Copley Fund, Inc.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
INVESTMENT MANAGEMENT
April 5, 2013
Mr. Philippe M. Salomon
Blank Rome LLP
405 Lexington A venue
New York, NY 10174-0208
Dear Mr. Salomon:
In your letter, dated March 28, 2012, you request assurance that we would not recommend
enforcement action to the Securities and Exchange Commission ("Commission") under Rule
22c-1 under the Investment Company Act of 1940 ("Act") or Regulation S-X against Copley
Fund, Inc. ("Copley"), a Nevada corporation registered under the Act as an open-end
management investment company, which has elected to operate as a C Corporation under the
Internal Revenue Code ("Code"), if Copley calculates its deferred Federal tax liability for
unrealized gains based on a management-developed estimate that is a pre-set fonnula. For the
reasons explained below, we are unable to provide such assurance.
Background
Rule 22c-1 under the Act states, in relevant part, that no registered investment company issuing
any redeemable security shall sell, redeem, or repurchase any such security except at a price
based on the current net asset value ("NA V") of such security which is next computed after
receipt of a tender of such security for redemption. Rule 2a-4(a)(4) under the Act provides, in
relevant part, that in computing the NA V of any redeemable security, "[a]ppropriate provision
shall be made for Federal income taxes if required" by the registered investment company.'
Copley is offering for sale and has outstanding redeemable securities that are subject to Rules 2a
4 and 22c-1.
1 From 1970 until1982, Rule 2a-4(a)(4) specifically required provision for Federal income taxes in
accordance with Regulation S-X. In 1982, the Commission removed the specific reference, a change
made to confonn with amendments to Article 6 of Regulation S-X that were adopted at the same time,
and not as a substantive change to Rule 2a-4(a)( 4). Financial Statement Requirements for Registered
Investment Companies, Investment Company Act Release No. 12871 (Dec. 6, 1982).

As an investment company registered under the Act, Copley is subject to Regulation S-X,
including Rule 4-0l(a)(l) of Regulation S-X, which states, in relevant part, that "[f]inancial
statements filed with the Commission which are not prepared in accordance with generally
accepted accounting principles [("GAAP")] will be presumed to be misleading or inaccurate,
despite footnote or other disclosures, unless the Commission has otherwise provided." As a C
Corporation under the Code, Copley must account for income taxes in accordance with the
Financial Accounting Standards Board's ("FASB's") Accounting Standards Codification Topic
740, Income Taxes ("ASC 740"). ASC 740 indicates that financial statements should reflect the
amount of deferred tax liabilities and assets for the future tax consequences of events that have
been recognized in an entity's financial statements or tax returns? There is also an assumption
that all assets and liabilities of an entity will be recovered and settled, which may result in
temporary differences. 3
ASC 740 also provides several examples of items that result in differences between the
recognition oftransactions or events for financial reporting purposes and tax purposes.
Revenues or gains that are taxable after they are recognized in financial income are included as
an example of a temporary difference. 4
Unrealized gains on investments, which are taxable after they are recognized in the financial
statements, represent a temporary difference on which a deferred tax liability must be
recognized. The recognized deferred tax liability is calculated by multiplying the temporary
difference (i .e. , the unrealized gains) by the expected tax rate at the expected time ofreversal. 5
Copley' s proposal to calculate the deferred tax liability based on a management-developed
estimate that is a pre-set formula would not comply with GAAP as it would result in Copley
recognizing only a portion of the deferred tax liability required by ASC 740 .
Conclusion
We do not believe that Copley can comply with GAAP or with Rule 4-0l(a)(l) of RegulationS
X without complying with ASC 740 . We also do not believe that Copley has demonstrated that,
for purposes of Rule 2a-4(a)(4) under the Act, an appropriate provision for Federal income taxes
should be made in any manner other than one that is consistent with GAAP . Therefore,,we are
unable to assure you that we would not recommend enforcement action to the Commission
against Copley under Rule 22c-1 or Regulation S-X if Copley does not comply with ASC 740.
2 FASB ASC 740-10 -10-1(b) .
3 See FASB ASC 740-10-25-20.
4 FASB ASC 740-10-25 -20(a).
5 Se e generally FASB ASC 740-10-10-3 (indicating that the objective is to measure a deferred tax
liability using the enacted tax rate expected to apply to taxable income in the periods in which the
deferred tax liability is expected to be settled).

If you have any further questions related to this matter, please contact Megan Monroe in the
Division of Investment Management at 202-551-6950.
Sincerely,
Douglas Scheidt
Associate Director and Chief Counsel
Division of Investment Management
fJ~{;v~
Jaime Eichen
Chief Accountant
Division of Investment Management

ROME LLP	BLANK COUNSELORS AT LAW
Phone: 	(212) 885-5455
Fax: 	(212) 885-5002
Email: 	psalomon@blankrome. com
March 28, 2012
Office of Chief Accountant
Division of Investment Management
U.S. Securities and Exchange Commission
100 F. Street, N .E., Mail Stop 4 720
Washington, D.C. 20549-4720
Attn: Jaime Eichen
Re: 	Copley Fund, Inc.: Request for Interpretive Opinion and No Action
Assurance; Rule 22c-1 promulgated under the Investment Company
Act of 1940 and Rule 4-0l(a)(l) of Regulation S-X
Dear Ms. Eichen:
This Firm represents Copley Fund, Inc. ("Copley" or the "Fund") and on its behalf,
submits this letter as a continuation of Copley's prior communication, through counsel, to the
Division oflnvestment Management (the "Division") on September 28, 2011 (the "September 28
Letter," annexed hereto as Exhibit A). Copley is hereby requesting a written opinion from the
Division permitting the Fund to alter the manner in which it has accounted for deferred tax
liability for unrealized gains since 2007. More specifically, Copley proposes to account for its
deferred tax liability for unrealized gains by establishing a tax reserve based on a pre-set formula
more fully set forth below at pages 11 through 14. Further, it seeks assurances that the Division
will not recommend that the Commission commence an enforcement action against Copley
should it follow this proposed approach. While Copley has submitted various proposals to the
Division regarding how the Fund could more fairly, reasonably and accurately account for its
deferred tax liability for unrealized gains, including the September 28 Letter, to date, the
Commission has failed to provide a final determination.
In the September 28 Letter, Copley sought no-action assurances from the Division if the
Fund were to (i) prepare and issue financial statements using a reserve for taxes on unrealized
gains based on management's estimates, rather than on the assumption that all assets with
unrealized appreciation would be sold at current prices and/or (ii) issue and redeem shares based
on current net asset value as so determined, with an explanation of the calculation and a
comparison ofthe difference between such calculation of net asset value with a reserve for taxes
on all unrealized appreciation. After the submission of that letter, Copley had detailed
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Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page2
discussions of the issues with numerous representatives from the Staff on a conference call in the
Fall of2011. Thereafter, Copley had expected to receive a written response from the Staff, but
has not received any to date.
Requiring Copley to set a tax reserve for unrealized gains on the assumption of full
liquidation is inconsistent with Copley's investment philosophy of reinvesting dividends and
accumulating capital gains and misleading because it substantially understates the Fund's
invested assets and net asset value ("NA V"), while overstating its operating expenses. See infra,
at 7. To address these circumstances, Copley does not now simply seek approval for the
discretion by its management to establish an appropriate reserve. Rather, as discussed more fully
below at pages 11 through 12, Copley presents two alternatively defined formulas for calculating
the reserve and allowing pre-set means to sell securities in its portfolio to satisfy extraordinary
redemptions if necessary. Finally, Copley is prepared to convert to a Regulated Investment
Company ("RIC") by a pre-arranged commitment, essentially triggered by the unforeseen event
of unusually high redemptions.
Accordingly, Copley respectfully requests that a final written opinion or order be issued
granting the relief requested. In support, Copley offers this summary of the prior dialogue the
Fund has had with the SEC on this issue, incorporates by reference the arguments made in its
prior submissions annexed hereto, and submits a new proposal for the Division's consideration,
which the Fund believes would result in a fairer and more accurate disclosure of its current and
ongoing financial operations.
A. Procedural History of this Matter
Since 1992, Copley has maintained that the accrual for unrealized capital gains taxes is
best represented by a "reserve" established by its Board, rather than the use of a full liquidation
value accrual to calculate the Fund's NAV. Until2007, the SEC had never required that Copley
change this methodology. It is this structure for which the Fund now seeks no-action relief.
In August of2007, the Stafftook issue with Copley's accounting for, and disclosure of,
tax reserves for unrealized appreciation in its financial statements filed for the year ended
February 28, 2007. In a comment letter dated September 26, 2007 (the "Comment Letter"), the
Staff asserted that Copley had failed to account properly for deferred tax liabilities and assets for
the future tax consequences of events recognized in its financial statements, as required by FAS
109 and in violation ofRule 4-01(a)(l) of Regulation S-X, which provides that "financial
statements filed with the Commission which are not prepared in accordance with generally

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 3
accepted accounting principles will be presumed to be misleading or inaccurate, despite footnote
of other disclosures, unless the Commission has otherwise provided." (A copy of the Comment
Letter is annexed hereto as Exhibit B.) It is not clear from the Staffs correspondence what
caused it to change its view in 2007 and suddenly to require Copley to change its methodology.
In the Comment Letter, the Staff noted that Copley has elected to operate as a subchapter
C Corporation, and not a RIC, and that it was unaware of any other investment company that
chose not to qualify as a RIC that did not accrue a deferred tax liability associated with its
unrealized appreciation. (Ex. Bat 3-4.) The Staff explicitly acknowledged Copley's willingness
to convert to RIC status in the event unforeseen circumstances caused gains to be realized that
consumed the entire amount of accumulated deferred income taxes that Copley had recognized.
(ld. at 5-6.) It did not, however, address- and, to date, still has not addressed -whether
conversion would satisfy the SEC's concerns regarding the Fund's tax accounting.
By letter dated November 30, 2007, the Division of Enforcement's Boston Regional
Office expressed to Copley its intent to seek immediate injunctive relief against the Fund if it did
not adjust its per share NAV to account for the full liquidation liability for tax on unrealized
capital gains. (A copy of the November 30, 2007 Letter is annexed hereto as Exhibit C.) To
avoid such injunctive litigation with the Commission, Copley's Board approved shortly
thereafter an adjustment of the Fund's NA V using the SEC's preferred full liquidation value
methodology.
On March 21, 2008; the Division of Enforcement informed Copley that it was conducting
an informal investigation of the Fund into possible violations of the securities laws, and
requested that the Fund provide certain information on a voluntary basis. The Commission
apparently later converted the proceeding into a formal investigation against Copley a11d its CEO
Irving Levine for potential violations of certain antifraud provisions, namely, Section 34(b) of
the Investment Company Act of 1940 (the "ICA"), Rule 22c-1(a), promulgated under Section
22( c) thereunder, Section 17(a) of the Securities Act, and Section 1O(b) of the Exchange Act and
Rule 1Ob-5 promulgated thereunder; as well as a books and records violation under Section 204
of the Investment Advisors Act of 1940 and Rule 204-2 promulgated thereunder. 1 Copley fully
cooperated with the investigation.
1 The SEC's request for information and its Formal Order of investigation are not being annexed hereto because they
are non-public documents. Copley presumes that the Division has access to those records.

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012 	·
Page4
On July 18, 2008, Copley was required to restate its historical financial statements to
account for the full liquidation value methodology required by the SEC and filed an amended
Form N-CSR/A containing a Restated Annual Report to its shareholders. (A copy of that filing
is annexed hereto as Exhibit D.)
On or about November 19, 2008, in an effort to resolve the investigation, Thomas Henry,
Esq., Copley's counsel, sent a letter to James S. Goldman, Esq., of the SEC's Boston Regional
Office, enclosing a memorandum that described in detail the negative impact of the change 'in
methodology and the reasons Copley's original reserve methodology was in the best interests of
the shareholders (the "November 2008 Memo"). (A copy ofthe November 19, 2008 letter, with
its enclosures, is annexed hereto as Exhibit E.) Among other things, the letter explained that
Copley's change in methodology to a full liquidation value accrual'in calculating the Fund's per
share NA V had resulted in misleading and inconsistent financial statements that did not reflect
the fair or accurate value ofthe Fund's shares. The letter also enclosed a proposed Prospectus
Supplement that would provide disclosures to the shareholders necessary for their consideration
of the risks associated with this methodology. We understand that correspondence was shared
with the Division.
Copley has not received a substantive response to the November 19, 2008 letter to Mr.
Goldman. In February of2009, Copley was informed by Mr. Goldman that the investigation of
the Fund had been reassigned to Lawrence Pisto, Esq., also of the Boston Regional Office.
Thereafter, the Staff took testimony of, among others, Irving Levine and Copley's outside
accountant, Roy Hale.
On October 5, 2009, Mr. Henry sent a letter to Mr. Pisto to follow up on a prior telephone
conversation to inquire about the status of the investigation. With that letter, Mr. Henry re
submitted the November 2008 Memo and proposed Prospectus Supplement. (A copy of Mr.
Henry's October 5, 2009 letter, with its enclosures, is annexed hereto as Exhibit F.) As detailed
therein, Mr. Henry argued that a certain degree of flexibility is appropriate under GAAP and
FAS accounting standards and under the SEC rules, and that such flexibility was warranted here.
Further, Mr. Henry reiterated Copley's willingness to provide transparent disclosures to its
investors and requested a meeting with the Staff.
Our understanding is that the requested meeting did not take place. Instead, in a
December 2, 2009 letter, the Division responded to Mr. Henry's October 5 letter and asserted
that Copley had provided neither any new arguments not previously considered by the Staff, nor
any "changes in the Company's circumstances that might cause reconsideration of [the Staffs]

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 5
original position." (A copy of the December 2, 2009 letter is annexed hereto as Exhibit G.) In
that letter, the Division informed Copley that it would again recommend immediate enforcement
action if Copley were to submit financial statements that did not comply with ASC 740 (which
codified FAS 109) by using the methodology required by the Staff.
On March 5, 2010, Kevin Kelcourse, Esq., Assistant Regional Director from the Boston
Regional Office, informed Mr. Henry by letter that the investigation of Copley and Mr. Levine
was officially completed and that the Staff would not recommend enforcement action. Thus, the
investigation closed without any penalties. Nonetheless, Mr. Kelcourse's letter reiterated that if
Copley did not comply with the requirements ofF AS 109 and/or re-codified ASC 740, the
Division of Enforcement would recommend enforcement action by the Commission. (See
Exhibit H.)
Following the closing of the investigation, Copley and its counsel engaged in further
communications with the Staff in an effort to reach a mutually acceptable resolution ofthis issue.
For example, on July 15,2010, Mr. Henry exchanged e-mails with Kevin Rupert ofthe
Division's Staff concerning proposed modifications to Copley's financial statements. In that
exchange, Mr. Rupert acknowledged the unique structure of the Fund, stating that, "While we
have been firm on not permitting footnotes, this fund has really unusual tax issues, and for this
reason an explanatory footnote might be permitted- but I make no promises." (Exhibit I
(emphasis added).)2
Finally, on September 28, 2011, Copley, through its counsel, David Faust, Esq., sent the
Division the request for no-action assurance referenced earlier. The September 28 Letter
explained in detail why the use of the Staffs full liquidation value methodology is inappropriate
given the unique nature of the Fund, is inconsistent with its investment philosophy, policy and
practice, has led to misleading financial statements and reporting that understates the amount of
assets under management and does not represent the true value ofthe Fund's shares. (See Ex.
A.) Moreover, Mr. Faust explained that the Commission's refusal since 2007 to permit Copley's
management to exercise any discretion with respect to deferred tax accounting differed from its
treatment of Weyerhaeuser Corporation, which apparently had been permitted to depart from a
literal reading of a required tax accounting provision. Indeed, as more fully explained below, the
Commission's position with respect to Weyerhaeuser and other similarly situated companies
contradicts its position with respect to Copley.
2 The Staff apparently did deviate from its normal practice of not permitting footnotes, as Copley's semi-annual
shareholder report for the period ended August 31, 2010, includes footnotes to its financial statements clarifying the
nature of the deferred tax liability. (See Ex. J.)

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28,2012
Page 6
B. Summary of Copley's Arguments
Copley believes it would be useful to summarize briefly the arguments the Fund has
previously presented to the Staff and which it believes continue to support its position.
1. 	The Fund is unique.
Copley is a C Corporation, and not a RIC. Although the Fund has some of the
characteristics of a RIC, unlike one, up to 70% of the dividend income received, or 70% of the
taxable income of the Fund, whichever is less, is exempt from federal taxation under the Internal
Revenue Code. The remaining 30% of the Fund's income is taxable. Unlike most funds, the
taxable income generated by the Fund is not passed on to the shareholders. Furthermore,
contrary to most other funds, Copley has maintained a strategy of not distributing dividends and
capital gains to shareholders, but rather, accumulating them within the Fund and then adding
them to the value of each share on a daily basis. Shareholders, therefore, are able to defer
dividend and capital gains taxes until redemption.
To the knowledge of Copley's management, it is the only U.S. open-end mutual fund that
operates in this manner. The Division has, in fact, acknowledged the unique tax structure of the
Fund. (See supra at 5 and Ex. Il As a result of this method of operation, the risk of Copley
incurring a tax liability in excess of the reserve established by the Board is exceedingly remote.
Concomitantly, a strict application ofF AS 109 to require a full liquidation value deferred tax
liability affects the Fund disproportionately because, unlike a typical C Corporation whose
shares are valued by the market, Copley is required to calculate its price daily with respect to its
redeemable shares.
Thus, the Division's methodology puts Copley at a decisive disadvantage relative to its
peer funds because it artificially deflates the Fund's NA V and thereby unfairly makes it appear
to the investing public to be a less attractive investment opportunity compared to its competitor
funds.
3 Although in its 2007 Comment Letter (see Ex. B), the Staff referred to two other investment companies that have
not elected RIC status but record a deferred tax liability, Tortoise Energy Capital Corp. and Kayne Anderson MLP
Investment Company, as Copley explained in the November 2008 Memo, both are easily distinguishable from
Copley because, among other things, they are closed-end funds. (See November 2008 Memo at Ex. E, p. 11, n. 4.)

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 7
2. 	The Staffs mandated methodology leads to misleading financial accounting.
Beginning in 1992, Copley implemented a policy of regularly monitoring the Fund's
potential income tax liability on unrealized gains and accruing a reserve that corresponded with
the anticipated actual liability. The estimate ofthe Fund's future liability was based on factors
that included anticipated redemptions beyond the ability of the Fund to cover, the Fund's
investment strategy and track record of holding dividend paying stocks for the long term, and the
fact that the entire deferred liability would be due only in the unlikely event the entire portfolio
were liquidated. (See November 2008 Memo, at Ex. E, for a more detailed explanation of the
reserve methodology.) During the entire period in which the Board employed this methodology,
the reserve was never used. (See November 2008 Memo at 5.)
The Fund's use of the Staffs mandated methodology, under which it records the entire
deferred tax liability, has led to a materially misleading reported NAV since 2007. This result
derives from the facts that it (i) does not accurately reflect Copley's investment policy and
practice of long-term holdings of its positions; (ii) understates the amount of invested assets
actually under management on which gains or losses are actually realized; and (iii) overstates the
Fund's operating expense ratio (by including as expenses deferred taxes, which are not actual or
realized operating expenses). (See Ex. A at 2-4.)
Copley submits that it is in the best interests of the Fund's shareholders to reserve for
deferred tax liability in a manner that allows the per share NAV to reflect better the true value of
the Fund's shares. As Copley has always assured the Staff, if permitted to do so, it will provide
full transparency to investors by, for example, including in its prospectus a clear explanation of
the differing effects in pricing, as calculated using the reserve method and the full liquidation
value methods. (See, e.g., Ex. E; Ex. F.)
Copley recognizes that the SEC may be reluctant to permit its management unfettered
discretion to calculate the appropriate reserve and that it may have concerns that Copley, through
its prior methodology, may have overstated the value of its shares. Without conceding the
validity of those concerns, the Fund is prepared to address this issue and to propose an
acceptable resolution. Accordingly, in Section C, below, Copley sets forth a new methodology,
whereby the Fund will calculate the reserve using a pre-set formula that it believes will be
acceptable to the Commission and should allay any of its concerns.

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 8
3. 	Copley is willing to convert to a RIC.
As explained in more detail in the memorandum initially provided to the Staff in
November of2008, Copley has advised the Staff of its willingness to convert to RIC status in the
event unforeseen circumstances caused gains to be realized that consumed the entire amount of
accumulated deferred income taxes it has recognized. (See Ex. B at 5-6; November 2008 Memo
at Ex. E, pp. 6-8.) As discussed more fully, infra, at 14, conversion to a RIC would be analogous
to the restructure and tax treatment sanctioned by the SEC with respect to other entities.
4. 	Copley's "reserve" methodology is consistent with the ICA Rules.
Rule 22c-1 promulgated under the ICA requires open-end funds to issue and redeem
shares "at a price based on the current net asset value of such security .... " In turn, the rules
define "current net asset value" as the "amount which reflects calculations, whether or not
recorded in the books of account, made substantially in accordance with the following, with
estimates used where necessary or appropriate." ICA Rule 2a-4 (emphasis added). As set forth
in more detail in the September 28 Letter, these rules, when read together, do not require the
price of the Fund's shares to be exactly the same as its NAV. (Ex. A at 2.) Copley's issuance
and redemption of shares based on aNA V that reflects a management determined tax reserve,
therefore, does not violate the ICA Rules.
5. 	Copley's "reserve" methodology is permissible under GAAP.
The Staff has argued that a management established reserve, rather than a deferred tax
liability reflecting the full liquidation, would violate GAAP, and specifically FAS 109 and re
codified ASC 740. The reserve methodology, however, is actually more consistent with the
assumptions, constraints and conventions underlying GAAP than the full liquidation value
methodology. For example, under GAAP, there is an assumption that a business will continue to
operate as a going concern. (See, e.g., Accounting Research Bulletin 43, Chapter 3: Working
Capital, Section A, stating "It should be emphasized that financial statements of a going concern
are prepared on the assumption that the company will continue in business."). The Staffs
liquidation value method, by contrast, assumes the Fund will close, be sold or entirely liquidated
en masse. The use ofthe liquidation value method also contradicts the principles of
realization/revenue recognition and matching by effectively transforming a contingent liability
into a full, current, realized liability and failing to match current revenue and assets with correct,
actual liabilities. Lastly, the use of the liquidation value method is contrary to the principle of
adequate disclosure underlying GAAP, in that it presents financial statements that are effectively

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 9
misleading because they do not accurately convey the true value of Copley's shares. (See
November 2008 Memo, at Ex. E,_p. 10.)
Even assuming, arguendo, that the Fund's proposed reserve methodology would depart
from ASC 740, GAAP does allow for certain flexibility where, for instance, the strict adherence
to GAAP appears unreasonable under the circumstances and/or would produce unreasonable
results. The Commission has appropriately recognized this concept. (See November 2008
Memo at Ex. E, p. 11, n.5, citing the Commission's issuance of rules even for the use ofnon
GAAP financials, Release No. 33-8176, 34-17226 (January 22, 2003).) Further, as discussed in
Copley's October 5, 2009 letter to Mr. Pisto (Ex. F), the Commission submitted to Congress in
2008 a report on mark to market accounting in which it presented recommendations that
suggested the appropriateness of discretion and flexibility, including the application of
"judgment" in making market price decisions. Here, the use of the full liquidation value method
has produced a skewed and unreasonable result- Copley's per share NAV does not reflect the
realistic value of the Fund - and, therefore, such flexibility is warranted.
6. 	The Commission has permitted management discretion with respect to GAAP and tax
accounting provisions.
We understand from prior correspondence that the Staff apparently has adopted the
position that ASC 740 does not allow for any discretion or flexibility with respect to accounting
for deferred tax liability. There is, however, evidence to the contrary, as the SEC has permitted
certain flexibility to depart from a strict interpretation of GAAP or other tax accounting
provisions where doing so would lead to more accurate reporting.
First, we are aware of at least two entities- Weyerhaeuser and American Tower Corp.
that recently converted from C Corporations into real estate investment trusts ("REITs") and, in
doing so, have exercised discretion with respect to accounting for deferred tax liabilities. Upon
conversion to REIT status, those entities would be subject to a tax on any "built-in gains" that
had accrued as of the conversion date if they recognized gains on the disposition of any assets
owned at the time of the conversion during the 10-year period following the conversion.
Nonetheless, both Weyerhaeuser and American Tower have not accounted for deferred tax
liabilities associated with such "built-in gains"- presumably concluding that their likelihood of
disposing of such assets within the 10-year recognition period is exceedingly remote. (See also
discussion of Weyerhaeuser in the September 28 Letter at Ex. A, pp. 7-8.)

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 10
To our knowledge, the SEC has not challenged the approaches of either Weyerhaeuser or
American Tower. Notably, the conversions to REITs by Weyerhaeuser and American Tower
took place in 2010 and 2012, respectively- years after the Commission mandated that Copley
not exercise any management discretion with respect to its deferred tax liability accounting.
Although the Fund's situation is not entirely equivalent to that of Weyerhaeuser and American
Tower, it is sufficiently analogous because like those entities, Copley is seeking to exercise
discretion not to account for the full amount of liabilities that are contingent and exceedingly
remote. Copley does not understand the SEC's justification for prohibiting it from exercising
similar management discretion, but later permitting· Weyerhaeuser and American Tower to do so.
Put differently, Copley submits that the SEC's interpretation of ASC 740 as applied to the Fund
is fundamentally inconsistent with the deferred tax liability accounting of these two REITs.
Second, in at least one instance, the SEC has granted no-action relief permitting an
investment company to present its financial statements in a manner that would have been
prohibited under a strict interpretation of GAAP. In April of 2008, the Division assured Fidelity
Investments that it would not recommend enforcement action against a Fidelity registered
investment company called the Gold Portfolio if it consolidated its financial statements with
those of its subsidiary, Fidelity Select Gold Cayman Ltd. See Response of the Office of Chief
Accountant of the Division oflnvestment Management to Fidelity Investments, 2008 SEC No
Act. LEXIS 459 (Apr. 29, 2008).
Under a technical reading of the ICA, the subsidiary might not have been considered an
investment company because it was only invested in commodities, which are not considered
"securities." !d. at * 10. Therefore, the Gold Portfolio technically was not permitted to
consolidate its financial statements with the subsidiary, pursuant to GAAP and Rule 6-03(c)(l)
of Regulation S-X, which preclude consolidation by a registered investment company with an
entity that is not an investment company. !d. at *4-*5. The Division, however, accepted
Fidelity's argument that notwithstanding those regulations, it would be appropriate to consolidate
the financial statements of the subsidiary into the Gold Portfolio because it would give
shareholders a "more accurate picture" of the portfolio and its structure. Specifically, the
subsidiary was authorized to invest in securities, would operate as an investment company for all
relevant purposes, and was established to act as an investment vehicle for the Gold Portfolio. !d.
at *5, * 15. Copley, likewise, should be permitted flexibility to depart from a strict interpretation
of GAAP by formulating a reserve for deferred tax liability that leads to a per share NAV that
better, and more accurately, reflects the true value ofthe Fund's shares to the investing public.

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 11
For all of the reasons summarized here (and others more fully articulated in the attached
Exhibits) Copley requests that the Division accept the Fund's proposal regarding its accounting
for its deferred tax liability for unrealized gains and issue a final order granting such relief.
C. Copley's New Proposal
In addition to the arguments which Copley has previously advocated, Copley now
submits the following two new proposals that, given Copley's circumstances, would result in a
fairer and more accurate disclosure to the investing public, together with a more equitable
outcome.
1. 	Reserve Formula
The Fund proposes to accrue a deferred tax liability that fairly and accurately reflects a
realistic tax liability, and which addresses the issues regarding the ability to meet redemptions at
aNA V that does not include a tax reserve that assunies full liquidation. Accordingly, the Fund
proposes to accrue a defined tax liability using one of the following two formulas, each of which
is fully transparent.
(a) Alternative 1
• 	At the end of each calendar quarter, the Fund will calculate its average historical
turnover rate over the previous five, or even ten, years. In calculating its NAV on
a daily basis, Copley will use a tax reserve calculated at a tax rate equal to a
percentage of the statutory corporate tax rate determined at four times the average
historical turnover rate. The historic, average five-year turnover rate of the Fund
for the period from February 29, 2008 through February 29, 2012 was 2.31 %; the
average ten-year turnover rate is 2.28%. (See Portfolio Turnover Rate chart
annexed hereto as Exhibit K.) Thus, for example, if the unrealized gain at the
close of business is $50,000,000, the deferred tax liability under the full
liquidation value approach would be $17,500,000. Under either the historical,
five-year rate of 2.31% or the historical ten-year rate of 2.28% (both rounded to
2.5%), Copley would set a reserve at four times that 2.5%, or 10%, of the
$17,500,000, i.e., $1,750,000. 	Based on these actual average historical rates,
Copley respectfully submits that any multiple of four times allows for a
reasonable and adequate tax reserve.

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28,2012
Page 12
• 	This formula obviously would be independent of any unfettered discretion of the
Fund's management. Rather, it would reflect, in a most conservative manner, the
average historical turnover rate of the Fund and, therefore, the lack of need for
or propriety of- a "full" or "liquidation based" tax reserve.
• 	Under this scenario, the Fund would ensure that even if it receives requests on any
given day which would require sales of investment assets at a rate four times in
excess of its historical rates - a high number based on a 20-year historical track
record - it will be able to accommodate such requests.
(b) Alternative 2
• 	At the end of each trading day, the Fund will determine the highest daily
redemption of its shares (as a percentage of shares outstanding) during the
previous five years. In calculating its NAV on a daily basis, Copley will use a tax
reserve calculated at a tax rate equal to a percentage of the statutory corporate tax
rate determined at four times the highest daily redemptive rate. For example, if
the unrealized gain at the close of business is $50,000,000, the deferred tax
liability under the full liquidation value approach would be $17,500,000. If the
historically highest daily redemptive rate of the Fund were 2%, Copley would set
a reserve at four times that 2%, or 8%, of the $17,500,000, i.e., $1,400,000. This
formula, likewise, would be totally independent of the unfettered discretion of the
Fund's management. It would reflect, in a most conservative manner, the
historically low redemptive rate of the Fund and, therefore, the lack of need for
or propriety of- a "full" or "liquidation based" tax reserve.
• 	To put this alternative into perspective, the highest daily redemption in the history
of the Fund since inception was $1,000,000, which represented approximately
23,260 shares or approximately 1.6% of the total outstanding shares on the date of
redemption. The redemptions were effected with no problem.
• 	Under this scenario as well, the Fund would insure that even if it receives
redemption requests on any given day that are four times greater than its
historically highest redemption- an inconceivably high number based on a 20
year historical track record- it will be able to accommodate such redemptions.

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 13
Either alternative will assure investors in the Fund the ability to redeem their shares at the
stated, accurate NAV, thus addressing any concerns that the SEC may have previously harbored.
(c) Further Safety Valve
In any event, under Section 22(e) of the ICA, the Fund need not redeem all such shares
on the day such requests are received, but instead has seven days to redeem them. The Fund has
never failed to redeem on the day requests are made. Although the Fund expects to continue to
honor all redemption requests on the day requested, it notes that Section 22(e) provides an
additional safety valve.
Copley does not believe it is a cogent objection to its proposal to say that if more than 8%
ofthe shares are redeemed on one day, then the NAV will somehow be overstated due to an
insufficient deferred tax liability. In such case, the Fund would seek relief from the Staff and/or
could postpone some redemptions to the next day, or for several more days, or for an
appropriately longer period, in which case the NA Von those later days would be adjusted to
reflect any updated deferred tax liability. Again, the Fund would be following traditional and
accepted industry practice, since hundreds or thousands of funds would in fact defer some
redemptions if these requests reached 8%. If they did not, they would have to dispose of assets
at a material discount, resulting in an apparently overstated NA V. As discussed above, a fund is
presumed under GAAP to be a going concern that will continue in business. (See ARB 43.) In
other words, the regulatory framework of the fund industry, which promises investors liquidity at
a stated NA V, is founded on the premise that there will be an orderly process for large
redemptions all at once.
For example, if all the investors in Vanguard's S&P 500 Index requested redemptions at
the same time, they would, even with a wait of seven days, receive a fraction of their expected
NA V, if a distressed liquidation were mandated. Of course, either Van guard W<?uld implement
gating procedures or the SEC would be expected to provide relief by allowing for a more orderly
liquidation in such instance; the core point regarding the assumptions of the regulatory scheme
still holds.
Copley believes that such a sophisticated approach is appropriate given the unique status
and history of the Fund and, in particular, given the treatment apparently afforded to
Weyerhaeuser and American Tower, both of which have excluded deferred tax liabilities relating
to assets whose sale is considered remote. Copley's alternative rational formulas similarly take
into account the fact that the accrual of the full deferred tax liability under the liquidation value

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 14
methodology would be exceedingly remote. The Fund believes that the Commission has a
regulatory obligation to provide Copley with equal treatment.
The Division simply has not addressed the issue of this disparate treatment. If the
Division's response to the Fund in its September 26, 2007 letter were applied to Weyerhaeuser
and American Tower, those companies would have to accrue a deferred tax liability calculated
by assuming a liquidation of all their assets. These companies are not special purpose vehicles
restricted by covenants designed to limit borrowings ("bankruptcy remote vehicles"). Thus, for
example, they may borrow, become overleveraged and have to sell assets. Additionally, they
may encounter environmental or other operating liabilities, be subject to large legal claims and
be forced to sell assets. Nonetheless, the Commission apparently has taken the position that the
prospect of such a disposition of assets is sufficiently remote to warrant a deferred tax liability
that assumes there will be no such sale. The Fund respectfully submits that it is likewise entitled
to such treatment.
2. 	Board Resolution to Convert to RIC Status
As discussed above, the Fund has long contemplated conversion to a RIC in the event
unforeseen circumstances caused gains to be realized that consumed the entire amount of
accumulated deferred incomes taxes it has recognized. To ensure that this occurs as first
contemplated by the Board years ago, the Fund has recently enacted new Board resolutions
confirming its intent and detailing how and when this RIC conversion shall occur. A redacted
copy ofthe Board minutes adopting the Resolutions, on March 23, 2012, is annexed hereto as
Exhibit L.
The resolutions (Ex. L) provide that if the deferred tax liability, as computed under the
proposal described above, reaches an amount equal to 10% of Pre-Tax NA V, defined as the
NA V of the Fund plus an amount equal to Copley's deferred tax liability as of the end of such
trading day, the Fund will convert to a RIC for tax purposes. Upon such conversion, there would
be a further parallel with Weyerhaeuser and American Tower, since those companies have
converted from C Corporation to REIT status and have assumed they will not sell assets so as to
recognize built-in gain for 10 years, and the Fund will be making the same (or a parallel)
conversion and assumption. The Fund, however, will continue to accrue a deferred tax liability
in excess of the assumptions employed by Weyerhaeuser and American Tower, as certain asset
sales sufficient to support redemptions of the Fund's shares will be assumed. The Fund, unlike
Weyerhaeuser and American Tower, does have explicit restrictions on its permitted leverage
under the ICA, and is, for all practical purposes, a bankruptcy remote vehicle. Thus, if anything,

Jaime Eichen
Chief Accountant, Division of Investment Management
March 28, 2012
Page 15
the Fund's tax accrual proposal is far more conservative than the practices of Weyerhaeuser and
American Tower that are currently sanctioned by the Commission.
* 	* 	* 	* 	*
Based on the foregoing law, facts and arguments, and those set forth in the Exhibits
annexed hereto, CopleY submits that its use of a formulaic reserve in accounting for deferred tax
liability, and the Fund's new proposals, will satisfy any concerns the Division and/or the
Commission may have. Additionally, the alternative formulas presented herein would
substantially mitigate the misleading effects of the full liquidation tax reserve calculations
currently being employed, as more fully set forth at pages 6 to 9, supra. As the Staff previously
has recognized, the Fund, like Weyerhaeuser and American Tower, has a unique investment
philosophy and operation and, therefore, requires novel, but equal, treatment.
Literally for years, Copley has presented multiple legitimate arguments in support of its
position that the Fund and its investors have been treated unfairly given the acknowledged,
unique circumstances. And while the Staff has been receptive to a courteous dialogue on these
points- including a lengthy conference call with numerous Division·personnellast Fall- it has
yet to provide any written explanation regarding the Fund's multiple proposals and the
conclusion that they would not result in a more reasonable, accurate and equitable result for both
Copley and the investing public. Nor has the SEC explained its apparently disparate treatment of
Weyerhaeuser and American Tower, and Copley, with respect to permitting certain management
discretion under ASC 740. As a result, Copley respectfully requests that the Division address its
prior arguments, as well as the new proposals set forth in this letter, in a final order.
We look forward to your favorable response. If you have any questions, or if we can be
of further assistance, we would welcome the opportunity to discuss these issues further with you
and/or your Staff.
Enclosures
cc: 	David I. Faust, Esquire (w/attachments)

