Dear Fellow Shareholders:
We've reached the mid-point of our second fiscal year, and the picture looks
brighter than it did at this time last year. You may remember that the "old
economy" stocks, such as those in the Dow Jones Industrials, were in the midst
of a prolonged slide in value. They were later joined by the "new economy"
high-tech stocks, such as those found in the NASDAQ Composite, and a market-wide
bottom occurred near the end of our fiscal year, February 29, at which time our
Net Asset Value (NAV) stood at $8.81. The NAV dipped as low as $8.63, but had
risen to $10.34 by August 31. The rebound of our fund has surpassed that of
either the Dow or the NASDAQ, both of which have struggled to attain positive
results for the year. The MP 63 Fund, by contrast, has maintained a gain of
about 5% over the course of the past few months. The NAV has fluctuated between
about $10.05 and $10.45 since the spring, gradually moving higher on a
consistent basis.
There are at least three major reasons for these results. One has been the
recovery of traditional companies, such as AFLAC, Home Depot, and The Limited. A
second factor has been a surge in the values of utilities and oil companies. The
latter have benefited from a tripling of the price of oil, which had reached a
20-year low in early 1999. At the same time, the best-performing Index in 2000
has been the Dow Jones Utilities, which are up close to 40%. Both the
energy-related stocks and the other "old economy" stocks...in industries such as
food, insurance, banking, and consumer goods...have enjoyed increased support
from traders and investors that have fled the no-earnings world of Internet
stocks. A third major reason for our recent success is the effect of
replacements made early in the year to both the fund and the underlying Index.
We sold Hannaford Brothers and Jostens, which were being acquired, along with
Kmart, New Plan Excel Realty, and Questar. These were replaced by Corning,
Global Crossing, Hewlett-Packard, Medtronic, and Scientific-Atlanta. (Our Global
Crossing shares originated as Frontier Corp. stock, and we added CenturyTel.)
Although the new companies are more volatile, their high-tech natures add an
element of growth for the long term, without the level of risk associated with
Internet stocks.
As we enter the last half of our second year, we are in position to take
advantage of buying opportunities. As this is being written (early October),
third-quarter earnings warnings have adversely affected the shares of stocks
such as Ingersoll-Rand, Intel, Newell Rubbermaid, and Pitney Bowes, providing us
with bargain prices at which to buy. At the same time, the dividends we receive
are growing in size, augmenting the inflow of cash that fuels our continued
buying for the long term. It's worth noting that we managed to use the small
loss from selling our "old" companies to offset some of those dividends,
minimizing their taxable impact on shareholders. Yet the changes only raised our
turnover rate (shown in the Financial Highlights) to 6.44%, a far cry from the
100% turnover at many actively-managed funds. The Highlights also show a 17.37%
annualized return for the six-month period, and a lowering of the expense ratio
to just 0.95%. As promised, we're making every effort to keep costs at a
minimum.
We're encouraged by more subtle signs of recovery even in some of our poorer
performers. Rite Aid, for example, has slipped to $4 per share on the heels of
restating 1998 and 1999 earnings, but the company has reported a double-digit
same-store sales increase for virtually every month this year. Philip Morris
stock has moved from the lower $20s to the lower $30s. Avon, Bank One, and
Coca-Cola have all moved higher as their prospects brighten. And the stock
market's overall mood, though somewhat glum, has shifted away from high-flying
Internet stocks to a more traditional stance where value matters. Investors and
analysts are "remembering" that earnings and dividends, along with customer
loyalty and solid balance sheets, deserve more respect...and higher share prices
We encourage you to join us in maintaining a long-term focus and continuing
to add funds on a regular basis. A discussion of performance can be found under
the Financial Highlights section.
<PAGE>
<TABLE>
<CAPTION>
THE MP 63 FUND, INC.
SCHEDULE OF INVESTMENTS
August 31, 2000
(Unaudited)
MARKET
SHARES VALUE
------ -----
<C> <S> <C> <C>
COMMON STOCKS 99.23%
ADVERTISING 1.74%
6,787 Interpublic Group Of Companies ................... $259,603
--------
APPAREL 0.78%
5,110 VF Corporation ................................... 116,891
--------
AUTOMOTIVE MANUFACTURING 3.90%
11,690 Harley-Davidson, Inc. ............................ 582,308
--------
AUTOMOTIVE PARTS 0.81%
5,845 Genuine Parts Co. ................................ 120,188
--------
BANKING 6.21%
4,373 Bank One Corporation ............................. 154,148
8,669 BB&T Corporation ................................. 234,605
8,481 Fleet Boston Financial Corporation ............... 362,033
8,425 National City Corporation ........................ 176,398
--------
927,184
--------
BEVERAGES 1.37%
3,896 Coca-Cola Corporation ............................ 205,027
--------
CHEMICALS 3.29%
4,518 E.I. DuPont de Nemours & Company ................. 202,745
8,588 Engelhard, Inc. .................................. 161,025
13,292 RPM, Inc. ........................................ 127,105
--------
490,875
--------
COMMUNICATIONS 8.65%
2,247 Centurytel, Inc. ................................. 64,742
1,320 Hewlett-Packard Company .......................... 159,390
14,244 Intel Corporation ................................ 1,066,519
--------
1,290,651
--------
COMMUNICATIONS EQUIPMENT 2.68%
1,220 Corning, Inc. .................................... 400,084
--------
COMPUTER EQUIPMENT 1.48%
2,824 Scientific-Atlanta, Inc. ......................... 220,095
--------
THE MP 63 FUND, INC.
