UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-09053
The MP 63 Fund, Inc.
(Exact name of registrant as specified in charter)
MP 63 Fund, Inc.
555 Theodore Fremd Ave., Suite B-103
Rye, NY 10580
(Address of principal executive offices)(Zip code)
MP 63 Fund Inc.
555 Theodore Fremd Ave., Suite B-103
Rye, NY 10580
(Name and address of agent for service)
Registrant's telephone number, including area code: (914) 925-0022
Date of fiscal year end: February 28
Date of reporting period: August 31, 2008
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). 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 ("OMB") control number. Please direct comments concerning 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. § 3507.
Item 1. Reports to Stockholders.
Dear Fellow Shareholders,
As we write this letter, the stock market has been through a series of sharp sell-offs that qualify it as a bear market, generally defined as a decline of more than 20%. Many stocks have lost one-third of their market capitalization, and our portfolio hasn’t been immune to that trend. However, we firmly believe that there is plenty of reason for hope. First, the good news. For the first six months of our 10th fiscal year, ending on August 31, 2008, net investment income (dividends and interest, less expenses) totaled $370,696, compared with the $273,495 earned a year earlier. Our Net Asset Value per share rose from $12.10 on February 29, 2008 to $12.23 as of August 31, 2008, and the expense ratio for the six months ending August 31 was 0.85%, down from 0.88% for the fiscal year that ended in February. The higher net investment income, the result of generally rising dividends paid by ou r portfolio companies (as well as lower expenses), should result in another increase in the year-end dividend, which was 19.28¢ per share at the end of 2007.
Now the “bad” news. The market decline accelerated in September and early October, sending our NAV lower along with the market and creating a decidedly negative investing climate. However, from a long-term perspective, the current market also presents potential buying opportunities, especially for the stocks of high-quality, well-capitalized companies. And the changes we made in the spring--trading companies in decline for firms that should benefit from long-term demographic trends, such as the need for water infrastructure upgrades and the growing popularity of warehouse clubs-- spared us from some of the carnage, while improving the quality of out portfolio. Our latest replacement was the addition of United Technologies, a solid, growing conglomerate, for Wrigley, which was acquired by Mars Inc.
DRIPX shareholders deserve to be congratulated for their restraint. While many investors have given in to short-term, panic selling, our shareholders have, by and large, exhibited a more logical, long-term perspective. Therefore, we have not been forced to sell into the bear market and we are in position to potentially benefit from the array of bargain prices on high-quality companies that should be providing their shareholders (and ours) with a steady stream of higher profits and dividends. We feel that it’s more important than ever to continue to invest, either through dollar-cost averaging (which can be accomplished via automatic debits) or through periodic purchases, so that we take advantage of the potential opportunities provided by this market.
<signed>Vita Nelson and David Fish, co-managers
<October 20, 2008>
Past performance is not a guarantee of future results.
Must be preceded or accompanied by a prospectus. Mutual fund investing involves risk. Principal loss is possible.
Fund holdings are subject to change and should not be considered a recommendation to buy or sell any security. Please refer to the schedule of investments in the report for complete holdings information.
Dollar-cost averaging involves continuous investment in securities regardless of fluctuating price levels of such securities; the investor should consider his/her financial ability to continue purchases through periods of low price levels. Dollar-cost averaging and automatic investment plans do not assure a profit and do not protect against loss in declining markets.