FAUST OPPENHEIM LLP
ATTORNEYS AT LAW
488 MADISON AVENUE
NEW YORK, NEW YORK 10022
WRITER'S DIRECT E-MAIL 	TELEPHONE (212) 751-7700
davidfaust@frolaw.com 	FACSIMILE (212) 371-8410
September 28, 2011
VIA CERTIFIED MAIL
Division of Investment Management
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-0504
Re: 	The Copley Fund, Inc.
Request for No-Action Assurance
Ladies and Gentlemen:
We write on behalf of the Copley Fund, Inc., a corporation organized under the laws of the State of
Nevada and a registered investment company under the Investment Company Act of 1940, as amended (the
"ICA") ("Copley Fund"). 	Copley Fund seeks assurance from the staff of the Division of Investment
Management that it will not recommend enforcement action to the U.S. Securities and Exchange
Commission (the "Commission") if Copley Fund (1) prepares and issues financial statements using a
reserve for taxes on unrealized gains based on management's estimates, rather than on the assumption that
all assets with unrealized appreciation would be sold at current prices and/or (2) issues and redeems shares
based on current net asset value as so determined with an explanation of the calculation and a comparison
of the differences between such calculation and the calculation of net asset value with a reserve for taxes on
all unrealized appreciation.
We make this request based on (i) Copley Fund's clear investment policies which have been consistently
applied since inception, (ii) explicit language in the applicable regulations which provide for exceptions to
fixed rules and permit estimates where necessary or appropriate and (iii) the overriding policy of the federal
securities laws to promote, if not require, full and accurate disclosure of all material information.
Factual Background
Copley Fund is a regular corporation (C corporation). Like a Regulated Investment Company
("RIC"), Copley Fund seeks to earn dividend and interest income as well as capital gains. Unlike a RJC,
Copley is entitled to use the dividends received deduction whereby up to 70% of the dividend income
received, or 70% of the taxable income of Copley Fund, whichever is less, is exempt from federal taxation.
The remaining taxable income (whether derived from dividends, interest or capital gains) is taxed to the
Fund at a current federal tax rate of35%. Dividends, interest income and capital gains are not distributed,
but rather are accumulated within Copley Fund and are added to the value of each share on a daily basis.
Copley Fund's portfolio securities are all highly liquid and are marked to the market daily. Any increase or
decrease in value is reflected in the per share price, which is publically available after the close ofbusiness
every day on which The New York Stock Exchange is open.
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Division of Investment Management
Securities and Exchange Commission
September 28, 2011
Page2
Share Price "Based" on NA V
Pursuant to Rule 22c-1 of the ICA open end funds, like Copley Fund, are required to issue and
redeem shares "***at a price based on the current net asset value of such security ... " (emphasis added).
Current net asset value is defined as "***amount which reflects calculations, whether or not recorded in the
books of account, made substantially in accordance with the following, with estimates used where
necessary or appropriate" (emphasis added). ICA Rule 2a-4. Rule 2a-4(a)4 provides that in calculating
"current net asset value" for use in computing the current price of redeeq1able securities: "Appropriate
provision shall be made for federal income taxes if required" (emphasis added). Rule 2a-4(a)(4) does not
define "ifrequired."
The above two Rules, read together, do not explicitly require sales or redemptions at "net asset
value." Rule 22c-l(a) requires sales or redemptions to be at a price based on current net asset value. Rule
2a-4(a)4 provides for how to calculate net asset value for use ''in computing periodically the price the
current price for the purpose of' sales and redemptions. Using "net asset value" to compute a price is not
the same as requiring net asset value to be the price. One obvious accepted variation is that commissions
and other charges may be added to sale prices and deducted from redemption prices, if fully and accurately
disclosed.
There is no explicit requirement in the above two Rules to use GAAP, but the Commission has
required GAAP in financial statement reporting by registered investment companies. We suggest that, in
the case of Copley Fund, for the reasons set forth below, the Commission should permit Copley Fund to (1)
prepare its financial reports and/or (2) issue and redeem shares based on a net asset value calculation which
reflects, a management determined tax reserve, so long as there is transparency in explanation as to how the
tax reserve and the share price is determined.
Copley Fund seeks to price its shares based on a net asset value calculated with a management
estimate of its liability for federal income tax on unrealized appreciation, not on the assumption that the tax
reserve should be calculated at a 35% tax rate on all unrealized appreciation. Based on Copley Fund's
investment strategy and decades long history oflong-term holding of its underlying securities, a tax reserve
calculated at a 15% tax rate is more descriptive of Copley Fund's actual need for such a reserve (see below
for a further description of the tax reserve issue). We suggest, if you so permit, that the prospectus contain
an explanation of the difference in pricing calculated at each tax rate to maximize transparency to
imrestors. See below for an example of the illustration and explanation:
Tax Reserve
Requiring Copley Fund to reports its net asset value with a 35% reserve for federal income tax on
unrealized gains, and then requiring Copley Fund to issue and redeem shares based on that calculation is
materially misleading for three reasons.
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FAUST OPPENHEIM LLP
Division of Investment Management
Securities and Exchange Commission
September 28, 2011
Page 3
First: It does not accurately reflect Copley Fund's decades long investment policy and practice.
Copley Fund's investment policy and p·ractice includes long-term holding of its investment positions. Its
federal income tax liability from inception, expressed as a percentage of earnings are as follows:
Year Ended 	Tax reserve as% of total assets using SEC mandated
tax reserve
Tax reserve as % of total assets
using management determined
tax reserve
2/28/2011 	20.25% 	1.26% (Assuming a
management determined tax
reserve of$1M)
2/28/2010 	18.11% 	1.45% (Assuming a management
determined tax reserve of $1M)
2/28/2009 	15.67% 	1.56% (Assuming a management
determined tax reserve of$1M)
2/29/2008 	20.13% 	1.15% (Assuming a management
determined tax reserve of $1M)
0.92%	2/28/2007 	20.75%
2/28/2006 	19.31% 	1.00%
2/28/2005 	18.48% 	1.04%
The effect on the price at which Copley Fund may issue and redeem shares is as follows:
Year Ended 	Share Price
NAV- Tax reserve @35%
Share Price
NAV- Management
Determined tax reserve
2/28/2011 	$46.27 	$57.31
2/28/2010 	$40.21 	$48.39
2/28/2009 	$35.80 	$41.81
2/29/2008 	$44.07 	$54.56
2/28/2007 	$43.71 	$54.67
2/28/2006 	$38.17 	$46.86
2/28/2005 	$36.12 	$43.88
Second: 	Calculating net asset value after deduction of an unrealistic "reserve" materially
understates the amount of assets actually under management, and thereby overstates investment results as a
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Securities and Exchange Commission
September 28, 2011
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percentage of assets. The following chart indicates the misleading results.
Year
Ended
Gain/Loss 	Investment
reserve
results 	using 	SEC 	tax 	Investment results with
management detennined
tax reserve
2/28/2011 	$8,364,758 	13.26% 	10.71%
2/28/2010 	$6,583,992 	11.71% 	9.73%
2/28/2009' 	($12,450,117) 	-22.14% 	-19.83%
2/29/2008 .· $2,418,380 	3.48% 	2.81%
2/28/2007 	$12,198,111 	17.57% 	14.04%
2/28/2006 	$4,815,279 	7.92% 	6.45%
2/28/2005 	$7,715,251 	13.00% 	10.70%
Third: Calculating net asset value after deduction of an unrealistic "reserve" materially overstates
Copley Fund's operating expense ratio.
· .. - For the fiscal year ended February 28,2011, the Fund's ratio of total annual operating expenses to
average net assets, using the Commission staff mandated reserve, was 7 .96%. This ratio includes deferred
income taxes and does not include an investment advisory fee waiver (also per the Commission Staffs
requirement). Without including these deferred taxes, which are not an actual operating expense of the
Fund, and including the investment advisory fee waiver, the ratio would be 1.95%. Management believes
this ratio is more appropriate for comparison to other funds.
Year Ended 	Expense
reserve
ratio 	using 	SEC 	tax 	Expense 	ratio 	using 	mgnt
determined tax reserve
2/28/2011 	7.96% 	1.95%
2/28/2010 	5.54% 	1.70%
2/28/2009 	1.58% 	1.35%
2/29/2008 	1.56% 	1.25%
2/28/2007 	5.90% 	1.13%
2/28/2006 	3.01% 	1.21%
2/28/2005 	3.82% 	1.15%
Discussion
GAAP is intended to provide a principled framework by which financial transactions are
recorded in an accurate, consistent, manner pennitting comparability with prior years information and
with statements prepared by other comparable entities. Those objectives are best served by permitting
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Division of Investment Management
Securities and Exchange Commission
September 28, 2011
Page 5
fully and fairly disclosed management judgments to be used when particular facts and circumstances
warrant a departure from a literal application of a guideline or principle, e.g., where a literal application
would be misleading.
Financial reporting should not be a simple "check the box" exercise; it should provide useful
information for making informed business and economic decisions. To be useful, fmancial statements
must be reliable. To be reliable they should be verifiable, neutral, unbiased and represent what really
happened or existed during the period or on the date as of which they speak. They also should be
comparable i.e. prepared in a similar manner to comparable businesses, tailored to individual
cirGUmstances which are fully and fairly disclosed. To the best of our knowledge, there are no other
registered investment compames structured or operating like Copley Fund, so the most relevant
comparisons are to Copley Fund's own prior reports. This makes it all the more important that
deviations in mea5irred outcomes from period to period for Copley Fund should be the result of
deviations in performance, not changes in methods.
Pursuant to staffcom.ments received in connection with Copley Fund's updating amendment to
its registration statement filed on June 6, 2008, Copley Fund was required to file an amended N-CSR/A
which contained a "Restated Annual Report to Shareholders." This restatement covered much of
Copley Fund's historical financial information including average annual returns, the per share value
table and the financial highlights table.
Prior to this required restatement, Copley Fund's financial statements were completely within
the basic framework and objectives ofGAAP. The PCAOB examined the Fund's financials and report
thereon for the period ended February 28, 2006 and issued an affirming clean report thereon. The
fmancials had been prepared in a consistent manner for 30 years. They were useful because they
· enabled informed decision making by an investor or prospective investor since they clearly and
correctly set forth results for the periods covered by the reports. They were reliable because they were
verifiable and the information accurately represented results from a historical perspective, consistently
reported. This changed dramatically in 2008. Copley Fund's actual NAV per share at February 28,
2007 was $54.67 and it was reported as such in the Fund's Annual Report of even date. Yet, the
Restated Annual Report for the period ended February 29, 2008 reflects a per share value for that same
date (February 28, 2007) of $42.54. This simply did not reflect actual results, was not consistent with
prior years' reporting and thwarted comparability with prior years.
The foundation of G AAP consists of basic assumptions, basic principles, basic constraints and
modifying conventions. Some of these are particularly relevant herein.
Assumptions: Going Concern Assumption: This assumption assumes that a business will
continue operating and will not close or be sold.
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Principles: 	Adequate Disclosure: This principle states that all pertinent information should be
fully disclosed and in understandable form.
Constraints and Modifying Conventions. 	The modifying conventions include Application of
Judgment- an accountant may, indeed should, tailor GAAP to fit specific varied circumstances if the
result is reasonable under the circumstances, especially when the strict adherence to GAAP will
produce unreasonable results. Assuming- arguendo that the use of the reserve method to determine an
appropriate reserve for taxes is a "departure" from GAAP, it certainly appears reasonable under the
circumstances relevant to Copley Fund, where the use of the theoretical "full liability" accrual method
produces a misleading result, i.e., aper share net asset value which does not reflect the realistic net
assets of the Fund, distorts performance and expense ratios, and disables redeeming shareholders from
receiving their fair proportionat~ share of Copley Fund assets.
Copley Fund is unique. To its knowledge, it is the only registered investment company which
is a C corporation for federal tax purposes. As an open-end registered investment company, Copley
Fund's share price is based upon a mark to market NA V as opposed to a value based on supply and
demand for its shares. If Copley Fund were permitted to revert to its pre-2008 method of determining
its tax reserve with full disclosure, as now requested, prospective investors would know what it costs
to buy a share and investors would know what they would get by redeeming a share, with the
assurance that they were getting a fair and fully transparent price on purchase or redemption.
If Copley Fund's methodology is applied consistently, as it was in the past (pre 2008), and is
fully disclosed all shareholders and prospective shareholders through ample disclosure, comparisons
with other mutual funds will be facilitated and will not result in overstated performance, by
understating the amount of investable assets which are "at work" to produce income or loss or by
grossly misleading reported expense ratios. For this reason alone the use of a reserve method falls
well within the judgment parameters ofGAAP.
While Copley Fund believes that its pre 2008 financials historically were compiled and
presented in accordance with GAAP, the modifying conventions make clear that GAAP is not "carved
in stone" and that variations are made and considered acceptable. 	If nothing else, GAAP and FAS
109 are not clear on the appropriate calculation of a tax accrual particularly in view of the fact that the
"inherent assumption" underlying FAS 109 is not present given the particular circumstances of the
Fund.
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Securities and Exchange Commission
September 28, 2011
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CONCEPTS OF FAIR VALUE 	<
Copley Fund is currently valued at its liquidation value. Simply put, this does not represent the
fair value of the Fund's shares. It ignores reality and misstates the assets of the Fund.
Utilization of a full liquidating value accrual method is contrary to the basic "going concern"
assumption of GAAP that Copley Fund will continue operating and will not precipitously liquidate all
of its security positions. The use of the full liquidating value method in Copley Fund's circumstances
makes the exact opposite assumption, that all portfolio securities will be liquidated as at the end of
each reporting period. This simply is not the case and is therefore unrealistic and misleading.
On September 30, 2008, the SEC's Office of the Chief Accountant issued a press release (2008
234) which addressed fair value accounting stating that "(t)he current environment has made questions
surrounding the termination of fair value particularly challenging for preparers, auditors, and users of
financial information". While not precisely on point, the concepts addressed in the release are
applicable to this request. The release makes clear that Management's internal assumptions can be
used to measure fair value. It acknowledges that the determination of fair value often requires
significant judgment; particularly in unusual or atypical circumstances. The release also concludes
that clear and transparent disclosures are critical to providing investors with an understanding of the
judgments made by management.
An example of where the Commission accepted a management determined departure from a
strict, literal reading of a "required" tax accounting may be found with Weyerhauser Corporation,
("WY"). In 2010, WY converted from a "C" corporation to a real estate investmenttrust ("REIT").
Paragraph 28 of SFAS No. 109, Accounting/or Income Taxes, (ASC 740), provides, in part,
that, "... an enterprise's tax status may change from ... taxable to non-taxable .... A deferred tax liability or
asset shall be eliminated at the date an enterprise ceases to be a taxable enterprise .... The effect of an
election for a voluntary change in tax status is recognized on the approval date or on the filing date if
approval is not necessary .... The effect of recognizing or eliminating the deferred tax liability or asset
shall be included in income trom continuing operations ... "
Treasury Reg. Sec. 1.337(d)-7(a) provides that if property owned by a "C" corporation becomes
the property of a REIT in a conversion transaction, then "Sec. 1374 treatment" will apply unless the
"C" corporation elects "deemed sale" treatment with respect to the conversion transaction. Apparently,
WY did make a Section 1374 election. Therefore, ifWY, during the 10-year recognition period
commencing on the conversion date, recognizes gain on the disposition of assets owned at the time of
its conversion, it will be taxed on such gain (to the extent the gain had "economically accrued" as of the
conversion date) at the highest marginal corporate tax rate.
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September 28, 2011
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Nevertheless, WY eliminated its deferred~ liabilities accumulated as a result of certain
"taxable temporary differences", primarily resulting~ from djffer€mces between the carrying amount and
tax basis of its depreciable property, as of the first gay of the first taxable year for which its REIT
election became effective. Therefore, WY must have concluded that the likelihood of its disposing of
its built-in gain assets prior to the expiration of the recognition period was exceedingly remote and,
accordingly, chose to eliminate its deferred tax liabilities based on this judgment. Apparently, the
Commission has not challenged WY' s position. We requesj tha~ Copley Fund be afforded similar
flexibility to exercise judgment in determining its tax reserve,. In light of Copley Fund's record and
longstanding policies, its management should be permitted to ~ccrue and report an estimated deferred
tax liability rather than a "mechanical" one. This would morefairly present Copley Fund's financial
position and its results of operations and avoid the misleading re.porting described above.
Copley Fund believes that it has demonstrated-~ clear and compelling rationale as to why the
use of the Board's reserve accrual methodology best represents a fair value for its shares. It also
believes that the disclosures made in the attached proposed Supplement to the Fund's Prospectus
provides clear and transparent disclosures with respect to }?otlj the methodology and rationale used by
the Board as we11 as the risks inherent therein.
The static application of an accounting cohc~pt (F AS 10_9 treatment of a deferred tax liability)
that is equivalent to liquidation accounting serves to u.ndef\'alue the true fmancial position of the
Fund. It operates to overstate dividend yield and expense ratios and understate performance for
comparison purposes. Redeeming shareholders do not receive their proportionate share of Fund
assets.
Management of the Fund has, since 1992, attempted to reflect in the financial statements a
deferred tax liability to the extent that management anticipates, in an exercise of their best, good faith
business judgment that such a liability exists. Deferred income tax liabilities are at best an estimate
due to the nature of changing income tax rates, tax law and regulations. As demonstrated elsewhere
herein, when management was permitted to exercise its judgment in determining a tax reserve for
Copley Fund it never underestimated the Copley Fund's actual liability for taxes.
Expense Ratio
Copley Fund's actual expense ratio, after a consistent and voluntary $60,000 per year advisory
fee waiver Copley Fund's advisor have been maintained below 1.25%. These ratios, on average, are
well below the average ratios of all equity funds, which ranged from 1.44% to 1.07% over the same
period. Investment Company Institute, Fees and Expenses of Mutual Funds, 2007. Ratios for
equivalent small funds are much higher. Under the SWf-mandated ''full tax liability" reserves,
Copley Fund ratio was increased to 5.54% (!)for the year ended February 28, 2010- with no increase
in actual fees!- which is grossly misleading.
F:\2400-1 0 I\Copley'NoAction'005.doc

FAUST OPPENHEIM LLP
Division of Investment Management
Securities and Exchange Commission
September 28, 2011
Page9
SUMMARY
The Fund's overall structure, investment strategies and operating philosophy have not
materially changed since its inception in 1978. Its underlying principles and strategies have been
consistent, year to year, and the overriding concern of Management and the Board of Directors always
has been the welfare of the individual shareholders.
Every effort has been made to operate Copley· Fund in the best in~~re:Sts of the shareholders and
to reflect the true value of the Fund's assets in its net asset value. This effort has been thwarted by
compelling the Fund to use a full liquidating value accrual with respect to the Fund's unrealized
appreciation.
Copley Fund is required by Rule 22c-1a to issue and redeem, its shares at a price based on1
current net asset value. Rule 2a-4a defines current net asset value and specifically states that with
respect to NAV calculations "estimates (maybe) used where necessary or appropriate". That Rule also
provides that "(a)ppropriate provision shall be made for Federal Income Taxes if required" (emphasis
added).
There is no explicit requirement however that the full liquidating liability tax accrual be used in
calculating net asset value on which the daily issue and redemption price of its shares must be based.
For the reasons set forth above the Board of Directors believe that neither GAAP nor FAS 109
mandate a liquidating liability accrual. On the other hand, the Board does believe it clear that the use
of a full liquidating liability accrual does not represent a fair value with respect to the price of Copley
Fund's shares. In fact, the application of such a methodology is unrealistic, misleading and operates
to the detriment of Copley Fund and its shareholders.
As demonstrated above, the risk of the Fund incurring a tax liability in excess of the Board
established reserve is practically nil. 	Copley Fund believes that this risk should be assessed and
either accepted or rejected by the shareholders with the staff providing guidance related to the risk
disclosure. Of course, Copley Fund would be receptive to any disclosure comments made by the staff
and would make every effort to include them in all disclosure documents.
The Sarbanes-Oxley Act of2002 was a legislative directive to make financial disclosure more
meaningful and less boiler-plate and required management to sign off personally on the material
accuracy of financial statements. Copley Fund's management, since 2008, has faced the Hobson's
Choice of either signing off on financial disclosures which, in its honest, reasoned and good faith
view, are materially misleading OR violate the SEC staffs directive on the calculation of Copley
'It should be noted that "based on" is not synonymous with "at."
F:\2400-10 l \Copley'NoAction'005.doc

FAUST OPPENHEIM LLP
Division of Investment Management
Securities and Exchange Commission
September 28, 2011
Page 10
Fund's tax reserve. Neither choice is consistent with GAAP's objectives or with the purposes of the
Securities laws, rules and regulations.
Conclusion
The basic objective of accounting policies, and of the statutes, rules and regulationswhich govern
the United States securities markets, is to provide investors and prospective investors with materially
accurate information. 	.
We believe that, if allowed to proceed as requested, the investors in the Copley Fund will be
provided with sufficient, accurate information as to the method of calculating the price at issuance and
redemption of shares based on current NA V including a tax reserve at the management determined rate.
Further, we believe that even ifthis calculation of the tax reserve would be a technical deviation from
GAAP, it would not violate the fundamental principles of GAAP and would avoid the misleading
calculations which Copley Fund is now required to take and which results in misleading information to
investors and prospective investors.
We believe that full, transparent, non-misleading disclosures to investors and prospective investors
should be the paramount consideration, and not an unnecessarily restrictive interpretation of GAAP which
is not applicable in the particular circumstance of the Copley Fund and which results in misleading
information to investors and prospective investors.
On behalf of the Copley Fund, we hereby request that the Staff give its assurance that it will not
recommend that the Commission take enforcement action if the Copley Fund proceeds in the manner set
forth in this letter by specifically, (a) reverting to using a management determined tax reserve in all of its
financial reporting and/or (b) continuing to use the Commission's mandated tax reserve in its financial
reporting but being permitted to offer and redeem shares at a net asset value calculated with a management
determined reserve for federal income tax, with full disclosure as to methodology and effect.
I would be pleased to provide any additional information you request, to answer any questions you
may have and to meet with you at your convenience to discuss any or all aspects of this request.
Ver)Z1ml~ yours,
FAU~··.-= 	.. 	\ . 	·- -... _ ·- .. , -. 	{	-~,By: 	. 	: 	~
David I. Faust
F:\2400·1 0 I\Copley'NoAction'005.doc

••
••
.,
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20549
.<i>OIYIIIONO,.
September 26, 2007
Irving Levine
President
Copley Fund, Inc.
245 Sunrise Avenue
Palm Beach, Florida 33480
Re: 	Copley Fund, Inc. (the "Company")
Rle Numbers: 	2-60951 and 811-2815
Dear Mr. levine:
We are sending this letter to you as a follow-up to our teleconference
with Thomas Henry and Roy Hale held on August 16, 2007. 	We have
comments and questions with respect to the Company's financial statements
for the year ended February 28, 2007 ("2007 FS") filed In a Form N-CSR on
May·9, 2007. 	Mr. Hale, the Company's independent accountant audited the
2007 FS and Mr. Henry serves as the Company's counsel. 	The Company has
not elected to operate as a regulated Investment company ("RIC") under
subchapter M of the Internal Revenue Code. 	Thus, the Company Is taxed as
a subchapter c Corporation.
Our concerns primarily relate to the Company's accounting and
reporting of the effects of Income taxes. 	While It appears that the Company
has recorded Its portfolio securities at market prices In accordance with
Section 2(a)(41} of the Investment Company Act of 1940 ("1940 Act'1,
resulting In $53,994,093 of unrealized appreciation, we believe it has failed
to measure and disclose the future tax consequences related to this
appreciation, In accordance with accounting principles generally accepted in
the United States of America ("GAAP"}.
;t, 	Accounting and RePorting for Income Taxes in Accordance with
GMP
The Financial Accounting Standards Board's {"FASB'f) sta~ement of
Financial Accounting Standards No. 109, Accounting For Income t7xes ("FAS
109'') establishes the financial accounting and reporting standards for the
effects of income taxes that result from an enterprise's activities during the
current and preceding years. 	Paragraph 6 of FAS 109 states that t.~e

objectives of accounting for Income taxes are to recognize (a) the amount of
taxes payable or refundable for the current year and (b) deferred tax
llabllltles and assets for the future tax consequences of events that have
been recognized In an enterprise's financial statements or tax returns.
Paragraph 11 of FAS 109 sets forth a key concept underlying the
recognition of deferred tax assets and liabilities. 	Paragraph 11 provides
that:
An assumption Inherent In an enterprise's statement of financial position prepared in
accordance with generally accepted accounting principles js that the reported amounts
of assets and liabilities will be recovered and settled. respectively. Based on that
assumption, a difference between the tax basis of an asset or a liability and Its
reported amount In the statement of financial position will result In taxable or
deductible amounts In some future year(s) when the reported amounts of assets are
recovered and the reported amounts of liabilities are settled. (Emphasis added.) 	·
Paragraph 11 also provides several examples of Items that result In
differences between the recognition of transactions or events for financial
reporting purposes and for tax purposes. 	Revenues or gains that are taxable
after they are recognized In financial Income are Included as an example of
this difference. In Paragraph 11(a).
The FASB considered whether the deferred tax consequences of
taxable temporary differences truly represent a liability for fl'nanclal
reporting purposes. 	The FASB concluded that the deferred tax
consequences do represent liabilities. 	Paragraph 78 of FAS 109 states:
An enterprise might be able to delay the future reversal of taxable temporary
differences by delaying the events that give rise to those reversals, for example, by
delaying the recovery of related assets or the settlement of related liabilities. A
contention that those temporary differences will never result In taxable amounts,
however, would contradict the accounting assumption inherent In the statement of
financial position that the reported amounts of assets and liabilities will be recovered
and settled, respectively; thereby making that statement Internally lnconslste[lt. For
that reason, the Board concluded that the only question is when, not
whether, temporary differences will result In taxable amounts In future years.
(Emphasis added.).
Paragraph 16 of FAS 109 provides that, with respect to recognition and
measurement, "[a]n enterprise shall recognize a deferred tax liability or
asset for .9JJ. temporary differences and operating loss and tax credit.
carryforwards In accordance with the provisions of paragraph 17". (Emphasis
added.)' Paragraph 17 states:
Deferred taxes shall be determined separately for each tax-paying component (an
Individual entity or group of entitles that Is consolidated for tax purposes) In each tax
jurisdiction. That determination Includes the following procedures:
•
•
•2

a. 	Identify (1). the types and amounts of existing temporary differences and (2} the
• nature and. amo1int of each type of operating loss and tax credit carryforward and
the remaining length of the carryforward period
b. 	Measure the total deferred tax liability for taxable temporary differences using the
applicable tax rate (paragraph 18)
c. 	Measure the total deferred tax asset for deductible temporary differences and
operating loss carryforwards using the applicable tax rate
d. 	Measure deferred tax assets for each type of tax credit carryforward
e. 	Reduce deferred tax assets by a valuation allowance if, based on the weight of
available evidence, it Is more likely than not (a likelihood of more than SO percent)
that some portion or all of the deferred tax assets will not be realized. The
valuation allowance should be sufficient to reduce the deferred tax asset to the
amount that is more llkelx than not to be realized.
•
Paragraphs 41 to 49 of FAS 109 provide the disclosure requirements
for financial statement presentation. 	Paragraph 41 generally requires the
separation of deferred tax liabilities Into current and non-current amounts
based on the classification of the related asset or liability for financial
reporting. 	Paragraph 43 provides that financial statements must disclose (a)
the total of all deferred tax liabilities, (b) the total of all deferred tax assets,
and (c) the total valuation allowance recognized for deferred tax assets.
Paragraph 47 requires a reconciliation of the reported amount of income tax
expense attributable to continuing operations for the year to the amount of
Income tax expense that would result from applying domestic federal
statutory tax rates):o pretax income from continuing operations .
Investment companies are also subject to the accounting and
reporting standards established by AICPA Audit and Accounting Guide for
Investment Companies (May 1, 2006) ("Audit Guide"). 	Most Investment
companies subject to the Audit Guide elect and qualify as RICs and,
therefore, do not provide for federal Income tax. However, Investment
companies that do not elect nor qualify as RICs (such as the Company) or
Investment companies subject to other levels of taxation (e.g., foreign
taxes) should account and report Income taxes In accordance with FAS 109.
Paragraph 6.05 of the Audit Guide states:
Some investment companies may be subject to state, local, or foreign taxes on net
Investment income and realized gains on a recurring basis. State, local, and foreign
taxes, if payable, are reported on the accrual basis, including deferred taxes on the
unrealized appreciation or depreciation of investments.
The staff is aware of other Investment companies that chose not to
qualify _a~ ~UCc;; and these companies. genP,raU.y follow FAS 109 by recording a
oefer+ed tax liability associated with the unrealized appreciation of portfolio
securlties1• The staff Is unaware of any Investment company (other than the
• 1 See Tortoise Energy Capital Corp., ft.l,e.no. 811-21725, Form N-CSRS (Aug~ 1, 2007) and
Kayne Anderson MLP Investment Company, file no. 811-21593, Form N-CS;RS (Aug. 3,
2007).
3

Company) that chooses not to qualify as a RIC and does not accrue a
deferred tax liability associated with Its unrealized appreciation.
2. 	Summarv of the Company's Tax Presentation
The statement of operations-In the 2007 FS shows a provision for
income taxes of $283,481 and the statement of assets and liabilities shows
deferred Incomes taxes of $807,345 (referencing notes 1 and 2), accrued
income taxes-current of $137,125, and net unrealized appreciation of
Investments of $53,994,093. 	Notes 1 and 2, In pertinent part, state:
Note 1 Significant Accounting Policies
Income Taxes
The Fund flies tax returns as a regular corporation and accordingly the financial
statements include provisions for current and deferred Income taxes.
New Accounting Pronouncements.
On July 13, 2006, The Flnandal Accounting Standards Board ("FASB") released FASB
Interpretation No. 48 "Accounting for Un~erti;!lnty In Income Taxes" ("FIN 48"). 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 l:>e taken In the course o.f pr~p.arlng, the IW'lP's t~x
returns to determine whether-the lax positions are "more-likely-than-not" of being
sustained by the applicable tax authority. T<.~x positions not deemed to meet the more
likely-than-not threshold would be recorded as a tax benefit or expense in the current
year.- Adoption of FIN 48 Is requtrea for flseal years beginning after December 15,
2006 and Is to be applied to all open tax years as of the effective date. At this time
management believes that the adoption of FIN 48 will have no Impact on the financial
statements of the Fund.
Note 2 Federal and State Income Taxes
· The Income tax provision Included In the financial statements is as follows:
Regular tax liability ............................. .......... 	$283,481
The Fund provides deferred taxes for unrealized appreciation on Its Investment
portfolio to the extent that management anticipates that a liability may exlsi: 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 futur~.
The amount of deferred taxes currently available to the Fund Is $807,345. 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.
•
•
•4

The Fund has $1,908,9371n accumulated capital loss carry forwards which. expire as
• follows: $1,600,732 on February 26, 2008; ari~ $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.
It Is our understanding that you assert that the Company does not
need to record the entire deferred tax liability associated with the unrealized
appreciation on the Company's books and records because:
a. 	The Company maintains a cash position to assist It In meeting
redemptions;
b. 	The capital loss carryforwards will shelter some amount of
c;:apltal gains;
c. 	The Company could first sell securities without unrealized
appreciation to meet redemptions;
d. 	The Company has recorded a deferred tax liability of $807,345
which would shelter some capital gains;
•
e. 	The Company's Board of Directors monitors the above factors in
light of historical trends, the Company's Investment objective, its
low level of redemptions, andlts histOrically low portfolio
turnover, ensuring an appropriate reserve Is available In the
Company's deferred tax liabiflty account; and
f. 	The·entlre deferred tax liability would be due only if the whole
portfolio were sold (a circumstance you describe· as "liquidation")
and that the Board believes It would be Inappropriate to record
the full deferred tax liability.
The Company asserts that as long as It accrues sufficient deferred
Income taxes to compensate for the antldpated sale of appreciated
securities, there Is no harm to shareholders. 	Moreover, It contends that to
record the entire qeferred tax liability would not be In the best Interests of
Its shareholders, and that such action might be prohibited by Rule 22c-1
under the 1940 Act. 	Further, It states that a deferred tax liability should
only be recorded if it is "more likely than not" that the amount recorded
would ·ultimately be paid. 	Accordingly, It states that recording the full
deferred tax liability would understate Its net asset v~lue per share ("NAV").
The Company further asserts that it has provided adequate disclosure
regarding this Issue. 	.
The Company also claims that its Board of Directors passed a
resolution that would require the Company to convert to RIC status in the
event unfore?een circumstances caused· gains to be realized that consumed
• 	the entire amount of accumulated deferred Income taxes the Company has
5

recognized. 	You acknowledge that If the Company elects a conversion to 	•
RIC status, It might be required to have a deemed sale of all appreciated
securities and thus be required to recognize the tax associated with such
deemed sale. 	You believe this Is similar to a C corporation converting to a
subchapter s corporation and you assert that the'.IRS has issued regulations
that permit a C corporation to defer the tax on any appreciated property
held for 10 years or more following the conversion to S corporation· status.
You believe the Company's conversion would be similar and that the
Company should be able to argue to the IRS that, provided. the Company
held the appreciated securities for over ten years following conversion to RIC
status, the deemed sale provisions should not apply.
3. 	Staff Questions Regarding Accounting and Reporting for
Income Taxes ·
A. 	Appreciation of portfolio securities represents revenue to the Company
that Is taxable after It Is recognized In financial Income. 	Accordingly,
portfolio appreciation Is a temporary difference thattrlggers the recognition
of a deferred tax liability under FAS 109 and the Audit Guide. 	As discussed
in paragraph 78 of FAS 109, the issue Is not whether Jnc·ome taxes wlll
ultimately be due on the appreciation of portfolio secyrities, but when such
taxes will be due. 	The FASB directly refuted the notion that a delay In
recognition does not mean that a temporary difference, (such as the
Company's unrealized appreciation), will not resultJn taxable amounts In 	•future years. 	Accordingly, delaying a sale or rationalizing the delay of a sale
has no bearing on the recognition of a deferred tax liability associated with
the unrealized appreciation of that position.
The Company appears to have estimated some amount of deferred tax
liability using the factors previously discussed in Section 2 of this letter,
recording $807,345 as of the last financial statements. 	However, we believe
this amount is materially understated based on the temporary differences
resulting from the appreciation of portfolio securities as of the date of the
last financial statements. 	Further, the mechanics and specific assumptions
underlying this estimate are undisclosed. 	· 	•
Paragraphs 16 and 17 of FAS 109 require that a company recognize a
deferred tax liability for all temporary differences existing as of the date of
the financial statements. 	Paragraph 17(b) specifically requires measurement
of the total deferred tax liability for taxable temporai-y differences using the
applicable tax rate.
•6

• Please explain why the total deferred tax liability for temporary
differences arfsfng from appreciation of portfolio securities WiJS ·not recorded
and reported In accordance with FAS 109. 	·
B. 	The Company has disclosed the existence of capitaJioss carryforwards
which it intends to use to offset future taxable Income. The Company has
asserted that the existence of these capital loss carryforwards, In part,
obviates the need for It to recognize deferred tax liabilities related to the
appreciation of portfolio securities. 	Paragraph 17 of FAS 109, however,
provides specific instructions for the measurement and recognition of
deferred tax assets associated with the future tax benefits attributable to
capital loss carryforwards. 	Such future tax benefits should be measured and
recognized separate from the measurement and recognition of deferred tax
liabilities. 	··
Please explain why the Company has not separately measured and
recognized deferred tax assets for the capital loss carryfo~.9rd:S and other
applicable future tax benefits in accordance with FAS 109 ....
• C. 	It appears that the Company has not provided all of the dtsclosures
required under FAS 109, as described In Paragraphs 41 through 47 of the
standard. 	Please explain why the Company did not provld~..all of the
disclosures required under FAS 109 within the notes to tne financial
statements. 	·
D. 	We believe the Company has a clear obligation to account for Income
taxes In. accordance with GAAP, which Includes the requirements established
by FAS 109. 	Rule 4-01(a)(1) of Regulation S-X provides that "[f]lnanclai
statements flied with the Commission which are not prepared In accordance
with generally accepted accounting principles will be presumed to be
misleading or inaccurate, despite footnote of other disclosures, unless the
Commission has otherwise provided."
Pfease explain why the Company's apparent failure, as outlined In this.
letter, to comply with FAS 109, a generally accepted accounting priflCiple,
does not make the Company's 2007 FS misleading.
4. 	Estimated Deferred Tax Liability
•
We believe that the requirements of FAS 109 apply to the Company in
order for its financial statements to be presented fairly and In accordance
with GAAP. 	Accordingly, we believe that significant adjustments are
required to the financial statements. 	We are pt:"ovidlng the following
· estimate, based upon Information contained in the Company's latest financial
1

statements, to demonstrate the significance of this Issue to the Company,Ats
shareholders, and its prospective shareholders.
•Unrealized Appreciation 	$ 53,994,093
Currently Enacted Tax Rate 	35°/o ,
Entire Deferred Tax 	$ 18,8971932
Less: Existing Deferred Tax 	807.345
Unrecorded Deferred Tax 	$ 	18,090,587
Outstanding shares 	1,588,813
NAV/ Share Difference 	($ 11.38)
The Company might avail itself of capital loss carryforwards, the use of-
which could mitigate the NAV/share Impact described above. 	The 	_... '
measurement and recognition of deferred tax assets, If any, however, are
subject to the requirements established under FAS 109, Including the
determination of whether It Is more likely than not the future tax benefits
will be realized. 	We are unable to estimate the Impact of deferred tax
assets, If any, on this analysis because we are uncertain If a valuation_>_.- 	•
allowance exists.
Notwithstanding potential deferred tax assets described above, we
bel-ieve the necessary adjustments to the Company's flnanclal·statements
are material to shareholders. 	As of February 28, 2007, the Company's
NAV/Share was $54.67. 	When ,our estimate of the Impact of adjustments Is
compared to the Company's share price as of that date, it appears that the
share price was overstated by approximately 26%.
s. 	General Comments
A. 	Page 1 of the 2007 FS states "[t]hus, if a Copley shareholder does not
redeem, the shareholder pays no taxes." Regardless of the FAS 109 analysis
that will be provided by the Company, the Company has paid taxes and
thus, the. shareholder has paid a proportionate amount ofthose taxes. 	We
believe the statement should be revised to state that, while the shareholder
does not pay a tax directly, they do pay taxes Indirectly througn the
company, and at a rate that may be higher than If the shareholder pald such
taxes directly. 	The consequences- of two Tevefs of taxation should also be
explained.
•8

