Dear Fellow Shareholders,
This is our first annual report since launching the fund on March 1, 1999. Our
fiscal year, which ended February 28, happened to coincide with a sharp sell off
in the stock markets, so the fund's Net Asset Value (NAV) reflects that fact.
Since then, the NAV has rebounded from $8.81 to $9.78 (as of April 26) and the
net loss of $1.9 million has narrowed to about $400,000. As we've seen recently,
that amount can be erased in moments of strong market action. However, our
focus, as always, is on the long term, and low prices present us with favorable
buying opportunities.
As you know, we eschew any notion of portfolio turnover. One of our
primary goals is to keep investing in the great companies in our fund (and the
underlying Index). We've experienced some change, though, most of it
unavoidable. In our second week of operation, three mergers were announced, and
each had been completed by November. So BankBoston, Frontier, and Pioneer
Hi-Bred International have been replaced, respectively, by FleetBoston
Financial, CenturyTel, and DuPont. We were able to minimize capital gains
distributions by adopting the acquirer as an Index component, with the exception
of Frontier (but later added its acquirer, Global Crossing). In late 1999, two
other components, Hannaford Brothers and Jostens, announced that they had agreed
to be acquired. Our second group of replacements began in early March 2000, so
they won't be reflected in our holdings as of February 28. However, we think the
changes will significantly enhance future performance.
As March began, we disposed of our shares of Hannaford and Jostens, as
well as shares of Too Inc. (spun off by The Limited). We also sold Kmart, which
had debuted a hgh-fee DRIP at the start of March, and sold New Plan Excel Realty
and Questar. We adopted Global Crossing as a component, already owning shares
from the Frontier acquisition. We began purchasing new components Corning,
Hewlett-Packard, Medtronic, and Scientific-Atlanta...all well-established
companies that will benefit from being at the forefront of computer,
communications, and medical technologies. Our purchases were spread over March
and April, so that we are once again fully invested as this is written.
Although our NAV has recovered a substantial portion of the lost
ground, we are optimistic that it is only the beginning of a strong period of
growth for our roster of industry-leading companies. We'll continue to post
updated information at our web site (www.mp63fund.com) and in The Moneypaper. We
urge fellow shareholders to keep investing, just as they do with dividend
reinvestment plans. You may want to consider signing up for automatic monthly
investments so that you can enjoy the benefits of dollar-cost averaging. Thanks
for your past and future support.
Sincerely,
<PAGE>
<TABLE>
<CAPTION>
Page 2
THE MP 63 FUND, INC.
Schedule of Investments in Securities
February 29, 2000
MARKET
Shares VALUE
- --------------------------------------------------------------------------------
<C> <S> <C> <C>
COMMON STOCKS 95.87%
ADVERTISING 2.08%
6,400 Interpublic Group of Companies 257,200
--------
APPAREL 0.92%
4,600 VF Corporation 113,563
--------
AUTOMOTIVE MANUFACTURING 3.08%
5,600 Harley-Davidson, Inc. 381,500
--------
AUTOMOTIVE PARTS 0.95%
5,200 Genuine Parts Co. 117,325
--------
BANKING 5.34%
3,900 Bank One Corporation 100,669
8,200 BB&T Corporation 192,700
8,043 Fleet Boston Financial Corp. 219,172
7,700 National City Corporation 148,225
--------
660,766
--------
BEVERAGES 1.45%
3,700 Coca-Cola Corporation 179,219
--------
CHEMICALS 3.50%
4,172 E.I du Pont de Nemours & Company 210,686
7,700 Engelhard Inc. 104,912
11,800 RPM Inc. 118,000
--------
433,598
--------
COMMUNICATIONS EQUIPMENT 0.15%
100 Corning Inc. 18,800
--------
COMPUTERS 6.39%
7,000 Intel Corporation 791,000
--------
CONSUMER PRODUCTS 4.54%
6,400 Avon Products, Inc. 173,200
3,100 Johnson & Johnson 222,425
6,900 Jostens, Inc. 166,031
--------
561,656
--------
DRUGS 3.94%
5,300 Abbott Laboratories 173,575
9,000 Schering-Plough Corporation 313,875
--------
487,450
--------
See Notes to Financial Statements.
<PAGE>
Page 3
THE MP 63 FUND, INC.
