As filed with the Securities and Exchange Commission on April 28, 2000
Securities Act registration no. 333-65609
Investment Company Act registration no. 811-09055
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Post-Effective Amendment No. 2 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Amendment No. 3 [X]
- --------------------------------------------------------------------------------
PAPP SMALL & MID-CAP GROWTH FUND, INC.
(Registrant)
6225 North 24th Street, Suite 150
Phoenix, Arizona 85016
Telephone Number: 602/956-1115
- --------------------------------------------------------------------------------
Robert L. Mueller Janet D. Olsen
Papp Small & Mid-Cap Growth Fund, Inc. Bell, Boyd & Lloyd
6225 North 24th Street, Suite 150 Three First National Plaza, Suite 3300
Phoenix, Arizona 85016 Chicago, Illinois 60602
(Agents for service)
- --------------------------------------------------------------------------------
Amending Parts A, B and C and filing Exhibits
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
__ immediately upon filing pursuant to paragraph (b)
X on May 1, 2000 pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)
__ on _________ pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on _________ pursuant to paragraph (a)(2) of rule 485
- --------------------------------------------------------------------------------
<PAGE>
[DRAWING OF L. ROY. PAPP]
THE PAPP FAMILY OF FUNDS
Papp Stock Fund, Inc.
Papp America-Abroad Fund, Inc.
Papp America-Pacific Rim Fund, Inc.
Papp Focus Fund, Inc.
Papp Small & Mid-Cap Growth Fund, Inc.
Prospectus
May 1, 2000
6225 North 24th Street - Suite #150
Phoenix, Arizona 85016
(602) 956-1115
(800) 421-4004
No sales or redemption charges
(Pure no-load funds)
Email: [email protected]
Internet: http://www.roypapp.com
The Securities and Exchange Commission has not approved or disapproved
these securities or determined whether this prospectus is accurate or
complete. Anyone who tells you otherwise is committing a crime.
<PAGE>
Table of Contents
Page
PAPP STOCK FUND................................................................1
PAPP AMERICA-ABROAD FUND.......................................................3
PAPP AMERICA-PACIFIC RIM FUND..................................................5
PAPP FOCUS FUND................................................................7
PAPP SMALL & MID-CAP GROWTH FUND...............................................9
INVESTMENT OBJECTIVES AND METHODS.............................................11
RISK FACTORS..................................................................13
PURCHASING SHARES.............................................................14
REDEEMING SHARES..............................................................15
DETERMINATION OF NET ASSET VALUE..............................................16
MANAGEMENT....................................................................16
DISTRIBUTIONS.................................................................17
FEDERAL INCOME TAX............................................................17
FINANCIAL HIGHLIGHTS..........................................................17
i
<PAGE>
PAPP STOCK FUND
INVESTMENT OBJECTIVE
Papp Stock Fund invests with the objective of long-term capital growth.
PRINCIPAL INVESTMENT STRATEGIES
The Fund is designed to provide a comprehensive investment for the common
stock portion of an investment program. The Fund purchases and retains a
diversified high quality group of common stocks of companies traded in the
United States. The Fund usually invests in large or mid-sized companies, but may
invest in companies of any size. In choosing stocks, the Fund looks for
companies that it regards as having excellent prospects for capital appreciation
at a price, relative to the market as a whole, that does not fully reflect the
superiority of that particular company.
RISKS YOU SHOULD CONSIDER
Because the Fund invests primarily in common stocks, your investment is
subject to certain risks. In the short-term, stock prices may fluctuate widely
in response to company, market or economic news. The Fund does not pursue
income, and is not, alone or together with the other Papp Funds, a balanced
investment plan. You can lose money by investing in the Fund.
HOW DO I KNOW IF THE FUND IS RIGHT FOR ME?
The Fund is appropriate for shareholders who are long-term investors and
who are willing to accept fluctuations in share price.
The Fund is not appropriate for investors who need regular income, have a
short-term investment horizon or who are unwilling to accept possible losses.
HOW THE FUND HAS PERFORMED
The following bar chart shows the year-to-year performance of the Fund
since January 1, 1990. The table after the bar chart shows the Fund's average
annual total return for the one, five and ten year periods ended December 31,
1999, compared to a broad-based market index. This information is intended to
help you assess the variability of Fund returns over the periods indicated.
Returns include the reinvestment of dividends and distributions. Of course, past
performance does not guarantee future results. The principal value and return on
your investment will fluctuate and on redemption may be worth more or less than
your original cost.
[BAR CHART APPEARS HERE]
Annual Total Returns
1990 2.6%
1991 33.8%
1992 13.5%
1993 1.7%
1994 (1.5%)
1995 32.9%
1996 21.8%
1997 33.1%
1998 27.0%
1999 15.0%
For the ten years ended December 31, 1999, the best and worst quarterly
returns were:
o Best quarterly return - 23.5%, during the quarter ended December 31,
1998
o Worst quarterly return - (16.7)%, during the quarter ended September
30, 1990
Average Annual Total Returns for the Periods Ended December
31, 1999
- ---------------------------------------------------------------
1 Year 5 Years 10 Years
- ---------------------------------------------------------------
Fund 14.99% 25.77% 17.25%
S&P 500* 21.04% 28.56% 18.21%
- -----------------
* The S&P 500 Index is an unmanaged market-weighted index that includes the
stocks of 500 of the largest U.S. companies.
1
<PAGE>
FUND FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you
invest in shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Paid directly from your investment.
Maximum sales load.................................None
Deferred sales load................................None
Redemption fees....................................None
Exchange fees......................................None
ANNUAL FUND OPERATING EXPENSES
Deducted from Fund assets.