•
•
•
B. 	The 485BPOS filed by the Company on July 2, 2007 improperly
presents the fee waiver regarding the management fee. 	The Company
shows the net manaqement fee of .63% in the body of the fee table, even
though a footnote states that "[w]lfhout such waiver the fee would have
been 0.71%" and that "[t]he Advisor voluntarily waived a portion of the
advisory fees but It Is under no contractual obligation to do so." See
Instructions 3(d)(l) and 3{e) of Form N-1A. 	The disclosure must be revised
accordingly. 	Only contractual wafvers ca·n be presentea ·rn tne boay of ttie
fee i:abrfi and both gross and net expenses must be shown In the fee table •
.C. 	Rule 38a-1 under the 1940 Act mandates that the Company have a
functioning Chief Compliance Officer {''CCO") and a compliance program.
We note that there Is no disclosure regarding the Identity of the Company's
ceo. 	Please provide a copy of this letter to the ceo, and assure his/her
Input In the Company's response letter. 	Has the Company finalized a
compliance program pursuant to the requirements of the 1940 Act? 	Please
advise us who the ceo Is and make appropriate disclosure revisions, as
needed.
D. 	In the Company's Form N-CSR, the Company provided disclosure
regarding its historical performance from 1984 through 2007. The
disclosure states that there was a "reserve for taxes on unrealizecLQains" for
1989. 	Please explain what this Is and why the Company appears to have
made a change at that time.
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure In the filings reviewed by the staff to be certain
that they have provided all Jr:lformatlon Investors require. 	Since the
Company and Its management are in possession of all facts relating to a
Company's disclosure, they are responsible for the accuracy and adequacy of
the disclosures they have made. 	· 	·
In connection with your response to our comments, please provide, in
writing, a statement from the Company acknowledging that:
• 	the Company Is responsible for the adequacy and accuracy of the
disclosure In the filings;
• 	staff comments or changes to disclosure in response to staff comments.
In the filings reviewed by the staff do not foreclose the Commission
from taking any action with respect to the filing; and
_, .;
9

••
• 	the Company may not assert staff comments as a defense In any
proceeding Initiated by the Commission or any person under the
federal securities laws of the United States. •In addition, please be advised that the Division of Enforcement has
access to all Information you provide to the staff of the Division of
Investment Management in our review of your filings or In response to our
comments on your filings. 	Please note, a non-response by the Commission
or Its staff to any Information you submit or fall to submit does not mean the
Commission acquiesces In or agrees with any position you have taken.
Please contact Bryan Morris at 202-551-6935 or Kevin Rupert at 202-551
6966 if you have any questions.
Sincerely,
cc: 	Thomas c. Henry, Esquire
Roberts & Henry
164 Honeysuckle Drive
Jupiter, FL 33458
Bryan J. Morris
Assistant Chief Accountant
Division of Investment Management
Richard F. Sennett
Chief Accountant
Division of Investr:nent Management
Frank Donaty
Assistant Director, Office of Disclosure and Review
Division of Investment Management
•10

. •~~;- .. "' 	..	-·
UNITED STATES
SEC'ORJTIES AND EXCHANGE COMMJSSlON
BOSTON RltGJONAL OFFICE 	INIIt'I'I.Yl)ol(II'IJ!,.SI!QUOili
. l3RDFLOOR
33 ARCH STRE!:T
BOSTON, MASSACHUSETTS 02110.1424
RY .FACSIMILE (410) 745-5802 and FIRST CLASS MAIL
November 30, 2007
Thoma.'i C. Hcmy, Esq.
Roberts.& Henty 	·
164 Honeysuckle Drive
Jupiter. FL 33458
Re: ~pley t"und. Inc. CB-02335)
Dear Mr. liOlU)':
This Jetter confirms today's telephone conversation in which thu .starr advised you that it
intends to recommend that the Commission bring an emergency civil injunctive ·action against
your client,' Copley Flmd, Inc .. alleging that it violated both Rule 22c-l promulgated under
Section 22(c) of the Investment Company Act of 1940 as well as Section 34(b) of the Investment
Company Act. 	In connection with the contcmplated.actionJ the staffmay seek preliminill)' and
permanent injunctions (including a preliminary order barring the Copley fund from selling or
redeeming shares at l:l net asset value that is not calculated in conformity with generally accepted
accounting principles), civil monetary penalties and other relief. In accordance with Rule 5(c) of
the Commission's Rules on lnformaJ and Other Procedures, 17 C.F.R. § 202.5(c), we aro otlering
your client the oppOrtwlity to make a Wells Submission.
We enclose for your infon~atiop a copy of SecurHics Act Release No. 531 0 entitled
"Procedures Relating to the Commencement of Enforeement ~roceedings l:IIld Tennination of
Staff Investigations." If your client wishes to make a written QI videotaped submtssion setting
forth QflY rca.CJons of Jaw. policy or faci why it believes the civil injunctive action should not be
brought, or bringing any tacts to the Commission's Httention in connection with its considemtion
ofthis matter, you should forward the submission to me by no later than Decembe1· 5, 2007. Any
written submission should be limited to 40 pages. and any video submission should not exceed
12 minutes. Any submission should be sent to:

-e.! ... .,...,., .....
Thomas C. Henry, F.sq.
November 30, 2007
Page2
LeeAnn 0. Gaunt
Assistant R~gional Director
Securities and Exchange Commission
33 Arch Street. 23rd Floor
Boston. MA 02110-1424 .
In the event the staff makes an ooforcement recommendation to the Commission on this matter, we will
foiWatd any submission that you make Lo the Commfssion. Please be advised that the Commission may use the
information contained in such a submjssion as an admis.c;ion, or in iiDY other manner pcnnitted by the Federal Rule!:t
of Evidence, in connection with Commission enforcement proceedings, or otherwise. This practice is explicitly
provided for in the list of Routine Uses of Information (Item 4), which is contained in Fonn 1662, "Supplemental
Infonnation for Persons Requested to Supply lnfonnation Voluntarily or Directed to Supply Information Pursuant
to a Cornrnission Subpoena.'' For your in formation, a eopy ofFonn 1662 is enclosed. Please also be advised that
any submission you make may be discoverable by third parties in accordance with appl£able law.
lfyou have any questions, please contact me at 617-573·8945.
~?JI(J!Jat,#-LeeAnn G. Gau.nt
Assistanl Regional Director
Enclosures: 	Securities Act Release No. 5310
SEC Fonn 1662

IT 	I»

Unassociated Document 	Page 1 of28
N-CSR/A 1 vl20186 ncsra.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-CSR Amended
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)
5348 Vegas Drive
Suite 391
Las Vegas, NV 89108
(Address of principal executive offices) (Zip code)
Irving Levine, President
5348 Vegas Drive
Suite 391
Las Vegas, NV 89108
(Name and address of agent for service)
REGISTRANTS TELEPHONE NUMBER, INCLUDING AREA CODE: 1-561-744-5932
DATE OF FISCAL YEAR END: FEBRUARY 29, 2008
DATE OF REPORTING PERIOD: FEBRUARY 29, 2008
Form N-CSR is to be used by management investment companies to file reports with the commission not later than I 0 days after the
transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-l under the Investment
Company Act of 1940 (17 CFR 270.30e-I). The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A
registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid
Office of Management and Budget ("O:MB") control number. Please direct comments concery-ting the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44
U.S.C. ss. 3507.
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Item I. Annual Report
Restated Annual Report February 29, 2008
COPLEY FUND, INC.
A No-Load Fund
TABLE OF CONTENTS
COPLEY FUND, INC.
FINANCIAL STATEMENTS
FOR THE YEAR ENDING
FEBRUARY 29, 2008
Table of Contents
Title
Shareholder Letter and Management's Discussion of Fund Performance
Per Share Value Graph
Comparative Performance
Page
l- Z
±
!i
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Unassociated Document 	Page 3 9f28
Independent Auditor's Report 	fi
Portfolio of Investments 	1.-.2.
Statement of Assets and Liabilities 	10
Statement of Operations 	ll
Statement of Changes in Net Assets 	12
Statement of Cash Flow 	13.
Notes to Financial Statements 14
-.lll
Financial Highlights 	20
Disclosure of Fund Expenses 	21
Supplemental Data 	22
General 	22
Voting Proxies on Portfolio Securities
Disclosure of Portfolio Holdings
Approval of Investment Advisory Agreement
Inside Back
About the Fund's Directors and Officers 	Cover
TABLE OF CONTENTS
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
April 2008
Dear Fellow Shareholder:
November 30, 2007, was an eventful day for the Copley Fund. The Securities and Exchange
Commission (SEC) compelled us to change our method of accounting for deferred income tax on all
unrealized gains. The unrealized gain in our approximately $90 million portfolio was about $60 million. This
accounting change reduced our per share value by $13.89 by increasing a deferred liability to a level that
would be realized only if the entire appreciated portfolio was liquidated. This change did not affect the
total assets of the Fund and they remain intact. The Board immediately began to explore ways in which the
Fund might be able to restore some or all of this reserve to the NAV. One of these avenues, a change in
the Fund's state venue from Florida to Nevada, provided a direct benefit to the Fund by reducing our per
share adjustment to approximately $12.00 per share.
During our thirty years of existence we had always maintained a reserve for unrealized gains which has
always been more than sufficient to cover any capital gains tax liability. As you consider this issue, it is
important to note that the only way we would have to actually pay out the full reserve would be an entire
liquidation of Copley Fund. Obviously we do not intend to liquidate and go out of business.
Management and the Board of Directors strongly disagree with the SEC's position and are actively
attempting to identify and pursue any alternatives which may be available to restore some or all of the
reserve to NA V. Of course, there can be no assurance that we will be successful in these efforts. Thus, we
are left with a price per share that reverts back to 2005 and 2006. However, we now have nearly an
additional $17 million of tax reserves giving us income and hopefully stock increases to add to our net
asset value. This change in treatment of deferred income tax is an accounting issue and no capital gains
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taxes have been paid nor are any even currently payable. The Fund retains all of its current assets and
continues to earn dividends in everincreasing amounts and gains (or losses) continue to be taken on the
entire value of the portfolio which is approximately $90 million.
This unexpected reserve caused Copley to have a loss of 10.8% in 2007 instead of a gain of 12.2%
under normal circumstances. Our sector diversification insulated us from much of the havoc of the market.
Utilities and energy stocks were some of the prime movers in our substantial market gain. The financial
sector was particularly hard hit by the mortgage market and tightening of credit. We were fortunate in
disposing of a fair amount of our financial stocks in September thus avoiding the huge losses which
occurred during the balance of the year.
The volatility of the market in 2008 causes us to cite averages in approximations as stocks and sectors
can change as much as 2% daily. At this writing Copley is down between 4.5% and 5% year to date. The
Dow Jones average is down between 5% and 7%. No major sector is up. However the financials have been
the hardest hit. Our reductions of this sector in September of 2007 saved us from much larger losses. Note
also our defensive cash position is approximately 11% of the portfolio.
1
TABLE OF CONTENTS
Our retail associates in whose stores Copley Operating Division had the bag departments closed the
majority of their stores which caused a substantial decrease in our operating volume. Thus we decided to
expand in another direction. Over the years we have had a close association with two families, Raffa and
Riccardi, who individually have been in the country Italian Restaurant business for over 50 years, owning
among them nine restaurants. Patrick Riccardi, 53 years of age, has worked in one family restaurant for 35
years. Based upon his experience and success Copley Operating has elected to open a restaurant in
Bristol, RI called Rice's Ristorante and to employ Mr. Riccardi as it's operator and manager. We look
forward to the same success and tradition that the Raffa and Riccardi families have achieved.
Meanwhile we are continuing our same investment philosophy, i.e., highly visible and dividend paying
stocks in ever increasing amounts. Note our dividend income is at an all time high and should continue to
add substantially to our net asset value. We communicate with our Chicago consultants very often for
exchanges of ideas. Thus the Fund is assured of long term continuance.
We are making every effort to keep our expense ratio close to normalcy but with the challenge of the
accounting issue and Sarbanes-Oxley it is no easy task.
However, please remember that we have all of our assets intact, we have not been subject to credit or
sub-prime mortgage problems; thus, we look forward to the future.
All the above are reflected in our chart and the following numbers.
1984 	+ 23.9% 	(Top performing Fund 1984)
1985 	+ 25%
1986 	+ 18%
1987 	-8%
1988 	+20%
1989 	+16%
1990 	-2%
1991 	+18%
1992 	+18%
1993 	+10%
1994 	-7%
1995 	+26%
1996 	+5%
1997 	+25%
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Unassociated Document
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
-6.86%
+ 22.50%
-9.30%
-13.9%
+ 14.31%
+ 12.99%
+5.89%
+ 19.70%
-10.83%
-7.48%
Page 5 of28
(Reflects the increased tax reserve)
(As of March 31, 2008)
2
TABLE OF CONTENTS
Note. The performance figures provided for years prior to 2007 are consistent with the information
furnished in prior reports and do not reflect an adjustment for the change in accounting treatment of
deferred income tax.
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 are to our Board, and to the many shareholders who contacted me over the past several
months. All these shareholders expressed an appreciation for our Funds past performance and look
forward to the future.
Cordially yours,
.. .·fl.. ~ ~ ·- .;. . . J:·.. ·: .. . . .· . .
·vrJ~
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 then click on Mutual Funds and it will bring up Copley.
3
TABLE OF CONTENTS
COPLEY FUND, INC.
PER SHARE VALUE
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C/<!BIDAA. YEAR ENDED OECEI.IBER 31, 20()7
PERIOO !Hilllm FES1'1LJARY 29, 2008
Wlr-------------------------------~--------------------,
~s .................. "............................................ _.. 	. .............. Sli
41111r ¥:0<
.. <l
~
The per share values provided for years prior to 2/28/08 are consistent with information furnished in prior
reports and do not reflect an adjustment for the change in accounting treatment for deferred income taxes.
4
TABLE OF CONTENTS
COPLEY FUND, INC.
COMPARATIVE PERFORMANCE
This chart shows the value of a hypothetical $10,000 investment in the Fund and the S&P 500 which is
a broad-based market index comprised of 500 of the largest companies traded on the U.S. Securities
Markets as measured by market capitalization. Market Indexes do not include expenses which are
deducted from Fund returns. There can be no assurance that the performance of the Fund will continue
into the future with the same or similar trends depicted below. The graph does not reflect the deduction
for taxes that a shareholder may pay on the redemption of shares or dividends and capital gains received.
Ten Year Cumulative Return
Copley Fund As of 2/29/08
22,000.
20,0\lQ
ta.ooo
16,000
14,000
12,000
tO,Oaa
,
~S21,0CO
~ 	S20,t13
518,03$
6,000 Cl-----------------------------------------2198 	2199 	2100 	2JU1 	2!"(]-2: 	2103 	:;!104 	:ZIDS 	;?iUS 	2JU~' ;?iDB
AVERAGE ANNUAL RETURNS
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The following table depicts the periodic 1-, 5-, and 10-year annualized returns and the S&P 500 Index;
Periods Ended 2/29/08 	1 Year 	5 Years 	10 Years
Copley Fund 	3.60% 	9.80% 	4.80%
S&P 500 	(3.60)% 	11.62% 	7.23%
Dow Jones Wilshire 5000 	(4.07)% 	12.90% 	.7.69%
Current performance may be higher or lower than the quoted past performance, which cannot guarantee
future results. Share price, principal value and return will vary, and you may have a gain or loss when you
sell your shares. For most recent performance please call us at 877-881-2751. Returns do not reflect
taxes that a shareholder may pay on redemption of Fund shares. When assessing performance, investors
should consider both short and long-term returns.
5
TABLE OF CONTENTS
Shareholders and Board of Directors
Copley Fund, Inc.
Las Vegas, Nevada
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying statement of assets and liabilities, including the portfolio of
investments, of Copley Fund, Inc., as of February 29, 2008, and the related statement of operations for the
year then ~nded, the statement of changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. My responsibility is to express an
opinion on these financial statements and financial highlights based upon my audit.
I conducted my audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. My procedures included confirmation of securities owned at
February 29, 2008 by receipt of correspondence from the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements and financial highlights referred to above present fairly, in all
material respects, the financial position of Copley Fund, Inc., as of February 29, 2008, the results of its
operations for the year then ended, the changes in its net assets, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting principles generally accepted in the
United States of America.
As discussed in Note 1 to the financial statements, the Copley Fund, Inc., changed its method of accrual
for deferred income taxes in 2007.
Roy G. Hale
Certified Public Accountant
April 28, 2008
La Plata, Maryland
6
TABLE OF CONTENTS
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COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 29, 2008
Common Stocks -113.10%
Banking - 7.41%
Bank of America Corp.
J.P. Morgan Chase & Co.
KeyCorp.
PNC Financial Services Group
Diversified Utility Companies- 13.91%
Alliant Energy Corp.
Dominion Resources, Inc.
FPL Group
· Drug Companies- 3.24%
Bristol Myers Squibb Co.
Electric and Gas- 19.20%
American Electric Power
First Energy Corp.
Great Plains Energy, Inc.
Integrys Energy Group, Inc.
Progress Energy, Inc.
Public Service Enterprise Group
Scana, Corp.
Sempra Energy, Inc.
Electric Power Companies- 19.25%
Ameren Corp.
DTE Energy Co.
Duke Energy Co.
Exelon Corp.
Nstar Corp.
PP&L Corp.
Southern Co.
Gas Utilities & Supplies - 8.83%
Delta Natural Gas Co.
Energy East Corp
Shares
25,000
42,000
15,000
35,000
20,000
60,000
110,000
100,000
35,000
40,000
40,000
33,000
40,000
30,000
50,000
35,000
30,000
55,000
54,600
23,200
50,000
100,000
35,000
20,000
40,000
Value
$ 	993,500
1,707,300
330,750
2,150,050
5,181,600
694,800
2,396,400
6,631,900
9,723,100
2,261,000
1,432,200
2,703,600
1,017,200
1,515,690
1,676,400
1,323,000
1,893,500
1,859,550
13,421,140
1,281,000
2,189,550
957,684
1,736,520
1,545,000
4,538,000
1,208,550
13,456,304
510,400
1,066,000
The accompanying notes are an integral part of the financial statements.
7
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----------
Unassociated Document
TABLE OF CONTENTS
COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 29, 2008
New Jersey Resources Corp.
Northwest Natural Gas Co.
WGL Holdings, Inc.
Health Care Products - 0.44%
*Zimmer Holdings, Inc.
Insurance- 2.70%
Arthur J. Gallagher & Co.
Oil Companies - 21.30%
BP Amoco PLC.
Chevron Texaco Corp.
Exxon-Mobil Corp.
Oil Refineries - 4.37%
Sunoco, Inc.
Pipelines - 0.90%
Spectra Energy Corp.
Publishing - 0.03%
*Idearc, Inc.
Retail- 1.42%
Wal-Mart Stores, Inc.
Telephone- 10.10%
AT&T, Inc.
Citizens Communications Co.
Verizon Communications, Inc.
Total value of investments (Cost $28,630,559)
Excess of liabilities over cash and other assets
Net Assets
* 	Non-income producing securities.
Shares
37,500
40,000
38,000
4,100
80,000
25,500
46,200
106,086
50,000
27,300
4,711
20,000
93,555
35,000
94,232
Value
$ 1,725,375
1,681,600
1,185,220
6,168,595
308,689
1,888,000
1,654,185
4,003,692
9,230,543
14,888,420
3,054,000
630,903
22,707
991,800
3,258,521
375,900
3,422,506
7,056,927
79,053,185
(9,658,656)
$69,394,529
Page 9 of28
The accompanying notes are an integral part of the financial statements.
8
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COPLEY FUND, INC.
PORTFOLIO OF INVESTMENTS
February 29, 2008
Federal Tax Information: At February 29, 2008, the net unrealized appreciation based on cost for Federal
income tax purposes of $50,422,626 was as follows:
Aggregate gross unrealized appreciation for all investments
for which there was an _el$cess of value over cost 	$50,658,953
Aggregate gross unrealized depreciation for all investments
for which there was an excess of cost over value 	(236,327)
$50,422,626	Net unrealized appreciation
The accompanying notes are an integral part of the financial statements,
9
TABLE OF CONTENTS
COPLEY FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2008
ASSETS
Investments in securities, at value (identified cost
$28,630,559) (Note 1)
Cash
Receivables:
Securities Sold 	$ 	108,501
Trade (Notes 5 & 6) 	3,958
Dividends and interest 	330,162
Inventory (Notes 1 & 6)
Machinery & Equipment (Note 1)
Leasehold Improvements (Note 1)
Prepaid Expenses and other assets
Total Assets
LIABILITIES
Payables:
Redemptions 	4,939
Trade 	11,356
Accrued income taxes 	146,016
Accrued expenses 	51,311
Deferred income taxes (Note 1) 	17,516,875
Total Liabilities
Commitments and Contingencies (Note 7)
Net Assets
Net assets consist of:
$79,053,185
7,126,759
442,621
113,259
264,755
96,838
27,609
87,125,026
17,730,497
$69,394,529
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Undistributed net investment and operating income 	12,053,268
Accumulated net realized gain on investment
transactions 	3,279,447
Net unrealized appreciation in value of investments
(Note 2) 	· 	50,422,626
$69,394,529	Total
Net Asset Value, Offering and Redemption Price Per Share
(5,000,000 shares authorized, 1,574,658 shares of $1.00
par value capital stock outstanding) 	$ 	44.07
The accompanying notes are an integral part of the financial statements.
10
TABLE OF CONTENTS
COPLEY FUND, INC.
STATEMENT OF OPERATIONS
For the year ending February 29, 2008
Investment Income (Note 1)
Income
Dividend 	$ 2,885,330
Interest 	259,302
Investment income 	$3,144,632
Expenses:
Investment advisory fee (Note 5) 	603,710
Professional fees 	175,768
Custodian fees 	26,149
Accounting and Shareholder Services
Printing
68,551
13,893
Postage and shipping 	4,478
Directors fees 	14,148
Blue Sky fees 	6,580
Insurance 	45,293
Office expense and miscellaneous 	3,788
962,358
Less: Investment advisory fee waived 	(60,000) 	902,358
Net investment income before income taxes 	2,242,274
Operating Loss (Notes 2, 5 and 7)
Gross profit 	34,826
Less: Operating expenses 	129,652
Net operating loss before income taxes 	(94,826)
Net Investment and Operating Income before Income
Taxes 	2,147,448
Less provision for income taxes (Notes 2 and 7) 	275,016
Net investment and operating income 	1,872,432
Realized and Unrealized Gain (Loss) on Investments
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Realized gain from investment transactions during
the period 	1,557,833
Decrease in unrealized appreciation of investments
during current period, net of income tax affect 	(1,011,885)
Net realized and unrealized loss 	545,948
Net Increase in Net Assets Resulting from Operations 	$2,418,380
The accompanying notes are an integral part of the financial statements.
11
TABLE OF CONTENTS
COPLEY FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
Increase (Decrease) in Net Assets from Operations
Net investment and operating income
Net realized gain on investment transactions
Net change in unrealized appreciation on investments
Increase in net assets resulting from operations
Capital Share Transactions (Note 3)
Increase (decrease) in net assets resulting from capital
share transactions
Total increase (decrease) in net assets
Net Assets
Beginning of Year
End of Year (including undistributed net investment and
operating income of $12,553,750 and $11,480,653
respectively)
Year Ended
2/29/08
$ 1,872,432
1,557,833
(1,011,885)
2,418,380
(604,547)
1,813,833
67,580,696
$ 	, 	,
69 394 529
Restated
Year Ended
2/28/07
$ 1,861,031
353,076
6,044,537
8,258,644
23,780
8,282,424
59,298,272
$67,580,696
The accompanying notes are an integral part of the financial statements.
12
TABLE OF CONT[mTS
COPLEY FUND, INC.
STATEMENT OF CASH FLOWS
For the year ending February 29, 2008
Increase (Decrease) in Cash
Cash flows from operating activities
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Proceeds from disposition of long-term portfolio investments
Receipts from customers
Payments of taxes, net
Expenses paid
Purchase of long-term portfolio investments
Payments to suppliers
Net cash provided by operating activities
Cash flows from investing activities
Purchase of Machinery, Equipment & Leasehold Imp
Net cash provided by investing activities
Cash flows provided by financing activities
Fund shares sold
Fund shares repurchased
Net cash used by financing activities
Net increase in cash
Cash at beginning of the year
Cash as of February 29, 2008
Reconciliation of Net Decrease in Net Assets Resulting from
Operations to Net Cash Provided By Operating Activities
Net Increase in net assets resulting from operations
Decrease in investments
Increase in receivable for securities sold
Increase in dividends and interest receivable
Decrease in receivables from customers
Increase in inventory
Increase in income taxes payable
Increase in trade payables
Increase in accrued expenses
Decrease in deferred taxes
Total adjustments
Net cash provided by operating activities
6,524,557
125,418
(264,004)
(1,052,291)
(3,571,737)
(103,137)
4,799,430
(361,593)
(361,593)
4,196,963
(4,733,552)
(536,589)
3,901,248
3,225,510
$ 7,126,758
$ 1,073,097
5,075,438
(108,501)
(23,053)
13,950
(3,4 78)
8,891
2,747
16,981
(1,256,642)
3,726,333
$ 4,799,430
The accompanying notes are an integral part of the financial statements.
13
TABLE OF CONTENTS
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
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accounting principles generally accepted in the United States of America.
Secun"ty 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.
Machinery, Equipment & Leasehold Improvement.
Property and equipment are recorded at cost. Expenditures for major additions and improvements are
capitalized, and minor replacements, maintenance, and repairs are charged to expense as incurred. When
property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are
removed from the accounts and any resulting gain or loss is included in the results of operations for the
respective period. Depreciation is provided over the estimated useful lives of the related assets using the
straight-line method for financial statement purposes. The Fund uses other depreciation methods
(generally accelerated) for tax purposes where appropriate. The estimated useful lives for the machinery
and equipment held by the Fund is 3 to 20 years. 	·
Amortization of leasehold improvements is computed using the straight-line method over the shorter of
the remaining lease term or the estimated useful lives of the improvements.
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.
14
TABLE OF CONTENTS
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies - (continued)
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
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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.
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.
Restated Financial Statements
Recent Developments
On November 30, 2007, an adjustment was made to the long-term liabilities section of the Fund's
balance sheet to recognize the total potential federal and state income taxes associated with the
accumulated unrealized appreciation generated by the Fund's stock portfolio. For financial reporting
purposes, this change should be regarded as a correction of an error on prior-period financial reports. The
affect of the adjustment will be to increase the liabilities of the Fund for all prior year information
contained in this annual report and thereby reduce the overall net assets of the Fund. The total assets of
the Fund, contained on page 10 of this annual report, are not affected. Under the current application of
generally accepted accounting principles, the Fund is required to recognize a full accrual of the Federal
income tax associated with the unrealized appreciation in the Fund's security portfolio. Accordingly, the
Fund will recognize an accrual of deferred income at the Federal statutory rate of 35% on a daily basis on
the taxable amount of accumulated unrealized appreciation.
It should be understood that the foregoing application of generally accepted accounting principles is
based upon the assumption that at some point the appreciated securities of the Fund will be sold and the
applicable income tax will be paid. With the Fund's history of holding securities for long periods of time,
the actual payment of the deferred income tax may not be paid for many years and it is conceivable that
with fluctuating market conditions, the total liability at any given point in time will never be paid.
15
TABLE OF CONTENTS
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies - (continued)
Past Policy
For over 15 years, the Fund has recognized a liability for deferred income tax to the extent that the
management of the Fund felt a real liability may exist. This policy, applied consistently over the entire
period, demonstrated that the Fund was able to reasonably estimate the extent of the deferred tax
obligation in that at no point in time during the fifteen year period, did the actual liability associated with
the liquidation of appreciated securities exceed the accumulated deferred taxes recognized in the Fund's
semi-annual or annual financial statements.
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Notwithstanding the management of the Fund's reasonable ability to estimate the carrying value of the
deferred income tax liability, FASB Statement of Financial Accounting Standard 109 (FAS 109) requires all
entities to recognize a full accrual on the deferred income tax that may be payable at the end of each fiscal
year. Based upon a decision by the Board of Directors that the Fund would change its taxable status from a
regular corporation to a regulated investment company (RIC) if the Fund found itself in a position where it
had reserved insufficient deferred income taxes to meet actual income tax obligations associated with its
appreciated security portfolio, an action available to the Fund as a registered investment company, this
decision was felt to be a reasonable response to the application of FASB 109. Albeit conversion to RIC
status is not a tax free event, the transactions required could be managed by the Fund in s'uch a manner;
that the Fund would not be required to recognize the full deferred income tax accrual required under FAS
109.
Correction of an error in comparative financial statements
In accordance with generally accepted accounting principles, the cumulative effect of the change for the
periods prior to March 1, 2007, totaling $16,727,527, has been recognized in the February 29, 2008
Statement of Assets and Liabilities as a restatement of the beginning balance of undistributed net
investment and operating income.
2/29/08 	2/28/07
Undistributed net investment and operating
income at beginning of year, as previously
reported 	$10,180,836 $ 25,04 7,332
Cumulative effect on prior years of retroactive
restatement 	0 	(16,727,527)
Net investment and operating income 	1,872,432 	1,861,031
Undistributed net investment and operating
income 	$12,053,268 $ 10,180,836
16
TABLE OF CONTENTS
COPLEY FUND, INC.
NOTES TO FlNANCIAL STATEMENTS
2. Disclosure of the provisions for income taxes, reconciliation of statutory rate to effective rate, and
significant components of deferred tax assets and liabilities.
The Federal and state income tax provision (benefit) is summarized as follows:
Fiscal Year
2008 	2007
Current:
Federal 	$ 	248,162 	$ 215,023
State 	26,854 	38,170
275,016 	253,193
Deferred:
Federal 	500,482 	3,370,927
State 	(2,270,716) 	568,540
0,770,234) 	3,939,467
Net provision (benefit) for income taxes 	$0,495,218) 	$4,192,660
Effective income tax rate 	35.00% 	38.58%
Differences between the effective tax rate and the federal statutory rates as of the last day of the fiscal
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year are as follows:
Fiscal Year
2008 	2007
Federal statutory rate 	35.00% 	35.00%
State income tax benefit 	0.00 	(1.92)
State income tax rate 	0.00 	5.50
Effective tax rate 	35.00% 	38.58%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. The deferred tax liabilities relate to the Fund's unrealized gains on marketable securities.
The reduction in deferred tax liabilities for the fiscal year ending February 29, 2008 is due to a change
in tax venue for the Fund from Florida to Nevada. The state of Nevada does not access a corporate level
income tax.
The Fund has $308,205 in accumulated capital loss carryforwards which expire as follows: $308,205 on
February 28, 2009.
17
TABLE OF CONTENTS
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
3. Capital Stock
At February 29, 2008, there were 5,000,000 shares of $1.00 par value capital stock authorized.
Transactions in capital shares were as follows:
Year Ended
2/29/08
Shares 	Amount
Year Ended
2/28/07
Shares 	Amount
Shares sold
Shares repurchase
Net change
d
73,475
(87,630)
(14, 155)
$ 4,126,682
(4,731,229)
$ 	(604,54 7)
103,791
(107,802)
(4,011)
$ 5,369,011
(5,345,231)
$ 	23,780
4. Purchase and Sale of Securities
For the year ended February 29, 2008, purchases and sales of securities, other than United States
government obligations and short-term notes, aggregated $3,571,737 and $6,610,433 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 year ended February 29, 2008, the fee for investment advisory service totaled $603,710 less
fees of $60,000 voluntarily waived. Also during the period unaffiliated directors received $14,148 in
directors' fees.
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Operating Divisions
The Fund has an operating division, Copley Fund, Inc.- Operating Division ("COD"), which imports
merchandise for resale. A portion of its merchandise is placed on consignment with a company controlled
by Irving Levine. The Fund invoices the consignee when the merchandise is ultimately sold.
The Fund also recently formed a new wholly owned subsidiary, Copley Operating Group LLC ("COG"),
which owns equipment and operates a restaurant, Rice's Ristorante. The real property used by the
restaurant is leased.
During the period covered in this report, the Fund made a $100,000 equity investment in COD. COD also
made an equity investment of $5,000 in COG. In addition, COD provided a loan to COG in the amount of
$483,978.
18
TABLE OF CONTENTS
COPLEY FUND, INC.
NOTES TO FINANCIAL STATEMENTS
5. Investment Advisory Fee and Other Transactions with Related Parties - (continued)
The combined results of these subsidiary companies during the year ended February 29, 2008, are as
follows:
Sales 	$ 111,469
Cost of goods sold 	(95,687)
Gross profit 	15,782
General & administrative expenses 	(129,652)
Net loss from operations 	(113,870)
Other income (dividends and interest) 	19,044
Net Loss 	$ 	(94,826)
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
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the Internal Revenue Service.
19
TABLE OF CONTENTS
COPLEY FUND, INC.
Financial Highlights
The financial highlights table is intended to help you understand the Fund's financial performance for
the fiscal years 2/29/04 through 2/29/08. Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that an investor would have earned or lost on an
investment in the Fund. The information for fiscal years prior to February 29, 2008 have been restated to
incorporate the correction of an error as it relates to accumulated deferred income taxes on unrealized
appreciation associated with the securities portfolio. The information set forth herein will be consistent
with the financial information contained in the restated financial statements for the period ending February
29, 2008. Shareholders should be certain that they have the most recent annual report which should be
read in connection with the prospectus.
The financial information was audited by Roy G. Hale, CPA, whose report, along with the Fund's
financial statements, is included the Fund's annual report to Shareholders, a copy of which is available at
no charge on request by calling 877-881-2751.
Year Ended
February 	February 28, 	February February 28, February 29,
29,2008 	2007 	28,2006 	2005 	2004
Net asset value, beginning of year 	$ 42.54 	$ 37.23 	$ 35.28 	$ 32.63 	$ 27.62
Income (loss) for investment operations:
Net investment income (loss) 	1.18 	(1.31) 	0.27 	(0.44) 	(1.86)
Net gains (losses) on securities (both
realized and unrealized) 	0.35 	6.62 	1.68 	3.09 	6.87
Total investment operations 	1.53 	5.31 	1.95 	2.65 	5.01
Net asset value, end of year 	$ 44.07 	$ 42.54 	$ 37.23 	$ 35.28 	$ 32.63
Total return 	3.60% 	14.26% 	5.53% 	8.12% 	18.14%
Net assets, last day of February Gn
thousands) 	69,395 	67,581 	59,298 	57,948 	57,747
Ratio of net expenses, including regular
& deferred taxes, to average net
assets 	1.72% 	7.88% 	3.80% 	5.65% 	10.60%
Ratio of net expenses, excluding
deferred taxes, to average net assets 	1.72% 	1.67% 	1.72% 	1.49% 	1.59%
Ratio of net investment and operating
income (loss) to average net assets 	2.73% 	(3.28)% 	0.76% 	(1.30)% 	(6.18)%
Ratio of net investment and operating
income (loss), excluding deferred
taxes, to average net assets 	2.73% 	2.93% 	2.83% 	2.86% 	2.84%
Portfolio turn over rate 	4.11% 	0.50% 	0.73% 	0.44% 	0.92%
Number of shares outstanding at end of
period (in thousands) 	1,575 	1,589 	1,593 	1,643 	1,770
The financial highlights shown above included the waiver of $60,000 of the investment advisory
fee (as noted in the Statement of Operations). If the waiver of $60,000 of investment advisory fees
had not been included, the following. ratios would apply:
Ratio of net expenses, including regular
& deferred taxes, to average net
assets 	1.81% 	7.97% 	3.90% 	5.76% 	10.71%
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aererrea taxes, to average net assets 	1.1H '1o 	1./ 0'1o 	l.l:l-5'10 	l.OU'1o 	1./ U'1o
Ratio of net investment and operating
income (loss) to average net assets 	2.65% 	(3.37)% 	0.66% 	(1.41)% 	(6.29)%
Ratio of net investment and operating
income (loss), excluding deferred
taxes, to average net assets 	2.65% 	2.84% 	2.73% 	2.75% 	2.72%
The accompanying notes are an integral part of the financial statements.
20
TABLE OF CONTENTS
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.
Expenses Paid
Beginning 	During Period*
Account Value Ending Account 	Annualized 	(9/1/07
9/1/07 	Value 2/29/08 	Expense Ratios 	2/29/08)
Actual Fund Return 	$ 	1,000 	$ 	1,018.28 	1.72% 	$ 	8.86
Hypothetical 5% Return 	$ 	1,000 	$ 	1,031.40 	1.72% 	$ 	8.98
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* 	Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over
the period, multiplied by 182/366 (to reflect the one-half period).
21
TABLE OF CONTENTS
COPLEY FUND, INC.
SUPPLEMENTAL DATA
General
Investment Products Offered
Are not FDIC Insured
May Lose Value
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.
Approval of Investment Advisory Agreement
On March 14, 2008, 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
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22
TABLE OF CONTENTS
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. The Directors considered that the Fund's performance had been impacted negatively primarily
because of the November 30, 2007 NA V adjustment related to the Fund's accounting for income tax
liability. Even with this change the Directors noted that the Fund's performance compared favorably to the.
S&P 500 Index. 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 and particularly the performance of the portfolio securities themselves 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. The Board also considered that the Fund's expense ratio,
while still equalto or even lower than the average mutual fund expense ratio, had increased. In particular,
the Board concluded that the Fund's expense ratio had increased, primarily due to increased expenses
related to challenging the accounting issue and the expansion of the operating division. They noted that the
advisory fee also is adjusted downward if economies of scale are realized during the current contract
period as the Fund grows, 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 has entered into a written agreement to continue this practice on a yearly basis.
23
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TABLE OF CONTENTS
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 5348 Vegas Drive, Suite
391, Las Vegas, NV 89108.
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]
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ll:'eoruary Ztl,
1996 !~'±OJ 	J'lew Jjearora, JVlli
[ 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
(September 25, 1921)
1978
[1]
Officers
Name
(Date of Birth)
Title
President, Treasurer and a Director of Copley Financial
Services Corp. since 1978; a Director of Franklin
Capital Corp. (an operating investment company) since
Marcil, 1990 to October 2004; 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.
from 2000 to October 2004.
Principal Occupations(s) During Past 5 Years
and Other Directorships of Public Companies
Irvine Levine 	See Above
(September 25, 1921)
Chairman of the Board of
Directors and President
Patricia Taylor 	Chief Compliance Officer of the Fund since 2004;
(May 27, 1950) 	Owner, Patricia Taylor Administrative Services, since
Chief Compliance Officer 	1994.
24
Restated Annual Report
February 29, 2008
COPLEY FUND, INC.
A No-Load Fund
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Investment Adviser
Copley Financial Services Corp.
P.O. Box 3287
Fall River, Massachusetts 02722
E-mail: copleyfunds@verizon.net
Custodian
Bank of America
111 vVestminster Street
Providence, Rhode Island 02903
Transfer Agent
Gemini Fund Services
4020 South 14 7th Street
Suite 2
Omaha, Nebraska 68137
Tel. 002)493-4603
(877)881-2751
Fax: (402)963-9094
General Counsel
Roberts & Henry
164 Honeysuckle Drive
Jupiter. Florida 33458
Auditors
Roy G. Hale, C.P.A.
624 Clarks Hun l~oad
La Plata, MD 20646
COPLEY FUNDJ INC.
A No- Load Fund
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Item 2. CODE OF ETHICS
(a) 	The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial
officer. 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 at (508)674-8459.
(b) 	During the period covered by this report, no amendments were made to the provisions ofthe Code ofEthics adapted in 2(a)
above.
(c) 	During the period covered by this report, no implicit or explicit waivers to the provisions of the Code of Ethics adapted in 2(a)
above were granted.
Item 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant's Board of Directors has determined that it is not necessary for the Fund to have either an audit committee or an audit
committee financial expert. This determination was made in light of the Fund's small size and limited complexity of audit issues.
Item 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The registrant paid the following amounts to Roy G. Hale, CPA, the registrant's principal accountant, for the audit ofthe registrant's
annual financial statement and services in connection therewith for the last two calendar years:
2007 	2008
(a) Audit Fees 	$19,200 	$18,600
(b) Audit Related Fees 	None 	None
(c) Tax Fees 	None 	None
(d) All Other Fees 	None 	None
(e)( 1) The Fund's Independent Directors perform the functions of an audit committee. The Fund has no standing audit committee. The
policy ofthe Fund's Directors is to specifically pre-approve (i) all audit and non-audit services provided by the Fund's independent
auditor to the Fund ("Fund Services") and (ii) all non-audit services provided by the Fund's independent auditor to the Fund's advisor.
If such Fund Services are required during the period between the Fund's regularly scheduled meetings, the President must seek approval
from the Independent Directors.
(e)(2) The Fund's Independent Directors were not required to approve any of the fees described in paragraphs (b) through (d) ofthis
item.
(f) Not applicable.
(g) See above table.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. Schedule oflnvestments
The registrant's schedule of investments is included in its annual report to the shareholders filed under Item 1 of this form.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT
INVESTMENT COMPANIES.
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Not applicable.
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ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Directors has no audit or other standing committees. Rather the Independent Directors function as the audit and
nominating committee. The Independent Directors, in performing the functions of the nominating committee advise the Board of
Directors on the selection and nomination of individuals to serve as Directors ofthe Fund. Nominations for director, including
nominations submitted by shareholders are evaluated according to the Fund's specific needs and the nominees' knowledge, expertise
background and reputation. The Independent Directors do not have a formal procedure by which shareholders may recommend director
candidates but will consider appropriate candidates recommended by shareholders. A shareholder wishing to submit such a
recommendation should send a letter to the Fund's Clerk at PO Box 3287, Fall River, MA 02722. The mailing envelope should have a
clear notation that the enclosed letter contains a DIRECTOR NOMINEE RECOMMENDATION. The letter must identifY the writer as
a shareholder and provide a summary ofthe candidate's qualifications.
ITEM I I. CONTROLS AND PROCEDURES.
(a) Except as may be deemed related to the Funds' recognition of deferred income tax during the period, the certifYing officer, whose
certification is included herewith, has concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of I 940 (the "Act") are effective as of a date within 90 days of the filing date of the report that
includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b)
under the Act.
Except as may be deemed related to the Funds' recognition of deferred income tax during the period, there were no significant changes
in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of his
evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
(b) Except as may be related to the Funds' recognition of deferred income tax during the period, there were no changes in the registrant's
internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the registrant's fiscal year that
has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting.
ITEM I2. EXHIBITS.
The Exhibits listed below are attached to this Form N-CSR:
Exhibit No. 	Description
I2(a)(I) 	Not applicable. See Item 2 hereof.
I2(a)(2) 	Certification of principal executive officer and principal financial officer pursuant to Rule 30a-2(a) under
the Investment Company Act of I940, as amended (I 7 CFR 270.30a-2(a)), is filed and attached hereto.
(see attached)
I2(a)(3) 	Not applicable.
I2(a)(4) 	Certification of principal executive officer and principal financial officer pursuant to Rule 30a-2(b) under
the Investment Company Act of I 940, as amended (I 7 CFR 270.30a-2(b )), is furnished and attached
hereto.
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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: Is! Irving Levine
Name: Irving Levine
Title: President (Principal Executive Officer)
Date: July 18, 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 person on behalf of the registrant and in the capacities and on the dates indicated.
By: Is/ Irving Levine
Name: Irving Levine
Title: President (Principal Executive Officer & Principal
Financial and Accounting Officer)
Date: July 18, 2008
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ROBERTS & HENRY
MTORNEYS .A!r LAW
164 HONEYSUCKLE DRIVE
JUPITER, FLoRIDA. 33468
(56l.l744-5982
FAX 156l.l207-6857
E-MAIL• RobertsHenryLaw@aolcom
101 BUJDN.A. V'Is!I!A. AVENUE
FEDEJULSBtT.R~, MD 21.632
14l.Ol 764-9876
Fri !4l.Ol 754-9376
November 19,2008
James S. Goldman, Esquire
U.S. Securities and Exchange Commission
Boston Regional Office
33 Arch Stree~ 23rd Floor
Boston, MA 02110
RE: 	In the Matter of Copley Fund. Inc., B-2335
Dear Jim!
504 TALBOT STREET
P.O. Box uss
l3T. MICHAELS, MD 21663
(410) 822-4456
F~<410l754-9376
. 	After much thought and consideration, we have formalized a proposal. which we
are hopeful might work toward resolving the Copley Fund matter.
As you know, the Board has consistently maintained that the accrual for
unrealize~ capital gains taxes. is best represented by a "reserve" established by the Board
as opposed to a full liquidating value accrual that currently is being employed in
calculating the Fund's Net Asset Value. Our experience since November 30,2007 when
the NAV was adjusted, has revealed that the use of the latter methodology has resulted in
what we ~lieve are misleading and inconsistent financial statements and a per share
value that does not represent the fair value for the Fund's shares.
The attached Memorandum details the Fund's rationale in support of the use of
the Board established reserve. We believe, for the reasons set forth therein, that use of
the Board established methodology is the only way in which the Fund's shares may be
fairly priced. We also believe that the use of this methodology is consistent with
generally accepted account principles and is required to fairly present Fund financials in a
consistent manner, fairly price Fund shares and render the financials not misleading.
The Fund believes that the issue really is more a disclosure and risk assessment
issue than an accounting issue. We have attached a proposed Prospectus Supplement
which contains disclosures that we believe will enable both present and future Copley
Fund shareholders to fully assess the risks of investing in the Fund insofar as

