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[PHOTO]
PAPP AMERICA-PACIFIC RIM FUND, INC.
A No-Load Fund
SEMI-ANNUAL REPORT
JUNE 30, 1997
Managed by:
L. Roy Papp & Associates
4400 North 32/nd/ Street
Suite 280
Phoenix, AZ 85018
(602)956-1115 Local
(800)421-4004
<PAGE>
Papp America-Pacific Rim Fund, Inc.
Dear Fellow Shareholder:
We are pleased with the performance of our Fund since its inception a little
more than three months ago. Per share net asset value increased from $10.00 on
March 14, the day the Fund was initially offered to the public, to $11.98 on
June 30, or 19.8%. For the same period, the Morgan Stanley World Index, against
which we measure ourselves, was up 15.8% and the Standard & Poor's 500 Stock
Index was up 12.5%.
It is unlikely that the Fund will pay an income dividend of any substance in
1997. Many of our companies have not increased their dividends, or have done so
only modestly. They believe that because of high income tax rates, it is in
their stockholders' best interests to repurchase their own shares and modernize
their facilities to produce long-term capital gains which are taxed at a lower
rate. These factors, together with the higher prices of our portfolio
securities, have resulted in a near offset between the Fund's expenses and its
income from investments. On our part, we attempt to keep portfolio turnover low.
Our companies have been meeting, and in many instances exceeding, our sales and
earnings expectations and we see no reason to sell them only to create
distributions upon which you must pay taxes.
Our Fund is designed to provide a vehicle for those who believe like ourselves
that a portion of ones assets should be invested in companies which do a
substantial amount of business with the Pacific Rim nations because that is
where the greatest probability of substantial growth over the next several
decades lies. As you know, we believe this can best be accomplished through the
purchase of carefully selected, good quality growth companies which are largely
based in the United States.
While the origin of a multinational company is far less important than the
quality of that company and the ability of its management, it just so happens
that a big majority of the best companies in the world are United States
domiciled. This is best illustrated by the fact that of the 100 largest
companies in the world, based on sales, only 24 are American, but those 24
produced 50% of the earnings. Of the ten most profitable companies in the world,
seven are American. While we do own a few quality foreign companies, the vast
majority of our holdings will continue to be American based.
I have written before about the importance of globalization. I am convinced this
is the engine driving our economy and that, coupled with rapid advances in
informational and medical technology, this will continue to be the case for at
least the next twenty years. As the standard of living continues to rise in
nations like China, Indonesia, and Malaysia, so will the demand for American
goods, services, and technology. Our companies will be the beneficiaries of this
ever increasing demand.
Best Regards,
/s/ L. Roy Papp
L. Roy Papp, Chairman
July 30, 1997
P.S. At this writing, the Fund's per share net asset value is $12.94, an
increase of 29.4% since inception.
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PAPP AMERICA-PACIFIC RIM FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Number Market
Common Stocks of Shares Value
- -------------------------------------------------- --------- ------
<S> <C> <C>
Telecommunications (13.1%)
L. M. Ericsson Telephone
(Manufacturer of telecom systems and cellular handsets) 6,500 $ 255,938
Hong Kong Telecommunications Ltd.
(International telecommunications services) 13,000 303,875
Motorola, Inc.
(Manufacturer of electronic equipment) 4,500 342,000
----------
901,813
----------
Industrial Services (9.3%)
Air Express International
(Air freight forwarding) 8,000 318,000
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 5,300 324,956
----------
642,956
----------
Pharmaceutical (9.1%)
Eli Lilly and Co.
(Healthcare products) 3,000 327,937
Warner-Lambert Company
(Pharmaceutical and consumer products) 2,400 298,200
----------
626,137
----------
Computers and Software (9.0%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 5,550 310,800
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 2,200 311,988
----------
622,788
----------
Consumer Products (8.6%)
Colgate-Palmolive Company
(Household and personal care products) 4,400 287,100
Unilever Group
(Producer and marketer of branded and packaged consumer goods) 1,400 305,200
----------
592,300
----------
Financial Services (8.2%)
Pacific Century Financial Corp.
(Provider of financial services in the U.S. and Pacific island nations) 6,000 277,500
State Street Boston Corporation
(Provider of U.S. and global securities custodial services) 6,000 277,500
----------
555,000
----------
Industrial Components (7.1%)
Millipore Corporation
(Leading supplier of purification products) 6,500 286,000
Minnesota Mining and Manufacturing Co.
(Diversified manufacturer ) 2,000 204,000
----------
490,000
----------
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</TABLE>
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PAPP AMERICA-PACIFIC RIM FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Number Market
Common Stocks (continued) of Shares Value
- ----------------------------------------------- --------- ----------
<S> <C> <C>
Medical Services (6.8%)
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 2,800 $ 226,800
Stryker Corp.
(Developer and manufacturer of surgical and medical devices) 7,000 244,125
----------
470,925
----------
Electrical Equipment (4.6%)
General Electric Co.
