[Sketch of L. Roy Papp appears here]
PAPP AMERICA-PACIFIC RIM FUND, INC.
A No-Load Fund
SEMI-ANNUAL REPORT
JUNE 30, 1999
Managed by:
L. Roy Papp & Associates
6225 North 24th Street
Suite 150
Phoenix, AZ 85016
(602)956-1115 Local
(800)421-4004
E-mail: [email protected]
Web: http://www.roypapp.com
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
Dear Fellow Shareholder:
Lingering doubts about the magnitude and timing of the economic recovery in Asia
led to a fairly flat performance by our Fund for the first half of 1999. We were
up 4.9% for the period ended June 30 which was a little less than the Morgan
Stanley World Index which was up 8.5%. However, since inception on March 14,
1997 we were up 63.5% while the Morgan Stanley Index was up 53.3%.
With only a few exceptions, our companies, most of which do a substantial amount
of business in Asia, reported good to excellent end of the year and first
quarter 1999 earnings. We expect this trend to continue for the June, 1999
quarter and to date we have not been disappointed. We were disappointed,
however, in that some of our smaller companies, despite fine earnings, were
totally ignored by the marketplace. These included American Power Conversion,
G&K Services, and Molex which were either flat or down for the six month period.
Of course we realize this will change one day because stock prices eventually
rise along with earnings, so we have no intention of selling these stocks as
long as they perform as anticipated.
The situation in Japan continues to improve although they are not out of the
woods completely. Their government has intervened to keep the yen as low as
possible against the dollar which helps their exports and makes their goods
cheaper for the American consumer. This improving situation in Japan will aid
the rest of Asia somewhat but, in truth, the industrialized Asian nations are
pulling out of recession on their own without Japanese help.
We continue to believe that globalization and medical and electronic technology
will be the driving forces in our economy for many more years. Companies like
IBM, Intel, and Microsoft continue to provide us with tremendous technological
advances. Most importantly, they have done so at ever lower costs which has
provided a great deflationary factor never seen before. Consequently, we have
full employment and a strong economy without inflation.
Our securities portfolio is structured with these factors in mind and we look
forward to the future with a good deal of optimism.
Warmest regards,
/s/ L. Roy Papp
L. Roy Papp, Chairman
August 1, 1999
2
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<TABLE>
<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
Number Market
Common Stocks of Shares Value
- -------------------------------------------------------------------------------- ------------- -------------------
<S> <C> <C>
INDUSTRIAL SERVICES (18.8%)
Air Express International
(Air freight forwarding) 5,000 $ 126,875
Expeditors International of Washington, Inc.
(International air freight forwarding) 21,000 572,250
G & K Services, Inc. Class A
(Uniform rental service) 16,500 864,187
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 13,000 1,126,125
-----------------
2,689,437
-----------------
COMPUTER EQUIPMENT (18.5%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 8,500 854,250
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 18,800 1,118,600
International Business Machines Corporation
(Global provider of information technology, hardware,
software, and services) 2,000 258,500
National Instruments Corporation *
(Supplier of computer based instrumentation products) 10,000 403,750
-----------------
2,635,100
-----------------
FINANCIAL SERVICES (17.2%)
American International Group
(Major international insurance holding company) 8,000 936,500
General Electric Co.
(Diversified financial and industrial company) 5,500 621,500
State Street Corporation
(Provider of U.S. and global securities custodial services) 10,500 896,438
-----------------
2,454,438
-----------------
ELECTRICAL EQUIPMENT (11.8%)
American Power Conversion *
(Leading producer of uninterruptible power supply products) 48,000 966,000
Molex, Inc.
(Supplier of interconnection products) 23,000 724,500
-----------------
1,690,500
-----------------
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
3
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<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
Number Market
Common Stocks (continued) of Shares Value
- -------------------------------------------------------------------------------- ------------- -------------------
<S> <C> <C>
MEDICAL PRODUCTS (10.2%)
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 11,000 $ 856,625
Stryker Corp.
(Developer and manufacturer of surgical and medical devices) 10,000 601,250
-----------------
1,457,875
-----------------
PHARMACEUTICAL (9.0%)
Eli Lilly and Co.