Management fee.....................................1.00%
12b-1 fee..........................................None
Other expenses ....................................0.09%
-----
Total annual Fund operating expenses...............1.09%
EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 year....................... $114
3 years...................... $357
5 years...................... $618
10 years..................... $1,365
This example is not meant to suggest actual or expected costs or returns, which
may be more or less than the amounts shown.
AVAILABILITY
Papp Stock Fund is available to the residents of all 50 states.
2
<PAGE>
PAPP AMERICA-ABROAD FUND
INVESTMENT OBJECTIVE
Papp America-Abroad Fund invests with the objective of long-term capital
growth.
PRINCIPAL INVESTMENT STRATEGIES
America-Abroad Fund is a way to invest "internationally" without leaving
the United States. The Fund invests in common stocks of U.S. companies that have
substantial international activities, and in common stocks of foreign companies
that are traded in the U.S.
The Fund usually invests at least 70% of its common stock assets in U.S.
companies that satisfy one of the following criteria:
o At least 35% of its aggregate reported sales and other revenues, or of its
reported operating earnings, were classified by the company as "foreign",
"international" or "outside the U.S.", or
o At least 25% of its aggregate reported revenues, operating earnings, or
identifiable assets were classified as foreign, and had doubled in amount
over the past five years, and the Fund's investment adviser believes that
prospects are excellent for a continuing large increase over the company's
next five fiscal years.
The Fund may invest up to 30% of its common stock assets in stocks of
foreign companies that are traded in the U.S.
In choosing stocks, the Fund's Adviser looks for companies that it regards
as having excellent prospects for capital appreciation at a price, relative to
the market as a whole, that does not fully reflect the superiority of that
particular company.
RISKS YOU SHOULD CONSIDER
The Fund invests primarily in common stocks. In the short-term, stock
prices may fluctuate widely in response to company, market or economic news. You
can lose money by investing in the Fund. The Fund does not pursue income, and is
not, alone or together with the other Papp Funds, a balanced investment plan.
Because it invests primarily in companies with foreign business interests,
investing in the Fund may be riskier in some ways than investing in companies
whose operations are in the U.S. only. Certain political and economic risks may
affect the Fund's portfolio companies, especially those with commitments in
developing countries. These risks include: foreign controls over currency
exchange; restrictions on monetary repatriation; oppressive regulation;
differing tax systems among countries, with differing consequences to portfolio
companies; possible seizure, nationalization or expropriation of assets; and
political, economic or social instability.
If the Fund invests directly in foreign companies, even through U.S. traded
securities, the Fund would also have risks related to: less governmental
supervision of issuers of securities; limited publicly available corporate
information; varying accounting, auditing and financial reporting standards and
financial statements among countries; and difficulties in obtaining legal
recourse and enforcing judgments abroad.
HOW DO I KNOW IF THE FUND IS RIGHT FOR ME?
The Fund is appropriate for shareholders who are long-term investors and
who are willing to accept fluctuations in share price.
The Fund is not appropriate for investors who need regular income, have a
short-term investment horizon or who are unwilling to accept possible losses.
3
<PAGE>
HOW THE FUND HAS PERFORMED
The following bar chart shows the year-to-year performance of the Fund
since January 1, 1992. The table after the bar chart shows the Fund's average
annual total return for the one and five year periods ended December 31, 1999,
and since the Fund's initial offering on December 6, 1991, compared to a
broad-based market index. This information is intended to help you assess the
variability of Fund returns over the periods indicated. Returns include the
reinvestment of dividends and distributions. Of course, past performance does
not guarantee future results. The principal value and return on your investment
will fluctuate and on redemption may be worth more or less than your original
cost.
[BAR CHART APPEARS HERE]
Annual Total Returns
1992 7.4%
1993 (0.1%)
1994 7.8%
1995 37.1%
1996 27.7%
1997 29.9%
1998 23.8%
1999 14.0%
For the period covered by the bar chart above, the Fund's best and
worst quarterly returns were:
o Best quarterly return - 27.8%,
during the quarter ended December 31, 1998
o Worst quarterly return - (12.6)%,
during the quarter ended September 30, 1998
Average Annual Total Returns for the Periods Ended
December 31, 1999
- ------------------------------------------------------------
Since Inception
1 Year 5 Years December 6, 1991
- ------------------------------------------------------------
Fund 14.01% 26.26% 19.04%
Morgan Stanley
World Index* 24.94% 19.84% 15.65%
- -----------------
* The Morgan Stanley World Index is an unmanaged, market-weighted index that
includes 50% foreign companies and 50% U.S. companies.
FUND FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you
invest in shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Paid directly from your investment.
Maximum sales load.................................None
Deferred sales load................................None
Redemption fees....................................None
Exchange fees......................................None
ANNUAL FUND OPERATING EXPENSES
Deducted from Fund assets.
Management fee.....................................1.00%
12b-1 fee..........................................None
Other expenses ....................................0.07%
-----
Total annual Fund operating expenses...............1.07%
EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 year....................... $112
3 years...................... $350
5 years...................... $607
10 years..................... $1,341
This example is not meant to suggest actual or expected costs or returns, which
may be more or less than the amounts shown.
AVAILABILITY
Papp America-Abroad Fund is available to the residents of all 50 states.
4
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND
INVESTMENT OBJECTIVE
Papp America-Pacific Rim 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.
PRINCIPAL INVESTMENT STRATEGIES
Papp America-Pacific Rim Fund is a way to emphasize investments in the
Pacific Rim region, without leaving the United States. The Fund invests in
companies that have substantial sales to, and receive significant income from,
countries within the Pacific Rim.