Quasar Distributors, LLC, Distributor. (10/08)
The MP63 Fund, Inc. |
|
Statement of Assets and Liabilities | |
August 31, 2008 (Unaudited) | |
Assets: | |
Investments at Market Value (Cost $33,449,806) | $ 40,068,329 |
Cash | 41,492 |
Receivables | |
Dividends and Interest | 104,353 |
Prepaid Registration | 26,282 |
Total Assets | 40,240,456 |
Liabilities | |
Accrued Expenses | 10,422 |
Accrued Management Fees | 11,181 |
Total Liabilities | 21,603 |
Net Assets | $ 40,218,853 |
Net Assets Consist of: | |
Capital Stock, $.001 par value; 1 billion shares | |
authorized; 3,289,822 shares issued and outstanding | $ 3,290 |
Additional Paid in Capital | 34,262,659 |
Accumulated Undistributed Net Investment Income | 452,623 |
Realized Loss on Investments - Net | (1,118,242) |
Unrealized Appreciation in Value | |
of Investments Based on Identified Cost - Net | 6,618,523 |
Net Assets | $ 40,218,853 |
Net Asset Value and Offering Price ($40,218,853/3,289,822) | $ 12.23 |
Redemption Price Per Share ($12.23 x .98)* | $ 11.98 |
* The Fund will deduct a 2% redemption fee from redemption proceeds if purchased and redeemed | |
within 6 months. | |
The MP63 Fund, Inc. |
|
Statement of Operations | |
For the year six months ended August 31, 2008 (Unaudited) | |
Investment Income: | |
Dividend Income | $ 540,283 |
Interest Income | 1,685 |
Total Investment Income | 541,968 |
Expenses: | |
Investment advisor fees | 70,457 |
Administration fees | 31,486 |
Fund servicing expense | 20,943 |
Registration fees | 10,055 |
Insurance expense | 7,417 |
Printing and postage expense | 7,005 |
Compliance fees | 5,984 |
Miscellaneous expense | 5,105 |
Custody fees | 4,323 |
Legal fees | 3,494 |
Director fees | 2,992 |
Audit fees | 2,011 |
Total Expenses | 171,272 |
Net Investment Income | 370,696 |
Realized and Unrealized Gain (Loss) on Investments: | |
Realized Gain on Investments | (1,073,395) |
Unrealized Depreciation on Investments | 1,121,467 |
Net Realized and Unrealized Gain (Loss) on Investments | 48,072 |
Net Increase in Net Assets from Operations | $ 418,768 |
The MP63 Fund, Inc. |
|
|
|
Statements of Changes in Net Assets | (Unaudited) | ||
For the | For the | ||
Six Months Ended | Year Ended | ||
August 31, 2008 | February 28, 2008 | ||
From Operations: | |||
Net Investment Income | $ 370,696 | $ 576,664 | |
Net Realized Gain on Investments | (1,073,395) | 387,118 | |
Net Unrealized Appreciation (Depreciation) | 1,121,467 | (2,217,443) | |
Increase (Decrease) in Net Assets from Operations | 418,768 | (1,253,661) | |
From Distributions to Shareholders: | |||
Net Investment Income | - | (613,907) | |
Net Realized Gain from Security Transactions | - | (2,243,913) | |
Change in Net Assets from Distributions | - | (2,857,820) | |
From Capital Share Transactions | |||
Proceeds From Sale of Shares | 1,781,431 | 3,681,195 | |
Shares Issued on Reinvestment of Dividends | - | 2,847,660 | |
Cost of Shares Redeemed | |||
(net of redemption fees $7,176 and $13,102, respectively) | (1,973,366) | (3,562,533) | |
Net Increase from Shareholder Activity | (191,935) | 2,966,322 | |
Net Increase (Decrease) in Net Assets | 226,833 | (1,145,159) | |
Net Assets at Beginning of Period | 39,992,020 | 41,137,179 | |
Net Assets at End of Period (Including Undistributed Net | |||
Investment Income of $452,623 and $72,992, respectively) | $ 40,218,853 | $ 39,992,020 | |
Share Transactions: | |||
Issued | 145,673 | 270,988 | |
Reinvested | - | 215,080 | |
Redeemed | (161,434) | (260,249) | |
Net increase in shares | (15,761) | 225,819 | |
Shares outstanding beginning of period | 3,305,583 | 3,079,764 | |
Shares outstanding end of period | 3,289,822 | 3,305,583 |
THE MP63 FUND, INC.
Notes to Financial Statements
August 31, 2008 (Unaudited)
Note 1. Organization
The MP63 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 accounting principles generally accepted in the United States of America.
A.
Security Valuation - Portfolio securities traded on a national securities exchange are stated at the last reported sales price or a market’s official close price on the day of valuation. Portfolio 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 valued 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. There were no securities valued under this pricing service for 2008 or 2007.
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 complies with requirements of the Internal Revenue Code applicable to regulated investment companies, distributing 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.