(Prescription pharmaceuticals) 7,500 537,188
Pfizer, Inc.
(Prescription pharmaceuticals) 3,000 329,250
Warner-Lambert Company
(Prescription pharmaceuticals) 6,000 416,250
-----------------
1,282,688
-----------------
RESTAURANTS (5.8%)
McDonald's Corporation
(Fast food restaurants and franchising) 20,000 826,250
-----------------
TELECOMMUNICATIONS (5.1%)
L. M. Ericsson Telephone AB
(Manufacturer of telecom systems and cellular handsets) 19,000 625,812
Hong Kong Telecommunications Ltd.
(International telecommunications services) 4,000 107,750
-----------------
733,562
-----------------
CONSUMER PRODUCTS (2.0%)
Mattel, Inc.
(Toy manufacturer) 11,000 290,813
-----------------
SOFTWARE (1.0%)
Microsoft Corporation*
(Personal computer software) 1,500 135,281
-----------------
TOTAL COMMON STOCKS - 99.4% 14,195,944
CASH AND OTHER ASSETS, LESS LIABILITIES - 0.6% 103,186
-----------------
NET ASSETS - 100.0% $ 14,299,130
=================
NET ASSET VALUE PER SHARE
(Based on 875,482 shares outstanding at June 30, 1999) $ 16.33
=================
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
ASSETS
<S> <C>
Investment in securities at market value (original
cost $9,132,760 at June 30, 1999 (Note 1) $ 14,195,944
Cash 91,711
Dividends and interest receivable 7,887
Receivable for securities sold 33,186
---------------
Total assets $ 14,328,728
==============
LIABILITIES
Accrued expenses $ 29,598
==============
NET ASSETS
Paid-in capital $ 9,767,006
Accumulated undistributed net realized loss
on sale of investments (424,492)
Accumulated undistributed net investment loss (106,568)
Net unrealized gain on investments 5,063,184
---------------
Net assets applicable to Fund shares outstanding $ 14,299,130
==============
Fund shares outstanding 875,482
==============
Net Asset Value Per Share (net assets/shares
outstanding) $ 16.33
==============
</TABLE>
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<S> <C>
INVESTMENT INCOME:
Dividends $ 39,586
Interest 3,353
Foreign taxes withheld (1,244)
---------------
Total investment income 41,695
---------------
EXPENSES:
Management fee (Note 3) 67,449
Filing fees 12,978
Auditing fees 8,000
Legal fees 4,711
Custodial fees 3,085
Directors' attendance fees 1,800
Transfer agent fees 1,249
Other fees 2,264
---------------
Total expenses 101,536
---------------
Less fees waived by adviser (Note 3) (17,225)
---------------
Net expenses 84,311
---------------
Net investment loss (42,616)
---------------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Proceeds from sales of securities 2,464,815
Cost of securities sold 2,578,992
---------------
Net realized loss on securities sold (114,177)
---------------
Net change in unrealized gain on investments 829,999
---------------
Net realized and unrealized gain on investments 715,822
---------------
Net increase in net assets resulting from operations $ 673,206
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
Six months ended Year ended
June 30, 1999 December 31, 1998
---------------- ---------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (42,616) $ (64,921)
Net realized loss on securities sold (114,177) (310,322)
Net change in unrealized gain on investments 829,999 3,833,105
---------------- ---------------
Increase in net assets resulting from
operations 673,206 3,457,862
---------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on securities sold - -
---------------- ---------------
Decrease in net assets resulting from
distributions to shareholders - -
---------------- ---------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 1,620,505 4,267,258
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
net realized gain on securities sold - -
Payments for redemption of shares (2,700,411) (6,760,679)
Decrease in net assets resulting
from shareholder transactions (1,079,906) (2,493,421)
---------------- ---------------
Total (decrease)/increase in net assets (406,700) 964,441
Net assets at beginning of the period 14,705,830 13,741,389
---------------- ---------------
Net assets at end of period $ 14,299,130 $ 14,705,830
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(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
in the common stocks of companies that have substantial international
activities, particularly in the Pacific Rim nations.
