Q:  What is the history of the MP 63 Fund? A : The Moneypaper 63-stock Index (MP 63) was launched in 1994 in order to track a representative sampling of companies that offer dividend reinvestment plans (or DRIPs). With an emphasis on quality and diversity, the index contains companies that can easily serve as "core" holdings in any portfolio, and typify the long-term aims of the small investor who uses DRIPs to build wealth. The result is a mixture of fifty-two industrial companies, nine utilities, and two transportation firms. This includes companies like Coca-Cola, Intel, Johnson & Johnson, 3M, as well as banks like BB&T and U.S. Bancorp, food companies like Hormel and ConAgra, and other companies like Costco, Polaris, and AFLAC. Q:  What core beliefs guide your investment philosophy? A : The MP 63 Index is designed to encourage individual investors to achieve long-term wealth by investing in a diverse group of companies, which decreases risk, and to focus on high quality, investor-friendly firms that offer DRIPs. The MP 63 Fund helps self-reliant investors achieve diversification among DRIP stocks. Our mission is to provide a safe environment for people to save for their retirement. Q:  How does the investment philosophy translate into an investment strategy? A : We invest more in the companies when they are depressed. We use the dividends paid by each company to make additional investment in that company. This approach takes advantage of market volatility. When some of our stocks are down, we accumulate more cheaply, and those that are up in price provide financial and emotional support. If everything is up, we buy fewer shares; if everything is down, we’re buying more cheaply. Q:  What is the benefit of a transition from an index to a fund? A : The transition from an index to an actual fund is designed for maximizing shareholder return over time. We focus on long term because many of these companies are conservatives and their stock prices don’t fluctuate much. We believe in spreading investments or dollars over time rather than making lump sum investments and the fund does that as opposed to the static nature of the index. Moreover, it is important to understand that the fund is not an index fund and doesn’t track the index. The proportion of stocks that we own is different than the index but it is based on the companies that are in the index. Q:  What is the advantage of investing little money over time as against a lump sum investment? A : First, we minimize the risk by spreading money over time because it's very difficult to time the market. By purchasing more shares of the companies in the index on a regular basis and selling rarely, our method is similar to dollar-cost averaging into what we have believe are the best companies in a diverse group of industries. Second, we've never had to sell stock to meet redemption requests, because our shareholders are continuing to fund their accounts. This has allowed us to take advantage of market declines to buy more shares. Third, shareholders have been taking advantage of the automatic investing option to increase their holdings, as well as the increased limits on retirement account contributions. These are important parts of the steady inflow of new cash that fuels asset growth. Basically, we are spreading the investment risk over a diverse group of companies over time. Q:  What is your research process? A : Basically, the companies in our index are solid dependable companies that have high margin of safety for their balance sheet and obviously extensive histories of increasing their earnings and dividends for many years. We look at things like both the 52-week high and low as well as the longer-term price range in determining what's attractive to buy at any given moment. But we try to buy each company in a given cycle. For example, we may buy a company two, three or four times a year taking into account the relative price fluctuations and dividends and the cash flow that are involved. We constantly review the companies in the index and the fund. If a company were to no longer fulfill its role in our portfolio, we would replace it. We are always looking for a company that had better prospects than the ones we already own. We don’t really make replacements often because we feel we already own industry leaders in a variety of industries. We might replace a company if we felt that the growth has slowed or another company has brighter prospects. We let the market fluctuations work to our advantage and that goes to the strategy basically where we keep buying each of the 63 companies in the fund on a regular cyclical basis. Q:  What is your buy and sell discipline? A : A good example would be last year’s addition of Becton Dickinson, a medical technology company that manufactures medical supplies, devices, laboratory equipment and diagnostic products. The company’s gross prospects were better and it raised its dividend for thirty-seven years in a row. The dividend actually demonstrates that the earnings have been gong up for many years and looking out into the future it appeared that the company had excellent earnings prospects. But then there are cases where we just decide that a company and its industry are really fading. For example, we just don’t think that the print media is going to come back anytime soon. The trends in subscribership whether it’s newspapers, newsletters or magazines, has been steadily down over the last decade or more as the Internet has become more important and even those companies in the publishing business have tried to adapt by having more online content. But their results just haven’t turned around at least so far. For example, International Paper Company is a global paper and packaging company in an industry that’s done a lot of consolidation and that should have led to better profits but hasn’t really turned around very much and the pricing power in the paper industry doesn’t seems to be there. So we hung with it for many years before giving up on it. We don’t sell very often so we don’t use proceeds as much as steady inflow to buy stocks. When we do sell it's because the company has increased in price to a point where it's a little bit larger holding than the other companies. Q:  How many companies are paying dividends in your universe? A : There are over a thousand DRIP companies paying dividends. About two-thirds of our companies have those long histories of rising dividends but it’s not an absolute requirement. If a company doesn’t have the dividend history we want but it’s an industry where we want some more strength we will take that company as long as it has a DRIP. Q:  What is your definition of “growth?” A : Earnings per share would be the first thing we look at and then obviously it varies by industry. We look for double-digit growth rates for the most part. We try to ignore the very short-term market. If things are going bad for a company and keep getting worst we are going to think about replacing it. But if it’s a temporary situation where earnings are down then we are going to look to weight it out as long as the company has reasonable prospects for bouncing back. We prefer to look at a company independent of its market price. Q:  How is your portfolio constructed? A : The MP 63 Fund is based on an index designed to track the performance of a group of high-quality industry leaders that represent the universe of companies that offer DRIPs. The MP63 Index is equally weighted among companies, regardless of size, and basically follows the fate of $100 investments in each company, with dividends reinvested, individually and in the aggregate. So each company has its own "index", regardless of price level or stock split history, and the overall index is the aggregate performance of all stocks. When an individual company has a reading of 200, it has doubled the value of its initial investment. The stocks in our portfolio represent a wide range of industries, and have the advantage of size and market leadership. This allows us to spread investment risk over both time and component allocation. Basically, our range is to have every company represent between 1% and 3% of the assets, while most of them are on the 2%. We have about 12 or 15 companies that are between 2% and 3%. The average holding is about 1.6%. Q:  How do you deal with investment risks and how do you manage them? A : We seek to minimize risk by having a diverse group of companies and investing money regularly both in the down and up markets. We spread out risk over time and over a great number of industries and companies. Basically, our risk control is built into our philosophy. The reason why we decided to hold 63 companies was that no one company could have a profound effect on the fund. We aim for 1% to 3% range for every holding because that is the best way to diversify.