James S. Goldman, Esquire
November 19, 2008 ·
Page two
such risks relate to taxes on unrealized appreciation. This disclosure is accomplished
through both text and comparison tables and every effort has been made to keep it easily
understandable and in "plain language". Of course, .we would be receptive to any staff
· comments with respect to the proposed disclosures.
The clear mandate of the Commission is to protect investors. In this case, an
interpretation of FAS 109 which uses liquidating value accounting achieves the exact
opposite result: one that should be avoided-investors are harmed. They cannot access
assets to which they are entitled. As demonstrated by the Commission's current study on
mark-to-market accounting and FAS 157 sometimes alternative, or at least flexible,
standards are required to fairly present financials and to serve the best interests of
investors. For the reasons set forth in the Memorandum, we believe a perfectly
ailalogous situation is presented here.
Simply put, a full liquidating value accounting view under FAS 109 operates to
the detriment of Fund shareholders and results in inconsistent and misleading financial
statements. On the other hand, a reserve accounting view under FAS 109 operates to the
benefit of shareholders and results in consistent, easily understandable and clear
financials which produce a Net Asset Value which represents fair value for the Fund's
shares. We believe that there is nothing in GAAP or applicable law or regulation which
precludes the use ofthe Board's methodology in pricing Fund shares.
We, of course, are available to discuss this with the staff either in person or via
conference at your convenience. 	'
The Fund has continued to offer its shares for sale using current financials only
because they were compiled based upon comments made by the staff of the Division of
Investment Management and agreed to by us at the time under the circumstances at the
time. Accordingly, nothing in the proposal should be construed as an explicit admission
that the current financials are false or misleading in fact or as a matter oflaw. We also
requeSt confidential treatment under the FOIA with respect to this correspondence and
associated memoranda.
·Very truly yours,
ROBERTS & HENRY
Thomas C. Henry 	-~1
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MEMORANDUM
PRELThflNARYSTATEMrnNT
This is about the best interests of the Copley Fund shareholders-past, present and future.
It is about the fair value of a Copley Fund share. It is about the Board of Directors' fiduciary
obligation to ensure that the Fund's ~es are fairly priced, that the best interests of the Fund's
shareholders are fully protected and served and that the FlJl1d's financial information is not
misleading. And, most importantly, it is about the flexibility of GAAP and the Commission's
rules. This point is particularly relevant now given the current financial crisis facing the nation
and the Commission's acknowledgement that otherwise rigid rules must bend to reasonable,
reassured, common sense evaluation.
November 30,2007 was a very difficult day for the Fund, its Board of Directors and its
shareholders. It was on that day that the Board was compelled, upon threat of injunctive action,
to direct the Fund's accounting services agent to reduce the Fund's per share value by $13.89 as
the result of an accounting interpretation expressed by the staff that generally accepted
accounting principles (GAAP) required the Fund to include in its current liabilities the entire
amoun.t of capital gains taxes that would be payable ifthe Fund liquidated its entire portfolio of
securities on that day; as opposed to the inclusion of a reserve for taxes that had been established
by the Board of Directors in an exercise of their good faith business judgment and based upon
fifteen (15) years of' experience operating successfully with such reserve.
For the reasons set forth below, the Fund believes that the NAV adjustment is contrary to
the best interests of the Fund's shareholders. The Fund believes that it has in the past complied
with GAAP, that both GAAP and applicable SEC rules are flexible enough to permit the ·
"reserve" accounting method established and approved by the Board and that the "full
liquidating value accrual method" has produced inconsistent and misleading financial statements
that have resulted in Management having to qualify its c~rtifications made pursuant to Section
302 ofthe Sarbanes-Oxley Act of20021• 	. 	.
THE FUND AND ITS INVESTMENT OBJECTIVE
The Copley Fund, Inc. (the "Fund'') is registered with the Commission as an open-end,
management investment company pursuant to the provisions of the Investment Company Act of
1940. Unlike most funds, it has not elected regulated investment company ("RIC") status under
the Internal Revenue Code, 1986, as amended. It is organized as a regular "C" Corporation for
federal income tax purposes. Accordingly, any taxable income generated by the Fund is subject
to taxation at the corporate level and is not passed on to individual shareholders as would be the
case ifthe Fund had elected RIC status.
The Fund was organized iii 1978 and has operated continuously since that time. Its stated
investment objective is ''the generation and accumulation of dividend income". Its secondary
objective is "long-term capital appreciation". Key to the Fund's investment objective is its
strategy, contrary to most other funds, of not distributing dividends and capital gains to
1The Fund's N-CSR Certification provides that the Fund's financial statements "fairly represent in all material respects (except to
the extent that management's position on the accounting for deferred income taxes is correct) the financial condition ... ofthe
registrant."

Memorandum (cont)
Page 2 ofl4
shareholders bUt rather accumulating them within the Fund and then adding them to the value of
each share on a daily basis. Hence, an increase in per share value directly raises the value of a
shareholder's account Thus, shareholders are able to defer,.divl.dend and capital gains taxes until
redemption at which time shareholders will incur a loss or realize a gain depending upon the
Fund's per share value at the time ofredemptiozi. fn additiori., and central to the Fund's
investment policy, is that the retention of dividends leaves inore money "at work" in the Fund.
Thus, the true measure of the Fund's performance is to measure income and gain as a function of
the total deployed capital. Artificially discounting the reported amount of deployed capital by an
inappropriate "reserve" distorts the Fund's performance. 	·
Insofar as the Fund itself is concerned, as a C Corporation, it uses its corporate structure
to create dividend income to the Fund, 70% of which is offset by the deduction allowed by the
Internal Revenue Code for dividends received by a C Corporation.
TAX MANAGEMENT POLICY AND RATIONALE
Beginning in 1993, the Board of Directors of the Fund implemented a tax ma.nagement
policy whereby the accrual for deferred income tax on unrealized gains on the Fund's portfolio
securities was reduced to a stated reserve of $422;000. This amount was determined by the
Board in an exercise of their good faith business judgment and based upon the seven factors
which are set forth below. Prior to the adoption of that policy the Fund had a stated deferred
income tax liability accrual of$3,541,000. The implementation of this policy had the effect of
increasing the Fund's NAV with a corresponding increase in stated per share value. This policy
more accurately reflected the deployed capital which was invested by the Fund.
1bis tax management strategy was implemented based upon a strategy adopted and
implemented by the Rochester Tax Managed Fund, an informal opinion expressed by Price
Waterhouse at the time and a position paper prepared by Roy G. Hale, CPA, dated November 27,
1992 (See Attachment "A"); The decision was memorialized in the Minutes of a Meeting of the
Board of Directors held on December 7, 1992 to implement the strategy wherein the Directors
instructed "that Fund Management shall monitor on a regular basis the Fund's potential income
tax liability on unrealized gains to ensure that the present reserve is, in its best business
judgment, appropriate given the particUlar circumstances of the Fund's portfolio and policies."
The basis for the adjustment to the Fund's previously accrued tax liability was set forth in
Note 1 to the Fund's financial statements for the year ended February 28, 1994 as follows: "in
this accounting period the Fund elected to change the estimate of deferred income tax liability on
unrealized appreciation of investments ... the Fund will provide deferred taxes for unrealized
appreciation on its investment portfolio to the extent that management anticipates a liability may
exist. .. this change is consistent with the Board of Directors intent to qualify the Fund as a
Regulated Investment Company in the event the Fund's future income tax liability should exceed ~	current (reserved) deferred income tax levels." ·-Qj:-/}

Memorandum (cont)
Page3 of14
The Fund has, for more than 15 years, consistently maintained that the amount of the
deferred income tax liability for the Fund is an accounting estimate that is properly based upon a
reasonable estimate of the future obligations of the Fund as it_;relates to the difference between
the tax basis of the Fund's assets and their reported mark to market current value. The Fund
recognizes all current income tax obligations in the current accounting period. It has been the
Fund's.longstanding position, since 1993, that the deferred tax liability for unrealiZed capital
gains should be based ·on a good faith business judgment estimate of future tax obligations.
associated with any required liquidation of portfolio securities necessary to raise cash to meet
foreseeable Fund requirements.
The key concept here is that the deferred tax liability earned by the Fund on any given
date is an accounting estimate of future obligations of the Fund. This estimate is based upon
various factors including (1) capital loss carry forwards (2) anticipated redemptions beyond the
· ability of the Fund to cover with its current cash position or through the sale of non-appreciated
securities (3) the amount of the recorded reserve for the estimated maximum tax liability ( 4)
fifteen (15) years of operating history without ever exceeding or even approaching the reserve
established by the Board (5) the Fund's stated investment strategy and track record of holding
high quality, dividend paying stocks for the long term (6) the fact that the entire deferred tax
liability would be due only in the unlikely event the entire portfolio were liquidated and (7) the
best good faith business judgment of the Board of Directors .. These factors are, and historically
have been, used to establish a reasonable and realistic basis for the estimated tax liability. And,
as discussed below, the option to convert the Fund to RIC status establishes a floor upon which
the estimated taxes would not be exceeded.
ACCOUNTING AND REPORTING FOR INCO:ME TAXES
The essence of the issue is Copley Fund's accounting and reporting of the effects of
potential income taxes. The sta:ff' s initial theory is understood to be that the Fund had not
measured and disclosed the future tax consequences of the unrealized appreciation of securities
in the Fund's portfolio in accordance with generally accepted accounting principles ("GAAP").
In support of this position they have referenced the Financial Accounting Standards Board's
("FASB") Statement ofFinancial Accounting Standards No. 109, Accounting for Income Taxes
(''F AS 109''). F AS 109 "establishes financial accounting and reporting standards for the effects
of income taxes that result from an entetprises activities during the current and preceding years."
Paragraph 6 ofF AS 109 states that ''the objectives of accounting for income taX:es are to
recognize (a) the amount of taxes payable or refundable for-the current year and (b) deferred tax
liabilities and assets for the future tax consequences of events that have been recognized in an
enterprises' financial statements or tax returns."

Memorandum (cont)
Page 4 of14
Paragraph 11 ofFAS 109 provides "An assumption inherent in an enterprise's statement
of financial position in accordance with generally accepted accounting principles is that the
reported amounts of assets and liabilities will be recovered and settled, respectively. Based on
that assumption, a difference between the tax basis of an asset or liability and its reported amount
in the statement of financial position will result in taxable or deducti~le amounts in some future
year(s) when the reported amounts of assets are recover~d and the reported amounts of liabilities
are settled''. (Emphasis added.)
Paragraph 78 ofF AS 109 makes the observation that an "enterprise might be able to
delay the future reversal of taxable temporary differences by delaying the events that give rise to
those reversals, for example, by delaying the recovery of related assets or the settlement of
related liabilities. A contention that those temporary differences will never result in taxable
amounts, however, would contradict the accorinting assumption inherent in the statement of
financial position that the reported amounts of ~sets and liabilities will be recovered and settled,
respectively; thereby making that statement internally inconsistent. For that reason. the
(Accounting) Board concluded that the only question is when. not whether. temporary
differences will result in taxable amounts in future years." (Emphasis added).
The staff's initial theory then seems to be based upon a static and infleXible interpretation
ofF AS 109 to the effect that the statement requires a full accrual of the maximum potential
deferred income tax liability-period ("full liquidating value accrual method''). As more fully
developed below, the Fund believes that FAS 109 and GAAP are flexible enough to permit
variations or exceptions that are nonetheless in compliance with GAAP and are, in fact, required
to fairly present the financial condition of the· Fund and the accurate pricing of its shares. This,
the Fund has always maintained, is best accomplished through the use of a "reserve" for deferred
income taxes which is established by the Fund's Board of Directors in an exercise of their good
faith business judgment.
The fi.mdamental justification for recognizing an exception to or a variation from FAS
109 is that the full tax liability will not be recognized by the Fund.
FAS 109, as set forth above, plainly states that the requirement for full accrual is based
upon "an assumption" that the underlying appreciated assets would eventually be sold and the
associated income tax would eventually be paid. This simply is not the case and is, under the
circumstances, an invalid and misleading assumption. The effect of applying this invalid
assumption is that a full liquidating value accrual overstates Fund liabilities and understates the
Fund's equity as reflected in the Fund's Net Asset Value.
In support of this proposition the Fund advances the following points:
1. 	The use of historically proven good faith estimates represents the best method of
fairly presenting the Fund's financial condition. The amount of a reserve for income tax, 	~?J

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Memorandum (cont)
Page5of14
reported as a liability, is in fact an estimate of a future potential liability and not a real liability on
the date of the financial statements. These estimates, based upon the factors as discussed above,
are flexible and subject to change as circumstances dictate. As long a8 the Fund provides _ -,
reasonable estimates that meet current and future obligations, as has been the ca.Se for the last
fifteen (15) years, the Fund meets its inherent obligation to accurately accrue far this potential
liability. The following chart demonstrates the viability of the established reserve.
COMPARISON OF RESERVE ESTABLISHED BY BOARD AND
ACTUAL CAPITAL GAINS TAXES PAID
BOARD ESTABLISHED 	ACTUALCAPITAL 	FULLLIOUIDATING
CAPITAL GAINS TAX RESERVE 	GAINS TAXES PAID 	RESERVE FOR CAPITAL
GAll'IS LIABILITY ACCRUAL
2007 	$807,345.00 	$0 	$17,537,872.00
2006 	$758,766.00 	$0 	$16,104,320.00
2005 	$758,766.00 	$0 	$14,887,774.00
2004 	$824,472.00 	$0 	$12,548,834.00
2003 	$770,554.00 	$0 	$7,602.562.00
2002 	$664,576.00 	$0" 	$13,166j55.oo
2001 	$443,285.00 	$0 	$15,646,991.00
2000 	$464,563.00 	$0 	$10,961,527.00
1999 	$373,709.00 	$0 	$13,684,586.00
1998 	$278,488.00 	$0 	$13,224,672.00
1997 	$189,891.00 	$0 	$8,193,495.00
1996 	$378,955.00 	$0 	$7,160,983.00
1995 	$422,000.00 	$0 	$2,756,751.00
1994 	$422,000.00 	$0 	$3,843-,489.00
1993 	$422,000.00 	$0 	$5,430,633.00
No taxes have ever been paid because the Fund's taX liability for capital gains has always
been covered by either capital losses or capital loss carry forwards. Hence, the reserve has never
been used.
One of the concerns expressed by the staffhas been that circumstances beyond the
control of management might cause the Fund to liquidate portfolio securities due to market ·
conditions or to meet redemptions. It is important to note that even in this time of unprecedented
financial crisis and market upheaval Copley Fund has not even come close to invading the tax
reserve established by the Board. And, we note that this is at a time when money market funds
have had to tum to the Federal government to preserve their $1.00 NAV and mutual fund
redemptions are at an all time high-once again sustaining the Board's judgment.
2. 	The only shareholder risk associated with using the reserve method, which is
based upon good faith historically proven estimates, would arise in the event that the Fund

Memorandum (cont)
Page 6 of14
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l.mderstated the reserve and a real liability greater than the reserve would become due and
payable. As shown by the above.chart, this has never happened over the past fifteen years~
More noteworthy perhaps is the fact that it has not happened over the past two months~
Moreov~r, this would never occur .because of the Fl.md's intent and expressed ability to convert ..
to RIC status if it ever is placed in a position where the reserve was in an insufficient amount to
cover the capital gains tax on appreciated securities. This begs the question of why the Fund has
not elected RIC status subsequent to the compelled inclusion ofthe full accrual in its NAV. The
short answer is that the reserve established by the Board never was exceeded because of market
or other operating conditions. No tax ever became payable. The accrual only became an issue
when the Fund was compelle~ Un.der threat of injunction,· to include the full amount of the
accrual in its NAV. Election of RIC status has consequences, as discussed below, and the Board · ·
believes that it should not be "compelled' to accept these consequences when the conditions
precedent established by theni before electing RIC status have not been met.
In light of the Fund's ability to convert to a RIC, as more fully explained below, and
ultimately avail itself of the elimination of the tax otherwise payable at the corporate level on
appreciated securities the Fund believes that the inherent assumption made in Paragraph 11 of
FAS 109, i.e., that liabilities will be recovered and settled, does not properly apply to the instant
situation. Moreover, the statement in Patagraph 78 ofFAS 109 that "the (accounting) Board
concluded that the only question is when, not whether (tax liabilities will be realized)" supports ·
the Fund's belief that GAAP does not require the_ Fund to accrue the full potential deferred tax
liability because the ability to convert to a RIC on its own terms answers the ''when" question- ·
never.
CONVERSION TO RIC
Regulated Investment Companies (''RIC's") may escape full corporate taxation because,
lmlike ordinary corporations, they are entitled to claim a deduction for dividend payments
against ordinary income and net capital gains. A corporation qualifies as a RIC if it makes an
irrevocable election to be a RIC by filing a tax return. on Form 1120-RIC and it meets certain
requirements specified in JRC Sections 851 and 852. In order to qualify for this election, the
Fund would be required, among other things, to distribute to shareholders its undistributed
earnings and profits ("E&P").
The Fund could elect RIC status simply by filing a RIC tax return for the year in which
the status is deemed to be effective. Any capital gains taxes due and payable at the end of the tax
year, which in theory would be greater than the reserve, would then be shifted to the individual
shareholderl. The result is that the Fund would pay the tax on capital gains equal to the reserve
2Under current law, the capital gains taxes due on net realized gain only would be due at individual rates which are now much
lower than corporate rates. This is another example of why the "full liquidating value reserve" method is not only inappropriate
but also seriously misleading. )\
"':sii:J

Memorandum (cont)
Page 7 of 14
and shift the remainder of capital gains to shareholders. Given this methodology, the Fund
would never exceed the reserve.
As noted above, the Fund would have to distribute its accumulated E&P up to the date
RIC status was elected. The Fund would have until the end of the ~urrent tax year to make this
distribution. The accumulated E&P could be relatively large ($11,844,182 at February 29,
2008). This begs the question of where the money would come from to make the required
distribution without selling portfolio securities and generating additional capital gains tax for the
Fund. The answer is that the Fund could distribute additional shares in the Fund rather than cash
and, while the distribution of stock would decrease the value of the Fund, the shareholders would
receive something in value to compensate for the devaluation. The shareholders would be
subject to income tax on the received distributions, generally taxable at rates lower than the
corporate tax rate which does not distinguish between ordinary income and capital gains; but the
key point is that the distribution would not generate capital gains taxes for the Fund.
The last tax issue to be considered in a RIC conversion is the built in gains (''BIG") tax
on appreciated assets. Current IRS regulations require a new RIC, which was previously a C
Corporation, to pay a built in gains tax on appreciated assets ifthe assets are sold within ten (1 0)
years of the RIC conversion date. If all or any portion of the appreciated assets are not sold
(~~.--..l 	within this 10 year period, the built in gains tax goes away. It simply ceases to exist.
~:,.z~
This begs another question which is at the heart of the matter. Does the potential liability
for BIG tax require a full accrual under FAS 109? The answer is no because of the basic
assumption under FAS 109 that the full accrual is based upon the premise that the appreciated
assets will be sold and the associated income tax paid at some point in time. This simply is not
the case when there is, or could be, a date certain when the liability would cease to exist.
Because of this "date ce~ test" the potential BIG tax represents at most a contingent liability
rather than a real, current liability. This contingent liability has been fully disclosed in the
Fund's Prospectus and SAl for many years.3
Since inception, management of the Fund has not elected RIC status and met the required
distribution requirements but rather has opted to be treated as a regular C Corporation.
Underlying this decision is the fact that the dividends received deduction is available to a C
Corporation but not available to a RIC. This concept is critical to the Fund's basic investment
strategy to create dividend income· to the Fund using the 70% deduction from federal income
taxes for dividends received. Thus, the Fund's regular income tax liability is kept to a minimum
and shareholders are allowed to defer taxes until redemption.
3The staff of the Division of Investment Management has reviewed the capital gains tax accrual issue in connection with.
registration statements and financial reports filed by the Fund smce 1993, In each instance, until September of2007, the staff
accepted, or at least took no action with respect to, the Fund's rationale for using a reserve method of accounting for such
accruals. Tandy statements notwithstanding this lack of action provided the Board with an understanding that the reserve
methodology was not contrary to GAAP or applicable SEC rules with respect thereto.

Memorandum (cont)
. Page 8 of14
Hence, conversion to a RIC is a viable alternative to the Fund but is contrary to the
Fund's stated investment objective and strategy. Therefore, it is not something that should be
undertaken unless the conditions precedent to making the election, exceeding the reserve, have
been met. These conditions precedent have not been met. The established reserve has never
been exceeded or even invaded. The important concept for purposes of a deferred tax liability
standpoint how~ver is that the potential liability can be eliminated. The ultimate liability
therefore is not a certainty. In fact, it is a contingent liability which at the end of a ten year
period simply ceases to exist
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
Generally Accepted Accounting Principles ("GAAP'') consist of the basic principles,
assumptions and guidelines, the detailed rules and standards issued by the Financial Accounting
Standards Board ("FASB") and the generally accepted industry practices. GAAP are neither law
nor regulation. The Securities and Exchange Commission ("SEC'') however, has promulgated a
.regulation which provides, in pertinent part, that "financial statements filed with the Commission
which are not prepared in accordance with generally accepted accounting principles will be
presumed to be misleading or inaccUr-ate, despite footnote or other disclosures, unless the
Commission has otherwise provided." Rule 4-01. Regulation S-X (emphasis added). For all of
the reasons set forth herein the Fund believes that this presumption has been rebutted.
GAAP was developed to ensure that financial transactions are recorded in a consistent
manner, to require standardized reporting formats, and to permit comparability with prior year(s)
information and statements prepared by other business entities.
GAAP has evolved over the years from a basic ~ework and from basic objectives of
financial reporting. Financial reporting should provide_ useful information for making informed
business and economic decisions. Usefulness for decision makin:g is the most important
characteristic of the reported information. To be useful, financial statements must be relevant,
i.e., they must make a difference in the decision maker's (investor's) ability to predict the future
or to correct prior expectations. Hence, useful financial statements provide information about
what has happened in the past as well as information that will help in predicting what will
happen in the future.
Financial Statements must also be reliable. To be reliable they must be verifiable, neutral
and unbiased and the information presented must represent what really happened or existed. In
addition, the statements must be comparable (measmed and reported in a similar manner by all
types ofbusin~sses) and consistent (the same accounting methods should be applied from period
to period). In pther words, deviations in measured outcomes from period to period should be the
result of deviations_ in performance not changes in methods. Because of the change in the capital
gains tax acco~ting treatment and related financial restatements, the Fund's financial statements
are not now either "useful" or "reliable" within the framework of GAAP.
~·
~~i'
. }
·..___