Credit Risk - Financial instruments that potentially subject the Fund to credit risk include cash deposits in excess of federally insured limits.
F.
Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
THE MP63 FUND, INC.
Notes to Financial Statements
August 31, 2008 (Unaudited)
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 And Other Related Party
Transactions
The Fund has entered into an investment advisory agreement (the "Agreement") with The Moneypaper Advisor, Inc. (the "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 based on an annualized rate of .35% of the daily net asset value. For the six months ended August 31, 2008, the Advisor earned fees of $70,457.
The Advisor has voluntarily agreed to defer its advisory fee and to reimburse the Fund for other expenses if the total operating expenses of the Fund exceed an annual rate of 1.25% of average daily net assets. Under the terms of the Agreement, fees deferred or expenses reimbursed by the Advisor are subject to reimbursement by the Fund, if so requested by the Advisor, up to five years from the fiscal year the fee or expense was incurred. However, no reimbursement payment will be made by the Fund if it would result in the Fund exceeding the voluntary expense limitation described above.
An affiliate of the Advisor provides certain administrative services to the Fund. These expenses amounted to $20,943 during the six months ended August 31, 2008.
The Fund has an administrative agreement with Mutual Shareholder Services (The "Administrator"). Under this agreement, the Administrator provides the Fund with administrative, transfer agency, and fund accounting services. Mutual Shareholder Services charges an annual fee of approximately $60,000 for services rendered based on the Fund’s current asset size.
The Fund is responsible for the cost of printing, postage, telephone costs and certain other out-of-pocket expenses. Vita Nelson is an officer and director of the Advisor and also an officer and director of the Fund.
The Fund currently pays each Director an annual retainer of $2,000.
The Chief Compliance Officer is paid $1,000 per month. For the six months ended August 31, 2008 the Chief Compliance Officer was paid $6,000.
THE MP63 FUND, INC.
Notes to Financial Statements
August 31, 2008 (Unaudited)
NOTE 4. Investment Transactions
For the six months ended August 31, 2008, purchases and sales of securities, excluding short-term investments, aggregated $3,148,375 and $2,778,373, respectively.
Unrealized appreciation
$ 8,423,281
Unrealized depreciation
(1,804,758)
Net unrealized appreciation
$ 6,618,523
For Federal income tax purposes, the cost of investments owned at August 31, 2008 was $33,449,806.
NOTE 5. TaX INFORMATION
Distributions are determined on a tax basis and may differ from net investment income and realized capital gains for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified among capital accounts in the financial statements to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Differences in classification may also result from the treatment of short-term gain as ordinary income for tax purposes.
As of August 31, 2008, the components of net assets on a tax basis were as follows:
Ordinary income
$ 452,623
Long term gains (loss) $(1,118,242)
Unrealized appreciation
$ 8,423,281
Unrealized depreciation $(1,804,758)
The tax character of distributions paid during the fiscal year ended February 29, 2008 was as follows:
Distributions paid from:
Ordinary income
$ 611,414
Long term capital gains
2,236,245
Total
$ 2,847,659
There were no distributions paid during the six months ended August 31, 2008.
Expense Example
As a shareholder of the MP63 Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution [and/or service] (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, March 1, 2008 through August 31, 2008.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Fund’s actual returns. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in this Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The MP 63 Fund | Beginning Account Value | Ending Account Value | Expenses Paid During the Period* |
March 1, 2008 | August 31, 2008 | March 1, 2008 to August 31, 2008 | |
Actual | $1,000.00 | $1,010.74 | $4.32 |
Hypothetical | |||
(5% Annual Return before expenses) | $1,000.00 | $1,020.98 | $4.34 |
* Expenses are equal to the Fund's annualized expense ratio of 0.85%, multiplied by the average account value over the period, multiplied by 185/366 (to reflect the one-half year period). | |||
| |||
The Board of Directors supervises the business activities of the Fund. The names of the Directors and principal officers of the Fund are shown below. For more information regarding the Directors, please refer to the Statement of Additional Information, which is available free upon request by calling 1-877-676-3386.