SCHEDULE OF INVESTMENTS
August 31, 2000
(Unaudited)
<PAGE>
CONSUMER PRODUCTS 3.85%
6,902 Avon Products, Inc. .............................. 270,472
3,300 Johnson & Johnson ................................ 303,394
--------
573,866
--------
DRUGS 3.60%
5,693 Abbott Laboratories .............................. 249,069
7,180 Schering-Plough Corporation ...................... 288,097
--------
537,166
--------
ELECTRONIC INSTRUMENTS & CONTROLS 0.20%
499 Agilent Technologies, Inc.* ...................... 30,096
--------
FINANCIAL 8.38%
6,514 Franklin Resources, Inc. ......................... 247,532
3,432 H&R Block, Inc. .................................. 123,123
19,698 Paychex, Inc. .................................... 879,023
--------
1,249,678
--------
FOOD 6.02%
7,922 Conagra, Inc. .................................... 145,072
12,233 Flowers Industries, Inc. ......................... 266,068
10,175 Hormel Foods Corporation ......................... 157,077
8,297 Sara Lee Corporation ............................. 154,532
2,362 Wrigley Company .................................. 174,936
--------
897,685
--------
INSURANCE 4.43%
7,178 AFLAC, Inc. ...................................... 387,612
5,754 St. Paul Companies ............................... 274,034
--------
661,646
--------
MACHINERY 1.24%
4,056 Ingersoll-Rand Company ........................... 184,801
--------
MANUFACTURING 9.68%
14,852 Clayton Homes, Inc. .............................. 144,807
4,163 Illinois Tool Works, Inc. ........................ 233,388
2,330 Minnesota Mining & Manufacturing Company ......... 216,690
5,296 Newell Rubbermaid, Inc. .......................... 137,365
3,533 TRW, Inc. ........................................ 161,414
9,662 Tyco International Ltd. .......................... 550,734
---------
1,444,398
---------
MEDICAL INSTRUMENTS 1.53%
4,467 Medtronic, Inc. .................................. 228,934
---------
<PAGE>
THE MP 63 FUND, INC.
SCHEDULE OF INVESTMENTS
August 31, 2000
(Unaudited)
METALS 0.98%
3,270 Phelps Dodge Corporation ......................... 145,515
--------
OFFICE EQUIPMENT 2.34%
6,698 Diebold, Inc. .................................... 189,219
4,387 Pitney Bowes, Inc. ............................... 160,400
--------
349,619
--------
OIL & GAS 3.02%
3,184 ExxonMobil Corporation ........................... 259,894
3,699 Texaco, Inc. ..................................... 190,499
--------
450,393
--------
PACKAGING 1.17%
5,204 Bemis Company, Inc. .............................. 174,334
--------
PAPER & LUMBER 0.83%
3,889 International Paper Company ...................... 123,962
--------
PERSONNEL 0.84%
12,880 Servicemaster Company ............................ 124,775
--------
PUBLISHING 1.24%
3,255 Gannett Company, Inc. ............................ 184,314
--------
RENTAL & LEASING SERVICES 0.83%
6,462 Ryder System, Inc. ............................... 123,990
--------
RESTAURANT 0.84%
6,620 Wendys International ............................. 124,953
---------
RETAIL- APPAREL 1.67%
12,473 The Limited, Inc. ................................ 249,460
---------
RETAIL-DRUGS 0.35%
13,200 Rite Aid Corporation* ............................ 52,800
---------
RETAIL-GENERAL 2.21%
6,852 The Home Depot, Inc. ............................. 329,324
---------
TELECOMMUNICATIONS 4.44%
6,049 Bellsouth Corporation ............................ 225,703
8,176 Global Crossing Ltd.* ............................ 245,791
4,590 SBC Communications, Inc. ......................... 191,633
---------
663,127
---------
TOBACCO 1.25%
6,310 Philip Morris Companies, Inc. .................... 186,934
---------
TRANSPORTATION 0.91%
3,424 Union Pacific Corporation ........................ 136,104
---------
<PAGE>
THE MP 63 FUND, INC.