Memorandum (cont)
Page 9 of14
~
~~~~~i:..~
FUND FINANCIAL STATEMENTS SUBSEQUENT TO THE ISSUANCE OF TIIE
RESTATED ANNUAL REPORT FOR TilE PERIOD ENDED FEBRUARY 29, 2008 ARE
CONTRARY TO THE BASIC OBJECTIVES OF GAPP AND UNDER THE SPECIFIC
CIRCUMSTANCES OF THE FUND,S BUSINESS ARE MISLEADING
Pursuant to staff comments received in connection with the Fund's annual485APOS
updating amendment to its registration statement filed on June 6, 2008 the Fund was required to
file an amended N-CSR/A which contained a "Restated Annual Report to Shareholders". This
restatement caused the Fund to ''restate" much of its historical financial information including
average annual returns, the per share value table and the financial highlights table. This
restatement of historical information was required because the Investment Management staff
required the Fund to treat the inclusion of the full liquidating -liability accrual in the Fund's NA V
as a "correction of an error'' as opposed to a "change in accounting est.:irilate" which would not
have required a restat~ment of historical information. The consequence of this is that the Foods'
financial reports have not now been compiled in a consistent manner. This is clearly illustrated
by comparing the Financial Highlights Tables for the period ended February 28, 2007 and
February; 2008 (restated) (See Attachment "B").
Prior to this required restatement the Fund's financial statements were completely within
( 	-~ 	the basic framework and objectives of GAAP reporting as discussed above. In fact, the PCAOB
~~ 	examined the Fund's auditor's financials and report thereon for the period ended February 28,
2006 and issued an affirming clean report thereon. 	The financials had been recorded in a
consistent manner for 30 years. They permitted comparability With both prior year(s)
· information and the financial statements prepared by other Funds. They were useful because
they enabled informed decision making by an investor because they correctly set forth what
happened in the past and provided information about what will likely happen in the future. They
were reliable because they were verifiable and the information represented what really happened
from a historical perspective. For example, the Fund's actual _NAV per share at February 28,
2007 was $54.67 and it was reported as such in the Fund's Annual Report of even date. Yet, the
Restated Annual Report for the period ended February 29, 2008 reflects a per share value for that
same date (February 28, 2007) of $42.54. This simply does not reflect what really happened, is
not consistent and thwarts comparability with prior years. Contrary to one of the basic objectives
of GAAP there are now deviations in measured outcomes from period to period which are the
result of changes in methods rather than deviations in performance.
THE INCLUSION OF TilE FULL LIQUIDATING LIABILITY ACCRUAL IN THE FUND'S
NAV IGNORES BASIC GAAP ASSUMPTIONS, CONSTRAINTS AND MODIFYING
CONVENTIONS
The foundation of GAAP consists of basic assumptions, basic principles, basic
constraints and modifying conventions. Some of these are particularly relevant herein.

Memorandum (cont)
Page 10 of14
Assumptions: (1) Going Concern Assumption: This assumption assumes that a business
will continue operating and will not close or be sold. Based on this assumption, actual costs
instead of liquidation values are used for presenting financial information.
Principles: (1) Historical Cost: (1) Realization/Revenue Recognition: This principal
requires companies to record revenue when it is realized or realizable, i.e., at the time of actual
sale. (2) Matching Principle: This means recording the revenues earned during a period using
the revenue realization principal and matching the revenues with the expenses incurred in
generating this revenue. (3) 	Adequate Disclosure: This principle states that all pertinent
information should be fully disclosed and in understandable form.
Constraints and Modifying Conventions. The modifying conventions include (1)
Application of Judgment- an accountant may depart from GAAP ifthe result or departure
appears reasonable under the circumstances, especially when the strict adherence to GAAP will
produce unreasonable results, (2) Substance over Form- the economic substance of atransaction
determines the accounting treatment, even when the legal aspects of the transaction indicate
otherwise and (3) Industry practices and Peculiarities -the peculiarities and practices of an
industry may warrant selective exceptions to accounting principles.
Utilization of a full liquidating value accrual method is contrary to the basic "going
concern'' assumption of GAAP that a business will continue operating and will not close or be
sold. Based upon that assumption actual costs and liabilities instead of liquidation values are to
be used for presenting financial information. The use of the full liquidating value method in the
present circumstances makes the exact opposite assumption that all portfolio securities will have
to be completely liquidated today. This simply is not the case and is unrealistic and misleading.
The full liquidating value accrual method also is contrary to the principles of
realization/revenue recognition and matching. Full accrual transforms a potential contingent
liability into a full current liability and fails to match current revenues and assets with correct
liabilities. This, in turn, makes another principle, adequate disclosure of all pertinent information
in understandable form, difficult at best. Prior to being compelled to restate the Fund's
financials, they were presented in an easily understandable form. The Fund does not now
believe that this is the case. While those restated financials contain all of the staff's comments
made thereon, the Fund nonetheless believes that they are far from easily understandable and are
in fact misleading.
Insofar as the modifying conventions are concerned it is stated at the outset that the Fund
believes that its historical financial statements have always been compiled in accordance with
GAAP. However, it is important. to note that GAAP recognizes certain constraints and
modifying conventions that allow an accountant to depart from GAAP ifthe result or departure
appears reasonable under the circumstances especially when the strict adherence to GAAP will
produce unreasonable results. Assuming arguendo that the use of the reserve method is a

(..,_ .J
"~~-
_.;.
Memorandum (cont)
Page 11 of14
"departure" from GAAP it certainly appears reasonable under the circumstances especially here,
where the use of the full liability accrual method produces an unreasonable result, i.e., a per
share net asset value which does not reflect the realistic net assets of the Fund, distorts
performance and expense ratios, and disables redeeming shareholders from receiving their fair
proportionate share of Fund assets.
· Copley Fund is unique among all other Funds4• To the Fund's knowledge it is the only C
Corporation the share price of which is based upon a mark to market NAVas opposed to a value
based on supply and demand for its shares. This does not make it "bad" or "wrong"-just
different The Fund also notes that because of this uniqueness the Fund's use of the reserve
method will not impact other mutual funds. On the other hand, ifthe Fund's methodology is
applied consistently, as it has been in the past, and is fully understood by all shareholders
through am.ple·disclosure, it will facilitate comparisons with other mutual funds arid will not
resuit in overstated performance. This makes a substance over form approach compelling under
the circumstances of the Fund.· For this reason alone the use of a reserve method falls well
within the judgment parameters of GAAP.
All ofthis demonstrates that sometimes variations from strict interpretations ofGAAP
are required5• While the Fund believes that its financials historically have been compiled and
presented in accordance with GAAP the modifying conventions make clear that GAAP is not
"carved in stone" and that variations are made and considered acceptable. If nothing else, GAAP
and F AS 109 are not clear on the appropriate calculation of a tax accrual particularly in view of
the fact that the "inherent assumption" underlying FAS 109 is not present given the particular
circumstances of the Fund.
CONCEPTS OFF AIR VALUE
The Copley Fund is currently valued at its liquidation value. Simply put, this does not
represent the fair value of the Fund's shares. It ignores reality and misstates the assets of the
FUiid.
4There are at least two other investment companies that have not elected RIC status and record a deferred tax liability associated
with the unrealized appreciation of portfolio securities. See Tortoise Energy Capital Corp., rue number 811-2175, Form N-CSRS
(August 1, 2007) and Kayne Anderson MLP Invesb:nent Company, file number 811-21593, Form N-CSRS (August 3, 2007).
However, both are closed-end funds and as such do not issue redeemable securities. Their shares are bought and sold in the open
market A closed-end fund with a large amount of unrealized capital gains in its portfolio may trade at a discount for example
because buyers would be assuming a potential tax liability and uncertainty as to the amount and timing of the gains to be realized.
Closed-end funds are not required to calculate their NAV daily. Tortoise is a nearly $1 billion Fund that invests in securities of
energy related to MLP's operation infrastructure assets. Kayne is a $2 billion Fund that also invests in energy. Their portfolio
turnover rates exceed 30o/o. As such, they are easily distinguishable from Copley.. Unlike Copley they are required to apply the
deferrals that are accrued on a regular basis.
5The Commission has recognized this concept and issued rules for the use of even Non-GAAP financials. Release No. 33-8176,
34-17226 (January 22, 2003).

~
~#
Memorandum (cont)
·Page 12 of 14
On September 30, 2008, the SEC's Office of the Chief Accountant issued a press release
(2008-234}which addressed fair value accounting stating that "(t)he current environment has
made questions surrounding the determination of fair value particularly challenging for
prepare~, auditors, .and users of financial information". While not precisely on point the
concepts addressed in the release are equally applicable. The release makes clear that
Management's intemal assumptions can be used to measure fair value. It acknowledges that the
determination of fair value often requires significant judgment. The release also concludes that
clear and transparent disclosures are critical to providing investors with an understanding of the
judgments made by management.
.The Fund believes that it has demonstrated a clear and compelling rationale as to why the
use of the Board's reserve accrual methodology best represents a fair value for the Fund's shares.
It also believes that the disclosures made in the attached proposed Supplement to the Fund's
Prospectus provides clear and transparent disclosures with respect to both the methodology and
rationale used by the Board as well as the risks inherent therein..
The static application of an accounting concept (F AS 109 treatment of a deferred tax
liability) that is equivalent to liquidation accounting serves to undervalue the true financial
position of the Fund. It operates to overstate dividend yield and expense ratios and understate
performance for comparison purposes. Redeeming shareholders do not receive their
proportionate share of Fund assets. Purchasing shareholders receive a windfall in the event that
the deferred tax liability is eliminated or reduced due to conversion to a RIC or a change in tax
law or regulation.
Management of the Fund has, since 1992, attempted to reflect in the financial statements
a deferred tax liability to the extent that management anticipates, in an exercise of their best,
good faith business judgment that such a liability exists. Deferred income tax liabilities are at
best an estimate due to the nature of changing income tax rates and federal and state income tax
law and regulations. The Fund has consistently, from year to year, applied this concept in order
that the value of the Fund is never arbitrarily increased or decreased at any given point in time.
The performance of the Fund was based upon the true increases or decrease in the assets held for
the specified reporting period. Now the dai!Y NAV fluctuates, sometimes substantially, due only
to "hypothetical" changes in the tax accrual . 	.
SUMMARY
Copley Fund, Inc. was founded by Irving Levine in 197K ·Over the course of those years
the Fund's NAV consistently has grown from just over $3 per share to more than $54 per share
For example, assuming a 10% market decline, and that the Fund's shares react similarly, the Fund's per share NAV would
decrease by approximately $1.15 due solely to the maintenance ofthe full liquidating value accrual (example based upon
$50,000,000 in unrealized appreciation, a 35% tax rate and 1,500,000 shares outstanding). Utilizing the Fund'-s historical reserve
method there would have been no change in NAV due to anything other than the market
6

Memorandum (cont)
Page 13 ofl4
at year end 2007. This has been accomplished not through 12b-1 plans or sales loads or even
any sales efforts. Rather, the NAV growth is the result of a solid and consistently applied
investment philosophy of Rurchasing an4 holding highly viable, dividend paying stocks which
yield dividends in ever increasinKfUD.Ounts, all in accordance with the Fund's stated investment
objective of ''the generatiop and accumulation of dividend income" ..
Because of this structure the Copley Fund is unique among all other Funds. The Fund's
overall structure, investment strategies and operating philosophy have not materially changed
since its inception in 1978. Its underlying principles and strategies have been consistent, year to
year, and the overriding concern of Management and the Board of Directors always has been the
welfare of the individual shareholders.
The Fund's expense ratio, after a consistent and voluntary $60,000 per year advisory fee
waiver by the Fund's advisor has been maintained below 1.25%. These ratios, ori average, are
well below the average ratio~ ofall equity funds, which ranged from 1.44% to 1.07% over the
same period. Investment Company Institute, Fees and Expenses of Mutual Funds, 2007. Ratios
for equivalent small funds are much higher.
Every effort has been ID,ade to operate the Fund in the best interests of the shareholders
{ 	.$, 	and to reflect the true value of the Fund's assets in its net asset value. This effort has been
~;;2f} 	thwarted by compelling the Fund to use a full liquidating value accrual with respect to the Fund's
unrealized appreciation.
The Fund is required by Rule 22c-1 a to issue and redeem its shares at a price based on7
current net asset value. Rule 2a-4a defines current net asset value and specifically states that
with respect to NAV calculations "estimates (may be) used where necessary or appropriate".
That Rule also provides that "(a)ppropriate provision shall be made for Federal Income Taxes if
required" (emphasis added).
There is no explicit requirement however that the full liquidating liability tax accrual be
used in calculating the Fund's net asset value on which the daily issue and redemption price of
its shares must be based. For the reasons set forth above the Board ofDirectors believe that
neither GAAP nor FAS 109 mandate a liquidating liability accrual. On the other hand, the Board
does believe it clear that the use of a full liquidating liability accrual does not represent a fair
value with respect to the price of the Fund's shares. In fact, the application of such a
methodology is unrealistic, misleading and operates to the detriment of the Fund and its
shareholders.
As demonstrated above, the risk of the Fund incurring a tax liability in excess of the
Board established reserve is practically nil. Nonetheless, the Fund believes that this risk should
7 It should be noted that "based on" is not synonymous with "at".

Memorandum (cont)
Page 14 of14
be assessed.and either accepted or rejected by the shareholders with the staff providing guidance
related to the risk disclosure.
Accordingly, the Board proposes 'to adjust its N~t Asset Value8 based on the reserve
.method delineated above and to disclose, this adjUstment pursuant to the Prospectus Supplement
which is attached hereto. Of course, the Fund would be receptive to any disclosure comments
made by the staff and would make every effort to include them in the Supplement and all future
disclosure documents ..
As of0ctober31, 2008. This will have the effect ofincreasing the Fund's per share value from $39.94 to $48.14. In order to
compensate shareholders who redeemed between November 30, 2007and the date of the adjustment they will be reimbursed in an
amount equal to their proportionate share of the difference between the established Board reserve and the full liquidating liability
reserve which was in effect at the time.
8

ROY 	G ....H~L..E:, 	CP~ 	F>.04
.. 	.
'·.-·~
Copley Fund, 	Inc.
Altarnative Tax M~naqament 	St~ategy
Prepare.d by: 	Roy G. 	Hale, 	CPA
Date: 	Novamh~r 27, 	1992

ROY ,P..
-· P.as
·-· 	·'
.·
Copley 	Fund, 	Inc.
Alternativ~ 	Tax Management 	s~ategy
Page 	l
Scopa.
'I'he 	purpose 	of 	this 	paper 	is 	to 	:review 	the 	tax 	status 	of
Copley 	Fun~, 	Inc., 	and 	the ralated 	requiremen~ to accrue 	deferred
income 	taxes.
Bxeoutive 	Summa~y.
The 	Internal 	Revenue. 	Code, 	1986, 	as 	amended, 	provid~s 	two
types 	of 	income tax treat-ent for 	investment companies: 	taxing net
investment 	income 	at 	the 	corporate 	level 	or 	at 	the 	individual
shareholder 	level. 	In 	order 	to 	transfer 	the 	taxation 	of 	net
invaat:ment 	income 	to 	the 	shareholder 	level, 	at 	least 	go% 	ot 	net
invest~ent incQme must be distributad annually to shareholders and
other 	qual:.rf1cations 	must 	be 	met. 	since 	the 	Fund. 	has 	not 	made
annual 	dividend 	distributions 	t:.o 	shal:'ehold~rs 1 	all 	federal 	and
-stata 	inoo~e 	taxes 	are 	applied 	directly to 	the 	Fund.
By 	virtue 	of 	retaining 	tho 	income 	ta~ 	liability 	associated
with 	investment 	income, 	the 	Fund .must 	aocrue 	current 	and 	future 	\
income 	tax 	liabilities 	on 	realized 	and. 	unrealized 	gai.ns 	frolU 	\,~.:E:!J
investments 	made 	by 	the 	Fund. 	For 	the 	period 	ending 	August 	31 1
l992J 	the 	Fund had 	a 	current 	in~ome tax 	liability of 	$151,515 	and
a 	d•f•rr•d 	income 	tax 	liability 	of 	$3 1 .541 1 000. 	Both 	Of 	those
amount$ 	serva to ~educa the nat a~~~t value dQtermin~d daily by the
Fund.
The 	deferred 	income 	tax 	liability 	will 	be 	realized 	and
racoqnized 	when 	the 	applicable 	aeoul:'ities . are 	sold; 	the 	full
deferred 	income 	tax 	liability 	will 	be 	recognized 	when 	the 	entire
portfolio 	ia 	liquidated. 	since 	it 	is 	not 	the 	intention 	of 	the
Boa:r:d 	of 	Directors 	to 	liquidate 	the 	Fund 	or 	pay 	more 	corporate
inoomQ 	taxAs 	tha.n 	ne.eAs£ary, 	.it 	i• 	appropriate 	for 	the 	Board 	to
look 	at 	alternate 	tax ~anagement techniques. 	Electing re9ulated
investment 	company 	tr~atmQnt 	when 	it 	is 	deemed 	to 	be 	in 	the 	best
interast 	of thA 	Fund 	is. an 	appropriate 	a_lte:rnativa tax management
technique.
If 	the 	aoa~d 	of 	Diraetor~ 	were 	to 	eleeted 	to be 	taxed 	as 	a
regulated 	investment 	com.pany, 	the 	liability 	for 	the 	tax 	on
unre~lizad 	qains 	would 	ahift 	from 	the 	Fund 	to 	individual
shareholders. 	AccorQinqlyf 	the 	Fund would 	not have a 	req~iremQn~
to accrued dGf&rrad 	inoa.ma tax on unrealizad gains as a part of the
overall 	liabilities 	of 	the 	Fund.. 	The 	liability 	should. 	not 	be
dropped 	to 	z&ro, 	however, 	since 	it 	would 	be 	a 	reasonable
expectation 	that 	th• 	Puna 	would 	realize 	some 	qe.ins 	prior 	to 	~J
o.lect.ing 	regulated 	inveetmQnt company 	treatment. 	y

\ 	-~
~~
lgJ VUJ 	.
. ·p. 06
·~ 	.....	. .
...
Copley 	Fun~, 	Inc.
Alternative Tax Management Strategy
.l?age 	~
The 	Fund 	ia 	registered 	with 	the 	SecUr-ities 	_and 	Exchange
Co~ia~ion ~$ a diversified, 	open-end manaqement company under the
provis~ons of the 	Investment Company Act ot 	~940, 	as a~ahded. 	The
Fund has elected to hold rather than distribute to shareholders net
investment 	inoome, 	therefore, 	the· Fund 	is 	taxed 	as 	an 	ordinary
corporation rath&r 	th~n as 	a 	requlate.d 	investment 	company.
Since distributions are not mada to shareholders, 	the Fund is
liable 	for 	federal 	~nd stat• income taxes on amounts rsceived from
interest1 	dividen~s, 	capital 	qains, 	ancl 	operating 	division 	net
income. 	An 	ordinary 	corporation 	is 	currently 	taxed 	for.federal
income 	tax 	purposes 	at 	rates 	ot 	15% 	to 	34%, 	depending 	upon 	the
amount of its taxable. inoome. 	Further, 	the alternative minimum tax
may be applicable at a 	rate ot 	20,. 	~he Fund's overall tax liable
is 	substantially 	reduced. 	eaeh 	year 	by 	the 	applioation 	of 	a 	70%
di v iaends 	received 	deduction 	on 	qualified 	dividends. 	This 	tax
advantage 	ie 	partially 	offset 	by 	the 	requirement 	to 	add 	back 	the
aiviclends 	received 	d.eauotiQn 	for 	the 	calculation 	of.· alternat.ive
minimum 	tax. 	In 	the 	yeara 	that 	c:lividend 	income 	is 	a 	substantial
portion 	of 	investment 	income, 	the 	Fund 	will 	nave 	an 	alternative
mi~imu~ tax 	liability.
Capital gains are currently taxed ~t a 	corporation's marginal
tax rate, 	i.e., 	1St to 34%. 	The current ~aximum eapital 	gains 	tax
-rate 	for 	individuals 	is 	2St. 	With 	a 	spread . of 	six 	pe:rcentaqe
points be.tween the corporate and individual capital qains rates, 	it
would 	be prudent for 	the Fund to 	consider 	transferring 	the 	income
tax 	liability 	to individual 	shareholders when a 	principal portion
of 	the 	security 	portfolio 	was 	subject 	to 	liquidation. 	A method
readily 	available 	to 	the 	Fund 	is 	to 	qualify 	as 	a 	regulated
inveatm~nt oompan¥•
RegUlated 	Inveatmant 	Coap~y.
The 	special 	tax 	tr~atment 	accorded 	requlated 	irtvestment
companies 	(~ICs) 	under 	Subchapter M of 	the 	Internal Revenue Code,
··1986 1 	as 	amendAd, 	retlActs leqislative reoo;nition of tbe 	fact hat
such 	oompanies 	ax-e, 	in 	fact, 	primarily 	conduits. 	The 	rund 	is
raliaved of corporate. 	ineome 	taxes 	to whieh 	it would otharwi.se be
subject e.s 	a separate taxable entity except for 	income retained at
ths 	oorporate 	level.
In 	order 	to 	be 	taxed 	as 	a 	requla ted 	investment 	company, 	a
+>"'"''• e~3vtdaads~~aid d•d.uetion--that 	is, 	the amount distrib\J.tect to
.. 	-··-· 	· · ·1 	.... 	•.....____..:.--.......,.~..\. rl..,...ih.tetionr
•.. 	~ 0 y 	G • 	f.l A L E - 	t F' A 	31;11 9 3 4 a 98.4 P.e7

copley 	Funa~ 	Inc.
AltQrnativ• Tax M~nagement 	St~atagy 	1·
Fi!tqe 	3 	· 	1
II
lQast 	the 	su~ ot: 	{1) 	$0 percent 	of 	~he 	company's investment
company 	taxa~le 	income, 	computed 	wijthout 	dea'Qcting 	a 	dividends
~ee~ived deQuction, 	plus 	(2) 	90 percept of its net exampt 	inter~st
J.ncome,
. 	~apital 	gains 	ar• 	treated 	sepat-ately.. 	A 	R.IC 	may 	holcL,or
dlstrl.bUte any pot't~on of the capital!9ain realized during ;the tax
yaar. 	If 	the ~IC dJ.stribut&s 	100% of;the capital qain realized 	it
receives a 100% dividends paid deauction; 	if it distributes 	SO% 	it
receives 	an 	sot 	dividands paid aed~ct~on.
i
An 	investment 	com};)any 	desirin9 ! to 	qualify 	as 	a 	regulated
inv~stment company will proceed .qener~lly as 	follows;
~· 	!
(1) 	adopt 	a 	q~alityinq 	form 	of 	organization 	(Copley 	~lready
.meets 	this 	r~qu.irem~nt); 	. 	; 	· 	. ·
. ! 	.
(2) 	ioentify the 	first 	taxable 	y~ar 	in 	whieh 	it 	seeks 	to 	so
qualify; 	. 	. 	· 	! 	.
;
(3) 	arranqo. 	and 	maintain 	a 	portlt:olio 	mix 	that 	meets 	gross
inoome 	and diverai£ioation requiremen~s; 	· 	.
(4) 	declare 	and pay dividends 	to lits 	shareholders 	before 	th$
end 	of 	the year 	o:r shQrtly thereafter1, 	· 	.
{5) 	file~ 	tax.return 	electing 	to 	be 	a 	regulated 	investment
company and refleeting that it has met the distribution anq ~elated
rules 	fo~ 	being 	taxed 	und•r 	Subchapter M of 	the 	Internal 	Revenue
Code, 	1986, 	as 	amended.
cunqi.nq 	trom. 	a 	.t•c;ulaX' 	oo~p<tration 	t.o 	• 	r&qUlate4 	investmat'&t
cOJQpany ..
In 	addition 	to 	meetin9 	th• 	£iva 	requirements 	listed 	above,
Copley Fundf 	Inc., 	must ~eet two 	aaditional 	requirements.
{1) 	'l'he 	runa 	must 	distribute 	all 	earnings 	and 	profits
accumulated 	prior 	to 	the 	year 	in which RIC 	status 	is 	elected; 	and
· 	(2) 	it 	must 	pa.y 	a 	feae.ral 	ineoltl.e 	tax 	on 	all 	accumulated
unrealised 	gains 	at the point 	in time 	RIC 	statu.s 	is 	elected. 	.
TJnder 	an 	existinq 	I~S 	Requla~icn, 	the 	Fund may 	elect 	to
postponed this tax. 	Th• tax would be impO$ed on the built in gains,
at 	the 	til!ie 	RIC 	status was 	elected, 	when 	the 	securities 	are 	sold.
If the SQeuritiea are he.ld tor a minimum of ten years following th11
date RIC 	etatus 	i1 	elected, 	the tax would 	no~ be 	acces~ed aqainst
~
~
··~
·'"~Jg

~004
!:019::;48984 	P.ae..
(
/
3
·-.~~;··
Copley 	Fund, 	Inc.
· Alter1'1atdva. Tax Management 	strate<JY
P~9e 4
the· Fund.
Accumulated 	earninqa 	and 	profits 	at 	August 	31, 	1992 	-were
$13,618,161. 	Aa an axample, 	if the Board of Directors was t.o elect
RIC status commencinq i.fi calendar year 1993, 	the Fund would have 90
days 	starting 	on 	January 	1, 	1993, 	to 	CO!IIll\ence 	distributing 	the
aoe~ulated 	earnings 	and 	protits. 	All 	accumulated 	earnings 	and
profits would have to 	be distributed by the end of the 	year.
The 	distribution 	of 	earn inqs 	and 	prof 1 ts· 	could 	be 	made 	in
eithar 	cash 	or 	additional 	atock. 	A 	stock 	distribution 	woulcl
elitninate 	the 	need to. 	liquidate 	a 	portion 	of 	the 	stock 	portfolio
and pay the 	associated taxes. 	In 	either case, 	cash or 	stoek, 	the
shareholders 	would recognize 	taxable 	income 	in 	the amount 	of 	the ·
distribution received.
!f 	the 	Board 	of 	Direet:..ors 	were 	to 	e.leot 	to 	convert 	to 	RIC
status 	when 	t~a potential 	income 	tax 	liability on 	realized 	qains
reaohed 	a 	eert.ain ·plateau, 	say 	$500, ooo, 	then 	the 	na·ed 	to 	show
defer~ed inao~$ tax liabilities qreat~r than thie 	amount would not
be neoa~sary. 	Tha tax 	liability would shift to sharAholders above
the 	$5oo,coo 	ranqe and would 	not be a 	potential 	liability 	for 	the
Fund.
SinoA 	deterred 	ineome 	taxes 	serve 	to 	reduc~ 	net 	assats 1 	any
change 	in 	the 	amount 	ot 	deferred 	ineoDe 	taxes 	will 	have 	a 	direct
impaot 	on 	net 	asset 	value. 	Tha 	strategy 	discusse~ 	in 	this 	pap~r
will 	ultimately 	serve 	to 	increase 	the 	Fund" s 	net 	aeset 	value.
substantially. 	Tho 	not 	asset 	value 	must 	be 	a 	trua 	reflection of
the 	value 	Cf 	each 	share 	Of 	stock 	and 	not 	~e 	incumbered 	by 	value
judgemen~a 	(increases or deereases) 	that do not have some basis for
reooqnition, 	It 	eleotinq 	RIC 	status 	will 	reduce 	the 	tax
eoneaque.nces 	to 	tha 	Fund, 	t.he. 	FUnd 	finaneial 	statements 	should
refl$ot·this 	occurrence.
It 	is 	imperative that 	the Soard 	o! Directors comply with the
fUll disclo•ure conoe.pt of generally accept~d. accountinq principles
and 	SEC 	rules 	and 	requlations 	on 	any 	major 	change 	to 	accounting
:me:thoris or procedures. 	The willinqness to recognize RIC status and
the 	eorrespondinq 	impact on 	individual 	shareholders ~ust be 	fully
disclosed 	in the prospectus 	and in the financial 	statements 	issued
to 	shareholders.
-.;::6·~
~.~)
Some propo5ad 	lanquaqe tor the prospectus and the 	individual
_____r_l-_n_a-m::.i~U 	statements 	ios 	set 	£'01~.'"eh in 	the 	follOWinq 	pa9'eS 	.in 	tl'la
-~o 	R••~A 	o£ 	01rpctore 	accepted 	~na 	;~lte~native 	ta~
~019:S:4$$S;l	
,.. .

. ..,. 	·.
Copl$y Funa, 	Inc.
Alternative 	Ta~ Manaqe~ent 	Str~tegy
PiJge 	5
:rmpl@m4Hl~.ation La.nqy.~e .. ·
Proposad 	lanquage 	for 	the 	Fund's 	prospectus 	is 	submitted
below. 	.
Federal 7axea••GODe~ally
ThQ Fund is taxed a.a a regular corpo:ration under the Int~:rnal
Revenue 	Code 	of 	1986, 	as 	altlended 	(the 	••COde") • 	Except 	to 	the
extent 	hereinafte:r 	discussed, 	consistent 	with 	its 	investment
polioies and objectives, 	the Fund. :retains all net investment income
and realized capital 	gains, 	if any, 	to 	increase the 	Fund's assets.
Consequently, 	sha~eholders 	are 	not 	individ~ally liable 	for 	income
taxes 	asaooiated with 	the 	operations 	of the 	Fund except upon sale
of 	sha:res 	or 	the 	rac•ipt of distributions. 	. 	·
. 	.
~he 	Fund 	is 	taxGd, 	for 	Federal 	inoomQ 	tax 	purposes, 	on 	a
sch~dule 	of 	r~tes 	ranging 	from 	15% 	to 	34% 	depending 	upon· 	its
taxable 	income. 	However, 	a 5\ additional tax rate applies. ·to phase
out 	the 	benefits 	of 	the 	qraduated 	rates 	if 	tha 	Fund's 	taxable
income 	ia 	between 	$100,000 	and. $335,000. 	Subject 	to 	specific
limitations, 	the 	FUnd 	is 	entitled to 	a 	deduction 	in 	computin9 	its
Federal 	taxable 	income 	aqual 	to 	70% 	of 	the 	amount 	of 	divid.ands
reeeived 	.by 	the 	Fund 	trom 	~omestie 	corporations. 	'!'his 	O.iviaends 	\,. 	}
received deduction may not e)(ceed 70~ ot the Fund's taxable ineotn$ 	----<:0.-v
unless 	the 	Fund 	has 	a 	nGt 	operating 	loss 	for 	a 	tAXable 	yea~, 	as
comput•d 	aft•r 	deduetin9 	the 	dividend 	receive4 	deduction. 	rt 	is
anticipated, 	although 	there 	can be 	no 	assurance, 	that 	tha 	Fund's
management 	faes 	and 	other 	expanaQ~ 	will 	offset 	a 	substantial
portion of 	the remaining 30% of tha dividend income and investment
income 	from 	other 	sources 	durinq e4ch 	taxable year .
. The Fund pays 	income taxes on any 	nAt.realized capital 	9ain
a:t t.ha rata.tutory rate. noted above~ 	··In addition 1 	tha Fund will, 	for
financial 	statement purposes, 	accrue 	deferred 	income 	taxas 	on 	net
unrGalized 	capital 	gains 	that. 	a.ra 	expected 	to 	be 	realized 	at 	the
Fund level. 	The. Fund may carry net capital 	losses forward for 	five
years 	as 	an 	offset 	against 	any 	net 	capital 	qains 	realized 	by 	the
Fund during 	the 	current year.
If th~ Fund im unable to avoid the tax on net income throuqh
t.h~ 	use 	of 	tax 	management 	techniques, 	the. 	Fund's 	:management;
toqether 	with 	counsel, 	will 	oonsider 	limiting 	the 	liability 	for
payment 	of 	income 	taxos. 	A method 	available 	to 	the 	Fund 	is 	the
election to be ta~ed aa a re9ulatQd 	inv~stment company. 	Should th$
liability 	for 	tax. 	with 	regard 	to 	net 	ineo.l\\9 	axceed 	any 	set
limitation, 	and 	provided 	the 	Fund 	meets . a_ll 	applicable 	Internal
Revenue Code conditions, 	it 	is the 	intent cf the ~nd to make 	this
election.

~ ... 	lgf UUZIUUJ	-. 	·. 	~OY 	G. 	HAL~, 	CPA 	301'$1:;48$194 	p. 1 ...
. .
( Copley 	Fund, 	Inc.
~~;d Alternative Tax Manaqen1ent Stra t.egy
Page 	6
. 	.
Albeit tQe election to ba treated as a 	requlated investment
company 	will 	shift 	the 	income 	tax 	liability 	for 	net 	inveetment
ineome 	and 	oapital 	gains 	trom 	tha 	Fund 	to 	the 	individual
shareholder, 	the ~anaqemant of the Fund believes that 	it 	i~ in the
sharei;oldar' s beat interest to avoid double taxation by :making this
elac-t:-~on. 	Double taxation r•sults wb.en the.. Fund pays a 	tax on the
net 	1ncome, 	which 	reduces 	the 	net _asset 	value 	per 	&hare, 	and 	the
shareholder 	also 	pays a 	tax on that 	e~me qain ~pon ~edeeminq Fund
share$. 	·
corresponding 	with 	an 	election to be treated a• 	a 	regulated
inv~stmant 	company, 	the 	Fund 	must 	make 	a 	distribution 	to
shareholders of all earninqa acou•ulated as a regular corporation,
This 	distribution 	would 	reault 	in 	ta~able 	income 	to 	the
shareholders, 	wheth~r or not the distribution 	is 	received 	in 	cash
or 	additional 	ahare~ of 	Fund s~ook6
Unrealized appreciation 	(built-in gains) 	at the point in time
the 	Fund 	elaots regulated 	investment 	oompany 	treatment 	is 	taxable
income 	to 	the 	Fund. 	tlnder 	current 	Internal 	Revenue 	code
provisions, 	the 	Pund ~ay sleet to postpone thie built-in qains tax
until 	such time 	a$ 	the 	security 	is 	sold. 	If th• seourity 	is held
for 	at 	least 	10 	ysars 	after 	electing regulated 	investment company
status, 	the 	tax will 	not 	be 	accessed against 	the 	Fund.
Legislative or ragulatory changes in, 	or 	interpretations of,
applie,!!.ble 	federal 	te.K 	laws, 	regulations 	or 	rulings 	may 	make 	it
impossible 	for 	the 	Fund 	to 	'Utilize 	certain 	of 	the 	tax 	mana.qement
techniques 	an4 	atratoqias 	described 	in 	the 	Pro$pectus. 	The 	Fund
intends 	to 	avaluate 	continuously tha 	operations 	of 	the 	Fund under
the 	current 	fedGral 	tax 	la'\ls 	as 	1Nell· as 	various 	alternatives
available.
Proposed 	languaqe 	for 	thA 	s~mi-annual 	and 	annual 	financial
stateme.pts.
federal 	inecme 	tax•a. 	In 	accordance 	with 	the 	Fund's
objectives and policies, 	it does not eurrantly intend to distributs
net 	investment 	income 	or 	realized 	capital 	qains 	to 	shareholders.
Accorc:iinqly 1 	the Fund will be taxed as a 	regUlar corporation. 	The
Fund 	has 	accrued 	a 	liability 	!or 	realized 	and 	unrealized 	capital
gains 	to 	the 	extend 	th.• 	Fund 	anticipates 	such 	a 	liability 	will
occur. 	Through 	February 	28, 	1993, 	the 	Fund 	has 	accrued 	a 	tax
liability 	ot
During this aeeounting period, 	the Fund's Board of Directors
has 	provided 	mani!lgQm.en.t:. 	wj_th 	the 	authority 	to 	elect 	regulated
investment company treatment when the over~ll income tax liability

.. • • 	I
-,:.. 1 1
Copley Fund, 	Inc.
Alternative Tax Mangement 	Strategy
Page 7
li!itXQeada 	a 	de5ignatl!d 	level. 	This 	a\lthority 	has 	substantially
~•duced the Fund's potential liability for income tax on unr~alized
gains. 	Without 	this 	authority 	the 	Fund.'e 	net 	asset 	value 	would
have 	been 	; 	with this 	authority the Fund's net 	asset
value 	is

. •.: . 	~- .... ::: -:-: ·..:- . -: ..
COPLEY FUND, INC.
FINANCIAL IDGHLIGHTS
The following table presents inform~tion 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).
·l
.. Year Ended	... ':-f
-." -;:
. ! 	February 	February 	February 	February 	February 	February
28,2007 	29,2006 	28, 2005 	28, 2004 	28,2003 	28,2002
: 	I
. - ·:'! 	Net asset value,
• I
beginning of year ........ 	$ 46.86 	$ 43.88 	$ 39.26 	$ 31.33 	$ 37.66 	$ 39.94	'	.. . j
Income (loss) for investment
Operations:
Net investment income (loss) 	1.18 	1.02 	0.99 	0.85 	0.95 	0.67
Net gains (losses) on
securities (both realized
and unrealized) ........ 	6.63 	1.96 	3.63 	7.08 	(7.28) 	·(2.95)
Total investment operations 	7.81 	2.98 	4.62 	7.93 	(6.33) 	(2.28)
Net asset value, end of year 	$ 54.67 	$ 46.86 	$ 43.88 	$ 39.26 	$ 31.33 	$ 37.66
Total return<•> ............ 	16.67% 	6.79% 	11.77% 	25.31% 	(16.81)% 	(5.72)%
Net assets, last day of	-:. : ·.	
' 	. February (in thousands) 	86,868 	74,646 	72,079 	69,473 	57,644 	76,607
:::;;:.:.·\:~·>!, 	Ratio of expenses to average	:-.: .. -·- 	.
:::-·:_ :-._.. 	net assets<b)(c) ........... 	1.03% 	1.09% 	1.01% 	1.01% 	1.07% 	0.98%
Ratio of net income (loss)	
CJ.::;_·_. to average net assets<c> ..... 	2.37% 	2.26% 	2.33% 	2.42% 	2.47% 	1.70%
: . :·:- :~ _-: -: ..
..- ... 	Portfolio turnover rate ....... 	0.50% 	0.73% 	0.44% 	0.92% 	8.65% 	3.33%
Number of shares outstanding at
end of period (in thousands) .. 	1,589 	1,593 	1,643 	1,770 	1,840 	2,034
(a) 	Total return for periods less than one year are not annualized.
(b) 	Rutio 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.
18
.. 	. ...	-··.-:··. 	..
__ , .. _.

·:·~~::::.:::==:::.'±:::'·.=·=:i·~·,."5·~~~~~~~~~~
COPLEY FUND, INC.
Financial Highlights .
The financial highlights table is intended to help you understand the Fund's financial performance
for the fiscal years 2129/04 through 2129/08. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor would have earned or lost
on an investment in the Fund. The information for fiscal years prior to February 29, 2008 have been
restated to incorporate the correction of an error as it relates to accumulated deferred income· taxes on
unrealized appreciation• associated with the securities portfolio. The information set forth herein will be
consistent with the financial information contained in the restated financial statements for the period
ending February 29, 2008. Shareholders should be certain that they have the most recent annual report
which should be read in connection with the prospectus.
The financial information was audited by Roy G. Hale, CPA, whose report, along with the Fund's
financial statements, is included the Fund's annual report to Shareholders, a copy of whic.h is available
. . . . . . . . .
......... .
................. .
............ .
. . . . . . . . . . . . . . . . . . .....
.
..... .
......... .
........... .
..................... .
. . ............. .
February
29, 2008
$ 42.54
1.18
Year Ended
February February February
28, 2007 	28, 2006 	28, 2005
$ 37.23 	$ 35.28 	$ 32.63
·(1.31) 	0.27 	(0.44)
February
29, 2004
. $ 27.62
(1.86)
~ 	___Q,§_f 	~ 	3.09 	_Q,ll
1.53 	5.31 	1.95 	--w 	5.01
$ 44.07 	$ 42.54 	$ 37.23 	$ 35.28 	$ 32.63
~% 	14.26% 	5.53% ----s.i2% 18:14%
69,395 	67,581 	59,298 	57,948 	57,747
1.72% 	7.88% 	3.80% 	5.65% 	10.60%
1.72% 	1.67% 	1.72% 	1.49% 	1.59%
2.73% 	(3.28)% 	0.76% 	(1.30)% 	(6.18)%
2.73%
4.11%
2.93%
0.50%
2.83%
0.73%
2.86%
0.44%
2.84%
0.92%
. . . . . . . . . . . . . . . . . . . 	1,575 	1,589 	1,593 	1,643 	1,770
The financial highlights shown above included the waiver of $60,000 of the investment advisory fee
(as noted in the Statement of Operations). If the waiver of $60,000 of investment advisory fees had not
••• 0 •• 	1.81% 	7.97% 	3.90% 	5.76% 	10.71%
1.81% 	1.76% 	1.83% 	1.60% 	1.70%
............ 	2.65% 	(3.37)% 	0.66% 	(1.41)%: 	(6.29)%
• • • • • 	2.65% 	2.84% 	2.73% 	2.75% 	2.72%
The accompanying notes are an integral part of the financial statements.
20
....
-·-:	-:!". _:;·-~~:_=_·:~-~~ (_··=: -.;:.
--:-....
'".: .p;.···=··.::::::::··: 	·_:·=<:-:·:::::::::	·.:::::.·:::::::·~-··:==·
at no charge on request by calling 877-881-2751.	
.l
Net asset value, beginning of year
Income (loss) for investment operations:
Net investment income (loss)
Net gains (losses) on securities (both realized
and unrealized)
Total investment operations
Net asset value, end of year . . . . . . . . . . . . .
Total retum
Net assets, last day of February (in thousands)
Ratio of net expenses, including regular &
deferred taxes, to average net assets
Ratio of net expenses, excluding deferred taxes,
to average net assets . . . . . .
Ratio of net investment and operating income
(loss) to average net assets
Ratio of net investment and operating income
(loss), excluding deferred taxes, to average
net assets
Portfolio tum over rate
Number of shares outstanding at end of period
(in thousands).
been included, the following ratios would apply:
Ratio of net expenses, including regular &
deferred taxes, to average net assets
Ratio of net expenses, excluding deferred taxes,
to average net assets ................
Ratio of net investment and operating income
(loss) to average net assets
Ratio of net investment and operating income
(loss), excluding deferred taxes, to average
net assets 	• • • • • • • • • • • • • ~ 0 • •
.. ·.:·
·· ....
·. :· ··-:.
.. ;.•.
:.:·.

COPLEY FUND, INC.
SUPPLE:MENT DATED NOVEMBER 	, 2008 TO
PROSPECTUS DATED JULY 24, 2008
This Supplement (the "Supplement") to the Prospectus dated July 24,2008 provides
information relating to the Fund and d~velopments since issuance of the Prospectus.
. 	.
This Supplement mustbe read in conjunction with the Prospectus in order to obtain
complete information about the Fund as the Supplement only addresses certain issues. In the
case of any inconsistencies between the Supplement and the Prospectus this Supplement shall
prevail.
This Supplement amends the "Tax on Unrealized Appreciation" (page 5), t~?-e
"Performance" (pages 5, 6 and 7), the "Distribution and Taxes" (pages 8, 9 and 10) and the
"When and How Net Asset Value is Calculated (page 13) sections of the Prospectus.
TAX ON UNREALIZED APPRECIATION
This Section is replaced in its entirety by the following:
This section addresses two principal risks of investing in the Fund:
( 	TAx LIABILITY RISK. Federal Income Taxes are payable when the Fund sells
'\s:J 	portfolio securities that have appreciated (gone up) in value. The Fund maintains a reserve for
this tax, the amount of which has been established by the Board of Directors. IN THE EVENT
THAT THE TAXES PAYABLE ON THE SALE OF PORTFOLIO SECURITIES SHOULD
EXCEED THE AMOUNT OF THE RESERVE THE NET ASSET VALUE OF THE FUND'S
SHARES WOULD DECREASE AND SHAREHOLDERS WOULD INCUR A DECREASE IN
THE VALUE OF THEIR INVESTMENT. TillS DECREASE COULD BE SUBSTANTIAL.
For the life of the Fund, the tax reserve established by the Board always has exceeded the
capital gains taxes actually due and payable by the Fund. While the Board believes that it has a
clear and consistent record of establishing an adequate tax reserve and that the sale of sufficient
portfolio securities to generate a tax greater than the reserve is remote, THE POTENTIAL FOR·
A LOSS EXISTS.
ACCOUNTING INTERPRETATION RISK. The Fund is required to follow generally
accepted accounting principles (GAAP) in the preparation of financial statements and associated
supplemental information. GAAP however is not clear in respect of one accounting issue which
impacts on the Fund's fmancial statements-the methodology for the treatment of deferred
income tax as it relates to the accumulation of unrealized appreciation on the Fund's stock
portfolio.
Under one interpretation, the liquidating value accrual method, the Fund would be
required to report the full income tax liability, based upon prevailing income tax rates, that

Copley Fund, Inc.
Supplement dated November 	,
2008 to Prospectus dated July 24, 2008
(_ J
would be due and payable ·if the Ftind liquidated its entire portfolio on the date the financial
statements are presented.. Under the other interpretation, currently utilized by the Fund, the
income tax liability is reported based upon a reserve for such tax which is established by the
Board of Directors.
IN THE EVENT TIIAT THE FUND'S TAX ACCOUNTING :METHODOLOGY IS
DETERMINED TO BE NOT IN ACCORDANCE Willi GAAP OR NOT SUBJECT TO AN
EXCEPTION THERETO, THE FUND'S NAV WOULD HAVE TO BE ADWSTED TO
REFLECT 1HE FULL TAX LIABILITY, THE NET ASSET VALUE OF THE FUND'S
SHARES WOULD DECREASE AND SHAREHOLDERS WOULD INCUR A DECREASE IN
TilE VALUE OF 1HEIR INVESTMENT. THIS DECREASE COULD BE SUBSTANTIAL.
To illustrate the full potential impact of the realization of either of the identified risks, the
following table compares the Fund's historical Per Share Net Asset Value ("NAV") calculated .
based upon the reserve established by the Board with the NAV that would result had the Fund's
entire portfolio been liquidated at the end of the period indicated.
C)	YEAR ENDED """"'"~·
FEB29 	'FEB28 	FEB28 	FEB28 	FEB28
2008 	2007 	2006 	2005 	2004
Net Asset Value
Including Tax Reserve
Established by Board 	$54.68 	$54.67 	$46.86 	$43.88 	$39.26
Net Asset Value
Including Potential Tax
Liability Assuming Liquidat
Of Entire Portfolio
ion
$44.39 	$44.46 	$38.79 	$36.44 	$33.07
Per Share hnpact 	$10.29 	$10.01 	$8.07 	$7.44 	$6.19
This risk and the accounting principles related thereto are discussed in more detail in this