The Fund usually invests at least 65% of its common stock assets in U.S.
companies that satisfy one of the following criteria:
o 50% or more of its earnings or sales are attributed to, or assets are
situated in, Pacific Rim countries including the U.S., and
o 15% or more of its earnings or sales are attributed to, or assets are
situated in, Pacific Rim countries outside the U.S.
The Fund may also invest in U.S. companies that, in the opinion of the
Fund's investment adviser, will soon meet these criteria.
The Fund may invest up to 30% of its common stock assets in foreign
companies traded in the U.S. which derive 15% or more of their earning or sales
from the Pacific Rim, or which have 15% or more of their assets located in
Pacific Rim countries.
In choosing investments, the Fund's Adviser looks for stocks of companies
that it regards as having excellent prospects for capital appreciation at a
price, relative to the market as a whole, that does not fully reflect the
superiority of that particular company.
RISKS YOU SHOULD CONSIDER
The Fund invests primarily in common stocks. In the short-term, stock
prices may fluctuate widely in response to company, market or economic news. You
can lose money by investing in the Fund. The Fund does not pursue income, and is
not, alone or together with the other Papp Funds, a balanced investment plan.
Because it invests primarily in companies with foreign business interests,
investing in the Fund may be riskier in some ways than investing in companies
whose operations are in the U.S. only. Certain political and economic risks may
affect the Fund's portfolio companies, especially those with commitments in
developing countries. These risks include: foreign controls over currency
exchange; restrictions on monetary repatriation; oppressive regulation;
differing tax systems among countries, with differing consequences to portfolio
companies; possible seizure, nationalization or expropriation of assets; and
political, economic or social instability.
If the Fund invests directly in foreign companies, even through U.S. traded
securities, the Fund would also have risks related to: less governmental
supervision of issuers of securities; limited publicly available corporate
information; varying accounting, auditing and financial reporting standards and
financial statements among countries; and difficulties in obtaining legal
recourse and enforcing judgments abroad. In addition, the Fund's emphasis on
companies with significant earnings, sales or assets in Pacific Rim countries
outside the U.S. makes the Fund more vulnerable to potential adverse economic or
market developments affecting that region than would be the case for a fund
investing in companies with broader geographic diversification of their
businesses.
HOW DO I KNOW IF THE FUND IS RIGHT FOR ME?
The Fund is appropriate for shareholders who are long-term investors and
who are willing to accept fluctuations in share price.
The Fund is not appropriate for investors who need regular income, have a
short-term investment horizon or who are unwilling to accept possible losses.
5
<PAGE>
HOW THE FUND HAS PERFORMED
The following bar chart shows the year-to-year performance of the Fund
since January 1, 1998. The table after the bar chart shows the Fund's average
annual total return for the one year period ended December 31, 1999, and since
the Fund's initial offering on March 14, 1997, compared to a broad-based market
index. This information is intended to help you assess the variability of Fund
returns over the periods indicated. Returns include the reinvestment of
dividends and distributions. Of course, past performance does not guarantee
future results. The principal value and return on your investment will fluctuate
and on redemption may be worth more or less than your original cost.
[BAR CHART APPEARS HERE]
Annual Total Returns
1998 28.7%
1999 24.9%
During the period covered by the bar chart above, the Fund's best and worst
quarterly returns were:
o Best quarterly return: 26.9%,
during the quarter ended December 31, 1998
o Worst quarterly return: (9.5)%,
during the quarter ended September 30, 1998
Average Annual Total Returns for the Periods Ended December
31, 1999
- -------------------------------------------------------------
Since Inception
1 Year March 14, 1997
- -------------------------------------------------------------
Fund 24.86% 26.87%
Morgan Stanley
World Index* 24.94% 22.53%
- -----------------
* The Morgan Stanley World Index is an unmanaged, market-weighted index that
includes 50% foreign companies and 50% U.S. companies.
FUND FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you
invest in shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Paid directly from your investment.
Maximum sales load.................................None
Deferred sales load................................None
Redemption fees....................................None
Exchange fees......................................None
ANNUAL FUND OPERATING EXPENSES
Deducted from Fund assets.
Management fee.....................................1.00%
12b-1 fee..........................................None
Other expenses ....................................0.39%
-----
Total annual Fund operating expenses
(gross).......................................1.39%
Expense Reimbursement.............................(0.14)%*
-------
Total annual Fund operating expenses (net).........1.25%
- -----------------------
* The investment adviser has agreed to reimburse the Fund to the extent the
Fund's regular operating expenses during any fiscal year exceed 1.25% of
its average daily net asset value in such year. This limitation can not be
changed without shareholder approval.
EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 year....................... $131
3 years...................... $408
5 years...................... $706
10 years..................... $1,553
This example is not meant to suggest actual or expected costs or returns, which
may be more or less than the amounts shown.
AVAILABILITY
Papp America-Pacific Rim Fund is available to the residents of all 50
states.
6
<PAGE>
PAPP FOCUS FUND
INVESTMENT OBJECTIVE
Papp Focus Fund seeks long-term capital growth.
PRINCIPAL INVESTMENT STRATEGIES
Papp Focus Fund makes substantial investments in a relatively small number
of companies. The Fund usually owns stocks in 16 or fewer companies, although it
sometimes may own more.
In choosing investments, the Fund looks for stocks of companies that it
regards as having excellent prospects for capital appreciation at a price,
relative to the market as a whole, that does not fully reflect the superiority
of that particular company.
RISKS YOU SHOULD CONSIDER
The Fund invests primarily in common stocks. In the short-term, stock
prices may fluctuate widely in response to company, market or economic news. You
can lose money by investing in the Fund. The Fund does not pursue income, and is
not, alone or together with the other Papp Funds, a balanced investment plan.