The policies described below are followed by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
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 Fund's net asset value per share (NAV) is the value of a single share. It is
computed by dividing the market value of a Fund's assets, less its liabilities,
by the number of shares outstanding, and rounding the result to the nearest full
cent. The NAV 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.
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.
8
<PAGE>
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, are 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 $17,225 and $21,864 was required in 1999
and 1998 respectively. The Fund incurred fees of $1,249 as of June 30, 1999 from
the manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $250 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.
(4) PURCHASES AND SALES OF SECURITIES:
For the six months ended June 30, 1999 and the year ended December 31, 1998
investment transactions excluding short-term investments were as follows:
1999 1998
------------------ --------------
Purchases at cost $ 1,360,599 $ 1,908,840
Sales 2,464,815 4,544,223
9
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At June 30, 1999, there were 5,000,000 shares of $.01 par value capital stock
authorized. Transactions in capital shares of the Fund were as follows:
Proceeds Shares
-------------- -----------
Six months ended June 30, 1999
Shares issued $ 1,620,505 106,636
Dividends and distributions reinvested - -
Shares redeemed (2,700,411) (175,929)
-------------- -----------
Net decrease $ (1,079,906) (69,293)
============== ===========
Period ended December 31, 1998
Shares issued $ 4,267,258 320,978
Dividends and distributions reinvested - -
Shares redeemed (6,760,679) (511,920)
-------------- -----------
Net decrease $ (2,493,421) (190,942)
============== ===========
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
1999 1998
-------------- --------------
Market value $ 14,195,944 $ 14,584,338
Original cost (9,132,760) (10,351,153)
-------------- --------------
Net unrealized appreciation $ 5,063,184 $ 4,233,185
============== ==============
As of June 30, 1999, gross unrealized gains on investments in which market value
exceeded cost totaled $5,135,184 and gross unrealized losses on investments in
which cost exceeded market value totaled $72,000.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $4,523,937 and gross unrealized losses on
investments in which cost exceeded market value totaled $290,752.
10
<PAGE>
(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 period, divided by the weighted average of the
daily net assets of the Fund.
<TABLE>
<CAPTION>
Six months ended Year Ended Period Ended
June 30, December 31, December 31,
1999 1998 1997 (A)
------------ -------------- --------------
<S> <C> <C> <C>
Net asset value, beginning
of period $ 15.57 $ 12.10 $ 10.00
Income from investment operations:
Net investment income (0.06) (0.06) -
Net realized and unrealized
gain (loss) on investments 0.82 3.53 2.11
------------ -------------- --------------
Total from investment operations 0.76 3.47 2.11
Less Distributions:
Dividend from investment income - - -
Distribution of net realized gain - - (0.01)
Total distributions - - (0.01)
------------ -------------- --------------
Net asset value, end of period $ 16.33 $ 15.57 $ 12.10
============ ============== ===============
Total return 4.88% 28.68% 21.11%
============ ============== ===============
Ratios/Supplemental Data:
Net assets, end of period $14,229,130 $ 14,705,830 $ 13,741,389
Expenses to average net assets (B) 1.25%* 1.25% 1.25%*
Investment income to
average net assets (C) 0.61%* 0.79% 1.30%*
Portfolio turnover rate 19.86%* 13.73% 14.30%
</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
1.49%, 1.41% and 1.55%, for the periods ended June 30, 1999,
December 31, 1998, and December 31, 1997.
(C) Computed giving effect to investment adviser's expense limitation
undertaking.
11
<PAGE>
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 Julie A. Hein
George D. Clark, Jr. Robert L. Mueller
Jeffrey N. Edwards Rosellen C. Papp
Robert L. Hawley Bruce C. Williams
Secretary - Robert L. Mueller
Treasurer - Rosellen C. Papp
Assistant Treasurer - Julie A. Hein
INVESTMENT ADVISER
L. Roy Papp & Associates
6225 North 24th Street, Suite 150
Phoenix, Arizona 85016
Telephone: (602) 956-1115
E-mail: [email protected]
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
6225 North 24th Street, Suite 150
Phoenix, Arizona 85016
Telephone: (602) 956-1115
(800) 421-4004
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
501 North 44th Street, Suite 300
Phoenix, Arizona 85008
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.