Prospectus under the "Distribution and Taxes" Section.
DISTRIBUTION AND TAXES
This Section is amended by substituting the following for paragraphs 2 through 6 thereof:
-2

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Copley Fund, Inc.
Supplement dated November 	,
2008 to Prospectus dated July 24,2008
The Fund pays income taxes on any net realized capital gains at the statutory rate,
currently 35%. In addition, the Fund will, for purposes-of calculating the Fund's Per Share Net
Asset Value (''NAV") accrue deferred taxes on:net capital gains to the extent management and
the Board of Directors anticipate that a liability may exist. The Fund also may carry any net
capital losses forward for five years as an offset against any net capital gains realized by the
Fund during the current year.
The reserve for taxes established by the Board of Directors is a critical component in the
pricing of the Fund's Shares. There are two methods by which the liability for deferred income
taxes for purposes of pricing the Fund's Shares may be calculated. The first method
("liquidating value accrual method") establishes a liability which includes the entire amount of
capital gains taxes that would be payable if the Fund liquidated its entire portfolio of securities
that day. The second method ("reserve value accrual method"), currently used by the Fund,
establishes a current liability which includes only such amount as Management and the Board of
Directors believes adequately meets the current anticipated tax liability.
There are provisions under generally accepted accounting principles ("GAAP") which
may be interpreted to require the Fund to record the full potential income tax liability assoCiated ,
with the reported unrealized appreciation to ensure that shareholders are not required to
recognize a decrease in the value of their shares due strictly to the income tax obligation
associated with the sale of portfolio securities. This concept is understood by the Board of
Directors and the management of the Fun~ and it has been followed diligently albeit with a
reserve methodology rather than a full accrual. Even though th~ full accrual of deferred income
taxes associated with the unrealized appreciation would remove any risk associated with the ·
devaluation of shares due to the payment of federal income taxes,· the Board believes that the
resultant net asset value incorporating a ~1 accrual of deferred income taxes does not report the
shares at fair value. The basis for the Board's decision is summarized below:
(1) 	The use of a full liquidating accrual methodology is unrealistic. It assumes.the
liquidation of the entire portfolio of the Fund's securities. Neither the Board nor
management has any intention to liquidate. Nor do they believe, or anticipate, that there
exists any circumstances which would compel a liquidation of the Fund's entire portfolio
of securities. As illustrated by the following table, the history of the Fund for the past 15
years supports this position:
-3

, Copley Fund, Inc.
Supplement dated November 	,
2008 to Prospectus dated July 24,2008
COMPARISON OF RESERVE ESTABLISHED BY BO.A.im AND .
ACTUAL CAPITAL GAINS TAXES PAID
BOARD ESTABLISHED 	ACTUAL CAPITAL 	FULL LIQUIDATING
CAPITAL GAINS TAX RESERVE 	GAINS TAXES PAID 	RESERVE FOR CAPITAL
GAINS LIABILITY ACCRUAL
2007 	$807,345.00 	$0 	$17,537,872.00
2006 	$758,766.00 	$0 	$16,104,320.00
2005 	$758,766.00 	$0 	$14,887,774.00 '
2004 	$824,472.00 	$0 	$12,548,834.00
2003 	$770,554.00 	$0 	$7,602.562.00
2002 	$664,576.00 	$0 	$13,166,255.00
2001 	$443,285.00 	$0 	$15,646,991.00
2000 	$464,563.00 	$0 	$10,961,527.00
1999 	$373,709.00 	$0 	$13,684,586.00
1998 	$278,488.00 	$0 	$13,224,672.00
1997 	$189,891.00 	$0 	$8,193,495.00
1996 	$378,955.00 	$0 	$7,160,983.00
1995 	$422,000.00 	$0 	$2,756,751.00
1994 	$422,000.00 	$0 	$3,843,489.00
1993 	$422,000.00 	$0 	$3,430,633.00
(2) 	The use of a full liquidating accrual methodology results in a daily NAV that is
misleading. Lowering the NAY to a level that is inconsistent with the working assets of
the Fund by booking a long-term liability that is contingent upon some future event that
in all likelihood will not occur understates the real fair value of Fund shares. All
obligations of the Fund that must be met are recognized and impact the NAV on a daily
basis. Reducing the NAV to incorporate a liability that by its very nature is contingent
upon future events, when in fact the liability can be addressed through a sound reserve
policy, leads the Board to a finding that the resultant NAV would be mislead:irig. An
essential aspect of the Fund's strategy is the accumulation and retention of dividends
generated by its portfolio of securities. The full accrual method has the potential of
misleading investors by implying that dividends received are being earned at a rate which
is greater than the actual return, i.e., inflated yields because a significant portion of the
principal on which the return was earned is not included in the Fund's NAV. In addition,
the application of the full accrual method overstates expense ratios and may understate
· performance levels.
(3) 	Lastly, the use of the full liquidating accrual methodology does not represent a "fair
value" for the Fund's shares. 	( 	~
\dJ
-4

( 	\
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-'~
'"&_j/
Copley Fund, Inc.
Supplement dated November ---7
2008 to Prospectus dated July 24, 2008
The Board has directed the utilization of the reserve value accrual method because it
results in a fair value for the Fund's shares and fairly presents in all material respects the
financial condition of the Fund. It also stabilizes the Fund's daily NAV because it eliminates
exaggerated "swings" in NAV caused by the necessity of including a different, and often
substantial, amount for liquidating tax liability on a daily basis. Details of the Board's
methodology are set forth below. 	r·
When stocks appreciate in value in excess of their cost. an asset called unrealized
appreciation is generated. The appreciation will only be realized when these securities are.
actually sold. However, on a daily basis, the Fund is required to mark its securities to market
and thereby recogllize the unrealized appreciation in the net asset value of the Fund. By using
current values rather than cost values, the value of the portfolio, which makes up almost all of
the total assets of the Fund, is reported at its actual market worth. This is an important concept
in pricing the Fund at a value that truly reflects the assets held. When appreciated securities are
sold, the unrecognized gain becomes recognizable and, ifnot offset by accumulated capital
losses, will be subject to taxation. Since the unrealized appreciation and the associated taxation
thereof attaches to all appreciated securities, many of which will not be sold for long periods of
time, the management of the Fund has takenthe position that it will accrue a deferred income tax
liability on net unrealized capital gains to the extent that management anticipates a liability may
exist. This liability is based upon current market trends, accumulated capital losses, the amount
of cash and cash equivalents held, and anticipated redemptions as well as the Fund's long
operating history.
If the Fund actually realized capital gains and paid capital gains taxes that exceeded the
amount of the res·erve for deferred income taxes, the net asset value of the Fund would be
lowered by the amount of the taxes that exceed the reserve and shareholders would experience a
real loss in value of their respective shares. In order to avoid this potential scenario the Fund
may elect to be taxed as a regulated investment company ("RIC"), as opposed to a "C"
Corporation, in the event that the actual capital gains tax liability exceeds the reserve and
available tax loss carryforwards for a given period. This option would eliminate the income tax
at the Fund level (35% rate) and shift it to the individual shareholder at a current 15% rate.
Corresponding with an election to be treated as a regulated investment company, the
Fund must make a distribution to its shareholders, of all earning accumulated as a regular
corporation. This distribution would result in taxable income to the shareholders, whether or not
the distribution is received in cash or additional shares of Fund stock.
Unrealized appreciation (built-in-gains) at the point in time the Fund elects regulated
investment company treatment is taxable income to the Fund. However, under current Revenue
-5

Copley Fund, Inc.
Supplement dated November--~
2008 to Prospectus dated July 24, 2008
Code provisions, the Fund may elect to postpone this built-in-gains tax until such time as the
security is sold. If the security is held for at least 10 years after electing. regulated investm.eilt
company status, the tax will not be assessed against the Fund.
Legislative or regulatory changes in, or interpretations of, applicable federal tax laws,
regulations or nilings may make it impossible for the Fund to utilize certain of the tax
management techniques and strategies describ~d in the Prospectus. The Fund intends to evaluate
continuously the operations of the Fund under current federal tax laws as well as various
alternatives available .
. PERFORMANCE
This Section is amended by replacing the first paragraph thereof with the following and
by adding the Charts. and Tables set forth below: 	·
The bar charts and tables below can help in evaluating the potential risks of investing in
the Fund. The bar charts show changes in the yearly performance of the Fund over the last ten
years. The tables compare the average annual returns for the past one-year, five-year and ten-: 	( .. ~.~'
~
year periods of the Fund, before and after taxes, with the average annual returns for the S&P 500
for the same periods. Please keep in mind that the Fund's past performance (before and after
taxes) is not necessarily an indication of the Fund's future performance~
In order to demonstrate the effects of a full accrual of deferred income taxes as compared
to the reserve method, the following charts BI!d tables are provided. The information presented
in the first set of charts and graphs is based upon the inclusion in the Fund's NAV of a full
accrual of deferred income taxes that would be payable in its entirety only upon liquidation of
the Fund's entire stock portfolio.
1998 	1999 	2000 	2001 	2002 	2003 	2004 	2005 	2006 	2007
Fund 	5.83% (6.69)% 	19.75% (2.76)%(11.93)% 	18.14% 	8.12% 	5.53% 	14.26% 	3.60%
S&P 500 	26.~9% 11.55% (10.10)% (10.60)% (22.10)% 26.20% 	21.26% 	4.90% 	15.79% 	5.49%
Best Quarter
13.6%
3rd-2000
Worst Quarter
(14.95)%
3rd-2002
The performance infonnation shown above is based on full calendar years.
-6

Copley Fund, Inc.
Supplement dated November 	,
2008 to Prospectus dated July 24, 2008
~e investment return and principal value of an investment will fluctuate, so an investor's
shares, when redeemed, will be worth more or less than their origin8.I cost 	~.-
Average Annual Total Returns as of2/29/08
1 Year 	5 Years 	10 Years
Total Return Before Taxes 	3.60% 	6.20% 	4.20%
Total Return After Taxes on Distributions* 	N/A** 	N/A** 	N/A**
Fund Return After Taxes on Distributions
and Sale ofFund Shares* 	3.06% 	5.27% 	3.57%
S&P 500 Index 	(3.60)% 	11.62% 	7.23%
The information presented in the charts and tables set forth below are based upon the
reserve for deferred income taxes established by the Board of Directors. 	·
1998 	1999 	2000 	2001 	2002 	2003 	2004 	2005 	2006 	2007
\J Fund 	5.36% (6.86)% 26.075% (5.72)% (16.81)% 	25.31% 	11.77% 	6.79% 	16.67% 	0.00%
":~:!t......: .
S&P 500 	26.69% 	11.55% (I 0.1 0)% (1 0.60)% (22.1 0)% 26.20% 21.26% 	4.90% 	15.79% 	5.49%
Best Quarter 	Worst Quarter
13.6% 	(14.95)%
3rd-2000 	3rd-2002
The performance information shown above is based on full calendar years.
The investment return and principal value of an investment will fluctuate, so an investor's
shares, when redeemed, will be worth more or less than their original cost.
Average Annual Total Returns as of2/29/08
1 Year 	5 Years 	10 Years
Total Return Before Taxes 	0.00% 	6.90% 	5.50%
Total Return After Taxes on Distributions* 	N/A** 	N/A** 	N/A*"'
Fund Return After Taxes on Distributions
and Sale ofFund Shares* 	0.00% 	5.87% 	4.68%
S&P 500 Index 	(3.60)% 	11.62% 	7.23%
~
'-0;..-i/
-7

Copley Fund, Inc.
Supplement dated November 	,
2008 to Prospectus dated July 24,2008
WHEN AND HOW NET ASSET VALUE IS CALCULATED .
This Section is amended by substituting the following for the second paragraph thereof:
I
The Fund's NAVis determined by dividing the yalue of the Fund's securities, cash and
other assets, minus all liabilities, by the number of shares outstanding. For purposes of
calculating the Fund's per share price, the liability for deferred income taxes on unrealized
appreciation is based upon a "reserve" for such taxes established in good faith by the Fund's
Board of Directors.
The Board of Directors believe that a "fair value" accounting of the Fund is best served
by reportiri.g a reserve for deferred taxes that takes into account the investment policy of the
Fund, the Fund's long history of holding securities for many years, market conditions,
anticipated redemptions and other real-time factors deemed relevant by the Board of Directors.
The Fund's securities are valued each day at their market value, which usually means the
last quoted sales price on a security's principal exchange. Securities not traded on the valuation
date and securities not listed are valued at the last quoted bid price. All other securities, 	~.)
including securities in which the quotations are considered to be unreliable due to significant
market or other events are priced at their fair value as determined in good faith pursuant to .
procedures adopted by the Fund's Board of Directors. Part of the assets of the operating division
consist of inventory and is valued at its fair value as determined by the Board of Directors.
\,,")
..,
-8

I
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ROBERTS & HENRY
•
•
•
ATToRNEYS .A!r LAw
164. HoNEYSUCKLE DRIVE
JUPITER, FLORD>.A. 3341>8.
166ll 744·598S
FAX C56ll 207·6857
E-MAIL: RobertsHemyLaw@aolcom
101 Bl:JEN.A VlS'llA .A.VXNOEI 	504~STREET
Jlm)llllU.LSBURG, MD !Wisa
I.
IUOI ~:9376
P.O. Box 1138
ST. MicHAELS, MD 21663
FAX IillO) '754-9876 	C41018i!ll·44156
:B'.A%14101754·9376
October 5, 2009
Lawrence Pisto, Esquire 	·'"··
U.S. Securities and Exchange Commission
Boston Regional Office
33 Arch Street, 23rd Floor
Boston, MA 02110
RE: 	In the Matter of Copley Fund, Inc.<B-2335)
Dear Lawrence:
I wanted to follow up on our telephone conversation wherein I inquired about the
status of the Copley proceeding.~ I indicated, Mr. Levine and the Bo.ard are anxious to
come ro a resolution of the issues therein so that the Fund can move on with its business
and wor~ toward a solution of the NAV differential which will serve the best interests of
the Fund's shareholders.
As you know, the Board has consistently maintained that the accrual for
unrealized. capital gains taxes is best represented by a ''reserve" established by the Board
as opposed ro the full liquidating value accrual that currently is being employed in ·
calculating the Fund's Net ~set Value. The Fund's experience since November 30,
2007, when the NAV was adjusted at the insistence of the staffand over the objection of
the Board, has revealed that the use of the latter methodology has resulted in what the
Board and management believe are misleading and inconsistent financiat statements and
a per share value that does not represent the fair value for the Fund's shares.
We previously provided the staff with a memorandum.(copy attached) which
details the Fund's rationale in support of the use of the Board established reserve. This
rationale was further delineated by Messrs. Levine and Hale in the testimony given
during the COW'Se of the proceeding. 	The Board and management continue to believe·
that use of the Board established methodology is the only way in which the Fund's shares
may be fairly priced. 	They also believe that the use of this methodology is consistent
with generally accepted accounting principles and is required to fairly present Fund

.
"
financials in a consistent manner, fairly price Fund shares and render the :financials not
misleading.
•	In this regard, I have attached a compendium. of articles clipped from the Wall
Street Journal which illustrate the principle that neither GAAP nor F ASB accounting
standards are "cast in stone,, and that both have been accorded a great deal of flexibility
both in interpretation and application. In most, if not all, ofthese situations interpretations
have been made whiyh result in fair pricing and accounting principle application.
We submit that the tax accrual issue really is more a disclosure and risk
assessment issue than an accounting issue. Historically, the Fund has treated it as such
and made complete and clear disclosures which were routinely reviewed by the I M staff.
Copley Fund shareholders should be able to fully assess the risks of investing in the Fund
insofar as such risks relate to taxes on unrealized appreciation. As more fully set forth in
our memo,:andum complete and adequate disclosure can be accomplished through both
text and comparison tables that are easily understandable and in "plain language". We are
confident that we can provide clear parallel NAV calculations and other appropriate
disclosures which will allow Fund investors to make informed decisions. In this regard
we note that parallel disclosure certainly is not a novel concept. Public companies
regularly disclose both GAAP and Non-GAAP earnings and other fmancial information
for use by analysts and investors alike. This concept ftnds additional support in the newly
promulgated interactive (XBRL) format for risk/return information. This requirement
evidences a recognition by the Commission that investors want , should be able and
indeed should be encouraged, to use data as they see fit for their own analytic purposes.
This is exactly what the Board is proposing: providing parallel NAV calculations, with a
clear indication of the difference between the two. This method would facilitate clear, 	•consistent and transparent disclosure.
In December of 2008, the Commission delivered to Congress a Report and
Recommendation Pursuant to Section 133 of the Emergency Economic Stabilization Act
of2008: Study on Mark-To-Market Accollliting. At page 15 of that Report the staff
recognizes that ''the objective of financial reporting is to provide information useful to
investors and creditors in their decision making process". The purpose of financial
reporting is repeated in recommendation ,6 at page 206 as "intended to meet the needs of
investors". And, at page 8 and in the conclusion at page 205, the stafrs recommendation
is to improve the application of"judgment" in making farr value measurements. While
the Study is not exactly on point it supports the argument fully set forth in our
memorandum, to wit: SEC rules should, and do, have enough flexibility for the
application of sound judgment.
Many years of actual experience confirm that Copley Fund's management and the
Board's judgment in determining NAY was accurate and enabled both buyers and sellers
to purchase and sell Fund shares at a consistently fair and correct price (see table at page
5 of the memorandum). The method used by the Fund to calculate NAV gives a far more
accurate picture to investors than the method mandated by the staff. We submit that the
Fund should be allowed to report, and sell and redeem, at anNAV without a "full" tax
reserve in accordance with the Board's sound and proven business judgment.
•

,I
• 	. 	The clear mandate of the Commission is to protect investors. In this case, an
interpretation ofFAS 109 which uses liquidating value accounting achieves the exact
opposite result: one that should be avoided-investors are harmed.
Simply put, a full liquidating value accounting view under FAS 109 operates to
the detriment of Fund shareholders and results in iJlconsistent and misleading financial
statements. For example, the current SEC mandated NAV calculation is misleading
because, among other things, it exaggerates the performance of the Fund when pre-tax
income loss is calculated as a percentage of 1he artificially lower amount of assets verses
the amount actually deployed for investment. 	On the other hand, a reserve accounting
view wder FAS 109 operates to the benefit of shareholders and results in consistent,
easily understandable and clear financials which produce a Net Asset Value which
represents fair value for the Fund's shares. 	For example, at September 30, the Fund
would have to liquidate approximately $19,000,000 of its portfolio securities in order to
incur even the first dime oftax liability. This, we submit, is such a remote possibility as
to not even merit consideration. Even so, it should be for the shareholders to assess this
risk, however slight, not for the staff to make the detel11lination for them. 	We believe
that there is nothing in GAAP or applicable law or regulation which precludes the use of
the Board's methodology in pricing Fund shares.
• Lastly, I believe that it would be constructive for me to come to Boston and meet
with you to discuss the issues and alternatives which may be available to facilitate
bringing th~ proceeding to a mutually agreeable resolution. I would hope that this matter
would fall within the parameters of the four "S' s" outlined in the new Director in his
speech to the New York City Bar on August 5th. In that speech, as you know, Mr.
Khuzami asked the staff to embrace four principles: (1) be strategic- focus on cases
involving the greatest and most immediate harm and on cases that send an outsized
message of deterrence, (2) be swift·long gaps between conduct and atonem.ent undennine
the deterrent impact of our cases, (3) be smart- Commission reSources are finite aild
critically limited, we must better detennine on an informed basis whether to continue an
investigation, and (4) be successful- this means building strong cases with compelling
evidence. We believe that we could bring ideas to the table that the staff may find ·
compelling and which would facilitate the goals of the four "S's".
•We believe that that we have presented solid and rational reasons why the
preseJ?.t reporting format is misleading and inappropriate and believe further that the Fund
is entitled to an equally reasoned response and a record which we could challenge as
appropriate.
Tiulnk you in advance for your consideration of the matters rmsed herein and I
look fozward to hearing from you as to a meeting.
•

',
,.
Very truly yours,
ROBERTS & HENRY •\ 	u~
Thomas C. Henry
*The Fund has continued to offer its shares for sale using a liquidation value tax reserve
based upon comments made by the staff of the Division oflnvestutent Management in
connection with the filing of its registration statement and agreed to by us at the time
upon insistence by the staff. Accordingly, nothing in this letter or associated
memorandum should be construed as an explicit admission that the current financials are
false or misleading as a matter oflaw. We also request confidential treatment under the
FOIA with respect to this correspondence.
•
•

•
•
•
;MEMORAND!JM
PRELIMINARY STATE:MENT
This is about the best interests of the Copley Fund shareholders-past, present and future.
It is about the f~ value of a Copley Fund share. It is about the Board of Directors' fiduciary
obligation to ensure that the Fund's shares are fairly priced, that the best interests of the Fund's
shareholders are fully protected and served and that the Fund's financial information is not
misleading. And, most importantly, it is about the flexibility of GAAP and the Commission's
rules. This po'int is particularly re1evant now given the cmrent financial crisis facing the nation
and th~ Commission's acknowledgement that otherwise rigid rules must bend to reasonable,
reassured, common sense evaluation.
November 30, 2007 was a very difficult day for the Fund, its Board of Directors and its
shareholders. It was on that day that the Board was compelled, upon threat of injunctive action,
to direct the Fund's accounting services agent to reduce the Fund's per share value by $13.89 as
the result of an accounting interpretation expressed by the staffthat generally accepted
accounting principles (GAAP) required the Fund to include in its current liabilities the entire
amount of capital gains taxes that would be payable ifthe Fund liquidated its entire portfolio of
securities on that day; as opposed to the inclusion of a reserve for taxes that had been establi.shed
by the Board ofDirectors in an exercise of their good faith business judgment and based upon
fifteen (15) years of experience operating sucCessfully with such reserve.
For the reasons set forth below, the Fund believes that the NAV adjustment is contrary to
the best interestS of the Fund's shareholders. The Fund believes that it has in the past complied
with GAAP, that both GAAP and applicable SEC rules are flexible enough to permit the
"reserve" accounting method established and approved by the Board and that the ''full
liquidating value accrual method" has produced inconsistent and misleading financial statements
that have resulted in Management having to qualify its certifications made purstiant to Section
302 of the Sarbanes-Oxley Act of2002 1•
THE FUND AND ITS INVESTMENT OBJECTIVE
The Copley Fund, Inc. (the "Fund'') is registered with the Commission as an open-end,
management investment company pursuant to the provisions of the Investment Company Act of
1940. Unlike most funds, it has not elected regulated investment company ("RIC") status under
the Internal Revenue Code, 1986, as amended. It is organized as a regular "C" Corporation for
federal ineome tax purposes. Accordingly, any taxable income generated by the Fund is subject
to taxation at the corporate level and is not passed on to individual shareholders as would be the
case if the Fund had elected RIC status.
The Fund was organiud in 1978 and has operated continuously since that time. Its stated
investment objective is "the generation and accumulation of dividend income". Its secondary
objective is "long-term capital appreciation". Key to the Fund's investment objective is its
strategy, contrary to most other funds, of not distributing dividends and capital gains to
1
The Fund's N.CSR CertifiCation provides th11t1hc Fund's financial statements "fairly represent in all material respecl3 (except to
the extent that management's position on the actOunting for deferred income taxes is correct) the financial conditlon ... ofthe
registranl"

Memorandum (cont)
Page2 of14
shareholders but rather accwnulating them within the Fund and then adding them to the value of
each ~hare on a daily basis. Hence, an increase in per share value directly raises the value of a
shareholder's account Thus, shareholders are able to defer dividend and capital gains taxes until
redemption at which time shareholders will incur a loss or realize a gain depending upon the
Fund's per share value at the time of redemption. In addition, and central to the Fund's
investment policy, is that the retention of dividends leaves more money "at work" in the Fund.
Thus, the true measure of the Fund's performance is to measure income and gain as a function of
the total deployed capital. Artificially discounting the reported amount of deployed capital by an
inappropriate "reserve" distorts the Fund's performance.
Insofar as the Fund itself is concerned. as a C Corporation. it uses its corporate structure
to create dividen~ income to the Fund, 70% of which is offset by the deduction allowed by the
Internal Revenue Code for dividends received by a C Corporation.
TAX MANAGEMENT POLICY AND RATIONALE
Beginning in 1993, the Board of Directors of the Fund implemented a tax management
policy whereby the accrual for deferred income tax on unreal~ gains on the Fund's portfolio
securities was reduced to a stated reserve of $422,000. This am01mt was determined by the
Board in an exercise of their good faith business judgment and based upon the seven factors
which are set forth below. Prior to the adoption of that policy the Fund had a stated deferred
income tax liability accrual of$3,541,000. The implementation of this policy had the effect of
increasing the Fund's NAY with a corresponding increase in stated per share value. This policy
more accurately reflected the deployed capital which was invested by the Fund.
This tax management strategy was implemented based upon a strategy adopted and
implemented by the Rochester Tax Managed Fund, an informal opinion expressed by Price
Waterhouse at the time and a p<>sition paper prepared by Roy G. Hale, CPA, dated November27,
1992 (See Attachment "A"). The decision was memorialized in the Minutes of a Meeting of the
Board of Directors held on December 7, 1992 to implement the strategy wherein the Directors
instructed "that Fund Management shall monitor on a regular basis the Fund's potential income
· tax liability on unrealized gains to ensure that the present reserve is, in its best business
judgment, appropriate given the particular circumstances of the Fund's portfolio and policies."
The basis for the adjustment-to the Fund's previously accrued tax liability was set forth in
Note 1 to the Fund's financial statements for the year ended February 28, 1994 as follows: "in
this accounting period the Fund elected to change the estimate of deferred income tax liability on
unrealized appreciation of investments ... the Fund will provide deferred taxes for unrealized
appreciation on its investment portfolio to the extent that management anticipates a liability may
exist. .. this change is consistent with the Board of Directors intent to qualify the Fund as a
Regulated Investment Company in the event the Fund's future income tax liability should exceed
current (reserved) deferred income tax levels."
•
•
•

Memorandum (cont)
•
•
•
Page 3 of14
The Fund has, for more than 15 years, consistently maintained that the amount of the
deferred income tax liability for the Fund is an accounting estimate that is properly based upon a
reasonable estimate of the future obligations of the Fund as it relates to the difference between
the tax basis of the Fund's assets and their reported mark to market current value. The Fund
recognizes all cWTent income tax obligations in the current accounting period. It has been the
Fund's longstanding position, sine(: 1993, that the deferred tax liability for unrealized capital
gains should be based on a good faith business judgment estimate of future tax obligations
associated with any required liquidation of portfolio securities necessary to raise cash to meet
foreseeable Fund requirements.
The key concept here is that the deferred tax liability carried by the Fund on any given
date is an accounting estimate of future obligations of the Fund. This estimate is based upon
various factors including (1) capital loss carry forwards (2) anticipated redemptions beyond the
ability of the Fund to cover with its current cash position or through the sale of non-appreciated
securities (3) the amount of the recorded reserve for the estimated maximum tax liability (4)
fifteen (15) years of operating history without ever exceeding or even approaching the reserve
established by the Board (5) the Fund's stated investment strategy and track record of holding
high quality, dividend paying stocks for the long term (6) the fact that the entire deferred tax
liability would be due only in the unlikely event the entire portfolio were liquidated and (7) the
best good faith business judgment of the Board of Directors. These factors are, and historically
have been, used to establish a reasonable and realistic basis for the estimated tax liability. And,
as discussed below, the option to convert the Fund to RIC status establishes a floor upon which
the estimated taxes would not be exceeded.
ACCOUNTING AND REPORTING FOR INCOME TAXES
The essence of the issue is Copley Fund's accounting and reporting of the effects of
potential income taxes. The staff's initial theory is understood to be that the Fund had not
measured and disclosed the future tax consequences of the unrealized appreciation of securities
in the Fund's portfolio in accordance with generally accepted accounting principles ("GAAP").
In support of this position they have referenced the Financial Accounting Standards Board's
("FASB") Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
("FAS 109"). FAS 109 "establishes financial accounting and reporting standards for the effects
of income taxes that result from an enterprises activities during the current and preceding years."
Pamgraph 6 ofFAS 109 states that "the objectives of accounting for income taxes are to
recognize (a) the amount of taxes payable or refundable for the current year and (b) deferred tax
liabilities and assets for the future tax consequences of events that have been recognized in an
enterprises' financial statements or tax returns."

Memorandum (cont)	•I
Page4 of14
· Paragraph 11 ofF AS 109 provides "An asswnption inherent in an enterprise•s statement
of financial position in accordance with generally accepted accounting principles is that the
reported amounts of assets and liabilities will be recovered and settled. respectively. Based on
that assumption, a difference between the tax basis of an asset or liability and its reported amount
in the statement of fUl.Bilcial position will result in taxable or deductible amounts in some future
year(s) when the reported amounts of assets are recovered and the reported amounts of liabilities
ate settle4"· (Emphasis added.) 	·
Paragraph 78 ofFAS 109 makes the observation that an "enterprise might be able to
delay the future reversal of taxable temporary differences by delay~g the events that give rise to
those reversals, for example, by delaying the recovery of related assets or the settlement of
related liabilities. A contention that those temporary differences will never result in taxable
am<:>unts, however, would contradict the accounting assumption inherent in the statement of
financial position that the reported amounts of assets and liabilities will be recovered and settled,
respectively; thereby making that statement internally inconsistent For that reason. the
(Accounting) Board concluded that the only question is when. not whether. temporarv
differences will result in taxable amounts in future years." (Emphasis added).
The staffs initial theory then seems to be based upon a static and inflexible interpretation
ofFAS 109 to the effect that the statement requires a full accrual of the maximum potential
deferred income tax liability-period ("full liquidating value accrual method''). As more fully
developed below, the Fund believes that FAS I 09 and OAAP are flexible enough to pennit
variations or exceptions that are nonetheless in compliance with OAAP and are, in fact, required
to fairly present the financial condition of the Fund and the accurate pricing of its shares. This,
the Fund has always maintained, is best accomplished through the use of a ''reserve" for deferred
income taxes which is established by the Fund's Board of Directors in an exercise of their good
faith business judgment.
:rJle fundamental justification for recognizing an exception to or a variation from FAS
109 is that the full tax liability will not be recognized by the Fund.
FAS 109, as set forth above, plainly states that the requirement for full accrual is based
upon "an assumption, that the underlying appreciated assets would eventually be sold and the
associated income tax would eventually be paid. This simply is not the case and is, under the
circumstances, an invalid and misleading assumption. The effect of applying this invalid
assumption is that a full liquidating value accrual overstates Fund liabilities and understates the
Fund's equity as reflected in the ~d's Net Asset Value.
In support of this proposition the Fund advances the following points:
1. 	The use of historically proven good faith estimates represents the best method of
fairly presenting the Fund's financial condition. The amount of a reserve for income tax,
•
•
•

••
Memorandum (cont)
• Page 5 of14
reported as a liability, is in fact an estimate of a future potential liability and not a real liability on
the date of the financial statements. These estimates, based upon the factors as discussed above;
are flexible and subject to change as circumstances dictate. As long as the Fund provides
reasonable estimates that meet current and future obligations, as bas been the case for the last
fifteen (15) year8, the Fund meets its inherent obligation to accurately accrue for this potential
liability. The following chart demonstrates the viability of the established reserve.
COMPARISON OF RESERVE ESTABLISHED BY BOARD AND
ACTUAL CAPITAL GAINS TAXES PAID
•
BQARD ESTABLISHE!!
CAPITAL {IAINS TAX RESERVE
1007 	$807,345.00
1006 	$758,766.00
1005 	$758,766.00
1004 	$824,472.00
2003 	$770,554.00
1002 	$664,576.00
2001 	$443,285.00
:zooo 	$464,563.00
1999 	$373;709.00
1998 	$278,488.00
1997 	$189,891.00
1996 	$378,955.00
1995 	$422,000.00
1994 	$422,000.00
1993 	$422,000.00
A,CTUAL ~APIT~ 	FULL LIQUIDATIN!!
!ZAINS IAXE~ PAID 	RESERVE FOR CAPITAL
GAINS LIABILIIX ACCRUAL
$0 	$17,537,872.00
$0 	$16,104,320.00
$0 	$14,887,774.00
$0 	$12,548,834.00
so 	$7,602.562.00
$0 	$13,166,255.00
so 	$15,646,991.00
so 	$10,961,527.00
$0 	$13,684,586.00
so 	$13,224,672.00
$0 	$8,193,495.00
so 	$7,160,983.00
$0 	$2,756,751.00
$0 	$3,843,489.00
$0 	$5,430,633.00
No taxes have ever been paid because the Fund's tax liability for capital gains bas always
been covered by either capital losses or capital loss carry forwards. Hence, the reserve has never
been used.
One of the concerns expressed by the staff has been that circumstances beyond the
control of management might cause the Fund to liquidate portfolio securities due to market
conditions or to meet redemptions. It is important to note that even in this time of unprecedented
financial crisis and market upheaval Copley Fund lias not even come close to invading the tax
reserVe established by the Board. And, we note that this is at a time when money market funds
have had to turn to the Federal government to preserve their $1.00 NAV and mutual fund
redemptions are at an all time high-once again sustaining the Board's judgment.
2. 	The only shareholder risk associated with using the reserve method, which is
based upon good faith historically proven estimates, would arise in the event that the Fund

..· 	Memorandum (cont)
· Page 6 of 14 	·
•understated the reserve and a real ~iability greater than the reseiVe would become due and
payable. As shown by the above chart, this has never happened over the past fifteen years.
More. noteworthy perhaps is the fact that it has not happened over the past two months.
Moreover, this would never occur because of the Fund's intent and expressed ability to convert
to RIC status ifit ever is placed in a position where the reseiVe was in an insufficient amount to
cover the capital gains tax on appreciated securities. This begs the question ofwhy the Fund luis
not elected RIC status subsequent to the compelled inclusion of the full accrual in its NAV.- The
short answer is that the reserve established by the Board never was exceeded because of market
or other operating conditions. No tax ever became payable. The accrual only became an issue
when the Fund was compelled, under threat of injunction, to include the full amount of the
accrual in its NAV. Election ofRIC status has consequences, as discussed below, and the Board
believes that it should not be "compelled' to accept these consequences when the conditions
precedel)t establisht:d by them before electing RIC status have not been met. 	.
In light of the Fund's ability to convert to a RIC, as more fully explained below, and
ultimately avail itself of the elimination of the tax otherwise payable at the corporate level on
appreciated securities the Fund believes that the inherent assumption made in Parilgraph 11 of
FAS 109, i.e., that liabilities will be recovered and settled, does not properly apply to the instant
situation. Moreover, the statement in Paragraph 78 ofFAS 109 that ''the (accounting) Board 	•
concluded that the only question is when, not whether- (tax liabilities will be realized)" supports
the Fund's belief that GAAP does not require the Fund to ·accrue the full potential deferred tax
liability because the ability to convert to a RIC on its own terms answers the ''when" question-
never.
CONVERSION TO RIC
Regulated Investment Companies ("RIC's") may escape full corporate taxation because,
unlike ordinary corporations, they are entitled to claim a deduction for dividend payments
against ordinary income and net capital gains. A corporation qualifies as a RIC if it makes an
irrevocable election to be a RIC by filing a tax return on Form 1120-RIC and it meets certain
requirements specified in JRC Sections 851 and 852. In order to qualify for this election, the
Fund would be required, among other things, to distribute to shareholders its undistributed
earnings an~ profits ("E&P''). 	·
The Fund could elect RIC status simply by filing a RIC tax return for the year in which
the status is deemed to be effective. Any capital gains taxes due and payable at the end of the tax
year, which in theory would be greater than the re~e, would then be shifted to the individual
shareholders2• The result is that the Fund would pay the tax on capital gains equal to the reseiVe
2Under current law, the capital gains taxes due on net realized gain only would be due at individual rates which are now much
lower than corporate rates. This Is another example of why tho ''full liquidating value reserve" method Is not only inappropriate 	•
but also seriously misleading.

Memorandum (cont)
Page 7 of14
• and shift the remainder of capital gains to shareholders. Given this methodology, the Fund
would never exceed the reserve.
As noted above, the Fund would have to distribute its accumulated E&P up to the date
RIC status was elected. The Fund would have until the end of the current tax year to make this
distribution. The accumulated E&P could be relatively large ($11,844,182 at February 29,
2008). This begs the question of where the money would come from to make the required
distribution without selling portfolio securities and generating additional capital gains tax for the
Fund. The answer is that the Fund could distribute additional shares in the Fund rather than cash
and, while the distribution of stock would decrease the value of the Fund, the shareholders would
receive something in value to compensate for the devaluation. The shareholders would be
subject to income tax on the received distributions, generally taxable at rates lower than the
coiporate tax .rate which does not distinguish between ordinary income and capital gains; but the
key point is that the. distribution would not generate capital gains taxes for the Fund.
• The last tax issue to be considered in a RIC conversion is ~e built in gains ("BIG") tax
on appreciated assets. Current IRS regulations require a new RIC, which was previously a C
