[GRAPHIC OF L. ROY PAPP]
PAPP AMERICA-PACIFIC RIM FUND, INC.
A No-Load Fund
SEMI-ANNUAL REPORT
JUNE 30, 2000
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>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN PAPP AMERICA-PACIFIC
RIM FUND, INC. AND THE MORGAN STANLEY WORLD INDEX
AVERAGE ANNUAL TOTAL RETURN
1 YEAR SINCE INCEPTION
PAPP AMERICA-PACIFIC RIM FUND 43.0% 29.4%
MORGAN STANLEY WORLD INDEX 11.6% 17.7%
<TABLE>
<CAPTION>
[LINE CHART]
YEAR PAPP AMERICA-PACIFIC RIM FUND MORGAN STANLEY WORLD INDEX
<S> <C> <C>
3/14/97 $10,000 $10,000
1997 12,110 11,370
1998 15,580 14,130
1999 19,460 17,650
6/30/00 23,372 17,117
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE
-----------------------------------------------------------
The investment return and principal value of an investment in the Fund will
fluctuate so that Fund shares, when redeemed, may be worth more or less than
their original cost. This Fund's performance is measured against that of the
Morgan Stanley World Index. Approximately 25% of the sales of the companies in
the Fund's portfolio are derived from Pacific Rim sources, 25% are derived from
other foreign sources, and 50% are derived from United States sources. The
Morgan Stanley World Index is an unmanaged, market-weighted index that includes
50% foreign companies and 50% United States companies. The values shown include
reinvested dividends.
2
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
-----------------------------------
Dear Fellow Shareholders:
Our Fund, which passed its third anniversary on March 14, continues to
show very good results. For the six months ended June 30, 2000, we were up 20.1%
while the Morgan Stanley World Index, against which we compare ourselves, was
down 0.9% and the Standard & Poor's 500 Stock Index was down 0.3%. Since
inception, our Fund is up 133.7% while the World Index is up 75.0% and the S&P
500 is up 92.7%. Therefore, we have outperformed the World Index by
approximately 58 percentage points and the S&P 500 by approximately 41
percentage points.
As you know, this Fund was designed to reflect our conviction that the
next century will see Asia regain its place as a very powerful economic region.
It is our belief that the best way to participate in this growth is through
ownership of American companies that do a substantial amount of business in
Asia, particularly those companies that have demonstrated their clear leadership
in the fast growing areas of medical and electronic technology.
Generally, we have not invested in purely Asian companies because of
our concerns about their price volatility and lack of liquidity, differing
reporting standards and other auditing problems, and lack of SEC oversight.
Furthermore, many of these companies are in what we term "sunset" industries
such as automobiles and steel which do not provide the long-term growth
probabilities we require. Finally, most Asian companies lack the capital base
necessary to sustain them through difficult economic conditions. We are well
aware of the numerous business failures in even the more industrialized Asian
nations when that region was experiencing its recent economic slowdown. Most
important of all, however, is that U.S. companies are more efficient and make
more money than most of their competitors. This is best illustrated by the fact
that of the largest 100 companies in the world, based on sales, only 24 are
American, but those 24 produce 50% of the earnings. Of the ten most profitable
companies in the world, seven are American.
It is now apparent that the Asian nations are successfully working
their way out of the economic doldrums that have plagued them for the last
several years, although the recovery has been uneven from nation to nation. This
is not surprising. The Chinese, Koreans, and Japanese are hard working and
competitive. To a large extent they dominate the economies of Indonesia, the
Philippines, and Malaysia. They are the backbone of Hong Kong and Singapore.
They need the products of our superior technology so that they can effectively
compete. They want to be a part of the inevitable globalization.
Warmest regards,
L. Roy Papp, Chairman
July 28, 2000
P.S. On June 30, the Fund distributed $1.81 per share to shareholders of record
June 28 from net long-term capital gains realized in 2000. For those who
reinvest, the distribution simply results in a greater number of shares with a
lesser value per share.
3
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Number Market
Common Stocks of Shares Value
----------------------------------------------------------------- ------------- ----------
<S> <C> <C>
Industrial Services (12.7%)
Expeditors International of Washington, Inc.
