have never seen the volatility in the market that has occurred in 2007. It has
been commonplace to have changes of one hundred points and more in the Dow on
many days. Yet despite the many economic and world problems the market has had
an upward bias.
The subprime mortgage crisis, the weaker dollar, the high price of
gasoline, the war in Iraq, the trade imbalance, all these should have affected
the market negatively. Yet Copley and the Dow Jones have shown increases
averaging between 10 and 13% during a good part of 2007. The upward bias could
be attributed to fairly good earnings reports, consumer spending, rather low
inflation, low unemployment, strong company balance sheets and some confidence
that the Fed will use its power to prevent as much as possible a potential
economic catastrophe.
The assets of Copley Fund are comprised of a number of sectors. The
subprime mortgage problem played havoc with our financial sector stocks. All of
our bank stocks had to take substantial write offs not only on their subprime
loans and their resultant foreclosures but also on their packaged real estate
bonds. However, the safety of diversification is always comforting. Our electric
utilities had gains of 12%, our communication stocks had gains of 14%, and our
energy stocks had gains of 15%.
The balance of our portfolio, i.e. Healthcare, publishing, insurance etc.
held its own with an upside bias. Also the dividends and increases in dividends
added to our increases in net asset values.
All the above are reflected in our chart and the following numbers:
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%
1
2000 ........... +22.50%
2001 ........... -9.30%
2002 ........... -13.9%
2003 ........... +14.31%
2004 ........... +12.99%
2005 ........... +5.89%
2006 ........... +19.70%
2007 ........... +9.11% (as of September 30, 2007)
We work very closely with our consultants in Chicago. Thus our team is in
a good position to further the continuance of Copley Fund for the future.
We are in the process of changing some of the thrust of our operating
division and look forward to substantial increases in volume and profit starting
in 2008.
Meanwhile, we hope to keep our expense ratio to a reasonable level despite
the added expense of Sarbanes-Oxley.
It is interesting to note that a study by the "Investment News letter"
dated July 9, 2007 shows that the average mutual fund had trading expenses of
1.4%. Copley, with its long term hold philosophy, had trading expenses of
probably 1|M/10th of that.
We are looking forward to continued success in 2008.
The performance data quoted represents past performance and investment
return. Principal value of an investment will fluctuate so that the 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 nine years of operation.
Cordially yours,
/s/ Irving Levine
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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. Go to Google home page
search for "Copley Fund, Inc" then click on Mutual Funds and it will bring up
Copley.
2
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,
2007, 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, with the exception of the matter described in the
following paragraph, I am not aware of any material modification that should be
made to the accompanying interim financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
As discussed in note 2, income taxes, generally accepted accounting
principles require that a deferred income tax liability be accrued for the
income tax affect of the entire unrealized appreciation on the Fund's securities
portfolio. Management has elected to accrue a deferred income tax liability to
the extent that management feels a real liability may exist. If the full accrual
had been recognized, which is an amount equal to the total income taxes that
would be payable if the entire portfolio was liquidated, the Fund's net asset
value would be decreased by $13.44 per share as of August 31, 2007.
I have previously audited, in accordance with generally accepted auditing
standards, the statements of assets and liabilities as of February 28, 2007 and
the related financial statements and cash flows for the year then ended (not
presented in full herein) and in my report dated April 24, 2007, I expressed an
unqualified opinion on those financial statements.
Roy G. Hale
Certified Public Accountant
La Plata, Maryland
October 26, 2007
3
COPLEY FUND, INC.