Corporation, to pay a built in gains tax on appreciated assets ifthe assets are sold within ten (10)
years ofthe RIC conversion date. If all or any portion of the appreciated assets are not sold
within this 10 year period, the built in gains tax goes away. It simply ceases to exist
This begs another question which is at the heart of the matter. Does the potential liability
for BIG tax require a full acci'\liU under FAS 109? The answer is no because ofthe basic
assumption under F AS 109 that the full accrual is based upon the premise that the appreciated
assets will be sold and the associated income tax paid at some point in time. ThiS simply is not
the case when there is, or could be, a date certain when the liability would cease to exist.
Because of this "date pertain test'' the potential BIG tax represents at most a contingent liability
rather than a real, current liability. This contingent liability has been fully disclosed in the
Fund's Prospectus and SAl for many years.3
Since inception, management of the Fund has not elected RIC status and met the required
distribution requirements but rather has. opted to be treated as a regular C Corporation.
Underlying this decision is the fact that the dividends received deduction is available to a C
Corporation but not available to a RIC. This concept is critical to the Fund's basic investment
strategy to create dividend income to the Fund using the 700/o deduction from federal income
taxes for dividends received. Thus, the Fund's regular income tax liability is kept to a minimum
and shareholders are allowed to defer taxes until redemption.
3The staff ofthe Division of Investment Management bas reviewed the capital gains tax accrual issue In connection with
• registration starement.s and. financial reports filed by the Fund since 1993. In each Instance, until September of 2007, the staff
accepted, or at least took no action with respect to, the Fund's rationale for using a reserve method of accounting for such
acc;ruals. Tandy statements notwithstanding thls lack of action provided the Board with an understanding that the rcsCIVe
methodology was not contrary to GAAP or applicable SEC rules with respect thereto.

Memorandum (cont)
Page 8 of14
•Hence, conversion to a RIC is a viable alternative to the Fund but is contrary to the
Fund's stated investment objective and strategy. Therefore, it is not somethlng that should be
undertaken unless the conditions precedent to making the election, exceeding the reserve, have
been met. These conditions precedent have not been met. The established reserve has never
been exceeded or even invaded. The important concept for purposes of a deferred tax liability
standpoint however is that the potential liability can be eliminated. The ultimate liability
therefore is not a certainty. In fact, it is a contingent liability which at the end of a ten year
period simply ceases to exist.
GENERALLY ACCEPTED_ ACCOUNTING P~CIPLES
Generally Accepted Accounting Principles ("GAAP") consist of the basic principles,
assumptions and guidelines, the detailed rules and standards issued by the Financial Accounting
Standards Board ("FASB") and the generally accepted industry practices. GAAP are neither law
nor regulation. The Securities and Exchange Commission ("SEC'') however, has promulgated a
regulation which provides, in pertinent part, that "financial statements filed with the Commission
which are not prepared in accordance with generally accepted accounting principles will be
presumed to be misleading or inaccurate, despite footnote or other disclosures, unless the
Commission has otherwise provided." Rule 4-01. Regulation S-X (emphasis added). For all of 	•
the reasons set forth herein the Fund believes that this p~sumption has been rebutted.
GAAP was developed to ensure that :finaD.cial transactions are recorded in a consistent
manner, to require standardized reporting formats, and to permit comparability with prior year(s)
information and statements prepared by other business entities.
GAAP has evolved over the years from a basic framework and from basic objectives of
financial reporting. Financial reporting should provide useful information for making informed
business and economic decisions. Usefulness for decision making is the most important
characteristic of the reported information. To be useful, financial statements must be relevant,
!&, they must make a difference in the decision maker's (investor's) ability to predict the future
or to correct prior expectations. Hence, useful financial statements provide information about
what has happened in the past as well as information that will help in predicting what will
happen in the future.
Financial Statements must also be reliable. To be reliable they must be veriftable, neutral
and unbiased and the information presented must represent what really happened or existed. In
addition, the statements must be comparable (measured and reported in a similar manner by all
types of businesses) and consistent (the same accounting methods should be applied from period
to period). In other words, deviations in measured outcomes from period to period shoUld be the
result of deviations in performance not changes in methods. Because of the change in the capital
gains tax accounting treatment and related ·financial restatements, the Fund's financial statements 	•
are not n~w either "useful" or "reliable" within the framework of GAAP.

Memorandum (cont)
• Page9ofl4
FUND FINANCIAL STATEMENTS SUBSEQUENT TO THE ISSUANCE OF THE
RESTATED ANNUAL REPORT FOR THE PERIOD ENDED FEBRUARY 29, 2008 ARE
· CONTRARY TO THE BASIC OBJECITVES OF GAPP AND UNDER THE SPECIFIC
CIRCUMSTANCES OF THE FUND'S BUS1NESS ARE MISLEADING
Pursuant to staff comments received in connection with the Fund's annual485APOS
updating amendment to its registration statement filed on June 6, 2008 the Fund was required to
file an amended N-CSR/A which contained a "Restated Annual Report to Shareholders", This
restatement caused the Fund to ''restate" much of its historical financial information including
average annual returns, the per share value table and the financial highlights table. This
restatement of historical information was required because the Investment Management staff
required the Fund to treat the inclusion of the full liquidating liability accrual in the Fund's NAV
as a "correction of an error" as opposed to a "change in accounting estimate" which would not
have required a restatement ofhistorical information. The consequence of this is that the Funds'
financial reports have not now been compiled in a consistent manner. This is clearly illustrated
by comparing the Financial Highlights Tables for the period ended February 28, 2007 and
February, 2008 (restated) (See Attachment "B").
• Prior to this requiied restatement the Fund's financial statements were completely within
the basic framework and objectives ofGAAP reporting as discussed above. In fact, the PCAOB
exanrlned the Fund's auditor's financials and report thereon for the period ended February 28,
2006 and issued an affirming clean report thereon. 	The financials had been recorded in a
consistent manner for 30 years. They permitted comparability with both prior year(s)
information and the financial statements prepared by other Funds. They were useful because
they enabled informed decision making by an investor because they correctly set forth what
happened in the past and provided information about what will likely happen in the future. They
were reliable because they were verifiable and the information represented what really happened
from a historical perspective. For example, the Fund's actual NA V per share at February 28,
2007 was $54.67 and it was reported as such in the Fund's Annual Report of even date.· Yet, the
Restated Annual Report for the period ended February 29, 2008 reflects a per share value for that
same date (February 28, 2007) of $42.54. This simply does not reflect what really happened, is
not consistent and thwarts comparability with prior years. Contrary to one of the basic objectives
of GAAP- there are now deviations in measured outcomes from period to period which are the
result of changes in methods rather than deviations in performance.
THE INCLUSION OF TilE FULL LIQUIDATING LIABILITY ACCRUAL IN TilE FUND'S
NAV IGNORES BASIC GAAP ASSUMPTIONS, CONSTRAINTS AND MODIFYING
CONVENTIONS
• The foundation of GAAP consists of basic assumptions, basic principles, basic
constraints and modifying conventions. Some of these are particularly relevant herein .

Memorandum (cont)
Page 10of14
•Assumptions: (1) Going Concern Assumption: This assumption assumes that a business
will continue operating and will not close or be sold. Based on this assumption, actual costs
instead ofliqui~tion values are used for presenting financial information.
Principles: (1) Historical Cost: (1) Realization/Revenue Recognition: This principal
requires companies to record revenue when it is realized or realizable, i&., at the time of actual
sale. (2) Matching Principle: This. means recording the revenues ·~ed during a period using
the revenue realization principal and matching the revenues with the expenses incurred in
generating this revenue. (3) Adequate Disclosure: This. principle states that all pertinent
information should be fully disclosed and in understandable form.
Constraints and Modifying Conventions. The modifYing conventions include (1)
Application of Judgment- an accountant may depart from GAAP ifthe result or departure
appears reasonable under the circumstances, especially when the $ict adherence to GAAP will
produce unreasonable results, (2) Substance over Form- the economic substance of a transaction
determines the accounting treatment, even when the legal aspects of the transaction indicate
othenvise and (3) Industry practices and Peculiarities- the peculiarities and practices· of an
ind1lStry may warrant selective exceptions to accounting principles.
Utilization of a full liquidating value accrual method is contrary to the basic "going 	•
concern" assumption of GAAP that a business will continue operating and will not close or be
sold. Based upon that assumption actual costs and liabilities instead of liquidation values are to
be used for presenting financial information. The use of the full liquidating value method in the
present circumstances makes the exact opposite assumption that all portfolio securities will have
to be completely liquidated today. This simply is not the case and is unrealistic·and misleading.
The full liquidating value accrual method also is contrary to the principles of
realization/reven~e recognition and matching. Full accrual transforms a potential contingent
liability into a full current liability and fails to match current revenues and assets with correct
liabilities. This, in tum, makes another principle, adequate disclosure of all pertinent information
in understandable form, difficult at best. Prior to being compelled to restate the Fund's ·
financials, they were presented in an easily understandable form. The Fund does not now
believe that this is the case. While those restated financials ~ntain all of the staff's comments
made thereon, the Fund nonetheless believes that they are far from easily understandable and are
in fact misleading. 	·
Insofar as the modifying conventions are concerned it is stated at the. outset that the Fund
believes that its historical financial .. statements have always been compiled in accordance with
GAAP. However, it is important to note that GAAP recognizes certain constraints and
modifying CO:J?.Ventions that allow an accountant to dep~ from GAAP if the result or departure
appears reasonable under the circumstances especially when the strict adherence to GAAP will 	•
produce unreasonable results. Assuming arguendo that the use of the reserve method is a

Memorandum (coot)
•
•
•
Page 11 of14
"departure" from OAAP it certainly appears reasonable under the circumstances especially here,
where the use of the full liability accrual method produces an unreasonable result, i.e., a per
share net asset value which does not reflect the realistic net assets of the Fund, distorts
performance and expense ratios, and disables redeeming shareholders from receiving their fair
proportionate share of Fund assets.
Copley Fund is unique among all other Funds4• To the Fund's knowledge it is the only C
Corporation the share price of which is based upon a mark to market NAV as opposed to a value
based on supply and demand for its shares. This does not make it "bad" or "wrong"-just
different. The Fund also notes that because of this uniqueness the Fund's use of the reserve
method will not impact other mutual funds. On the other hand, if the Fund's methodology is
applied consistently, as it bas been in the past, and is fully understood by all shareholders
through ample disclosure, it will facilitate comparisons with other mutual funds and will not
result in overstated performance.- This makes a substance over fonn approach compelling under
the circumstances of the Fund. For this reason alone the use of a reserve method falls well
~thin the judgment parameters of GAAP.
All of this demonstrates that sometimes variations from strict interpretations of GAAP ·
are requfred5• Whiie the Fund believes that its financials historically have been compiled and
presented in accordance with GAAP the modifying conventions make clear that GAAP is not
"carved in stone" and that variations are made and considered acceptable. If nothing else, GAAP
and FAS 109 are not clear on the appropriate calculation of a tax accrual particularly in view of
the fact that the "inherent assumption" underlying FAS 109 is not present given the particular
circumstances of the Fund.
CONCEPTS OF FAIR VALUE
. . 	The Copley Fund is currently valued at its liquidation value. Simply put, this does not
represent the fair value of the Fund's shares. It ignores reality and misstates the assets of the
Fund. 	·
4Therc arc at least two other lovestmenl companies thai have not elected RIC status and record a deferred tax liability associate<!
With the llllliallzed appreciation of portfolio securities. See Tortoise Energy Capital Corp., file number 811-217$, Form N-CSRS
(August I, 2007) and Knync Anderson MLP Investment Company, file number 811-21593, Form N-CSRS (August 3, 2007).
However, both arc clotec;l-end funds and as such do not Issue redeemable securities. 'Ibcir shares are bought and sold In the open
marlcet. A closed-end fund with a large amount of unrealized capital gains in Its portfolio may trade lit a discount for Cl111Il1ple
because buyClS would be assum1og a potential tax llabllity and uncertainty as to the amount and tlmiDg of the gains to be realized.
Closed-end funds arc not required to calcullltc their NAV dally. Tortoise Is a nearly $1 billion Fund that Invests In securities of
energy related to MLP1s operation inftastructure assets. Kayne Is a $2 billion Fund that also invests In energy. Their portfolio
turnover rates exceed 30%. As such, they are easily distinguishable from Copley. Unlike Copley they are required to apply the
defmals that are accrue<! on a rcgular basis. 	·
5The Commission has recognfz.ed ~ concept and Issued rules for the use of even Non-GAAP financials. Release No. 33-8176,
34-17226 (January 22, 2003).

·' Memorandum (cont)
Page 12 ofl4
•On September 30, 2008, the SEC's Office of the Chief Accountant issued a press release
(2008-234) _which addressed fair value accounting stating that "(t)he current envir~nment has
made questions surrounding the determination of fair value particularly challenging for
preparers, auditors; and users of financial infonnation". While not precisely on point the
concepts addressed in the release are equally applicable. The release makes clear that
Management's internal assumptions can be used to measure fair value. It acknowledges that the
determination of fair value often requires significant judgment. The release also concludes that
clear and transparent disclosures are critical to providing investors with an understanding of the
judgments made by management.
The Fund believes that it has demonstrated a clear and compelling rationale as to why the
use of the Board's reserve accrual methodology best represents a fair va,lue for the Fund's shares.
It also believes that the disclosures made in the attached proposed Supplement to the Fund's
Prospectus provides clear and 1:nmsparent disclosures with respect to both the methodology and
rationale used by the Board as well as the risks inherent therein.
The static (1l)plication of an accounting concept (FAS 109 treatment of a deferred tax
liability) that is equivalent to liquidation accounting serves to undervalue the true financial
position of the Fund. It operates to overstate dividend yield and expense ratios and und~state 	•
perfonnan~ for comparison purposes. Redeeming shareholders do not receive their
proportionate share of Fund assets. Purchasing shareholders receive a windfall in the event that
the deferred tax liability is eliminated or reduced due to conversion to a RIC or a change in tax
law or regulation.
Management of the Fund bas, since 1992, attempted to reflect in the financial statements
a deferred tax liability to the extent that management anticipates, in an exercise of their best,
good faith business judgment that such a liability exists. Deferred income tax liabilities are at
best an estimate due to the nature of changing income tax rates and federal and state income tax
law and regulations. The Fund has consistently, from year to year, applied this concept in order
that the value of the Fund is never arbitrarily increased or decreased at any given point in tinie.
The performance of the Fund was based upon the true increases or decrease in the assets held for
the specified reporting period. Now the daill NAY fluctuates, sometimes substantially, due only
to "hypothetical" ~hanges in the tax accrual •
Sll.1MARY
Copley Fund, Inc. was founded by Irving Levine in 1978. Over the course of those years
the Fund's NAV consistently bas grown from just over $3 per share to more than $54 per share
For example, Bssuming a 100/o market decline, Bnd that the Fund's shares react similarly, the Fund's per share NAV would
de<:rease by approximately $1.15 due solely to·lhe maintenance of the full liquidating value accrual (example based upon
$50,000,000 In unrealized appreciation, a 35% tax rate Bnd 1,500,000 shares outstanding). Utilizing the Fund's historical reserve 	•
method there would have been no change in NAV due to Bnything other than the ntarlcct
6

Memorandum (cont)
•
•
•
Page 13 of14
at year end 2007. This has been accomplished not through 12b-1 plans or sales loads or even
any sales efforts. Rather, the NAV growth is the result of a solid and consistently applied
investment philosophy of purchasing and holding highly viable, dividend paying stocks which
yield dividends in ever increasing amounts, all in acrordance with the Fund's stat~ investment
objective of "the generation and accumulation of dividend income".
Because of this structure the Copley Fund is unique among all other Funds. The Fund's
overall structure, investment strategies and operating philosophy have not materially changed
since its inception in 1978. Its underlying principles and strategies have been consistent, year to
year, and the overriding concern of Management and the Board of Directors always has been the
welfare of the individual shareholders.
The Fund's expense ratio, after a consistent and voluntary $60,000 per year advisory fee
waiver by the Fund's advisor has been maintained below 1.25%. These ratios, on average, are
well below the average ratios of all equity funds, which ranged from 1.44% to 1.07% over the
same period. Investment Company Institute, Fees and Expenses of Mutual Funds, 2007. Ratios
. for equivalent small funds. are much higher.
Every effort has been made to operate the Fund in the best interests of the shareholders
and to reflect the true value of the Fund's assets in its net asset value. This effort has been
thwarted by compelling the Fund to use a full liquidating value accrual with respect to the Fund's
unrealized appreciation.
The Fund is required by Rule 22c-l~ to issue and redeem its shares at a price based on7
current net asset value. Rule 2a-4a defines current net asset value and specifically states that
with respect to NAV calculations "estimates (may be) used where necessary or appropriate".
That Rule also provides that "(a)ppropriate provision shall be made for Federal Income Taxes if
required" (emphasis added).
There is no explicit requirement however that the full liquidating liability tax accrual be
used in calculating the Fund's net asset value on which the daily issue and redemption price of
its shares must be based. For the reasons set forth above the Board of Directors believe that
neither GAAP nor FAS 109 mandate a liquidating liability accrual. On the other hand, the Board
does believe it clear that the use of a full liquidating liability accrual does not represent a fair
value with respect to the price ofthe Fund's shares. In fact; the application of such a
methodology is unrealistic, misleading and operates to the detriment of the Fund and its
shareholders.
As demonstrated above, the risk of the Fund incurring a tax liability in excess{)fthe
Board established reserve is practically nil. Nonetheless, the Fund believes that this risk should
7 It should be noted that "based on" is not synonymous with ..at".

Memorandum (cont) ·
Page 14 of 14 ·
•be assessed and either accepted or rejected by· the shareholders with the staff providing guidance
related to the risk disclosure.
Accordingly, the Board proposes to adjust its Net Asset Value8 based on the reserve
method delineated above and to disclose this adjustment pmsuant to the Prospectus Supplement
which is attached hereto. Ofcourse, the FWld would be receptive to any disClosure .comments
made by the staff and would make every effort to include the~ in the Supplement and all future
disclosure d6cuments.
•
FINAL AS TRANSMITIED TO SEC
As of October 31,2008. This will have the effect ofincreasiilg the Fund's per share value from $39.94 to $48.14. In prderto
compensate shareholders who redeemed between November 30, 2007and the date ofthe adjustment they will be reimbursed in an
amount equal to their proportionate share of the difference between the established Board reserve and the full liquidating liability
reserve which was in effect at the time.
•
8

•
•
•
COPLEY FUND, INC•
.SUPPLEMENT DATED NOVEMBER 	2008 TO
PROSPECTUS DATED JULY 24, 2008
This Supplement (the "SupPlement") to the Prospectus. dated July 24,2008, provides
information relating to the Fund and developments since issuance 'Of the Prospectus..
This Supplement must be read in conjunction with the Prospectus in order to obtain
complete information about the Fund as the Supplement only addresses certain issues. In the
case of any inconsistencies between the Supplement and the Prospectus this Supplement shall
prevail.
This Supplement amends the "Tax on Unrealized Appreciation" (page 5), the
"Performance" (pages 5, 6 and 7), the "Distribution and Taxes" (pages 8, 9 and 10) and the
"When an~ How Net Asset Value is Calculated (page 13) sections of the Prospectus.
TAX ON UNREALIZED APPRECIATION
This Section is replaced in its entirety by the following:
This section addresses two priticipal risks of investing in the Fund:
TAX LIABILITY RISK. Federal Income Taxes are payable when the Fund sells
portfolio securities that have appreciated (gone up) in value. The Fund maintains a reserve for
this tax, the amount of which has been established by the Board of Directors. IN THE EVENT
THAT TilE TAXES PAY ABLE ON THE SALE OF PORTFOLIO SECURITIES SHOULD
EXCEED THE AMOUNT OF THE RESERVE THE NET ASSET VALUE OF THE FUND'S
SHARES WOULD DECREASE AND SHAREHOLDERS WOULD lNCURA DECREASE 1N
THE VALUE OF THEIR INVESTMENT. TinS DECREASE COULD BE SUBSTANTIAL.
For the life of the Fund, the tax reserve established by the Board always has exceeded the
capital gains taxes actually due and payable by the Fund. While the Board believes that it has a
clear and consistent record of establishing an adequate tax reserve and that the sale of sufficient
portfolio securities to generate a tax greater than the reserve is remote, THE POTENTIAL FOR
A LOSS EXISTS.
ACCOUNTlNG INTERPRETATION RISK. The Fund is required to follow generally
accepted accounting principles (GAAP) in the preparation of financial statements and associated
supplemental information. GAAP however is not clear in respect of one accounting issue which
impacts on the Fund's. financial statements-the methodology for the treatment of deferred
income tax as it relates to the accumulation of unrealized appreciation on the Fund's stock
portfolio. 	·
Under one interpretation, the liquida~g value accrual method, the Fund would be
required to report the full income tax liability, based upon prevailing income tax rates, that

Copley Fund, Inc.
Supplement dated November --.......:r
2008 to Prospectus dated July 24, 2008
•
would be due and payable if the Fund liquidated its entire portfolio on the date the financial
statements are presented. Under the other interpretation, currently utilized by the Fund, the
income tax liability is reported based upon a reserve for such tax which is establi.shed by the
Board of Directors.
IN TIIE EVENf 1HAT TIIE FUND'S TAX ACCOUNTING METIIODOLOGY IS
DETERMINED TO BE NOT IN ACCORDANCE WITII GAAP OR NOT SUBJECT TO AN
EXCEPTION THERETO, THE FUND'S NAV WOULD HAVE TO BE ADJUSTED TO
REFLECT TIIE· FULL TAX LIABILITY, TilE NET ASSET VALUE OF TilE FUND'S
SHARES WOULD DECREASE AND SHAREHOLDERS WOULD INCUR A DECREASE IN
THE VALUE OF THEIR INVESTMENT. THIS DECREASE COULD BE SUBSTANTIAL.
To illustrate the full potential impact of the realization of either of the identifies risks, the
following table compares the Fund's historical Per Share Net Asset Value (''NAV'~) calculated
based upon the reserve established by the Board with the NAV that would result had ·the Fund's
entire portfolio been liquidated at the end of the period indicated.
YEAR ENDED
•FEB29 	FEB28 	FEB28 	FEB28 	FEB28
2008 	2007 	2006 	2005 	2004
Net Asset Value
lncludingTax Reserve
Established by Board 	$54.68 	$54.67 	$46.86 	$43.88 	$39.26
Net Asset Value
Including Potential Tax
Liability Assuming Liquidation
OfEntire Portfolio 	$44.39 	$44.46 	$38.79 	$36.44 	$33.07
Per Share Impact 	$10.29 	SIO.Ol 	$8.07 	$7.44 	$6.19
This risk and the accounting principles related thereto are discussed in more detail in this
Prospectus under the "Distribution and Taxes" Section.
DISTRIBUTION AND TAXES
This Section is amended by substituting the following for paragraphs 2 through 6 thereof:
•-2

Copley Fund, Inc.
•
•
•
Supplement dated November--~
2008 to Pros~ctus dated July 24, 2008
The Fund pays inoome taxes on any net realized capital gains at the statutory rate,
currently 35%. In addition, the Fund will, for purposes of calculating the Fund's Per Share Net
Asset Value ("NAV'') accrue deferred taxes on net capital gains to the extent management and
the Board of Directors anticipate that a liability may exist. The Fund also may carry any net
capital losses forward for five years as an offset against any net capital gains realized by the
Fund during the current year.
11te reserve for taxes established by the Board of Directors is a critical component in the
pricing of the Fund •s Shares. There are two methods by which the liability for deferred income
taxes for purposes of pricing the Fund's Shares may be calculated. The first method
("liquidating value accrual method'') establishes a liability which includes the entire amount of
capital gains taxes that would be payable if the Fund liquidated its entire portfolio of securities
that day. The second method ("reserve value accrual method"), currently used by the Fund,
establiShes a current liability which includes only such amount as Management and the Board of
Directors believes adequately meets the current anticipated tax liability.
There are provisions under genemlly accepted accounting principles ("gaap'') which may
be interpreted to require the Fund to record the full potential income tax liability associated with
the reported unrealized appreciation to ensure that shareholders are not required to recognize a
decrease in the value of their shares due strictly to the income tax obligation associated with the
sale of portfolio securities. This concept is understood by the Board ofDirectors and the
management of the Fund and it has been followed diiigentJy albeit with a reserve methodology·
rather than a full accrual. Even thought the full accrual of deferred income taxes associated with
the unrealized appreciation would remove any risk associated with the devaluation of shares due
to the payment of federal income taxes, the Board believes that the resultant net asset value
incorporating a full accrual of deferred income taxes does not report the shares at fair value. The
basis f<>r the Board •s decision is summarized below:
(1) 	The use of a full liquidating accrual methodology is unrealistic. It assumes the
liquidation ofthe.entire portfolio of the Fund's securities. Neither the Board nor
management bas any intention to liquidate. Nor do they believe, or anticipate, that there
exists any circumstances which would compel a liquidation of the Fund's entire portfolio
of securities. As illustrated by the following table, the history of the Fund for the past 15
years supports this position:
-3

Copley Fund, Inc.
Supplement dated November __ __
2008 to Prospectus dated July 24, 2008
COMPARISON OF RESERVE ESTABLISHED BY BOARD AND
ACTUAL CAPITAL GAINS TAXES PAID
BOARD ESTABLISHED 	ACfUAL CAPITAL 	FULL LIQUIDATING
CAPITAL GAINS TAX RESERVE 	GAINS TAXES PAID 	RESERVE FOR CAPITAL
GAINS LIABILITY ACCRUAL
2007 	$807,345.00 	$0 	$17,537,872.00
2006 	$758,766.00 	$0 	$16,104,320.00
2005 	$758,766.00 	$0 	$14,887,774.00
2004 	$824,472.00 	$0 	$12,548,834.00
2003 	$770,554.00 	$0 	$7,602.562.00
2002 	$664,576.00 	$0 	$13,166,255.00
2001 	$443,285.00 	$0 	$15,646,991.00
2000 	$464,563.00 	$0 	$10,961,527.00
1999 	$373,709.00 	$0 	$13,684,586.00
1998 	$278,488.00 	$0 	$13,224,672.00
1997 	$189,891.00 	$0 	$8,193,495.00
1996 	$378,955.00 	$0 	$7,160,983.00
1995 	$422,000.00 	$0 	$2,756,751.00
1994 	$422,000.00 	$0 	$3,843,489.00
1993 	$422,000.00 	$0 	$5,430,633.00
(2) 	The use of a full liquidating accrual methodology results in a daily NA V that is
misleading. Lowering the NAV to a level that is inconsistent with the working assets of
the Fund by booking a long-term liability that is contingent upon some future event that
in all likelihood will not occur understates the real fair value ofFund shares. All
obligations of the Fund that must be met are recognized and impact the NAV on a daily
basis. Reducing the NAV to incorporate a liability that by its very nature is contingent
upon future events, when in fact the liability can be addressed through a sound reserve
policy, leads the Board to a finding that the resultant NAV would be misleading. An
essential aspect of the Fund's strategy is the accumulation and retention of dividends
generated by it$ portfolio of securities. The full accrual method has the potential of
misleading investors by implying that dividends received are being earned at a rate which
- is greater than the actual return, i.e., inflated yields because a significant portion of the
principal on which the return was earned is not included in the Fund's NAV. In addition,
the application of the full accrual method overstates expense ratios and may understate
performance levels.
(3) 	Lastly, the use ofthe full liquidating accrual methodology does_ not represent a "fair
value" for the Fund's shares.
•
•
•-4

Copley Fund, Inc.
• Supplement dated November __ __:,
2008 to Prospectus dated July 24, 2008
The Board has directed the utilization of the reserve value accrual method because it
results in a fair value for the Fund's shares and fairly presents in all material respects the
financial condition of the Fund. It also stabilizes the Fund's daily NAV because it eliminates
exaggerated "swings" in NAV caused by the necessity of including a different, and often
substantial, amount for liquidating tax liability on a daily basis. Details of the Board's
methodology are set forth below.
•
When stocks appreciate in value in excess of their cost, an asset called unrealized
appreciation is generated. The appreciation will only be realized when these securities are
actually sold. However, on a daily basis, the Fund is required to mark its securities to market
and thereby recognize the unrealized appreciation in the net asset value of the Fund. By using
current values rather than cost values, the value of the portfolio, which makes up almost all of
the total assets of the Fund, is reported at its actual market worth. This is an important concept
in pricing the Fund at a value that truly reflects the assets held. When appreciated securities are
sold, the unrecognized gain becomes recognizable and, ifnot offset by accumulated capital
losses, will be subject to taxation. Since the unrealized appreciation and the associated taxation
thereof attaches to all appreciated securities, many of which will not be sold for long periods of
time, the management of the Fund has taken the position that it will accrue a deferred income tax
liability on net unrealized capital gains to the extent that management anticipates a liability may
exist. This liability is based upon current market trends, accumulated capital losses, the amount
ofcash and cash equivalents held, and anticipated redemptions as well as the Fund's long
operating history.
If the Fund actually realized capital gains and paid capital gains taxes that exceeded the
amount of the reserve for deferred income taxes, the net asset value of the Fund would be
lowered by the amount of the taxes that exceed the reserve and shareholders would experience a
real loss in value of their respective shares. In order to avoid this potential scenario the Fund
may elect to be taxed as a regulated investment company ("RIC"), as opposed to a "C"
Corporate, in the event that the actual capital gains tax liability exceeds the reserve and available
tax loss carryforwards for a given period. This option would eliminate the income tax at the
Fund level (35% rate) and shift it to the individual shareholder at a current 15% rate.
Corresponding with an election to be treated as a regulated investment company, the
Fund must make a distribution to its shareholders, of all earning accumulated as a regular
corporation. This distribution would result in taxable income to the shareholders, whether or not
the distribution is received in cash or additional shares of Fund stock.
• Unrealized appreciation (built-in-gains) at the point in time the Fund elects regulated
investment company treatment is taxable income to the Fund However, under current Revenue
-5

Copley Fund, Inc.
Supplement dated November ----J
2008 to Pro$pectus dated July 24, 2008
•
Code provisions, the FWld may elect to postpone this built-in:..gains tax until such time as the
security is sold. If the security is held for at least 10 years after electing regulated investment
company status, the tax will not be assessed against the Fund.
Legislative or regulatory changes in, or interpretations of, applicable federal tax laws,
regulations or ruling may make it impossible for the Fund to utilize certain of the tax
management techniques and strategies described in the Prospectus. The Fund intends to evaluate
continuously the operations of the Fund Wlder current federal tax laws as well as various
alternatives available.
PERFORMANCE
This Section is amended by replacing the first paragraph thereof with the following and
by adding the Charts and Tables set forth below:
The bar charts and tables below can help in evaluating the potential risks of investing in
the Fund. The bar charts show changes in the yearly performance of the Fund over the last ten· 	•
years. The tables compare the average annual returns for the past one-year, five-year and ten-
year periods of the Fund, before and after taxes, with the average annual returns for the S&P 500
'for the same periods. Please keep in mind that the Fund's past performance (before and after
taxes) is not necessarily an indication of the Fund's future performance.
In order to demonstrate the effects of a full accrual of deferred income taxes as compared
to the reserve method, the following charts and tables are provided. The information presented
in the first set of charts and graphs is based upon the inclusion in the Fund's NAV of a full
accrual of deferred income taxes that would be payable in its entirety only upon liquidation of
the Fund's entire stock portfolio.
1998 	1999 	2000 	2001 	2002 	2003 	2004 	2005 	2006 	2007
Fund 	5.83% (6.69)% 	19.75% .(2.76)% (11.93)% 18.14% 	8.12% 	5.S3% 	14.26% 	3.60"/e
S&P 500 	26.69% 	11.55%(10.10)%(10.60)0/o (22.10)"/o 26.20% .21.26% 	4.9QO/o 	15.79% 	5.49%
Best Ouarter 	Worst Ouarter
13.6% 	(14.95)%
3rd-2000 	3rd-2002
The performance information shown above is based on full calendar years.
•-6

Copley Fund, Inc.
• Supplement dated November __ _,
2008 to Prospectus dated July 24, 2008
The inyestment return and principal value of an investment will fluctuate, so an investor's
shares, when redeem~ will be worth more or less than their original cost.
Average Annual Total Returns as of2.29.08
1 Year 	5 Years 	10 Years
Total Return Before Taxes 	3.60% 	6.200/o 	4.20%
Total Return After Taxes on Distributions• 	N/A** 	N/A** 	N/A ..
Fund Return After Taxes on Distributions
and Sale of Fund Shares* 	3.06% 	5.27% 	3.51%
S&P 500 Index 	(3.60)% 	11.62% 	7.23%
The information presented in the charts and tables set forth below are based upon the
reserve for deferred income taxes established by the Board of Directors.
• 1998 	1999 	2000 	2001 	2002 	2003 	2004 	2005 	2006 	2007
Fund 	S.36% (6.86)0,{, 26.07S% (S.72)0A.(16.81)% ·25.31% 11.77";{. 	6.79".4. 	16.67% 	0.00"/..
S&P 500 	26.69",{, 	11.5S% (10.10)%(10.60)% (22.10)0,1, 26.2<>-A. 21.26% 	4.90-lc. 	15.79"1. 	S.49"A.
Best Qyarter 	Worst Ouarter
13.6% 	(14.95)%
3rd-2000 	3rd-2002..
The performance information shown above is based on full calendar years.
The investment return and principal value of an investment will fluctuate, so an investor's
·shares, when redeemed, will be worth more or less than their original cost.
Average Annual Total Returns as of2.29.08
1 Year 	sYears 	10 Years
Totai Return Before Taxes 	0.000/o 	6.900/o 	5.500/o
Totai Return After Taxes on Distnbutions• 	N/A** 	N/A** 	NIA**
Fund Return Aftec Taxes on Distributions
and Sale of Fund Shares* 	0.00% 	5.87% 	4.68%
S&P 500 Index 	(3.60)% 	11.62% 	7.23%
• -7

Copley Fund, Inc.	' ... Supplement dated November ---J
2008 to Prospectus dated July 24, 2008
•
WHEN AND HOW NET ASSET VALUE IS CALCULATED
This Section is amended by substituting the following for the second paragraph thereof:
The Fund's NAVis determined by dividing the value of the Fund's securities, cash and
other assets, minus all liabilities, by the number of shares outstanding. For purposes of
calculating the Fund's per share price, the liability for deferred income taxes on unrealized
appreciation is based upon a "reserve" for such taxes established in good faith by the Fund's
Board ofDirectors.
The Board of Directors believe that a "fair value" accounting of the Fund is best served
by reporting a reserve for deferred taxes that takes into account the investment policy of the
Fund, the Fund's long history o:(holding securities for many years, market conditions,
anticipated redemptions and other real-time factors deemed relevant by the Board fDirectors.
The Fund's securities are valued each day at their market value, which usually means the
last quoted sale~ price on a security's principal exchange. Securities not traded on the valuation 	•
date and securities not listed are valued at the last quoted bid price. All other securities,
including securities in which the quotations are considered to be unreliable due to significant
market or other events are priced at their fair value as determined in good faith pursuant to
procedures adopted by the Fund's Board ofDirectors. Part of the assets of the operating division
consist of inventory and is valued at its fair value as determined by the Board of Directors.
FINAL AS TRANSMITTED TO SEC
•-8

IT~

UNITED STATES.
SECURITIES AND EXCHANGE COMMISSION
WA!?HINGTON, D.C. g0549
DIVISION OF'
INVESTMENT MANAGEMENT December 2, 2009
..:
Roberts & Henry
164 Honeysuckle Drive
Jupiter, Florida 33458
Attn: Mr. Tom Henry
Re: 	Copley Fund. Inc. (File Nos. 2-60951 and 811-2815)
Dear Sir:
In your letter, addressed to Lawrence Pisto and dated October 5, 2009, you indicate that
your client, the Copley Fund, Inc. (the "Company''), would like to resubmit a position on
accounting for income taxes for consideration by the staff of the Division of
Enforcement. You indicate that the compliance with the requirements of Statement of
Financial Accounting Standards No. 109, Accountingfor Income Taxes ("SFAS 109")\
results in what you believe are misleading and inconsistent financial statements and a per
share value that dos not represent the fair value for the Company's shares. Further, you
indicate that the Fund has adopted the requirements of ASC 7 40, only in response to the
Staffs comments.
The staff of the Division of Investment Management (the "Staff') provided comments_
regarding the Company's accounting and reporting of income taxes in a letter dated
September 26, 2007. Within our comment letter, the Staff detailed the basis for our
comments, including our basis for determining the applicability of ASC 740 to the
Company's circumstances. Your most recent letter does not provide any arguments that
were not already considered by the Staff, nor does the letter cite any changes in the
Company's circumstances that might cause reconsideration of our original position.
As we have previously stated, we would recommend immediate enforcement action if
you were to submit financial statements that did not comply with the provisions of
ASC740.
1 In July 2009, the FASB released their FASB Codification, which is now the single source of authoritative
non-governmental U.S. generally accepted accounting principles. The codification is effective for annual
and interim periods ending after September 15,2009. SFAS 109 has been codified within Section 740 of
F ASB Accounting Standards Codification ("ASC 740").

The Staff requests that y~u provide a copy of this letter to the Company's independent
accountant, Amper, Politziner & Mattia, LLP (the "Accountants") upon your receipt to
ensure the Accountants understand the Staff's concerns. Please note that the Staff
believes that this letter should be provided to the Accountants because it constitutes a
communication from a regulatory agency concerning noncompliance with or deficiencies
in financial reporting practices. 2 The Staff also requests that you provide a copy of this
letter to the Company's board of directors.
Ifyou have any questions, please contact Bryan J. Morris at (202) 551-6935 or Kevin
Rupert at (202)551-6966.