Schedule of Investments in Securities
February 29, 2000
MARKET
Shares VALUE
- --------------------------------------------------------------------------------
FINANCIAL 7.62%
6,100 Franklin Resources Inc. 165,844
3,100 H&R Block Inc. 136,012
12,800 Paychex, Inc. 640,800
--------
942,656
--------
FOOD 5.46%
7,100 Conagra Inc. 116,262
11,200 Flowers Industries Inc. 144,900
9,200 Hormel Foods Corporation 153,525
7,500 Sara Lee Corporation 112,500
2,200 Wrigley Company 148,775
--------
675,962
--------
INSURANCE 2.96%
6,900 AFLAC Inc 252,281
5,100 St. Paul Companies 114,113
--------
366,394
--------
MACHINERY 1.18%
3,800 Ingersoll-Rand Company 145,588
--------
MANUFACTURING 9.11%
13,700 Clayton Homes Inc. 111,312
4,000 Illinois Tool Works Inc. 206,750
2,100 Minnesota Mining & Manufacturing Co 185,062
4,700 Newell Rubbermaid Inc. 108,688
3,300 TRW Inc. 158,400
9,400 Tyco International Ltd. 356,613
---------
1,126,825
---------
METALS 1.07%
2,800 Phelps Dodge Corporation 131,950
--------
OFFICE EQUIPMENT 2.89%
6,300 Diebold Inc. 154,350
4,100 Pitney Bowes Inc. 202,950
--------
357,300
--------
OIL & GAS 3.13%
3,000 Exxon Corporation 225,937
3,400 Texaco Inc 161,288
--------
387,225
--------
See Notes to Financial Statements.
<PAGE>
Page 4
THE MP 63 FUND, INC.
Schedule of Investments in Securities
February 29, 2000
MARKET
Shares VALUE
- --------------------------------------------------------------------------------
PACKAGING 1.15%
4,800 Bemis Company Inc. 142,800
--------
PAPER & LUMBER 1.01%
3,400 International Paper Company 125,162
--------
PERSONNEL 1.04%
11,700 Servicemaster Co. 128,700
--------
PUBLISHING 1.58%
3,000 Gannett Company Inc. 195,562
--------
REAL ESTATE INVESTMENT TRUST 0.89%
7,900 New Plan Excel Realty Trust Inc. 110,106
--------
RENTAL & LEASING SERVICES 0.86%
5,700 Ryder System Inc. 106,162
--------
RESTAURANTS 0.76%
6,000 Wendys International 94,500
--------
RETAIL APPAREL 1.58%
5,300 The Limited 180,200
657 Too Inc 15,768
--------
195,968
--------
RETAIL DRUGS 0.61%
11,000 Rite Aid Corporation 75,625
--------
RETAIL GENERAL 5.85%
3,700 Hannaford Brothers Co. 263,625
6,550 Home Depot 378,672
9,200 Kmart Corporation * 81,075
--------
723,372
--------
TELECOMMUNICATIONS 6.38%
5,700 Bellsouth Corporation 232,275
900 Centurytel Inc. 30,262
7,790 Global Crossing Ltd. 363,209
4,300 SBC Communications Inc. 163,400
--------
789,146
--------
TOBACCO 0.91%
5,600 Phillip Morris Companies Inc. 112,350
--------
See Notes to Financial Statements.
<PAGE>
Page 5
THE MP 63 FUND, INC.
Schedule of Investments in Securities
February 29, 2000
MARKET
Shares VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION 0.98%
3,200 Union Pacific Corporation 121,600
--------
UTILITY - ELECTRIC 3.28%
3,000 Duke Energy Corporation 145,500
6,300 Edison International 165,769
3,976 Scana Corporation 94,679
--------
405,948
--------
UTILITY - GAS 2.18%
3,700 National Fuel Gas Company 151,469
8,500 Questar Corporation 118,469
--------
269,938
--------
UTILITY- WATER 1.05%
6,500 American Water Works Company, Inc. 130,000
--------
TOTAL COMMON STOCKS
(Cost $13,776,973) 11,862,916
CASH EQUIVALENTS 3.55%
------
438,774 Firstar Treasury Fund 438,774
--------
TOTAL INVESTMENTS
(Cost $14,215,746) 99.42% 12,301,690
OTHER ASSETS LESS LIABILITIES 0.58% 72,086
------ -----------
TOTAL NET ASSETS 100.00% $12,373,776
====== ===========
<FN>
*Non-income producing security
See Notes to Financial Statements.
</FN>
</TABLE>
<PAGE>
Page 6
THE MP 63 FUND, INC.