SCHEDULE OF INVESTMENTS
August 31, 2000
(Unaudited)
UTILITY-ELECTRIC 3.85%
3,230 Duke Energy Corporation .......................... 241,644
7,071 Edison International ............................. 146,281
6,790 Scana Corporation ................................ 185,876
---------
573,801
---------
UTILITY-GAS 1.43%
4,062 National Fuel Gas Company ........................ 213,001
---------
UTILITY-WATER 1.19%
7,251 American Water Works Company, Inc. ............... 177,649
---------
TOTAL COMMON STOCKS
(Cost $14,618,356)............................ 14,805,231
----------
CASH EQUIVALENTS 0.72%
107,884 Firstar Treasury Fund (Cost $107,884) ............ 107,884
----------
TOTAL INVESTMENTS
(Cost $14,726,240)............................ 99.95% 14,913,115
OTHER ASSETS LESS LIABILITIES................. 0.05% 8,002
------ -----------
TOTAL NET ASSETS..............................100.00% $14,921,117
======= ===========
(1) Federal Tax Information: At August 31, 2000 the net unrealized
appreciation based on cost for Federal Income tax purposes of
$14,726,240 was as follows:
Aggregate gross unrealized appreciation for all investments
for which there was an excess of value over cost......... $2,281,354
Aggregate gross unrealized depreciation for all investments
for which there was an excess of cost over value......... (2,094,479)
----------
Net unrealized appreciation.............................. $186,875
==========
<FN>
* Non-income producing security
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE MP 63 FUND, INC.
Statement of Assets and Liabilities
August 31, 2000
(Unaudited)
ASSETS:
<S> <C>
Investments in securities, at value
(cost $14,726,240) (Note 2) .................. $14,913,115
Dividends and interest receivable .............. 28,486
Receivable for fund shares sold ................ 16,870
Prepaid expenses ............................... 19,501
-----------
TOTAL ASSETS .............................. 14,977,972
-----------
LIABILITIES:
Payable for fund shares repurchased ............ 119
Accrued directors fees ......................... 3,943
Accrued expenses and other liabilities ......... 52,793
-----------
TOTAL LIABILITIES .......................... 56,855
-----------
NET ASSETS ................................ $ 14,921,117
============
NET ASSETS CONSIST OF:
Capital stock, $.001 par value; 1 billion shares
authorized; 1,442,961 shares outstanding .... $ 14,638,466
Undistributed net investment income ............ 109,863
Accumulated net realized loss from
investment transactions ...................... (14,087)
Net unrealized appreciation on investments ..... 186,875
-----------
NET ASSETS ..................................... $ 14,921,117
============
NET ASSET VALUE ($14,921,117/1,442,961) ........ $ 10.34
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE MP 63 FUND, INC.
Statement of Operations
For the Six Months Ended August 31, 2000
(Unaudited)
INVESTMENT INCOME:
<S> <C>
Dividends .................................. $ 137,214
Interest ................................... 2,753
-----------
Total investment income ............... 139,967
-----------
EXPENSES:
Advisory fees (Note 3) ..................... 24,690
Administration fees (Note 4) .............. 34,851
Printing and postage expense ............... 9,654
Registration fees .......................... 8,417
Insurance expense .......................... 5,384
Custody fees ............................... 5,199
Directors fees ............................. 3,210
Other expenses ............................. 748
-----------
Total expenses ......................... 92,153
Less: advisory fees waived and expense
reimbursement (Note 3) ......... (24,982)
-----------
Net expenses ............................... 67,170
-----------
Net investment income ..................... 72,797
-----------
NET REALIZED AND UNREALIZED LOSSES
ON INVESTMENTS: (Note 2)
Net realized loss on investment transactions (23,629)
Net change in unrealized depreciation
on investments ........................... 2,100,931
-----------
Net gain on investments .................... 2,077,302
-----------
Net increase in net assets resulting
from operations .......................... $ 2,150,099
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE MP 63 FUND, INC.