(Diversified industrial company) 4,800 313,800
----------
Consumer Services (4.3%)
G & K Services, Inc. Class A
(Uniform rental service) 8,000 298,000
----------
Restaurants (4.2%)
McDonald's Corporation
(Fast food restaurants and franchising) 6,000 289,875
----------
Miscellaneous (13.8%)
Amway Asia Pacific, Ltd.
(Direct marketing of household and personal items in Asia) 6,000 261,750
Callaway Golf Company
(Manufacturer of golf clubs) 8,500 301,750
Mattel, Inc.
(Toy manufacturer) 7,500 254,062
Unocal Corporation
(Major oil exploration and production services) 3,500 135,844
----------
953,406
----------
Total Common Stocks - 98.1% 6,757,000
Cash and Other Assets, Less Liabilities - 1.9% 131,706
----------
Net Assets - 100.0% $6,888,706
==========
Net Asset Value Per Share
(Based on 575,164 shares outstanding at June 30, 1997) $ 11.98
==========
</TABLE>
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PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Investment in securities at market value (identified cost
$6,085,813 at June 30, 1997) (Note 1) $6,757,000
Cash 309,640
Dividends and interest receivable 8,763
----------
Total assets $7,075,403
==========
LIABILITES
Payable for investment securities purchased $ 179,008
Accrued Expenses 7,689
----------
Total Liabilities $ 186,697
----------
NET ASSETS
Paid-in capital applicable to 575,164 outstanding shares at
June 30, 1997 $6,217,519
Net unrealized gain on investments 671,187
----------
Net assets $6,888,706
==========
Net Asset Value Per Share (net assets/share outstanding) $ 11.98
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM MARCH 14, 1997
(DATE OF COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 15,656
Interest 2,215
Foreign taxes withheld (382)
--------
Total investment income 17,489
--------
EXPENSES:
Management fee (Note 3) 9,898
Filing fees 4,010
Directors' attendance fees 600
Custodial 73
Other fees 6,412
--------
Total expenses 20,993
--------
Less fees waived by adviser (Note 3) (8,621)
--------
Net expenses 12,372
--------
Net investment income 5,117
--------
REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS:
Proceeds from sales of securities 93,597
Cost of securities sold (94,873)
--------
Net realized loss on investments sold (1,276)
--------
Net change in unrealized gain on investments 671,186
--------
Net realized and unrealized gain on investments 669,910
--------
Net increase in net assets resulting from operations $675,027
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIOD FROM MARCH 14, 1997
(DATE OF COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Period ended
June 30 1997
------------
<S> <C>
FROM OPERATIONS:
Net investment income $ 5,117
Net realized loss on investments sold (1,276)
Net change in unrealized gain on investments 671,186
----------
Increase in net assets resulting from operations 675,027
----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income --
Net realized gain on investments sold --
----------
Total distributions to shareholders --
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 6,276,705
Net asset value of shares issued to shareholders in
reinvestment of net investment income and net realized
gain on investments sold --
Payments for redemption of shares (63,026)
----------
Increase in net assets resulting from shareholder transactions 6,213,679
----------
Total increase in net assets 6,888,706
Net assets at beginning of the period --
----------
Net assets at end of period $6,888,706
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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PAPP AMERICA-PACIFIC RIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp America-Pacific Rim Fund, Inc. (the Fund) was incorporated on December 18,
1996, and is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Operations of the Fund commenced on
March 14, 1997. The Fund invests with the objective of long-term capital growth
resulting to a considerable extent from the international activities,
particularly in the Pacific Rim nations, of its portfolio companies.
The policies described below are followed by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
(a) Investment in Securities
For purposes of computing the net asset value of a share of the Fund, securities
traded on securities exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales prices at the time
of valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Other securities traded over-the-counter are valued at the most
recent bid quotations. Securities for which quotations are not available and any
other assets are valued at a fair value as determined in good faith by the Board
of Directors. The price per share for a purchase order or redemption request is
the net asset value next determined after receipt of the order.
The net asset value of a share of the Fund is determined as of the close of
trading on the New York Stock Exchange, currently 4:00 p.m. New York City time,
on any day on which that Exchange is open for trading, by dividing the market
value by the number of shares outstanding, and rounding the result to the
nearest full cent.
Investment transactions are accounted for on the trade date (the date the order
to buy or sell is executed). Dividend income is recorded on the ex-dividend date
and interest is recorded on the accrual basis. Realized gains and losses from
investment transactions and unrealized appreciation or depreciation are
calculated on the identified cost basis.
The preparation of financial statements in conformity with generally accepted
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 increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
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(b) Federal Income Taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code which are applicable to regulated investment companies. The Code requires
that substantially all of the Fund's taxable income, as well as any net realized
gain on sales of investments, is to be distributed to the shareholders. The Fund
has complied with this policy and, accordingly, no provision for federal income
taxes is required.
(2) DIVIDENDS AND DISTRIBUTIONS:
Dividends and capital gain distributions are reinvested in additional shares of
the Fund unless the shareholder has requested in writing to be paid by check.
Dividends and distributions payable to its shareholders are recorded by the Fund
on the ex-dividend date.