The Fund is non-diversified and the Fund's strategy of investing in a
limited number of stocks may increase the volatility of the Fund's investment
performance as compared to funds that invest in a larger number of stocks. If
the stocks in which the Fund invests perform poorly, the Fund could incur
greater losses than it might have had it invested in a larger number of stocks.
HOW DO I KNOW IF THE FUND IS RIGHT FOR ME?
The Fund is appropriate for shareholders who are long-term investors and
who are willing to accept fluctuations in share price.
The Fund is not appropriate for investors who need regular income, have a
short-term investment horizon or who are unwilling to accept possible losses.
HOW THE FUND HAS PERFORMED
The following bar chart shows the performance of the Fund for 1999. The
table after the bar chart shows the Fund's average annual total return for 1999
and for the period from the Fund's initial offering on March 2, 1998 through
December 31, 1999, compared to a broad-based market index. This information is
intended to help you assess the variability of Fund returns over the periods
indicated. Returns include the reinvestment of dividends and distributions. Of
course, past performance does not guarantee future results. The principal value
and return on your investment will fluctuate and on redemption may be worth more
or less than your original cost.
[BAR CHART APPEARS HERE]
Annual Total Returns
1999 0.6%
During the period covered by the bar chart above, the Fund's best and worst
quarterly returns were:
o Best quarterly return: 14.1%,
during the quarter ended December 31, 1999
o Worst quarterly return: (12.1)%,
during the quarter ended September 30, 1999
Average Annual Total Returns for the Periods Ended December
31, 1999
- -------------------------------------------------------------
Since Inception
1 Year March 2, 1998
- -------------------------------------------------------------
Fund 0.60% 17.31%
S&P 500* 21.04% 21.75%
- -----------------
* The S&P 500 Index is an unmanaged market-weighted index that includes the
stocks of 500 of the largest U.S. companies.
7
<PAGE>
FUND FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you
invest in shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Paid directly from your investment.
Maximum sales load.................................None
Deferred sales load................................None
Redemption fees....................................None
Exchange fees......................................None
ANNUAL FUND OPERATING EXPENSES
Deducted from Fund assets.
Management fee.....................................1.00%
12b-1 fee..........................................None
Other expenses ....................................0.63%
-----
Total annual Fund operating expenses
(gross).......................................1.63%
Expense Reimbursement.............................(0.38)%*
-------
Total annual Fund operating expenses (net).........1.25%
- -----------------------
* The investment adviser has agreed to reimburse the Fund to the extent the
Fund's regular operating expenses during any fiscal year exceed 1.25% of
its average daily net asset value in such year. This limitation can not be
changed without shareholder approval.
EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 year....................... $131
3 years...................... $408
5 years...................... $706
10 years..................... $1,553
This example is not meant to suggest actual or expected costs or returns, which
may be more or less than the amounts shown.
AVAILABILITY
Shares of Papp Focus Fund are available to persons residing in certain
states only. Contact the Fund at (800) 421-4004 to determine whether the Fund is
available for residents of your state.
8
<PAGE>
PAPP SMALL & MID-CAP GROWTH FUND
INVESTMENT OBJECTIVE
Papp Small & Mid-Cap Growth Fund's investment objective is long-term
capital growth.
PRINCIPAL INVESTMENT STRATEGIES
Papp Small & Mid-Cap Growth Fund invests primarily in the stocks of small
and medium-sized companies.
In choosing investments, the Fund looks for the stocks of companies that it
regards as having excellent prospects for capital appreciation at a price,
relative to the market as a whole, that does not fully reflect the superiority
of that particular company.
RISKS YOU SHOULD CONSIDER
The Fund invests primarily in common stocks. In the short-term, stock
prices may fluctuate widely in response to company, market or economic news.
When you sell your shares, they may be worth more or less than you paid for
them. You can lose money by investing in the Fund. The Fund does not pursue
income, and is not, alone or together with the other Papp Funds, a balanced
investment plan. There can be no assurance that the Fund will achieve its
investment objective.
The stocks of small and medium-sized companies are often more volatile than
the stocks of larger companies. Further, a company with only one or several
product lines is vulnerable to the entrance of a substantial competitor. Small
and medium-sized companies, as compared to larger companies, may have a shorter
history of operations, may not have as great an ability to raise additional
capital, and may have a smaller public market for their shares.
HOW DO I KNOW IF THE FUND IS RIGHT FOR ME?
The Fund is appropriate for shareholders who are long-term investors and
who are willing to accept fluctuations in share price.
The Fund is not appropriate for investors who need regular income, have a
short-term investment horizon or who are unwilling to accept possible losses.
HOW THE FUND HAS PERFORMED
The following bar chart shows the performance of the Fund for 1999. The
table after the bar chart shows the Fund's average annual total return for 1999
and for the period from the Fund's initial offering on December 15, 1998 through
December 31, 1999, compared to a broad-based market index. This information is
intended to help you assess the variability of Fund returns over the periods
indicated. Returns include the reinvestment of dividends and distributions. Of
course, past performance does not guarantee future results. The principal value
and return on your investment will fluctuate and on redemption may be worth more
or less than your original cost.
[BAR CHART APPEARS HERE]
Annual Total Returns
1999 13.0%
During the period covered by the bar chart above, the Fund's best and worst
quarterly returns were:
o Best quarterly return: 22.9%,
during the quarter ended December 31, 1999
o Worst quarterly return: (8.7)%,
during the quarter ended September 30, 1999
Average Annual Total Returns for the Periods Ended December
31, 1999
- -------------------------------------------------------------
Since Inception
1 Year December 15, 1998
- -------------------------------------------------------------
Fund 13.04% 21.06%
Russell 2000 Stock
Index 21.26% 29.91%
- -----------------
* The Russell 2000 Stock Index is an unmanaged market-weighted index that
includes stocks of 2000 U.S. companies, with dividends reinvested.