PER SHARE VALUE
CALENDAR YEAR ENDED DECEMBER 31, 2006
PERIOD ENDED SEPTEMBER 31, 2007
[BAR CHART]
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 45.12
2006 54.01
2007 58.53 (As of September 30)
4
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS (Unaudited)
August 31, 2007
Shares Value
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COMMON STOCKS - 93.54%
BANKING - 6.89%
Bank of America Corp. ................... 25,000 $ 1,267,000
J.P. Morgan Chase & Co. ................. 42,000 1,869,840
KeyCorp. ................................ 20,000 666,000
PNC Financial Services Group ............ 35,000 2,462,950
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6,265,790
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DIVERSIFIED UTILITY COMPANIES - 10.75%
Alliant Energy Corp. .................... 20,000 757,600
Dominion Resources, Inc. ................ 30,000 2,555,400
FPL Group ............................... 110,000 6,472,400
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9,785,400
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DRUG COMPANIES - 3.20%
Bristol Myers Squibb Co. ................ 100,000 2,915,000
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ELECTRIC AND GAS - 15.12%
American Electric Power ................. 35,000 1,556,800
First Energy Corp. ...................... 40,000 2,457,600
Great Plains Energy, Inc. ............... 40,000 1,133,600
Integrys Energy Group, Inc. ............. 33,000 1,655,610
Progress Energy, Inc. ................... 40,000 1,835,200
Public Service Enterprise Group ......... 15,000 1,274,850
Scana, Corp. ............................ 50,000 1,919,000
Sempra Energy, Inc. ..................... 35,000 1,926,050
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13,758,710
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ELECTRIC POWER COMPANIES - 15.94%
Ameren Corp. ............................ 30,000 1,523,400
DTE Energy Co. .......................... 55,000 2,629,550
Duke Energy Co. ......................... 54,600 1,001,364
Exelon Corp. ............................ 23,200 1,639,544
Nstar Corp. ............................. 50,000 1,638,500
PP&L Corp. .............................. 100,000 4,826,000
Southern Co. ............................ 35,000 1,242,150
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14,500,508
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The accompanying notes are an integral part of the financial statements.
5
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS (Unaudited) - (Continued)
August 31, 2007
Shares Value
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GAS UTILITIES & SUPPLIES - 7.15%
Delta Natural Gas Co. ................ 20,000 $ 496,200
Energy East Corp ..................... 40,000 1,067,600
New Jersey Resources Corp. ........... 37,500 1,836,750
Northwest Natural Gas Co. ............ 40,000 1,858,400
WGL Holdings, Inc .................... 38,000 1,249,820
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6,508,770
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HEALTH CARE PRODUCTS - 0.47%
*Zimmer Holdings, Inc. ............... 5,500 430,815
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INSURANCE - 2.60%
Arthur J. Gallagher & Co. ............ 80,000 2,362,400
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OILS - 20.36%
BP Amoco PLC. ........................ 25,500 1,717,680
Chevron Texaco Corp. ................. 46,200 4,054,512
Exxon-Mobil Corp. .................... 106,086 9,094,753
Sunoco, Inc. ......................... 50,000 3,657,000
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18,523,945
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PIPELINES - 0.70%
Spectra Energy Corp. ................. 27,300 634,725
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PUBLISHING - 0.56%
*Idearc, Inc. ........................ 15,000 511,950
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RETAIL - 0.96%
Wal-Mart Stores, Inc. ................ 20,000 872,600
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TELEPHONE - 8.84%
AT&T, Inc. ........................... 93,555 3,730,038
Citizens Communications Co. .......... 25,000 362,750
Verizon Communications, Inc. ......... 94,232 3,946,436
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8,039,224
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The accompanying notes are an integral part of the financial statements.
6
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS (Unaudited) - (Continued)
August 31, 2007
Total value of investments (Cost $28,436,647) ............ $85,109,837
Excess of cash and other assets over liabilities ......... 5,877,764
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NET ASSETS ............................................... $90,987,601
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* Non-income producing securities
Federal Tax Information: At August 31, 2007, the net unrealized appreciation based on cost for
Federal income tax purposes of $28,436,647 was as follows:
Aggregate gross unrealized appreciation for all investments for which there was
an excess of value over cost ........................................................... $56,673,590
Aggregate gross unrealized depreciation for all investments for which there was
an excess of cost over value ........................................................... (400)
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Net unrealized appreciation .............................................................. $56,673,190
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The accompanying notes are an integral part of the financial statements.