(International air freight forwarding) 24,000 $1,140,000
G & K Services, Inc. Class A
(Uniform rental service) 14,500 363,406
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 25,500 1,096,500
---------
2,599,906
---------
Computer Equipment (12.5%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and supplies) 7,200 899,100
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 9,500 1,270,031
International Business Machines Corporation
(Global provider of information technology, hardware,
software, and services) 3,500 383,469
---------
2,552,600
---------
Electronic Equipment (12.1%)
American Power Conversion *
(Leading producer of uninterruptible power supply products) 35,000 1,428,438
Molex, Inc.
(Supplier of interconnection products) 30,000 1,050,000
---------
2,478,438
---------
Financial Services (12.1%)
American International Group
(Major international insurance holding company) 7,700 904,750
General Electric Co.
(Diversified financial and industrial company) 14,500 768,500
State Street Corporation
(Provider of U.S. and global securities custodial services) 7,500 795,468
---------
2,468,718
---------
Pharmaceutical (11.6%)
Eli Lilly & Co.
(Prescription pharmaceuticals) 13,000 1,298,375
Pfizer, Inc.
(Prescription pharmaceuticals) 22,500 1,080,000
---------
2,378,375
---------
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
Number Market
Common Stocks (continued) of Shares Value
----------------------------------------------------------------- ------------- -----------
<S> <C> <C>
Medical Products (8.9%)
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 20,000 $ 996,250
ResMed, Inc.*
(Developer and manufacturer of respiratory products) 6,000 160,500
Stryker Corp.
(Developer and manufacturer of surgical and medical devices) 15,000 656,250
-----------
1,813,000
-----------
Instruments & Testing (6.7%)
National Instruments Corporation *
(Supplier of computer based instrumentation products) 15,000 654,375
Agilent Technologies, Inc.*
(Designs and manufactures test and measurement systems for the
electronics and healthcare industries) 9,546 704,018
-----------
1,358,393
-----------
Consumer Products (6.4%)
Clorox Company
(Manufacturer of bleach and other consumer products) 29,000 1,299,563
-----------
Restaurants (4.9%)
McDonald's Corporation
(Fast food restaurants and franchising) 30,500 1,004,593
-----------
Telecommunications (4.2%)
L. M. Ericsson Telephone AB
(Manufacturer of telecom systems and cellular handsets) 39,000 780,000
Cable & Wireless HKT Ltd.
(International telecommunications services) 4,000 86,000
-----------
866,000
-----------
Software (3.5%)
Microsoft Corporation*
(Personal computer software) 9,000 720,000
-----------
Investment Management (3.3%)
T. Rowe Price Associates, Inc.
(No-load mutual fund company) 16,000 680,000
-----------
Total Common Stocks - 98.9% 20,219,586
Cash and Other Assets, Less Liabilities - 1.1% 227,428
-----------
Net Assets - 100.0% $20,447,014
===========
Net Asset Value Per Share
(Based on 950,389 shares outstanding at June 30, 2000) $ 21.51
===========
*Non-income producing security.
</TABLE>
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
<S> <C>
ASSETS
Investment in securities at market value (original cost
$11,139,559 at June 30, 2000) (Note 1) $20,219,586
Cash 297,840
Dividends and interest receivable 8,773
-----------
Total assets $20,526,199
===========
LIABILITIES
Accrued expenses $ 79,185
===========
NET ASSETS
Paid-in capital $11,621,754
Accumulated undistributed net realized loss
on sale of investments (842)
Accumulated undistributed net investment loss (253,925)
Net unrealized gain on investments 9,080,027
-----------
Net assets applicable to Fund shares outstanding $20,447,014
===========
Fund shares outstanding 950,389
===========
Net Asset Value Per Share (net assets/shares
outstanding) $ 21.51
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
6
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<S> <C>
INVESTMENT INCOME:
Dividends $ 44,084
Interest 7,615
Foreign taxes withheld (727)
----------
Total investment income 50,972
----------
EXPENSES:
Management fee (Note 3) 93,008
Filing fees 14,660
Accounting fees 7,200
Legal fees 5,094
Custodial fees 3,901
Directors' attendance fees 1,950
Printing and postage fees 1,913
Transfer agent fees 1,757
Other fees 600
----------
Total expenses 130,083
----------
Less fees waived by adviser (Note 3) (13,823)
----------
Net expenses 116,260
----------
Net investment loss (65,288)
----------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Proceeds from sales of securities 3,119,596
Cost of securities sold (1,528,683)
----------
Net realized gain on investments sold 1,590,913
Net change in unrealized gain on investments 1,730,086
----------
Net realized and unrealized gain on investments 3,320,999
----------
Net increase in net assets resulting from operations $3,255,711
==========
The accompanying notes are an integral part of this financial statement.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999
2000 1999
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $(65,288) $ (93,847)
Net realized gain on investments sold 1,590,913 279,478
Net change in unrealized gain on investments 1,730,086 3,116,756
----------- -----------
Increase in net assets resulting from
operations 3,255,711 3,302,387
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold (1,591,780) -
----------- -----------
Decrease in net assets resulting from
distributions to shareholders (1,591,780) -
----------- -----------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 6,398,512 2,214,299
Net asset value of shares issued to shareholders in
reinvestment of net realized gain on investments sold 1,428,339 -
Payments for redemption of shares (5,522,468) (3,743,816)
----------- -----------
Increase/(decrease) in net assets resulting
from shareholder transactions 2,304,383 (1,529,517)
----------- -----------
Total increase in net assets 3,968,314 1,772,870
Net assets at beginning of the period 16,478,700 14,705,830
----------- -----------
Net assets at end of period $20,447,014 $16,478,700
=========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
8
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(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.