Sincerely
~r7~Richard F. Sennett
Chief Accountant
Division of Investment Management
cc: 	Bryan J. Morris
Assistant Chief Accountant
Division of Investment Management
Kevin Rupert
Accountant
Division of Investment Management
John T. Dugan·
Associate Director
Divfsion of Enforcement
2 In connection with an audit of financial statements presented in accordance with GAAP, AU section 333
Management Representations requires a specific representation from management to the auditor relating to
communications from regulatory agencies concerning noncompliance with or deficiencies in financial
reporting practices. See also paragraph 11.26 of the AICPA Audit and Accounting Guide: Investment
Companies.

IT~

I·
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Boston Regional Office
33 Arch Street. 23rd Floor
Boston. MA 02110
Phone: (617) 573-8900
Fax: (617) 573-5923
VIA FEDERAL EXPRESS
March 5, 2010
Thomas C. Henry, Esq.
Roberts & Henry
164 Honeysuckle Drive
Jupiter, Florida 33458
. RE: In the Matter of Copley Fund, Inc .. B-233 5
Dear Mr. Henry:
This investigation has been completed as to your clients Irving Levine and the
Copley Fund, Inc., against whom we do not currently intend to recommend an
enforcement action by the Commission. We are providing this information under the
guidelines in the final paragraph of Securities Act Release No. 5310 (copy attached).
As we discussed, howev~r, if the Copley Fund does not comply with the
requirements of Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes ("SFAS 109") and Section 740 ofFASB Accounting Standards
Codification ("ASC 740"), as set forth in the December 2, 2009, letter from Richard F.
Sennett, Chief Accountant for the Division of Investment Management, to you (copy
attached), we likely will recommend an enforcement action by the Commission.
Sincerely,
. 	--;(/, 	/ 	-~·
fo--,~ /l _2~-k~,A---:>-"'"·.
Kevin M. Kelcourse
Assistant Regional Director
Enclosures

ITI

Page 1 ofl.
Subj: 	Re: Copley
Date: 	07/15/10 2:55:07 P.M. Eastern Daylight Time
From: 	robertshenrylaw@aol.com
To: 	RupertK@SEC.GOV
Tuesday good. Tom
--Original Message-
From: Rupert, Kevin C. <RupertK@SEC.GOV>
To: robertshenrylaw@aol.com
Cc: Morris, Bryan J. <MorrlsB@sec.gov>
Sent: Thu, Jul15,20102:39 pm
Subject: RE: Copley
Tom,
How about Tuesday at 11:00?
While we have been firm on not permitting footnotes, this fund has really unusual tax issues, and for
this reason an explanatory footnote might be permitted- but I make no promises. In sum, we believe
the numbers and general theory we discussed earlier this week are the correct disclosure. While I
understand what you mean in the last sentence, our position remains unchanged.
Kevin Rupert
202-551-6966
From: robertshenrylaw@aol.com [mallto:robertshenrylaw@aol.coml
sent: Thursday, July 15, 2010 1:00PM
To: Rupert, Kevin C.
Subject: Copley
Dear Kevin,
I have had something come up and cannot do the call tomorrow. How about monday at 11am? Also,
attached Is the final expense ratio calculations. I hope we can discuss the fee table Issue Monday. It
seems to me that the figure to use is the gross expenses ratio In calculating fee table Info, le, apples to
apples Instead of apples to oranges. It seems unfair and misleading to use a figure which Inclusive of
positive effects of the tax accrual but not to be able to use the negative figures when applicable.
Best regards,
Tom
07/19/2010 AOL: RobertsHenrylaw

Page 1 of32	Unassociated Document
N-CSRS I v200283_ncsrs.htm
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORMN-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 8I 1-2815
COPLEY FUND, INC.
(Exact name of registrant as specified in charter)
5348 Vegas Drive
Suite 39I
Las Vegas, NV 89108
{Address of principal executive offices) (Zip code)
Irving Levine, President
5348 Vegas Drive
Suite 391
Las Vegas, NV 89108
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-508-674-8459
DATE OF FISCAL YEAR END: FEBRUARY 28, 201 I
DATE OF REPORTING PERIOD: AUGUST 3I, 2010
http://www .sec. govIArchives/edgar/data/7212911000 11442 041 005 7 8 OO/v200283 _ncsrs.htm 	3/2112012

Unassociated Document 	Page 2 of32
ITEM 1. REPORT TO SHAREHOLDERS.
Semi-Annual Report August 31, 2010
COPLEY FUND, INC.
A No-Load Fund
http://www.sec.gov/Archives/edgar/data/721291/000 11442041 0057800/v200283 _ ncsrs.htm· 	3/21/2012

Unassociated Document 	Page 3 of32
TABLE OF CONTENTS
COPLEY FUND, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDING
AUGUST 31, 2010
Table of Contents
Title 	Page
Shareholder Letter and Management's Discussion of Fund Performance
Per Share Value Graph
Portfolio of Investments as of August 31, 2010 (unaudited)
Consolidated Statement of Assets and·Liabilities as of August 31, 2010
(unaudited)
Consolidated Statement of Operations for the six months ended
August 31, 2010 (unaudited)
Consolidated Statements of Changes in Net Assets for the six months ended
August 31, 2010 (unaudited) and year ended February 28, 2010 (audited)
Consolidated Statement of Cash Flows for the six months ended
August 31, 2010 (unaudited)
Financial Highlights for the six months ended August 31, 2010 (unaudited)
and years ended February 28 or 29, 2010 through 2006 (audited)
Notes to Consolidated Financial Statements (unaudited)
Disclosure of Fund Expenses
Supplemental Data
General
Voting Proxies on Fund Portfolio Securities
Disclosure of Portfolio Holdings
Approval of Investment Advisory Agreement
1-&
.1-.6.
z
10
11
12
1.3
17
113.
19
19
19
19
19
20
Inside Back
About the Fund's Directors and Officers 	Cover
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Tel: (508) 67 4-8459
Fax: (508) 672-9348
COPLEY FINANCIAL SERVICES CORP.
Adviser and Administrator to Copley Fund, Inc.
Post Office Box 3287
Fall River, Massachusetts 02722
October 2010
Dear Fellow Shareholder:
We were shocked and saddened by the accidental death of our friend and longtime attorney Tom Henry,
Esq. Tom, aged 61, was thrown from his boat in the Jupiter, Florida Inlet and died from the fall. He had
served brilliantly as Counsel for the Copley Fund since 1987 and will be sorely missed. Our sympathies
and good wishes go out to his wife Pat in this tragic moment.
This tragedy will not impede our efforts to resolve the deferred tax issue or our ability to deal with
other legal and regulatory matters.
David Faust, Esq. of Faust Oppenheim, LLP, a long time investor in Copley Fund, will now serve as its
counsel.
Our unusually high professional fees for this period are due to our attempts to resolve our previously
discussed and recorded deferred tax reserve issue, which we hope to achieve.
The type of stocks we own and buy gives credence to our buy and hold strategy. Our typical stock pays
a good dividend and has a history of increasing its dividend. This dividend increase usually results in an
increase in the price of the stock to keep pace with its yield. An example is Delta Natural Gas, our only
NASDAQ holding. We first bought 15,000 shares in 1991 at $13t. We next bought 5,000 shares at $19.85
in 2002. These shares have yielded almost 5% constantly.
Today, Delta's price is $30 per share and still yielding almost 5%. Thus, the price has doubled, but,
even more importantly, the average dividend has paid approximately $1 per share or $20,000 per year.
Thus, in twenty years the Fund has gained $400,000 in income and $300,000 in unrealized capital gains.
Our total cost was $302,000. This basic investment strategy has neutralized the volatility for Copley Fund
that regular markets undergo. As an example, in 2008, when regular mutual funds lost 40% to 50%, Copley
lost only 15.6%. In 2009, most funds gained on average of a mere 20% against the 50% loss; Copley gained
3%. Thus, our losses were minimized compared to most other funds.
My last letter to shareholders disclosed a change in how the SEC ordered us to calculate our expense
ratio. We must calculate our expenses like any other operating corporation- not as a mutual fund. Thus,
this ratio is no longer a fair basis for comparison with other funds.
It is important for all of us to keep in mind that Copley, unlike all other mutual funds, is a regular
corporation (a C Corporation). It pays its own taxes and does not distribute dividends or capital gains.
Thus, an investor only pays taxes if shares are sold for a gain. This rather unique structure creates an
important distinction from most other funds, where the shareholder is compelled to pay taxes each year on
any gains and dividends realized by the fund as they are required to be distributed, or deemed to be
distributed at year end.
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As is our custom, we present the chart and numbers based on a calendar year, which give us a clear
picture of our past and give credence to our basic philosophy and our structure for the future.
1984 	+ 23.9%
1985 	+25%
1986 	+ 18%
1987 	-8%
1988 	+20%
1989 	+16%
1990 	-2%
1991 	+18%
1992 	+18%
1993 	+10%
1994 	-7%
1995 	+26%
1996 	+5%
1997 	+25%
1998 	+ 14%
1999 	-6.86%
2000 	+22.5%
2001 	-9.30%
2002 	-13.9%
2003 	+14.31%
2004 	+ 12.99%
2005 	+ 5.89%
2006 	+ 19.70%
2007 	-10.83% 	* Addition of Tax Reserve
2008 	-15.6% 	*
2009 	+ 2.36% 	*
2010 	+3.29% 	* (As of Sept. 30)
* 	Please note that the performance figures provided for years prior to 2008 are consistent with the
information furnished in prior reports and do not reflect an adjustment for the change in accounting
treatment of deferred income tax.
The performance data quoted represents past performance and investment return. The prices of the
shares held by Copley 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.
All of the above gives us optimism for the future growth of Copley Fund.
We thank the Board and consultants for their advice and guidance and also our shareholders for their
confidence in Copley's concept.
Cordially yours,
Irving Levine
President
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COPLEY FUND, INC.
PER SHARE VALUE
CALENDAR YEAR ENDED DECEMBER 31
PERIOD ENDED AUGUST 31, 2010
40
20
10
0 I
54,01
~_35 11.00 JQjJ
~ ?~t'
1Al3j4,C~
.. 21~\5 ii
~ 	'
1M7
42:}6
;~
32.$3
I213£6
24.65
I
45.12 	44Ji7
.U.a1
~64! 41.50
$:77~
~
I
The per share values provided for years prior to 2008 are consistent with information furnished in prior
reports and do not reflect an adjustment for the change in accounting treatment for deferred income taxes.
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COPLEY FUND, INC.
SCHEDULE OF INVESTMENTS
August 31, 2010 (Unaudited)
Common Stocks - 109.88%
Banking- 4.87%
J.P. Morgan Chase & Company
PNC Financial Services Group, Inc.
Consumer Products - 	1.68%
Kimberly-Clark Corp.
Diversified Utility Companies- 11.80%
Alliant Energy Corp.
DTE Energy Co.
Dominion Resources, Inc.
Duke Energy Corp.
Drug Companies - 	4.54%
Bristol Myers Squibb Co.
Electric & Gas- 18.50%
American Electric Power, Inc.
First Energy Corp.
Great Plains Energy, Inc.
Integrys Energy Group, Inc.
Progress Energy, Inc.
Public Service Enterprise Group, Inc.
Scana Corp.
Sempra Energy, Inc.
Electric Power Companies- 20.93%
Ameren Corp.
Exelon Corp.
NextEra Energy, Inc.
Nstar Corp.
PPL Corp.
Southern Co.
Shares
42,000
25,000
15,000
20,000
55,000
60,000
54,600
100,000
35,000
40,000
30,000
20,000
40,000
30,000
50,000
35,000
12,500
23,200
90,000
50,000
100,000
35,000
Market Value
$ 1,527,120
1,274,000
2,801,120
966,000
700,400
2,576,750
2,565,600
938,574
6,781,324
2,608,000
1,239,350
1,461,200
554,700
969,000
1,716,400
958,800
1,951,500
1,782,200
10,633,150
350,875
944,704
4,835,700
1,901,500
2,716,000
1,284,150
12,032,929
The accompanying notes are an integral part of these consolidated financial statements.
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COPLEY FUND, INC.
SCHEDULE OF INVESTMENTS
August 31, 2010 (Unaudited) Shares 	Market Value
Gas Utilities & Supplies- 10.14%
Delta Natural Gas Co. 	20,000 $ 	580,000
New Jersey Resources Corp. 	56,250 	2,093,063
NorthwestNatural Gas Co. 	40,000 	1,817,600
WGL Holdings, Inc. 	38,000 	1,340,260
5,830,923
Insurance - 	3.46%
Arthur J. Gallagher & Co. 	80,000 	1,988,000
Office Equipment- 1.34%
Pitney Bowes, Inc. 	40,000 	769,600
Oils- 19.81%
Chevron Texaco Corp. 	46,200 	3,426,192
Exxon-Mobil Corp. 	106,086 	6,276,048
Sunoco, Inc. 	50,000 	1,684,000
11,386,240
Pipelines - 	0.96%
Spectra Energy Corp. 	27,300 	555,282
Retail - 	1.66%
Wal-Mart Stores, Inc. 	19,000 	952,660
Telephone -10.19%
AT&T, Inc. 	95,000 	2,567,850
Frontier Communications Corp. 	62,803 	485,467
Verizon Communications, Inc. 	95,000 	2,803,450
5,856,767
TOTAL COMMON STOCK (Cost $25,193,800) -109.88% 	63,161,995
Liabilities in excess of other assets - 	(9.88)% 	(5,678,701)
$57,483,294	NET ASSETS - 	100.00%
The accompanyjng notes are an Integral part of these consojjdated fjnandal statements.
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COPLEY FUND, INC.
SCHEDULE OF INVESTMENTS
August 31, 2010 (Unaudited)
At August 31, 2010, the net unrealized appreciation based on cost for financial reporting purposes of
$25,193,800 was as follows:
Aggregate gross unrealized appreciation for all investments for
which there was an excess of value over cost, net of tax effect 	$25,246,987
Aggregate gross unrealized depreciation for all investments for
which there was an excess of cost over value 	(307 ,003)
Net unrealized appreciation, net of tax effect 	$24,939,984
Portfolio Analysis
As of August 31, 2010
%of
Net Assets
Common Stocks 	109.88%
Electric Power Companies 	20.93%
Oils 	19.81%
Electric & Gas 	18.50%
Diversified Utility Companies 	11.80%
Telephone 	10.19%
Gas Utilities & Supplies 	10.14%
Banking 	4.87%
Drug Companies 	4.54%
Insurance 	3.46%
Consumer Products 	1.68%
Retail 	1.66%
Office Equipment 	1.34%
Pipelines 	0.96%
Liabilities in Excess of Other Assets 	(9.88)%
Total Net Assets 	100.00%
--
The accompanying notes are an integral part of these consolidated financial statements.
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COPLEY FUND, INC.
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
August 31, 2010 (Unaudited)
Assets:
Investments in Securities at Market Value (identified cost
$25,193,800) 	$63,161,995
Cash 	6,580,615
Receivables:
Trade and Subscriptions 	14,833
Dividends & Interest 	292,233
Loan 	356,500
Taxes 	100,000
Inventory 	46,035
Prepaid Expenses and Other Assets 	12,786
Total Assets 	70,564,997
Liabilities:
Payable:
Redemptions 	2,359
Trade 	13,436
Accrued expenses 	37,697
Deferred income taxes, net 	13,028,211
Total Liabilities 	13,081,703
Commitments and Contingencies
Net Assets 	$57,483,294
Net Asset Value, Offering and Redemption Price Per Share
(5,000,000 shares authorized, 1,383,212 shares outstanding
of $1.00 par value capital stock outstanding) 	$ 	41.56
Net assets consist of:
Capital paid in 	$ 1,383,212
Undistributed net investment and operating income 	28,625,386
Accumulated undistributed net realized gain on investment
transactions 	2,534,712
Net unrealized appreciation in value of investments, net of tax
effect 	24,939,984
Net Assets 	$57,483,294
The accompanying notes are an integral part of these consolidated finandal statements.
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COPLEY FUND, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended August 31, 2010 (Unaudited)
Investment Income:
Interest Income
Dividend Income
Total. Investment Income
Expenses:
Investment Advisory Fees
Professional Fees
Accounting and Shareholder Services
Insurance Expense
Printing Expense
Custodian Fees
Directors Fees
Postage & shipping
Blue Sky Fees
Total Expenses
Less: Investment advisory fee waived
Net Expenses
Net Investment Income Before Income Taxes
Operating Gain
Gross Profit
Less: Operating Expenses
Net Operating Income before income taxes
Net Investment and Operating Income before Income Taxes
Plus provision for income tax benefit
Net Investment and Operating Income
Realized and Unrealized Gain (Loss) on Investments
Realized loss from investment transactions during the period
Increase in unrealized appreciation of investments during current
period
Deferred income tax liability
Net Realized and Unrealized Gain on Investments
Net Increase in Net Assets Resulting From Operations
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$ 	2,590
1,339,802
1,342,392
225,311
246,807
35,898
21,988
12,602
9,374
5,600
2,029
2,200
561,809
(30,000)
531,809
810,583
19,453
(18,739)
714
811,297
811,297
(31,866)
1,689,451
(580,155)
1,077,430
$1,888,727
The accompanying notes are an integral part of these consolidated financial statements.
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COPLEY FUND, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Six Months
Ended 	Year Ended
August 31, 	February 28,
2010 	2010
(Unaudited)
Increase in Net Assets from Operations
Net investment and operating income 	$ 	811,297 	$ 2,086,646
Net realized loss on investment transactions 	(31,866) 	(62,350)
Net change in unrealized appreciation on
investments 	1,109,296 	4,559,696
Increase in Net Assets Resulting From Operations 	1,888,727 	6,583,992
Capital Share Transactions
Decrease in net assets resulting from capital share
transactions 	(633,782) 	(4,121,106)
Total increase in net assets 	1,254,945 	2,462,886
Net Assets:
Beginning of Period 	56,228,349 	53,765,463
End of Period
(including undistributed net investment and
operating income of $28,625,386 and $18,406,134
respectively) 	$57,483,294 	$56,228,349
The accompanying notes are an integral part of these consolidated financial statements.
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COPLEY FUND, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended August 31, 2010
Increase (Decrease) in Cash
Cash flows from operating activities
Dividends and interest received
Proceeds from disposition of long-term portfolio investments
Receipts from customers
Expenses paid
Purchase of long-term portfolio investments
Payments to suppliers
Net cash provided by operating activities
Cash flows used by financing activities
Fund shares sold
Fund shares repurchased
Net cash used by financing activities
Net decrease in cash
Cash at beginning of year
Cash as of August 31, 2010
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
Increase in investments
Decrease in dividends and interest receivable
Decrease in receivables from customers
Increase in inventory
Decrease in trade payables
Decrease in other assets
Decrease in accrued expenses
Increase in deferred taxes
Total adjustments
Net cash provided by operating activities
Page 15 of32
$ 1,350,772
832,914
33,570
(577,427)
(1,104,018)
(9,549)
526,262
189,337
(822,010)
(632,673)
(106,411)
6,687,026
$ 6,580,615
$ 1,888,727
(1,928,690)
8,376
235
(596)
(1,064)
3,210
(24,091)
580,155
(1,362,465)
$ 	526,262
The accompanying notes are an integral part of these consolidated financial statements.
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COPLEY FUND, INC.
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock outstanding throughout each
period presented.<al
The financial highlights table is intended to help you understand the Fund's financial performance for
the fiscal years February 28, 2006 through February 28, 2010 and the six months ended August 31, 2010.
Certain information reflects financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment in the Fund. Shareholders
should be certain that they have the most recent am:mal report which should be read in connection with the
prospectus.
The Fund's annual report to Shareholders, is available at no charge on request by calling 877-881
2751.
Six Months
Ended 	Fiscal Years Ending February 28 or 29,
8/31/10
(Unaudited) 	2010 	2009 	2008 	2007 	2006
Net Asset Value, ..
Beginning of Period 	$ 40.21 	$ 35.80 	$ 44.07 	$ 42.54 	$ 37.23 	$ 35.28
Income (loss) From
Operations:
Net investment gain (loss) 	0.58 	1.43 	1.20 	1.18 	(1.31) 	0.27
Net gain (loss) from
securities (both
realized and unrealized) 	0.77 	2.98 	(9.4 7) 	0.35 	6.62 	1.68
Total from operations 	1.35 	4.41 	(8.27) 	1.53 	5.31 	1.95
Net Asset Value, End of Period $ 41.56 	$ 40.21 	$ 35.80 	$ 44.07 	$ 42.54 	$ 37.23
Total Return<bl 	3.36% 	12.32% 	(18.77)% 	3.60% 	14.26% 	5.53%
Ratios/Supplemental Data
Net assets, end of period
Cin OOO's) 	$57,483 	$56,228 	$53,765 	$69,395 	$67,581 	$59,298
Ratio of total expenses,
including net regular and
deferred taxes, to
average net assets* 	4.01%(c) 	5.54% 	2.40%** 	1.56%** 	7.97% 	3.90%
Ratio of total expenses,
excluding net regular and
deferred taxes, to
average net assets* 	2.01%(c) 	1.70% 	2.06% 	1.25% 	1.76% 	1.83%
Ratio of net investment and
operating income (loss) to
average net assets 	0.80%(c) 	3.65% 	2.80% 	2.73% 	(3.28)% 	0.76%
Ratio of net investment and
operating income,
excluding deferred taxes,
to average net assets 	2.81%(c) 	3.25% 	3.14% 	2.73% 	2.93% 	2.83%
Portfolio turnover rate 	1.33% 	1.76% 	2.78% 	4.11% 	0.50% 	0.73%
Number of shares
outstanding at end of
period Cin thousands) 	1,383 	1,399 	1,502 	1,575 	1,589 	1,593
The accompanying notes are an integral part of these consolidated financial statements.
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TABLE OF CONTENTS
COPLEY FUND, INC.
FINANCIAL HIGHLIGHTS
(Continued)
The financial highlight ratios above do not reflect investment fees waivers of $30,000 for the six
months ended August 31, 2010, $60,000 during the fiscal year ended February 28, 2010, $185,972 during
the fiscal year ended February 28, 2009 and $60,000 per year for prior years. If the waivers had been
included, the following ratios would apply:
Six Months
Ended 	Fiscal Years Ending February 28 or 29,
8/31/10
(Unaudited) 	2010 	2009 	2008 	2007 	2006
Ratio of total expenses,
including net regular and
deferred taxes, to average
net assets* 	3.91 %(c) 	5.44% 	2.11 %** 1.49%** 	7.88% 	3.80%
Ratio of total expenses,
excluding net regular and
deferred taxes, to average
net assets* 	1.90%(c) 	1.60% 	1.77% 	1.18% 	1.67% 	1.72%
Ratio of net investment and
operating income Ooss), to
average net assets 	0.70%(c) 	3.55% 	2.52% 	2.65% 	(3.37)% 	0.66%
Ratio of net investment and
operating income, excluding
deferred taxes, to average
net assets 	2.70%(c) 	3.14% 	2.86% 	2.65% 	2.84% 	2.73%
(a) Per share amounts are calculated using the average shares method, which more appropriately presents
the per share data for the period.
(b) Total returns are historical in nature and assume changes in share price, reinvestment of dividends and
capital gains distributions, if any.
(c) Annualized for periods less than one year.
* 	Includes operating expenses from the Operating Divisions of $i8,739 for the six months ended August
31, 2010 and $81,764, $353,018, $129,652, $31,676 and $30,787 for the fiscal years ending 2010
through 2006, respectively.
** Excludes a deferred tax benefit of $7,490,467 and $1,770,234 for the fiscal years ended 2009 and 2008,
respectively, since including these amounts would generate negative expense ratios in these respective
years.
The accompanying notes are an integral part of these consolidated financial statements.
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COPLEY FUND, INC.
NOTES TO CONSOLIDATED 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. It's investment objective is the generation and accumulation of dividend income.
The preparation of financial statements in accordance with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the period. Actual results
could differ from those estimates.
The following is a summary of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements.
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.
The Fund utilizes various methods to measure the fair value of most of its investments on a recurring
basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input
are:
Level 	Unadjusted quoted prices in active markets for identical assets and liabilities that the Fund has
1- 	the ability to access.
Level 	Observable inputs other than quoted prices included in Level 1 that are observable for the
2- 	asset or liability, either directly or indirectly. These inputs may include quoted prices for the
identical instrument on an inactive market, prices for similar instruments, interest rates,
prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 	Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not
3- 	available, representing the Fund's own assumptions about the assumptions a market participant
would use in valuing the asset or liability, and would be based on the best information
available.
The availability of observable inputs can vary from security to security and is affected by a wide
variety of factors, including, for example, the type of security, whether the security is new and not yet
established in the marketplace, the liquidity of markets, and other characteristics particular to the security.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the
market, the determination of fair value requires more judgment. Accordingly, the degree of judgment
exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such
cases, for 	disclosure 	purposes, 	the 	level in 	the fair 	value 	hierarchy within 	which the fair value
measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair
value measurement in its entirety.
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COPLEY FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Significant Accounting Policies - (continued)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk
associated with investing in those securities. The following tables summarize the inputs used as of August
31, 2010 for the Fund's assets and liabilities measured at fair value:
Assets• 	Level 1 	Level 2 	Level 3 	Total
Common Stocks 	$63,161,995 	$ 	$ 	$ 63,161,995
Total 	$63,161,995 	$ 	$ 	$ 63,161,995
* 	Refer to the Schedule of Investments for industry classifications.
In January 2010, the Financial Accounting "Standards Board ("FASB") issued Accounting Standards
Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value Measurements". ASU 2010-06
amends FASB Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, to
require additional disclosures regarding fair value measurements. Certain disclosures required by ASU No.
2010-06 are effective for interim and annual reporting periods beginning after December 15, 2009, and
other required disclosures are effective for fiscal years beginning after December 15, 2010, and for
interim periods within those fiscal years. The Fund adopted ASU 2010-06 on March 1, 2010. The adoption
of ASU 2010-06 had no material impact on the Fund's disclosures.
Sales of Securities
In determining the net realized gain or loss from sales of secuntJes, 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 used to pay expenses, to make additional investments or held in cash
as a reserve.
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.
The Fund recognizes the tax benefits of uncertain tax positions only when the position is "more likely
than not" to be sustained assuming examination by tax authorities. Management reviewed the tax positions
in the open tax years of 2008 through 2010 and those expected to be taken during the six months ended
August 31, 2010 and concluded that no liability for unrecognized tax benefits should be recorded related to
uncertain tax positions taken in the above open tax years. The Fund identifies its major tax jurisdiction as
U.S. Federal and Nevada State. The Fund recognizes interest and penalties, if
14
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TABLE OF CONTENTS
COPLEY FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Significant Accounting Policies - (continued)
any, related to unrecognized tax benefits as income tax expense in the Statements of Operations. During
the period, the Fund did not incur any interest or penalties. Generally tax authorities can examine tax
returns filed for the last three years.
Indemnifica lion
The Fund indemnifies its officers and trustees for certain liabilities that may arise from the performance
of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts
that contain a variety of representations and warranties and which provide general indemnities. The Fund's
maximum exposure under these arrangements is unknown, as this would involve future claims that may be
made against the Fund that has not yet occurred. However, based on experience, the Fund expects the risk
of loss due to these warranties and indemnities to be remote.
Other
Security transactions are accounted for on a trade-date basis. Dividend income is recorded on the ex
dividend date. Interest income is recorded as earned.
2. Disclosure of the provisions for income taxes, reconciliation of statutory rate to effective rate, and
significant components of deferred tax assets and liabilities.
The Federal and state income tax provision (benefit) is summarized as follows:
Six Months Ended
August 31, 2010
(Unaudited)
Current:
Federal 	$
State
Deferred*:
Federal 	580,155
State
Net provision (benefit) for income taxes 	$ 	580,155
* 	Deferred income taxes are shown net within realized and unrealized gain (loss) on investments on the
accompanying consolidated Statement of Operations.
The difference between the effective tax rate of 23% and the statutory tax rate of 35% is primarily
attributable to the benefits of the dividend received deduction.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. The deferred tax liabilities of $13,028,211 as of August 31, 2010, relate to the Fund's unrealized
gains on marketable securities. Deferred tax liabilities are net of $249,504 of deferred tax assets which
relate to capital loss carryforwards.
As of August 31, 2010, the Fund has $712,869 in accumulated capital loss carryforwards which will
expire on February 28 of the following years: 2014- $650,519; 2015-$62,350.
15
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TABLE OF CONTENTS
COPLEY FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
3. Capital Stock
At August 31, 2010, 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
August 31, 2010 (unaudited) 	February 28, 2010
Shares 	Amount 	Shares 	Amount
Shares sold 	4,592 	$ 189,387 	27,630 	$ 1,057,097
Shares repurchased 	(19,921) 	(823, 169) 	(131,013) 	(5,178,203)
Net change 	(15,329) 	$(633,782) 	(103,383) 	$(4,121,106)
4. 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. 2010, the fee for investment advisory service totaled $225,311
less fees of $30,000 voluntarily waived. Also during the period unaffiliated directors received $5,600 in
directors' fees and reimbursed expenses.
Operating Divisions
The Fund has a wholly owned operating division, Copley Fund, Inc. - 	Operating Division ("COD"),
which imports merchandise for resale. A portion of its merchandise is placed on consignment with a
company controlled by Irving Levine. The Fund invoices the consignee when the merchandise is ultimately
sold.
The results of the subsidiary company during the six months ended August 31, 2010, are as follows:
Sales 	$ 	31,339
Cost of goods sold 	(11,889)
Gross profit 	19,450
General & administrative expenses 	(18, 739)
Net income from operations 	711
Other income (dividends and interest) 	3
Net Income 	$ 	714
16
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TABLE OF CONTENTS
COPLEY FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
5. 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 its most recent review of the Fund's federal income tax
returns for the 1999 tax year, performed during 2001, 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.
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TABLE OF CONTENTS
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.
Unlike virtually all other mutual funds, the Fund has an operating division. Therefore, its expenses and
expense rations may not be strictly comparable to those of mutual funds which do not have an operating
business. 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.
Expenses Paid
Beginning 	Ending 	During Period•
Account Value 	Account Value 	Annualized 	(3/1/10
(3/1/10) 	(8/31/10) 	Expense Ratios 	8/31/10)
Actual Fund Return 	$ 	1,000.00 	$ 	1,033.57 	3.91% 	$ 	20.04
Hypothetical 5% Return 	$ 	1,000.00 	$ 	1,005.49 	3.91% 	$ 	19.77
* 	Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period,
multiplied by 181/365 (to reflect the one-half period).
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TABLE OF CONTENTS
COPLEY FUND, INC.
SUPPLEMENTAL DATA
General
Investment Products Offered
Are not FDIC Insured
May Lose Value
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, (i) is available, without charge and upon request, by calling 1-877-881
2751; 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 April 21, 2010, the Board of Directors of the Fund approved the continuation of the advisory
agreement with Copley Financial Services Corp. ("CFSC"). The Board's decision regarding the contract
reflects the exercise of its business judgment on whether to continue the existing arrangement. Prior to
approving the continuation of the advisory agreement, the Board considered, among other things:
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
performance and expenses of comparable funds
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TABLE OF CONTENTS
SUPPLEMENTAL DATA
(Continued)
any indirect benefits that may accrue to CFSC and its affiliates as a result of its relationship with the
Fund.
the extent to which the independent Board members are fully informed about all the facts the Board
deems relevant bearing on CFSC's services and fees.
The Board was aware of these factors and was guided by them in its review of the Fund's advisory
contract to the extent it considered them to be relevant and appropriate, as discussed further below. The
Board considered and weighted these circumstances in light of its substantial accumulated experience in
governing the Fund and working with CFSC on matters related to the Fund, and was assisted by legal
counsel.
In considering the nature, extent and quality of the services provided by CFSC, the Board of Directors
reviewed the portfolio management and operating division supervision 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. In its decision to continue the existing agreement the Board was mindful of the potential
disruptions of the Fund's operations and various risks, uncertainies and other effects that could occur as a
result of a decision to terminate or not renew the contract. In particular, the Board recognized that most
shareholders have invested in the Fund on the strength of CFSC's industry standing and reputation and
with the expectation that CFSC will have a continuing role in providing advisory services to the Fund.
The Directors compared the performance of the Fund to benchmark indices over various periods of
time. The Directors noted that the Fund's performance must be considered in light of the Fund's structure
which is designed to avoid the trauma of extreme volatility in its investments. They concluded that the
performance 	reflected 	this 	structural 	goal 	generally 	outperforming 	in 	volatile 	down 	markets 	and
underperforming in bull type markets.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 and particularly the performance of the portfolio securities themselves 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 and Stuffco International Inc.
(a company wholly owned by Mr. Levine) from their 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. The Board also considered that the Fund's expense ratio had decreased slightly. In
particular, the Board concluded that the Fund's expense ratio had remained higher than historical measures
due to increased expenses related to addressing the tax accrual accounting issue and the fact that the
expense ratio is calculated based upon net assets including a liability for a large tax reserve which
operates to distort the ratio as compared to most other funds. They noted that the advisory fee also is
adjusted downward if economies of scale are realized during the current contract period as the Fund
grows, 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 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.
20
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TABLE OF CONTENTS
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 5348 Vegas Drive, Suite
391, Las Vegas, NV 89108.
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.
(March 23, 1922)
1978
Gary S. Gaines
(July 28, 1937)
2009
Inside Directors
Name
(Date of Birth)
Year Elected
(Number of Copley
Portfolios Overseen)
Physician Since 1948
No Directorships
President of Gary Gaines, Inc., a bag manufacturer since
1965
No Directorships
Principal Occupations(s) During Past 5 Years
and Other Directorships of Public Companies
Irving Levine
(September 25, 1921)
1978
Officers
Name
(Date of Birth)
Title
President, Treasurer and a Director of Copley Financial
Services Corp. since 1978; a Director of Franklin Capital
Corp. (an operating investment company) since March,
1990 to October 2004; 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. from 2000 to October
2004.
Principal Occupations(s) During Past 5 Years
and Other Directorships of Public Companies
Irving Levine 	See Above
(September 25, 1921)
Chairman of the Board of
Directors and President,
Treasurer and Secretary
David I. Faust 	Partner in Faust Oppenheim LLP, a law firm, since 1979.
Counse! 	Counsel to Copley Fund since 2010.
No Directorships
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Semi-Annual Report
COPLEY FUND, INC. August 31, 2010
A No-Load Fund
Investment Adviser
Copley Financial Services Corp.
P.O. Box 3287
Fall River, 1Vlassachusetts 02722
E-mail: copleyfunds@verizon.net
Cusrodi,1n
Bank of .1\merica
100 Federal Street
Boston, ?viA 02110
Tram:fer Agent
Gemini Fund Services
'1020 South lt17th Street
Suite 2
Omaha, Nebraska 681:37
Tel. (402)493-460~3
(877)881-2751
Fax: {402)963-9094
Counsel
Faust Oppenheim LLP
<188 Madison Avenue, 17th Floor
New York, New York 10022
Auditors
EisnerAmper LLP
2015 Lincoln Highway
P 0 Box 988
Edison. N.T 08818
COPLEY FUND, INC.
A No-Load Fund
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Item 2._CODE OF ETIITCS
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 ofEthics by mail when they call the registrant toll free at (800)635-3427.
Item 3. AUDIT COMMITTEE FINANCIAL EXPERT
(a)( I) The registrant's Board of Directors function as an audit committee. They have determined that the Board 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 Board
met all five qualifications in the definition, although some members of the Board met some of the qualifications. The Board also
determined that while the 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 members lacked any necessary skill to serve as persons performing functions similar to those who serve on an 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.
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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 fmancial 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.
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 (I 7 CFR 270.30a-2(b ))
also accompany this filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of I 934 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: Is/ Irving Levine
Name: Irving Levine
Title: President (Principal Executive Officer)
Date: November 5, 2010
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.
Copley Fund, Inc.
By: Is! Irving Levine
Name: Irving Levine
President (Principal Executive Officer & Principal Financial
and Accounting Officer)
Date: November 5, 2010
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Copley Fund, Inc.
Portfolio Turnover Rate
Date 	Portfolio Turnover Ratel
2/29/12
2/28/11
2/28/10
2/28/09
2/29/08
2/28/07
2/28/06
2/28/05
2/29/04
2/28/03
0.0%
2.90%
1.76%
2.78%
4.11%
0.50%
0.73%
0.44%
0.92%
8.65%
The average rate for the ten years from 2/28/03 to 2/29/12 is 2.28%.
1 The Fund calculates turnover rate by dividing the lesser of purchases or sales of portfolio securities
for the reporting period by the monthly average of the value of the portfolio securities owned by the
Fund during the reporting period.

The Copley Fund Inc.
(The "Fund")
Minutes of an in-person Meeting of the Board of Directors of the Fund held
on March 2_3, 2012m accordance with its Articles of Incorporation
pursuant to written notice sent to all members
PRESENT: 	Irving Levine
Alan Resnick, M.D.
Roy Hale, CPA
Gary Gaines
David I. Faust, Esq. and Petra v.Z. Davenport, Esq. were present by invitation
Mr. Levine acted as Chairman and Ms .. Davenport acted as Secretary
LOCATION: Faust Oppenheim LLP, 488 Madison Avenue, 17th Floor, New York, New York
10022
The meeting was called to order and a quorum was announced. All present wished Dr. Resnick a
very happy 90th Birthday.
Approval of Minutes
After a discussion, the motion du1y made and seconded, the Board unanimously approved the
minutes of the meeting held on January 30,2012.
President's Report
Mr. Levine provided an update on the fund operations, investments and performance as well as
an update on the operating division of the Fund. Mr. Levine noted that YTD the Fund was up
and many stocks have increased payment of dividends. Mr. Levine also noted that the operating
division opened a new store in a joint venture with a member of the Buxton group.
Discussion
The Fund's Tax Reserve Status was discussed. Currently, the Fund holds $18million in reserve.
REDACTED

Review and Approval
1. 	After a discussion, on motion duly made and seconded, the Board unanimously:
RESOLVED, that the Board ofDirectors approves, and authorizes the Fund to submit,
the No Action Letter substantially in the form presented to the Board;
RESOLVED, that it is deemed to be in the best interests of the Fund to make an election
to be treated as a RIC for purposes of Subchapter M of the Internal Revenue Code, upon
the occurrence ofthe Triggering Event, as defined below. The "Triggering Event" shall
be the accrual of deferred tax liabilities on any day of the year in an amount that exceeds
ten percent (10%) ofPre-Tax NAV, where "Pre-Tax NAV" equals the NAV ofthe Fund
plus an amount equal to the Fund's deferred tax liability as ofthe end of such day; and be
it further ·
RESOLVED, that the President, Vice-President, Secretary, Treasurer, or CFO of the
Fund, as applicable, are hereby authorized, ·empowered, and directed on behalf, and in the .
name, of the Fund, and to do any and all acts and things, and to make, execute, deliver,
file and/or record any and all agr~ents, instruments, papers, documents, and to take all
other actions, which are or become necessary, proper or convenient to carry out and
effectuate the purposes of the resolutions adopted above.
2. 	After a discussion, on motion duly made and seconded, the Board unanimously approved
and ratified the recent SEC filings." The annual report of the Fund will be provided in
April f?r a filing at the end of the month.
3. 	Review of Blue Sky Filings and Status. Ms. Davenport reported that after speaking with
MLS Blue Sky Services, the filings are all up to date and accounted for.
4. 	Copley Fund Services Corp. Form ADV Other Than Annual Amendment, was filed as
required by March 31, 2012.
Next Meeting Date
The Board agreed to hold quarterly meetings and tentatively set the next meeting date for
Wednesday, June 20, 2012 at llam via telephone conference.
Approved ·by:
Irving Levine
Chairman
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