Statements of Changes in Net Assets
For the
Six Months Ended For the
August 31, 2000 Year Ended
(Unaudited) February 29, 2000
----------- -----------------
OPERATIONS:
<S> <C> <C>
Net investment income ........................................... $ 72,797 $ 91,079
Net realized gain (loss) from investment transactions ........... (23,629) 36,549
Net increase (decrease) in unrealized depreciation on investments 2,100,931 (1,914,056)
------------ ------------
Net increase (decrease) in net assets resulting from operations . 2,150,099 (1,786,428)
------------ ------------
DIVIDEND AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income ........................................... 0 (54,014)
Net realized gains on investments ............................... 0 (27,007)
------------ ------------
Total dividends and distributions to shareholders ............... 0 (81,021)
------------ ------------
FUND SHARE TRANSACTIONS:
Proceeds from fund shares sold .................................. 1,649,081 14,990,839
Dividends reinvested ............................................ 0 80,869
Payments for fund shares redeemed (net of redemption fees of
$16,988 and $17,989, respectively) ........................... (1,251,839) (930,483)
------------ ------------
Net increase in net assets from
fund share transactions ..................................... 397,242 14,141,225
------------ ------------
Net increase in net assets ...................................... 2,547,341 12,273,776
NET ASSETS:
BEGINNING OF PERIOD ................................................. 12,373,776 100,000
------------ ------------
END OF PERIOD (INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME
OF $109,862 AND $37,066, RESPECTIVELY) .......................... 14,921,117 $ 12,373,776
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE MP 63 FUND, INC.
FINANCIAL HIGHTLIGHTS
(For a share outstanding throughout each period)
For the
Six Months Ended For the
August 31, 2000 Year Ended
(Unaudited) February 29, 2000
-------------------- -------------------
<S> <C> <C>
Net asset value, beginning of year .......... $ 8.81 $ 10.00
---------- ----------
Income (loss) from investment operations:
Net investment income ................. 0.05 0.08
Net realized and unrealized gain (loss)
on investments ...................... 1.48 (1.21)
---------- ----------
Total from investment operations ...... 1.53 (1.13)
---------- ----------
Less distributions:
Dividends from net investment income .. 0.00 (0.04)
Distributions from net realized gains . 0.00 (0.02)
---------- ----------
Total dividends and distributions ..... 0.00 (0.06)
---------- ----------
Net asset value, end of period .............. $ 10.34 $ 8.81
========== ==========
Total return + .............................. 17.37% (11.36)%
Ratios/Supplemental data
Net assets, end of year (in thousands) ...... $ 14,921 $ 12,374
Ratios to Average Net Assets:
Expenses (before reimbursement) ............. 1.31%* 1.81%
Expenses (net of reimbursement) ............. 0.95%* 1.15%
Net investment income (before reimbursement) 0.68%* 0.20%
Net investment income (net of reimbursement) 1.03%* 0.86%
Portfolio Turnover Rate ..................... 6.44% 0.97%
<FN>
* Annualized
+ Non-Annualized
</FN>
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE MP 63 FUND, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 2000
(Unaudited)
NOTE 1. ORGANIZATION
The MP 63 Fund (the "Fund"), is organized as a Maryland Corporation,
incorporated on October 13, 1998, and 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.
A. 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.
B. 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.
C. 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.
D. 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.
E. USE OF ESTIMATES - The preparation of financial statements in
conformity with general accounting principles 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 revenues and expenses
during the reporting periods. Actual results could differ from
those estimates.
NOTE 3. INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory agreement (the "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. As compensation for the services rendered, the fund
pays the Advisor a fee accrued daily and paid monthly based on a sliding scale
ranging .35% of the first $75 million of average daily net assets to .10% of
average net assets in excess of $1 billion.
<PAGE>
The Advisor has voluntarily agreed to waive its advisory fee and to reimburse
the Fund for expenses so that the expenses will not exceed 1.25% of average net
assets. For the six months ended August 31, 2000, the advisor waived and
reimbursed certain other operating expenses amounting to $24,982 pursuant to the
voluntary undertaking.
NOTE 4. FUND ADMINISTRATOR AGREEMENT
The Fund has an administrative agreement with American Data Services, Inc. (the
"Administrator"). Under this agreement, the Administrator provides the Fund with
administrative, transfer agency, and fund accounting services. As compensation
for the services rendered, the Fund pays the Administrator a fee accrued daily
and paid monthly based on a sliding scale ranging from .35% for the first $75
million of average net assets, to .10% of average net assets in excess of $1
billion. The Fund also reimburses the Administrator for printing, postage,
telepone costs and certain other out-of-pocket expenses.
NOTE 5. CAPITAL SHARE TRANSACTIONS
At August 31, 2000 there were 1 billion shares authorized at $.001 par
value. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 2000 FEBRUARY 29, 2000
(UNAUDITED)
----------------------- ------------------------
<S> <C> <C> <C> <C>
Shares sold.................... 169,259 $1,649,081 1,484,299 $14,990,839
Shares issued for
dividend reinvestment....... 0 0 8,260 80,869
Shares repurchased.............(130,107) (1,251,839) (98,750) (930,483)
--------- ---------- ---------- -----------
39,152 $ 397,242 1,393,809 $14,141,225
========= ========== ========== ===========
</TABLE>
NOTE 6. INVESTMENT TRANSACTIONS
For the six months ended August 31, 2000, purchases and sales of
investment securities, excluding short-term securities, aggregated $1,752,152,
and $887,140, respectively.