Name, Address and Age | Position(s) Held with the Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Director | Other Directorships Held By Director |
Disinterested Directors:
Ted S. Gladstone Age: 76 555 Theodore Fremd Ave., Suite B103 Rye, NY 10580 | Director | Indefinite – since 1998 | President, Gladstone Development Corporation (real estate development) | 1 | None |
Gloria Schaffer Age: 77 555 Theodore Fremd Ave., Suite B103 Rye, NY 10580 | Director | Indefinite – since 1998 | Partner, CA White (real estate development) | 1 | None |
Richard Yaffa Age: 76 555 Theodore Fremd Ave., Suite B103 Rye, NY 10580 | Director | Indefinite – since 2005 | President, Manhattan Products, Inc. | 1 | None |
Interested Directors:
Vita Nelson1,2 Age: 70 555 Theodore Fremd Ave., Suite B103 Rye, NY 10580 | Director | Indefinite – since 1998 | President, Editor and Publisher of The Moneypaper, Inc. (newsletter) | 1 | Director, The Moneypaper Advisor, Inc.; Director, Temper of the Times Communications, Inc. |
Principal Officers who are not Directors:
Lester Nelson1 Age: 79 555 Theodore Fremd Ave., Suite B103 Rye, NY 10580 | Secretary | Indefinite – since 1998 | Partner of the law firm of Nelson & Nelson | 1 | Director, Moneypaper Advisor, Inc.; Director, Temper of the Times Communications, Inc. |
David Fish Age: 59 555 Theodore Fremd Ave., Suite B103 Rye, NY 10580 | Treasurer | Indefinite – since 2003 | Executive Editor of The Moneypaper, Inc. (newsletter) | 1 | None |
(1)
Vita Nelson and Lester Nelson are married
(2)
Vita Nelson is President of the Fund and a Director of the Fund’s Advisor, The Moneypaper Advisor, Inc. and therefore, is an “Interested Director” of the Fund.
THE MP63 FUND, INC.
Additional Information (Unaudited)
August 31, 2008
Information Regarding Proxy Voting
A description of the policies and procedures that these Funds use to determine how to vote proxies relating to portfolio securities and information regarding how these Funds voted proxies during the most recent 12-month period ended June 30, are available without charge upon request by (1) calling the Funds at 1-877-676-3386 and (2) from Funds’ documents filed with the Securities and Exchange Commission ("SEC") on the SEC's website at www.sec.gov.
Information Regarding Portfolio Holdings
The Fund file a complete schedule of investments with the SEC for the first and third quarter of each fiscal year on Form N-Q. The Fund first and third fiscal quarters end on May 31 and November 30. The Fund Form N-Q’s are available on the SEC’s website at http://sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (call 1-800-732-0330 for information on the operation of the Public Reference Room). You may also obtain copies by calling the Funds at 1-877-676-3386.
Item 2. Code of Ethics. Not applicable.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors has determined that the registrant does not have an audit committee financial expert. The audit committee members and the full Board determined that, although none of its members meet the technical definition of an audit committee financial expert, the committee has sufficient financial expertise to adequately perform its duties under the Audit Committee Charter without the addition of a qualified expert.
Item 4. Principal Accountant Fees and Services. Not applicable.
Item 5. Audit Committee of Listed Companies.
Richard Yaffa
Ted Gladstone
Gloria L. Schaffer
Item 6. Schedule of Investments.
Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not yet applicable.
Item 9. Purchase of Equity Securities By Closed End Management Investment Company and Affiliates. Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
No Changes.
Describe any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item.
Item 11. Controls and Procedures.
(a)
Based on an evaluation of the registrant’s disclosure controls and procedures as of September 30, 2008, the disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Forms N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b)
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1)
Not applicable.
(a)(2)
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3)
Not applicable.
(b)
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.
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.
The MP 63 Fund, Inc.
By /s/Vita Nelson
*Vita Nelson
President
(principal executive officer)
Date November 5, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/Vita Nelson
*Vita Nelson
President
(principal executive officer)
Date November 5, 2008
By /s/David Fish
*David Fish
Treasurer
(principal financial officer)
Date November 5, 2008
* Print the name and title of each signing officer under his or her signature.