7
COPLEY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES (Unaudited)
August 31, 2007
ASSETS
Investments in securities, at value (identified cost $28,436,647)
(Note 1) ............................................................. $85,109,837
Cash ................................................................... 6,149,553
Receivables:
Loan ................................................................ 207,100
Trade (Notes 5 & 6) ................................................. 24,341
Dividends and interest .............................................. 313,553 544,994
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Inventory (Notes 1 & 6) ................................................ 103,056
Prepaid expenses and other assets ...................................... 27,646
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Total Assets ........................................................ 91,935,086
LIABILITIES
Payables:
Redemptions ......................................................... 5,500
Trade ............................................................... 11,799
Accrued income taxes-current ........................................ 129,000
Accrued expenses .................................................... 55,266
Deferred income taxes (Notes 1 and 2) ................................ 745,920
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Total Liabilities ................................................... (947,485)
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Commitments and Contingencies (Note 7)
Net Assets ........................................................... $90,987,601
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Net assets consist of:
Capital paid in ...................................................... $ 3,763,288
Undistributed net investment and operating income .................... 27,918,343
Accumulated net realized gain on investment transactions ............. 2,632,780
Net unrealized appreciation in value of investments (Note 2) ......... 56,673,190
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Total ............................................................... $90,987,601
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Net Asset Value, Offering and Redemption Price Per Share
(5,000,000 shares authorized, 1,580,492 shares of $1.00 par
value capital stock outstanding) .................................... $ 57.56
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The accompanying notes are an integral part of the financial statements.
8
COPLEY FUND, INC.
STATEMENT OF OPERATIONS (Unaudited)
For the six months ended August 31, 2007
Investment Income (Note 1)
Income:
Dividend ............................................................. $1,458,439
Interest ............................................................. 80,530
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Investment income .................................................. $1,538,969
Expenses:
Investment advisory fee (Note 5) ..................................... 312,932
Professional fees .................................................... 48,323
Custodian fees ....................................................... 12,871
Accounting and Shareholder Services .................................. 28,620
Printing ............................................................. 2,560
Postage and shipping ................................................. 2,027
Directors fees ....................................................... 7,148
Insurance. ........................................................... 22,646
Office expense and miscellaneous ..................................... 2,059
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439,186
Less: Investment advisory fee waived ................................. (30,000) 409,186
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Net investment income before income taxes ............................ 1,129,783
Operating Profit (Notes 2, 5 and 7)
Gross profit ......................................................... 19,898
Less: Operating expenses ............................................. (15,287)
----------
Net operating profit before income taxes ............................. 4,611
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Net Investment and Operating Income before Income Taxes ................. 1,134,394
Less provision for income taxes (Notes 2 and 7) ...................... (124,414)
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Net investment and operating income .................................. 1,009,980
Realized and Unrealized Gain on Investments (Notes 2 and 4)
Realized gain from investment transactions during the period ......... 911,166
Increase in unrealized appreciation of investments during
current period ..................................................... 2,679,097
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Net realized and unrealized gain ..................................... 3,590,263
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Net Increase in Net Assets Resulting from Operations ................. $4,600,243
==========
The accompanying notes are an integral part of the financial statements.
9
COPLEY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Six Months
Ended Year Ended
8/31/07 2/28/07
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(Unaudited)
Increase in Net Assets from Operations
Net investment and operating income .......................... $ 1,009,980 $ 1,861,031
Net realized gain on investment transactions ................. 911,166 353,076
Net change in realized and unrealized appreciation on
investments ................................................. 2,679,097 9,984,004
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Increase in net assets resulting from operations ............. 4,600,243 12,198,111
Capital Share Transactions (Note 3)
Increase (decrease) in net assets resulting from capital share
transactions ................................................ (480,447) 23,780
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Total increase in net assets ................................. 4,119,796 12,221,891
Net Assets
Beginning of Period .......................................... 86,867,805 74,645,914
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End of Period (including undistributed net investment and
operating income of $27,918,343 and $26,908,363
respectively) ............................................... $90,987,601 $86,867,805
=========== ===========
The accompanying notes are an integral part of the financial statements.