9
<PAGE>
FUND FEES AND EXPENSES
The following table describes the fees and expenses that you may pay if you
invest in shares of the Fund.
SHAREHOLDER TRANSACTION EXPENSES
Paid directly from your investment.
Maximum sales load................................None
Deferred sales load...............................None
Redemption fees...................................None
Exchange fees.....................................None
ANNUAL FUND OPERATING EXPENSES
Deducted from Fund assets.
Management fee.....................................1.00%
12b-1 fee..........................................None
Other expenses ....................................1.68%*
-----
Total annual Fund operating expenses
(gross)...................................... 2.68
Expense Reimbursement.............................(1.43)%
-------
Total annual Fund operating expenses (net).........1.25%
- -----------------------
* The investment adviser has agreed to reimburse the Fund to the extent the
Fund's regular operating expenses during any fiscal year exceed 1.25% of
its average daily net asset value in such year. This limitation can not be
changed without shareholder approval.
EXAMPLE
The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then redeem all of your shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 year....................... $131
3 years...................... $408
5 years...................... $706
10 years..................... $1,553
This example is not meant to suggest actual or expected costs or returns, which
may be more or less than the amounts shown.
AVAILABILITY
Shares of Papp Small & Mid-Cap Growth Fund are available to persons
residing in certain states only. Contact the Fund at (800) 421-4004 to determine
whether the Fund is available for residents of your state.
10
<PAGE>
INVESTMENT OBJECTIVES AND METHODS
INVESTMENT OBJECTIVES AND METHODS APPLICABLE TO ALL FUNDS
All of the Papp Funds invest with the objective of long-term capital
growth. A Fund's investment objective may not be changed without the approval of
a majority of the Fund's outstanding shares.
The Papp Funds invest in different ways, but each follows the basic
Papp investment strategy -- each Fund tries to purchase the shares of companies
that it regards as having excellent prospects for capital appreciation at a
price, relative to the market as a whole, that does not fully reflect the
superiority of that particular company. The Funds measure a company's prospects
for capital appreciation on an overall basis by such considerations as growth
over extended periods of time, above-average profitability created through
operating efficiency rather than financial leverage, and cash flows that appear
to confirm the sustainability of growth.
The Papp Funds are "buy and hold" investors. Once a security is
purchased, the Funds ordinarily keep it so long as the investment adviser
believes that the prospects for appreciation continue to be favorable and that
the securities are not overvalued in the marketplace. As a result, although the
Funds' portfolio turnover rates will vary, they are not ordinarily more than 25%
annually (approximately 50% in the case of Papp Focus Fund and Papp Small &
Mid-Cap Growth Fund).
The Funds are not market-timers. They usually stay substantially fully
invested in common stocks, except for the cash and cash equivalents they expect
to need to pay their expenses and meet redemptions. The Funds, however, may from
time to time, take temporary defensive positions that are inconsistent with
these principal investment strategies. If the adviser believes a temporary
defensive position is necessary in view of market conditions, each Fund may hold
cash or invest up to 100% of its assets in high-quality short-term government or
corporate obligations. Taking a temporary defensive position may prevent a Fund
from achieving its investment objective.
PAPP STOCK FUND
Stock Fund invests in common stocks. The Fund may invest up to 5% of
its net assets in securities convertible into common stocks. There is no
restriction on the size of the companies in which Stock Fund may invest, but it
usually invests in large or mid-sized companies. The Fund considers large and
mid-sized companies to be those at least as large as the companies included in
the S&P Mid-Cap 400 Stock Index, which ranged from $100 million to $51 billion
at March 31, 2000.
PAPP AMERICA-ABROAD FUND
America-Abroad Fund invests in common stocks of United States
enterprises that have substantial international activities and common stocks of
foreign enterprises that are traded publicly in the United States. The Fund
usually invests at least 70% of its common stock assets in United States
companies that satisfy one of the following criteria:
o At least 35% of its aggregate reported sales and other revenues, or of
its reported operating earnings, were classified by the company as
"foreign", "international" or "outside the United States", or
o At least 25% of any one of its aggregate reported revenues, operating
earnings, or identifiable assets were classified as foreign, and had
doubled in amount over the past five years, and the Fund's investment
adviser believes that prospects are excellent for a continuing large
increase over the company's next five fiscal years.
11
<PAGE>
The Fund relies on the annual geographic segment data published and
provided by companies to determine which companies meets these criteria.
America-Abroad Fund may invest up to 30% of its common stock assets in
foreign companies that are traded in the United States.
PAPP AMERICA-PACIFIC RIM FUND
America-Pacific Rim Fund invests in common stocks of companies that
appear to have substantial sales to and receive significant income from
countries within the Pacific Rim (defined as those countries bordering the
Pacific Ocean, including the United States). The Fund usually invests at least
65% of its common stock assets in United States companies that meet the
following criteria:
o 50% or more of their earnings or sales are attributed to, or assets
are situated in, Pacific Rim countries including the United States,
and
o 15% or more of their earnings or sales are attributed to, or assets
are situated in, Pacific Rim countries outside the United States.
In addition (and not included toward the 65% discussed in the preceding
sentence) the Fund may invest in United States companies that, in the opinion of
the Fund's investment adviser, will soon meet these criteria.