Statement of Assets and Liabilities
February 29, 2000
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
Investments in securities, at value
(cost $14,215,746) (Note 2) $ 12,301,690
Dividends and interest receivable 24,808
Receivable for fund shares sold 66,207
Due from advisor (Note 3) 13,242
Prepaid expenses 8,716
------------
Total assets $ 12,414,663
LIABILITIES
Payable for fund shares repurchased 12,578
Other accrued expenses 28,309
------------
Total Liabilities 40,887
------------
NET ASSETS $ 12,373,776
============
NET ASSETS CONSIST OF
Capital stock, $.001 par value; 1 billion shares
authorized, 1,403,809 shares outstanding $ 14,241,224
Undistributed net investment income 37,066
Accumulated net gain on investments 9,542
Net unrealized depreciation on investments (1,914,056)
------------
Net Assets $ 12,373,776
============
Net asset value ($12,373,776/1,403,809) $ 8.81
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
Page 7
THE MP 63 FUND, INC.
Statement of Operations
Year ended February 29, 2000
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C> <C>
Dividends $ 192,346
Interest 21,308
-----------
Total investment income $ 213,654
EXPENSES
Advisory fees (Note 3) 37,054
Administration fees (Note 4) 37,054
Printing expense 36,975
Registration fees 33,379
Custody fees 17,339
Insurance expense 10,672
Professional fees 9,487
Directors' fees 7,198
Other expenses 3,166
-----------
Total expenses 192,324
Less: advisory fees waived and expense
reimbursement (Note 3) (69,749)
-----------
Net expenses 122,575
------------
Net investment income 91,079
NET REALIZED GAINS AND UNREALIZED LOSSES
ON INVESTMENTS
Net realized gain on investments 36,549
Net unrealized depreciation on investments (1,914,056)
------------
Net loss on investments (1,877,507)
------------
Net decrease in net assets resulting from operations $(1,786,428)
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
Page 8
THE MP 63 FUND, INC.
Statement of Changes in Net Assets
Year Ended February 29, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net investment income $ 91,079
Net realized gain from investment transactions 36,549
Increase in unrealized depreciation on investments (1,914,056)
------------
Net decrease in net assets resulting from operations $ (1,786,428)
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income (54,014)
Distributions from net realized gains on investments (27,007)
------------
(81,021)
FUND SHARE TRANSACTIONS (Note 5)
Proceeds from shares sold 14,990,839
Dividends reinvested 80,869
Payment for shares redeemed (net of $17,989
of redemption fees) (930,483)
------------
Net increase in net assets from fund share transactions 14,141,225
------------
Net increase in net assets 12,273,776
NET ASSETS, BEGINNING OF YEAR 100,000
------------
NET ASSETS, END OF YEAR $ 12,373,776
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
Page 9
THE MP 63 FUND, INC.
Financial Highlights
Year Ended February 29, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 10.00
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Net investment income 0.08
Net realized and unrealized loss on investments (1.21)
------
Total from investment operations (1.13)
LESS DISTRIBUTIONS
Dividend from net investment income (0.04)
Distribution from realized gains (0.02)
------
Total dividends and distributions (0.06)
-------------
NET ASSET VALUE, END OF YEAR $ 8.81
=============
Total return (11.36%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (in thousands) 12,374
RATIOS TO AVERAGE NET ASSETS:
Expenses (before reimbursement) 1.81%
Expenses (net of reimbursement) 1.15%
Net investment income 0.86%
Portfolio turnover rate 0.97%
</TABLE>
See Notes to Financial Statements.
<PAGE>
Page 10
THE MP63 FUND, INC.
Notes to Financial Statements
February 29, 2000
NOTE 1 - ORGANIZATION
- ---------------------
The MP 63 Fund (the "Fund") is organized as a Maryland Corporation,
incorporated on October 13, 1998 and commenced operations on March 1,
1999. The Fund is registered as an open-end, diversified, management
investment company under the Investment Company Act of 1940, as
amended. The Fund's business and affairs are managed by its' officers
under the direction of its Board of Directors. The Fund's investment
objective is to seek long-term capital appreciation for shareholders.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------
The following is a summary of significant accounting policies
consistently followed by the Fund. These policies are in conformity
with generally accepted accounting principles.
SECURITY VALUATION - Securities for which market quotations are readily
available are valued at market value. Portfolio securities for which
market quotations are not considered readily available are stated at
fair value on the basis of valuations furnished by a pricing service
approved by the Board of Directors. The pricing service determines
valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for comparable
securities and various relationships between securities that are
generally recognized by institutional traders. Short-term investments
held by the Fund that mature in 60 days or less are valued at amortized
cost, which approximates market value. All other securities and assets
are valued at their fair value following procedures approved by the
Board of Directors.
SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Securities
transactions are accounted for on the trade date. Dividend income is
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis.
FEDERAL INCOME TAXES - The Fund intends to comply with requirements of
the Internal Revenue Code applicable to regulated investment companies
and to distribute all of its taxable income to its shareholders.
Therefore, no provision for Federal income tax is required.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - The Fund records
dividends and distributions to shareholders on the ex-dividend date.
The Fund will distribute its net investment income, if any, and net
realized capital gains, if any, annually.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates an 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 revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
<PAGE>
Page 11
THE MP63 FUND, INC.
Notes to Financial Statements
February 29, 2000
NOTE 3 - INVESTMENT ADVISORY AGREEMENT
- --------------------------------------
The Fund has an investment advisory agreement with The Moneypaper
Advisor, Inc. ("Advisor"). Under this agreement, the Advisor provides
the Fund with investment advice and supervises the Fund's management
and investment programs for which the
Fund pays a monthly fee equal, on an annual basis, to .35% of its
average daily net assets.
The Advisor has voluntarily agreed to waive its advisory fee and to
reimburse the Fund for expenses so that the Fund's expenses will not
exceed 1.25% of average net assets for the fiscal year ended February
29, 2000. The amount of fees waived and expenses reimbursed by the
Advisor for the year ended February 29, 2000 is set forth in the
Statement of Operations.
NOTE 4 - FUND ADMINISTRATOR AGREEMENT
- -------------------------------------
The Fund has an administrative agreement with American Data Services,
Inc. ("ADS" or the "Administrator"). Under this agreement, the
Administrator provides the Fund with administrative, transfer agency,
and fund accounting services. For the services rendered to the Fund by
the Administrator, the Fund pays the Administrator a monthly fee, which
is based on its average net assets. If the Fund's average daily net
assets are: less than $75 million, the Administrator's fee is equal to
.35% of its average daily net assets; between $75 million and $200
million, the Administrator's fee is equal to .30% of such assets;
between $200 million and $500 million, the Administrator's fee is equal
to .25% of such assets; between $500 million and $1 billion, the
Administrator's fee is equal to .20% of such assets; and in excess of
$1 billion, the Administrator receives a fee equal to .10% of the
Fund's average daily net assets. The Fund also reimburses the
Administrator for printing, postage, and telephone costs.
NOTE 5 - CAPITAL SHARE TRANSACTIONS
- -----------------------------------
At February 29, 2000, there were 1 billion shares authorized at $.001
par value. Transactions in capital stock during the year ended February
29, 2000 were as follows:
Shares sold 1,484,299
Shares issued for dividend reinvestment 8,260
Shares repurchased (98,750)
---------
1,393,809
=========
NOTE 6 - INVESTMENT TRANSACTIONS
- --------------------------------
Purchases and sales of investment securities, excluding short-term
securities, for the year ended February 29, 2000 aggregated $13,842,676
and $102,253, respectively.
NOTE 7 - UNREALIZED APPRECIATION (DEPRECIATION)
- -----------------------------------------------
Gross unrealized appreciation and gross unrealized depreciation of
investments for Federal income tax purposes at February 29, 2000 were
as follows:
Gross unrealized appreciation $ 1,070,994
Gross unrealized depreciation (2,985,050)
-----------
Net unrealized depreciation $(1,914,056)
===========
<PAGE>
Page 12
THE MP63 FUND, INC.
Notes to Financial Statements
February 29, 2000
NOTE 8 - DISTRIBUTIONS
- ----------------------
A distribution of six cents per share (including an income distribution
of four cents, plus a short term capital gain distribution of two cents
per share) was declared for shareholders of record on December 29, 1999
ex-date December 30, 1999 and paid December 30, 1999.
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors of
THE MP63 FUND, INC.
We have audited the accompanying statement of assets and liabilities of THE MP63
FUND, INC., including the schedule of investments in securities, as of February
29, 2000, and the related statements of operations, changes in net assets, and
the financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we 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. Our
procedures included confirmation of investments owned as of February 29, 2000 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of THE
MP63 FUND, INC. at February 29, 2000, and the results of their operations,
changes in their net assets and financial highlights for the year indicated
therein in conformity with generally accepted accounting principles.
MENDLOWITZ WEITSEN, LLP
East Brunswick, New Jersey
April 20, 2000