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.
On June 28, 2000, a distribution was declared from net realized long-term
capital gains of approximately $1.81 a share, aggregating $1,591,780. The
distribution was paid on June 30, 2000, to shareholders of record on June 28,
2000.
(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
9
<PAGE>
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 $13,823 was required in 2000. The Fund incurred fees of $1,757
as of June 30, 2000 from the manager for providing shareholder and transfer
agent services.
The Fund's independent directors receive $450 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, 2000 and the year ended December 31, 1999
investment transactions excluding short-term investments were as follows:
2000 1999
----------- -----------
Purchases at cost $3,597,527 $2,464,651
Sales 3,119,596 4,024,592
(5) CAPITAL SHARE TRANSACTIONS:
At June 30, 2000, 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, 2000
Shares issued $6,398,512 296,645
Distributions reinvested 1,428,339 67,469
Shares redeemed (5,522,468) (261,392)
----------- -----------
Net increase $2,304,383 102,722
=========== ===========
Period ended December 31, 1999
Shares issued $2,214,299 141,621
Distributions reinvested - -
Shares redeemed (3,743,816) (238,728)
----------- -----------
Net decrease $(1,529,517) (97,107)
============ ===========
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
2000 1999
----------- -----------
Market value $20,219,586 $16,420,631
Original cost (11,139,559) (9,070,690)
----------- -----------
Net unrealized appreciation $9,080,027 $7,349,941
=========== ===========
As of June 30, 2000, gross unrealized gains on investments in which market value
exceeded cost totaled $9,208,931 and gross unrealized losses on investments in
which cost exceeded market value totaled $128,904.
As of December 31, 1999, gross unrealized gains on investments in which market
value exceeded cost totaled $7,397,438 and gross unrealized losses on
investments in which cost exceeded market value totaled $47,497.
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 Years ended Period Ended
June 30, December 31, December 31,
2000 1999 1998 1997(A)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 19.44 $ 15.57 $ 12.10 $ 10.00
Income from operations:
Net investment loss (0.05) (0.12) (0.06) -
Net realized and unrealized
gain (loss) on investments 3.93 3.99 3.53 2.11
----------- ----------- ----------- -----------
Total from operations 3.88 3.87 3.47 2.11
Less Distributions:
Dividend from investment income - - - -
Distribution of net realized gain (1.81) - - (0.01)
----------- ----------- ----------- -----------
Total distributions (1.81) - - (0.01)
Net asset value, end of period $ 21.51 $ 19.44 $ 15.57 $ 12.10
=========== =========== =========== ===========
Total return 20.11% 24.86% 28.68% 21.11%
=========== =========== =========== ===========
Ratios/Supplemental Data:
Net assets, end of period $20,447,014 $16,478,700 $14,705,830 $13,741,389
Expenses to average net assets (B) 1.25%* 1.25% 1.25% 1.25%*
Investment income to
average net assets (C) 0.54%* 0.58% 0.79% 1.30%*
Portfolio turnover rate 33.94%* 17.52% 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 1.39%,
1.39%, 1.41% and 1.55%, for the periods ended June 30, 2000 and December
31, 1999, 1998, and 1997, respectively.
(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.