In determining which United States companies are eligible for inclusion
in the Fund's portfolio, the Fund's investment adviser relies largely on
published annual geographic data provided by many multinational companies.
However, many companies do not separately report earnings by geographic source.
As a result, the Fund's investment adviser also relies on discussions with
officials of companies being considered for inclusion in the Fund's securities
portfolio.
The Fund may invest up to 30% of its common stock assets in foreign
companies that are traded in the United States if 15% or more of such companies'
earnings, sales, or assets can be attributed to Pacific Rim countries, excluding
the United States or, in the opinion of its investment adviser, will soon meet
these criteria.
PAPP FOCUS FUND
Focus Fund makes substantial investments in a relatively small number
of companies. The Fund usually owns stocks in 16 or fewer companies, although it
sometimes may own more.
In choosing investments, the Fund looks for stocks of companies that it
regards as having excellent prospects for capital appreciation at a price,
relative to the market as a whole, that does not fully reflect the superiority
of that particular company.
The Fund may invest up to 30% of its common stock assets in foreign
companies traded in the United States.
PAPP SMALL & MID-CAP GROWTH FUND
Small & Mid-Cap Growth Fund invests primarily in the common stocks and
securities convertible into common stocks of small and medium sized companies.
The Fund's investment adviser believes that carefully selected small and medium
sized companies offer attractive capital growth possibilities significantly
above that of the general U.S. economy. Many of those companies have developed
significant expertise in the more limited markets they serve, and are able to
increase their sales and earnings at a more rapid pace than the average company.
Further, these companies typically are subject to less Wall Street research than
larger companies and are more likely to be priced inefficiently.
12
<PAGE>
Small companies are those whose market capitalizations fall within the
range of companies in the S&P Small-Cap 600 Index (the Small-Cap Index) while
medium-sized companies are those whose market capitalizations fall within the
range of companies in the S&P Mid-Cap 400 Index (the Mid-Cap Index). As of March
31, 2000, the Small-Cap Index included companies with capitalizations between
approximately $17 million and $6.1 billion while the Mid-Cap Index included
companies with capitalizations between approximately $100 million and $51
billion. Under normal market conditions, the Fund will invest at least 65% of
its assets in small and mid-capitalization securities.
The Fund may invest a maximum of 20% of its common stock assets in
foreign domiciled companies if they are traded in the United States.
RISK FACTORS
MARKET RISK
Each of the Funds invests primarily in common stocks. In the
short-term, stock prices may fluctuate widely in response to company, market or
economic news. The Funds, alone or together, are not intended to present a
balanced investment program. They are not intended to be a vehicle for
short-term trading, but are intended for investment for the long-term. You may
receive little or no return on your investment or may lose part of your
investment and there can be no assurance that the Funds will achieve their
investment objectives.
OTHER RISKS
Each of Papp America-Abroad Fund, Papp America-Pacific Rim Fund, Papp
Focus Fund and Papp Small & Mid-Cap Growth Fund also present other risks. Below
are the additional risks of these Funds.
PAPP AMERICA-ABROAD FUND AND PAPP AMERICA-PACIFIC RIM FUND
Because the Funds invest primarily in companies with foreign business
interests (either in United States companies with substantial international
activities or foreign companies), investing in these Funds may be riskier in
some ways than investment in companies whose operations are in the U.S. only.
Certain political and economic risks may affect the Fund's portfolio companies,
especially those with commitments in developing countries. The companies in
which the Funds invest may be affected by: foreign controls over currency
exchange; restrictions on monetary repatriation; oppressive regulation;
differing tax systems among countries, with differing consequences to portfolio
companies; possible seizure, nationalization or expropriation of assets; and
political, economic or social instability.
If the Funds invest directly in foreign companies, even through U.S.
traded securities, the Funds would also have risks related to: less governmental
supervision of issuers of securities; limited publicly available corporate
information; varying accounting, auditing and financial reporting standards and
financial statements among countries; and difficulties in obtaining legal
recourse and enforcing judgments abroad.
Additionally, Papp America-Pacific Rim Fund's focus on companies with
significant earnings, sales or assets in Pacific Rim countries outside the
United States makes that Fund more vulnerable to potential adverse economic or
market developments affecting that region than would be the case for a fund
investing in companies with broader geographic diversification of their
businesses.
PAPP FOCUS FUND
A strategy of investing in a limited number of securities may increase
the volatility of the Fund's investment performance compared to a strategy of
investing in a larger number of
13
<PAGE>
securities. Since each stock may represent a significant part of the Fund's
overall portfolio, the appreciation or depreciation of such a security will have
a greater impact on the net asset value of the Fund than it would have had if
the Fund invested in a larger number of securities. In addition, if the
securities in which the Fund invests perform poorly, the Fund could incur
greater losses than it might have, had it invested in a larger number of
securities. Because the Fund may invest in foreign business interests, investing
in the Fund is subject to the same risks as investment in the Papp
America-Abroad Fund.
PAPP SMALL & MID-CAP GROWTH FUND
The stocks of small and medium-sized companies often involve more
volatility and tend to be less liquid than the stocks of larger companies.
Further, a company with only one or several product lines is vulnerable to the
entrance of a substantial competitor. During some periods, the securities of
small and mid-cap companies, as a class, have performed better than the
securities of large companies and in other periods they have performed worse.
Small and mid-cap companies, as compared to larger companies, may have a shorter
history of operations, may not have as great an ability to raise additional
capital, and may have a less diversified product line - making them more
susceptible to market pressures. Also, because the Fund may invest in foreign
business interests, investing in the Fund is subject to the same risks as
investment in the Papp America-Abroad Fund.
PURCHASING SHARES
SEE THE NEW ACCOUNT PURCHASE APPLICATION ACCOMPANYING THIS PROSPECTUS.