10
COPLEY FUND, INC.
STATEMENT OF CASH FLOWS (Unaudited)
For the six months ended August 31, 2007
Increase (Decrease) in Cash
Cash flows from operating activities
Dividends and interest received ...................................... $ 1,539,948
Proceeds from disposition of long-term portfolio investments ......... 4,967,792
Receipts from customers .............................................. 66,953
Payments of taxes, net ............................................... (136,315)
Expenses paid ........................................................ (482,715)
Purchase of long-term portfolio investments .......................... (2,359,789)
Payments to suppliers. ............................................... (50,957)
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Net cash provided by operating activities ........................... 3,544,917
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Cash flows for investing activities
Investments in other companies ....................................... (5,000)
Loans issued to other companies ...................................... (207,100)
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Net cash provided by investing activities ........................... (212,100)
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Cash flows provided by financing activities
Fund shares sold ..................................................... 2,050,614
Fund shares repurchased .............................................. (2,459,388)
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Net cash used by financing activities ............................... (408,774)
============
Net increase in cash. ............................................... 2,924,043
Cash at beginning of the year ....................................... 3,225,510
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Cash as of August 31, 2007 .......................................... $ 6,149,553
============
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 ................... $ 4,600,243
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Increase in investments .............................................. (981,214)
Increase in dividends and interest receivable ........................ (6,445)
Increase in receivables from customers ............................... (6,434)
Decrease in inventory ................................................ 6,724
Decrease in income taxes payable ..................................... (8,125)
Increase in trade payables ........................................... 3,190
Increase in other assets ............................................. (667)
Decrease in accrued expenses ......................................... (930)
Decrease in deferred taxes ........................................... (61,425)
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Total adjustments ................................................... (1,055,326)
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Net cash provided by operating activities ........................... $ 3,544,917
============
The accompanying notes are an integral part of the financial statements.
11
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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.
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.
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.
New Accounting Pronouncements
Effective August 31, 2007, the Fund adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 48 ("FIN 48") "Accounting for Uncertainty in
Income Taxes", a clarification of FASB Statement No. 109, "Accounting for
Income Taxes". FIN 48 provides guidance for how uncertain tax positions should
be recognized, measured, presented and disclosed in the financial statements.
FIN 48 requires the evaluation of tax positions taken or expected to be taken
in the course of preparing the Fund's tax returns to determine whether the tax
positions are "more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the current year. The adoption
of FIN 48 had no impact on the fund's net assets or results of operations.
12
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. Significant Accounting Policies - (continued)
In September 2006, FASB issued Statement on Financial Accounting Standards
(SFAS) No. 157 "Fair Value Measurements." This standard establishes a single
authoritative definition of fair value, sets out a framework for measuring fair
value and requires additional disclosure about fair value measurements. SFAS
No. 157 applies to fair value measurements already required or permitted by
existing standards. SFAS No. 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007 and interim periods within
those fiscal years. The changes to current generally accepted accounting
principles from the application of this Statement relate to the definition of
fair value, the methods used to measure fair value, and the expanded
disclosures about fair value measurements. At this time, management does not
believe the adoption of SFAS No. 157 will impact the amounts reported in the
financial statements, however, additional disclosures may be required about the
inputs used to develop the measurements and the effect of certain of the
measurements reported on the statement of changes in net assets for a fiscal
period.
2. Federal and State Income Taxes
The income tax provision included in the financial statements is as
follows:
Regular tax liability ......................... $ 124,414
Deferred tax liability ........................ 4,586
---------
$ 129,000
---------
Deferred taxes at beginning of period ......... $ 807,345
Current liability ............................. (4,586)
Reclassification .............................. (56,839)
---------
Deferred taxes at end of period ............... $ 745,920
=========
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets, including tax loss and credit carryforwards, and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred income tax expense represents the change during the
period in the deferred tax assets and deferred tax liabilities.