(3) TRANSACTIONS WITH AFFILIATES:
The Fund has an investment advisory and management services agreement with L.
Roy Papp & Associates (Manager). The Manager receives from the Fund, as
compensation for its services, a fee accrued daily and payable monthly at an
annual rate of 1% of the Fund's net assets. The Manager will reimburse the Fund
to the extent the Fund's regular operating expenses during any of its fiscal
years exceed 1.25% of its average daily net asset value in such year. A
management fee expense reimbursement of $8,621 was required through June 30,
1997.
The Fund's independent directors receive $100 for each meeting of the Board of
Directors attended on behalf of the Fund. Certain officers and/or directors of
the Fund are also partners of the Manager and shareholders in the Fund. The Fund
made no payments to its officers or directors, except to independent directors
as stated above.
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(4) PURCHASES AND SALES OF SECURITIES:
For the period from March 14, 1997 (date of commencement of operations) to June
30, 1997, investment transactions excluding short-term investments were as
follows:
Purchases at cost 6,181,210
Sales 93,597
(5) CAPITAL SHARE TRANSACTIONS:
At June 30, 1997, there were 5,000,000 shares of $.01 par value capital stock
authorized. Transactions in capital shares of the Fund were as follows:
<TABLE>
<CAPTION>
Proceeds Shares
---------- -------
<S> <C> <C>
Period ended June 30, 1997
Shares issued $6,276,705 580,863
Dividends and distributions reinvested -- --
Shares redeemed (63,026) (5,699)
---------- -------
Net increase $6,213,679 575,164
========== =======
</TABLE>
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
<TABLE>
<CAPTION>
June 30,
1997
----------
<S> <C>
Market value $6,757,000
Original cost 6,085,813
----------
Net unrealized appreciation $ 671,187
==========
</TABLE>
As of June 30, 1997, gross unrealized gains on investments in which market value
exceeded cost totaled $699,308 and gross unrealized losses on investments in
which cost exceeded market value totaled $28,121.
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(7) SELECTED FINANCIAL HIGHLIGHTS:
The following selected per share data has been calculated using revenues and
expenses for the periods indicated, divided by the weighted average number of
shares outstanding during the periods. The ratios are calculated using the
revenues and expenses for the periods, divided by the weighted average of the
daily net assets of the Fund.
<TABLE>
<CAPTION>
Period Ended
June 30, 1997
-------------
<S> <C>
Net asset value, beginning of period $ 10.00
Income from investment operations:
Net investment income --
Net realized and unrealized gain (loss) on investments 1.98
----------
Total from investment operations 1.98
Less Distributions:
Dividend from investment income --
Distribution of net realized gain --
----------
Total Distributions --
Net asset value, end of period $ 11.98
==========
Total return 19.80%
==========
Ratios/Supplemental Data:
Net assets, end of period $6,888,706
Expenses to average net assets (B) 1.25%*
Net investment income to average net assets (C) 1.03%*
Portfolio turnover rate 5.59%*
Average commission per share $ 0.0625
</TABLE>
* Annualized
(A) From the date of commencement of operations (March 14, 1997).
(B) If the Fund had paid all of its expenses and there had been no
reimbursement by the investment adviser, this ratio would have been 2.12%,
for the period ended June 30, 1997.
(C) Computed giving effect to investment adviser's expense limitation
undertaking.
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PAPP AMERICA-PACIFIC RIM FUND, INC.
Directors
James K. Ballinger Harry A. Papp
Amy S. Clague L. Roy Papp
Robert L. Mueller Rosellen C. Papp
Carolyn P. O'Malley Bruce C. Williams
Officers
Chairman - L. Roy Papp President - Harry A. Papp
Vice Presidents
Victoria S. Cavallero Robert L. Mueller
George D. Clark, Jr. Rosellen C. Papp
Jeffrey N. Edwards Bruce C. Williams
Robert L. Hawley
Secretary - Robert L. Mueller
Assistant Secretary - Barbara D. Perleberg
Treasurer - Rosellen C. Papp
Assistant Treasurer - Julie A. Hein
Investment Adviser
L. Roy Papp & Associates
4400 North 32nd Street, Suite 280
Phoenix, Arizona 85018
Telephone: (602) 956-1115
E-mail: invest@roypapp
Web: http://www.roypapp.com
Custodian
Founders Bank of Arizona
7335 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
Shareholder Services and Transfer Agent
L. Roy Papp & Associates
4400 North 32nd Street, Suite 280
Phoenix, Arizona 85018
Telephone: (602) 956-1115
(800) 421-4004
Independent Public Accountants
Arthur Andersen LLP
2 North Central Avenue, Suite 1000
Phoenix, Arizona 85004
Legal Counsel
Bell, Boyd & Lloyd
70 West Madison Street
Chicago, Illinois 60602
This report is submitted for the general information of the shareholders of the
Fund. The report is not authorized for distribution to prospective investors in
the Fund unless it is accompanied or preceded by a currently effective
prospectus of the Fund. No sales charge to the shareholder or to the new
investor is made in offering the shares of the Fund.
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