To make an initial purchase of shares, you should complete and sign the
New Account Purchase Application and mail it, together with a check for the
total purchase price, to Papp Funds, 6225 North 24th Street, Suite 150, Phoenix,
Arizona 85016 or to P.O. Box 15508, Phoenix, Arizona 85066.
The purchase price of each Fund's shares is the net asset value per
share (NAV) next determined after receipt of the purchase order, as described
under "Determination of Net Asset Value." There are no sales loads or
commissions. The minimum initial investment to open an account is $5,000, except
for Individual Retirement Accounts (IRAs) where the minimum is $1,000. Minimum
subsequent investments in all cases are $1,000, excluding reinvestments of
dividends and capital gains distributions.
Each Fund will acknowledge your investment in shares of the Fund,
including dividends and capital gains distributions reinvested in Fund shares,
with a statement showing the number of shares you purchased, the net asset value
at which you purchased the shares, and your new balance of Fund shares owned.
The Funds do not issue stock certificates for the shares purchased. All full and
fractional shares will be carried on the books of the Funds without the issuance
of certificates.
The Funds may authorize certain financial service companies,
broker-dealers or their designees (authorized agents) to accept purchase,
redemption, and exchange requests from their customers on whose behalf the
authorized agent holds shares of the Funds. For purchase orders placed through
an authorized agent, a shareholder will pay a Fund's NAV next computed after the
receipt by the authorized agent of such purchase order, plus any applicable
transaction charge imposed by the agent. For redemption orders placed through an
authorized agent, a shareholder will receive redemption proceeds which reflect
the NAV next computed after the receipt by the authorized agent of the
redemption order, less any redemption fees imposed by the agent.
Some financial institutions that act as the Funds' agent or that
otherwise maintain nominee accounts with the Funds for their clients for whom
they hold Fund shares might charge a fee (usually a percentage of the average
net assets held in such accounts) for accounting,
14
<PAGE>
shareholder servicing, and distribution services the institution provides with
respect to the underlying Fund shares. The adviser pays these fees.
The Funds reserve the right not to accept purchase orders under
circumstances or in amounts considered disadvantageous to existing shareholders.
You may request the delivery of a single "shared" copy of each
prospectus and shareholder report to you and all other shareholders who share
your address by indicating your request on the New Account Purchase Application.
You may request delivery of individual copies by calling the Funds at (800)
421-4004 or by writing to the following address: 6225 North 24th Street, Suite
150, Phoenix, Arizona 85016. The Fund will commence sending individual copies
within 30 days after it receives your request.
REDEEMING SHARES
We will redeem all or any part of shares you own upon written request
delivered to the Funds at 6225 North 24th Street, Suite 150, Phoenix, Arizona
85016, or P.O. Box 15508, Phoenix, Arizona. The redemption request must:
(1) specify the number of shares or dollar amount you want to redeem, if
less than all of your shares are to be redeemed;
(2) be signed by all owners of the shares exactly as their names appear on
our account; and
(3) include a signature guarantee in some instances. A signature guarantee
is a way to protect the Funds and their shareholders, by guaranteeing
that a person signing a request is really the person he or she claims
to be. Your signature must be guaranteed by a bank, member firm of a
national securities exchange, savings and loan association, credit
union or other entity authorized by state law to guarantee signatures.
A notary public cannot guarantee a signature. A signature guarantee
may be waived by the Funds' Transfer Agent at the Transfer Agent's own
discretion and risk.
If you are making a redemption request on behalf of a corporation,
partnership, trust, fiduciary, executor, or administrator, you must send us
written evidence of your authority to act. Under certain circumstances, before
the shares can be redeemed, we may require additional documents to verify the
authority of the person seeking to redeem. Call (800) 421-4004 before submitting
a redemption request if you have any questions about the documents required.
Under ordinary circumstances, a signature guarantee will not be
required. However, a signature guarantee is necessary under the following
circumstances:
(1) the redemption request exceeds $25,000;
(2) the proceeds of the redemption are requested to be sent to a person
other than the registered holder(s) of the shares to be redeemed;
(3) the proceeds of the redemption are to be mailed to an address other
than the address of record; or
(4) a change of address request has been received by the Fund or the
Transfer Agent within the last 20 business days.
15
<PAGE>
In such cases, each signature on any redemption request must be
guaranteed by a commercial bank or trust company in the United States, a member
firm of the New York Stock Exchange or other eligible guarantor institution. A
notary public is not an eligible guarantor.
The redemption price per share is net asset value determined as
described under "Determination of Net Asset Value." There is no redemption
charge. The redemption value of the shares may be more or less than your cost,
depending upon the value of a Fund's portfolio securities at the time of
redemption. If the net asset value of your account falls below $1,000 because
you sold shares, we may notify you that unless the value of your account is
increased to at least $1,000 within 60 days, we will close your account and send
the proceeds to you.
We will pay you for the shares redeemed within seven days after our
receipt of a request for redemption in good order. However, if you redeem shares
immediately after they are purchased, we may delay paying the redemption
proceeds until your check for the purchase price has been cleared, which may
take up to 15 days.
The Funds may suspend or postpone redemptions during any period when
trading on the New York Stock Exchange is restricted or as otherwise permitted
by the Securities and Exchange Commission.
REDEMPTION IN KIND
Although the Funds intend to pay share redemptions in cash, each Fund
reserves the right to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
DETERMINATION OF NET ASSET VALUE
A 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 regular session
trading on the New York Stock Exchange, currently 4:00 p.m. Eastern time, on any
day on which that Exchange is open for trading.