The major temporary differences that give rise to the deferred tax assets
and liabilities are capital loss carryforwards and the appreciation of
securities held in the Fund's portfolio.
The Fund provides deferred taxes for unrealized appreciation on its
investment portfolio to the extent that management anticipates that a liability
may exist. This policy has been applied consistently over many years. A
combination of capital loss carryforwards and a deferred tax liability has
provided the resources necessary to offset capital gains realized by the Fund
without impacting the daily net asset value. It is management's investment
philosophy to purchase solid securities and hold them for long
13
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
2. Federal and State Income Taxes - (continued)
period of times, as evidenced by the Fund's low portfolio turnover ratio. Under
this management philosophy, the Fund should generate low levels of capital
gains in any given accounting period. Levels that will be sufficiently covered
by the accumulated deferred tax liability.
However, in the unlikely event the Fund would experience a situation or
series of situations that would require full liquidation of the Fund's
portfolio, events that have not historically affected the Fund or events that
are not anticipated in the current or foreseeable future by the Board of
Directors or management of the Fund, the Fund would have to recognize a federal
and state income tax on its accumulated appreciation on its stock portfolio.
The tax affect at the end of the current period, at current tax rates, is as
follows:
Unrealized appreciation ....................................... $ 56,673,199
Currently enacted federal tax rate ............................ 34.00%
Currently enacted state tax rate .............................. 5.50% 39.50%
----- ------------
Entire deferred tax ........................................... 22,385,914
Less: currently deferred tax .................................. (745,820)
Less: deferred tax asset - capital loss carryforwards ......... (404,097)
------------
Federal and state tax liability ............................... $ 21,235,997
============
The impact on each share of stock outstanding, as of August 31, 2007,
would be $13.44. For this entire charge to occur, it is reemphasized that the
entire portfolio would have to be liquidated by the Fund.
The Fund has $997,771 in accumulated capital loss carryforwards which
expire as follows: $689,566 on February 28, 2008, and $308,205 on February 28,
2009. These accumulated losses will generate a deferred tax asset of $404,097.
There is no reason to believe that these losses will not be utilized by their
respective expiration dates.
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.
3. Capital Stock
At August 31, 2007, there were 5,000,000 shares of $1.00 par value capital
stock authorized. Transactions in capital shares were as follows:
Six Months Ended 8/31/07 Year Ended 2/28/07
------------------------------ -------------------------------
Shares Amount Shares Amount
------------ --------------- ------------- ---------------
(Unaudited)
Shares sold ................ 34,173 $ 1,980,189 103,791 $ 5,369,011
Shares repurchased ......... (42,494) (2,460,636) (107,802) (5,345,231)
------- ------------ -------- ------------
Net Change ................. (8,321) $ (480,447) (4,011) $ 23,780
======= ============ ======== ============
14
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
4. Purchase and Sale of Securities
Purchases and sales of securities, other than United States government
obligations and short-term notes, for the six months ended August 31, 2007,
aggregated $2,359,789 and $4,967,792, respectively.
5. Investment Advisory Fee and Other Transactions with Related Parties
Copley Financial Services Corporation (CFSC), a Massachusetts corporation,
serves as investment advisor to the Fund. Irving Levine, Chairman of the Board
of the Fund, is the owner of all of the outstanding common stock of CFSC and
serves as its President, Treasurer and a member of its Board of Directors.
Under the Investment Advisory Contract, CFSC is entitled to an annual fee,
payable monthly at the rate of 1.00% of the first $25 million of the average
daily net assets; .75% of the next $15 million; and .50% on average daily net
assets over $40 million.
For the six months ended August 31, 2007, the fee for investment advisory
service totaled $312,932 less fees of $30,000 voluntarily waived. Also during
the period unaffiliated directors received $7,148 in directors' fees.
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 ......................................... $ 73,387
Cost of goods sold ............................ (60,911)
---------
Gross profit .................................. 12,476
General & administrative expenses ............. (15,288)
---------
Net loss from operations ...................... (2,812)
Other income (dividends and interest) ......... 7,423
---------
Net Income .................................... $ 4,611
=========
During the period of this report, the Fund has formed a new wholly owned
subsidiary, Copley Operating Group LLC. The purpose of this company will be to
expand the Fund's operating division into a field separate from its traditional
leather goods and handbag business. Copley Operating Group LLC will own the
equipment and operate a restaurant, Ricc's Ristorante. The real property used
by the restaurant will be leased.
The Fund has made a $5,000 equity investment in Copley Operating Group LLC
and the loan receivable noted in the balance sheet, amounting to $207,100, is a
loan between the Copley Fund, Inc., and Copley Operating Division LLC. This new
entity is still in the developmental stage.
15
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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.
16
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 period.
Year Ended
Six Months -------------------------------------------------------
Ended
August 31, February February February February February
2007 28, 2007 28, 2006 28, 2005 29, 2004 28, 2003
------------ ---------- ---------- ---------- ---------- -----------
(Unaudited)
Net asset value, beginning
of period .................... $ 54.67 $ 46.86 $ 43.88 $ 39.26 $ 31.33 $ 37.66
Income (loss) for
investment operations:
Net investment income
(loss) ...................... 0.64 1.18 1.02 0.99 0.85 0.95
Net gains (losses) on
securities (both realized
and unrealized) ............. 2.25 6.63 1.96 3.63 7.28 ( 7.28)
------- ------- ------- ------- ------- -------
Total investment operations 2.89 7.81 2.98 4.62 7.93 ( 6.33)
Net asset value, end of
period ....................... $ 57.56 $ 54.67 $ 46.86 $ 43.88 $ 39.26 $ 31.33
======= ======= ======= ======= ======= =======
Total return(a) ................ 5.29% 16.67% 6.79% 11.77% 25.31% -16.81%
Net assets, end of period
(in thousands) ............... 90,988 86,868 76,646 72,079 69,473 57,644
Ratio of expenses to
average net assets(b)(c) ..... 0.92% 1.03% 1.09% 1.01% 1.01% 1.07%
Ratio of net income (loss)
to average net assets(c) ..... 2.19% 2.37% 2.26% 2.33% 2.42% 2.47%
Portfolio turnover rate ........ 2.69% 0.50% 0.73% 0.44% 0.92% 8.65%
Number of shares
outstanding at end of
period (in thousands) ........ 1,580 1,589 1,593 1,643 1,770 1,840
- ---------------
(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.
The accompanying notes are an integral part of the financial statements.
17
COPLEY FUND, INC.
DISCLOSURE OF FUND EXPENSES
All mutual funds have operating expenses. As a shareholder of a mutual
fund, your investment is affected by these ongoing costs, which include
investment advisory fees. It is important for you to understand the impact of
these costs on your investment return.
Operating expenses such as these are deducted from the mutual fund's gross
income and directly reduce its final investment return. These expenses are
expressed as a percentage of the mutual fund's average net assets; this
percentage is known as the mutual fund's expense ratio.
The following examples use the expense ratio and are intended to help you
understand the ongoing costs (in dollars) of investing in your Fund and to
compare these costs with those of other mutual funds. The examples are based on
an investment of $1,000 made at the beginning of the period shown and held for
the entire period.
The table below illustrates your Fund's costs in two ways:
Actual Fund Return. This section helps you to estimate the actual expenses
after fee waivers that your Fund incurred over the period. The "Expenses Paid
During Period" column shows the actual dollar expense cost incurred by a $1,000
investment in the Fund, and the "Ending Account Value" number is derived from
deducting that expense cost from the Fund's gross investment return.
You can use this information, together with the actual amount you invested
in the Fund, to estimate the expenses you paid over that period. Simply divide
your actual account value by $1,000 to arrive at a ratio (for example, an
$8,600 account value divided by $1,000 = 8.6), then multiply that ratio by the
number shown for your Fund under "Expenses Paid During Period."
Hypothetical 5% Return. This section helps you compare your Fund's costs
with those of other mutual funds. It assumes that the Fund had an annual 5%
return before expenses during the year, but that the expense ratio (Column 3)
for the period is unchanged. This example is useful in making comparisons
because the Securities and Exchange Commission requires all mutual funds to
make this 5% calculation. You can assess your Fund's comparative cost by
comparing the hypothetical result for your Fund in the "Expenses Paid During
Period" column with those that appear in the same charts in the shareholder
reports for other mutual funds.
Note: Because the return is set at 5% for comparison purposes - NOT your
Fund's actual return - the account values shown may not apply to your specific
investment.
Beginning Expenses Paid
Account Value Ending Account Annualized During Period*
3/1/07 Value 8/31/07 Expense Ratios (3/1/07 - 8/31/07)
--------------- ---------------- ---------------- -------------------
Actual Fund Return ............. $1,000 $1,053 0.92% $ 4.75
Hypothetical 5% Return ......... $1,000 $1,021 0.92% $ 4.67
- ---------------
* Expenses are equal to the Fund's annualized expense ratio for the last
six months multiplied by the average account value over the period,
multiplied by the number of days.
18
COPLEY FUND, INC.
SUPPLEMENTAL DATA
General
Investment Products Offered
o Are Not FDIC Insured
o May Lose Value
o Are Not Bank Guaranteed
The investment return and principal value of an investment in the Copley
Fund (the "Fund") will fluctuate as the prices of the individual securities in
which it invests fluctuate, so that your shares, when redeemed, may be worth
more or less than their original cost. You should consider the investment
objectives, risks, charges and expenses of the Fund carefully before investing.
For a free copy of the Fund's prospectus, which contains this and other
information, call the Fund toll free at (877) 881-2751 or write to Gemini Fund
Services at 4020 South 147th Street, Omaha, NE 68137.
This shareholder report must be preceded or accompanied by the Fund's
prospectus for individuals who are not current shareholders of the Fund.
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 portfolio securities during the 12 month period
ended June 30, 2007, (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.
19
COPLEY FUND, INC.
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 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 Years
Year Elected and Other Directorships of Public Companies
- ---------------------- ---------------------------------------------
Albert Resnick, M.D. Physician Since 1948
(March 23, 1922)
1978
[1]
Kenneth Joblon President, Brittany Dyeing & Printing Corp.
(February 28, 1946) New Bedford, MA
1996
[1]
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 Financial Services Corp.
(September 25, 1921) since 1978; a Director of Franklin Capital Corp. (an operating invest-
1978 ment company) since March, 1990 to October 2004; Chairman of the
[1] Board and Treasurer of Stuffco International, Inc., a ladies handbag
processor and retail chain operator, since February 1978; Director of
US Energy Systems, Inc. from 2000 to October 2004.
Officers
Name
(Date of Birth) Principal Occupations(s) During Past 5 Years
Title and Other Directorships of Public Companies
- -------------------------- ---------------------------------------------------------------------
Irving Levine See Above
(September 25, 1921)
Chairman of the Board of
Directors and President
Eileen Joinson Clerk-Treasurer of the Fund since 1980; Clerk and Office Manager of
(March 14, 1948) Stuffco International, Inc., a ladies handbag processor, since 1978.
Clerk
Patricia Taylor CCO of the Fund since 2004; Owner, Patricia Taylor Administrative
(May 27, 1950) Services, since 1994.
Chief Compliance Officer
20
COPLEY FUND, INC. Semi-Annual Report
A No-Load Fund August 31, 2007
- --------------------------------------------------------------------------------
Investment Adviser
Copley Financial Services Corp.
P.O. Box 3287
Fall River, Massachusetts 02722
E-mail: copleyfunds@verizon.net
Custodian
Bank of America
111 Westminster Street
Providence, Rhode Island 02903
Transfer Agent
[LOGO]
Gemini Fund Services COPLEY FUND, INC.
4020 South 147th Street A No-Load Fund
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)(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 8, 2008
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 8, 2008