For purposes of computing the NAV, 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 or, if there have been no reported
sales on that day, at the most recent bid quotations. Other securities traded
over-the-counter are also 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 NAV next determined after
receipt of the order.
MANAGEMENT
INVESTMENT ADVISER
L. Roy Papp & Associates serves as investment adviser to the Funds.
Subject to the overall authority of the board of directors, the adviser
furnishes continuous investment supervision and management to the Funds under an
investment advisory agreement. L. Roy Papp & Associates is also investment
adviser to individuals, trusts, retirement plans, endowments, and foundations.
Assets under management exceed $1.2 billion. The adviser's address is 6225 North
24th Street, Suite 150, Phoenix, Arizona 85016.
PORTFOLIO MANAGERS
L. Roy Papp and Rosellen C. Papp, partners of the investment adviser,
have managed the portfolios of each Fund since each Fund's commencement. Except
for two years when he was
16
<PAGE>
United States director of, and ambassador to, the Asian Development Bank,
Manila, Philippines, Mr. Papp has been in the money management field since 1955.
He has been either sole proprietor of or a partner of L. Roy Papp & Associates
since 1978. Rosellen C. Papp has been the Director of Research of L. Roy Papp &
Associates since 1981.
FEES
The investment adviser receives from each of the Funds, as compensation
for its investment adviser and administrative services, a monthly fee at an
annual rate of 1% of that Fund's average daily net assets. The adviser has
agreed to reimburse each Fund to the extent its total annual expenses, excluding
taxes, interest and extraordinary litigation expenses, during any of its fiscal
years, exceed 1.25% of its average daily net asset value in such year.
DISTRIBUTIONS
The Funds intend to distribute to shareholders substantially all net
investment income and any net capital gains realized from sales of the Funds'
portfolio securities.
The Funds automatically reinvest your dividends from net investment
income and distributions from any net realized capital gains unless you request
in writing to have them paid by check.
FEDERAL INCOME TAX
Dividends from investment income and net short-term capital gains are
taxable as ordinary income. Distributions of long-term capital gains are taxable
as long-term capital gains. The tax you pay on a capital gains distribution
depends generally on how long a Fund has held the portfolio securities it sold,
and so may qualify as long-term capital gains even if you have held your Fund
shares 12 months or less. Distributions are taxable, whether received in cash
or reinvested in shares of the Fund. The sale of shares in your account may
produce a gain or loss, and is a taxable event.
Each Fund will advise its shareholders annually of the source or
sources of distributions for federal income tax purposes. A shareholder who is
not subject to federal income taxation will not be required to pay tax on
distributions received.
If you fail to furnish your social security or other tax identification
number or to certify properly that it is correct, the Funds may be required to
withhold federal income tax at the rate of 31% ("backup withholding") from
dividend, capital gain and redemption payments to you. Dividend and capital gain
payments may also be subject to backup withholding if you fail to certify
properly that you are not subject to backup withholding due to the
under-reporting of certain income. These certifications are contained in the New
Account Purchase Application, which should be completed and returned to the
Funds when you make your initial investment. You should consult your tax
advisor concerning the application of federal, state, or foreign tax laws to
your circumstances.
FINANCIAL HIGHLIGHTS
The following tables are intended to help you understand each Fund's
financial performance for the past five years (or the period during which the
Fund has been in operation, if less than five years). Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). The information presented has been audited and reported on by
Arthur Andersen LLP, the Funds' independent public accountants. The report of
the independent public accountants and further information about the performance
of each Fund is contained in the Annual Report and the Statement of Additional
Information, which may be obtained from the Funds free of charge.
17
<PAGE>
PAPP STOCK FUND
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $37.36 $29.78 $22.70 $19.29 $14.63
Income from Operations
Net investment (loss)/income.............. (0.15) (0.09) (0.04) 0.01 0.07
Net realized and unrealized gain
on investments........................ 5.75 8.13 7.55 4.16 4.73
Total from Operations................. 5.60 8.04 7.51 4.17 4.80
Less Distributions
Dividends from net investment income.. --- --- --- (0.01) (0.07)
Distribution of net realized gain..... (0.76) (0.46) (0.43) (0.75) (0.07)
Total Distributions....................... (0.76) (0.46) (0.43) (0.76) (0.14)
Net asset value, end of period............ $42.20 $37.36 $29.78 $22.70 $19.29
====== ====== ====== ====== ======
Total Return.............................. 14.99% 26.99% 33.12% 21.77% 32.93%
Ratios/Supplemental Data
Net assets, end of period.................$105,101,464 $98,608,333 $79,820,068 $53,277,087 $44,508,543
Expenses to average net assets........ 1.09% 1.10% 1.12% 1.16% 1.17%
Investment income to average net assets (b) 0.71% 0.82% 1.00% 1.19% 1.60%
Portfolio turnover rate............... 6.60% 9.74% 6.19% 14.47% 22.39%
</TABLE>
PAPP AMERICA ABROAD FUND
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $32.13 $25.98 $20.11 $16.47 $12.24
Income from Operations
Net investment (loss)/income.............. (0.23) (0.05) 0.01 0.01 0.04
Net realized and unrealized
gain (loss) on investments............ 4.74 6.24 6.00 4.48 4.52
Total from Operations................. 4.51 6.19 6.01 4.49 4.56
Less Distributions
Dividends from net investment income.. --- --- (0.01) (0.01) (0.04)
Distributions of net realized gain.... (1.39) (0.04) (0.13) (0.84) (0.29)
Total Distributions....................... (1.39) (0.04) (0.14) (0.85) (0.33)
Net asset value, end of period............ $35.25 $32.13 $25.98 $20.11 $16.47
====== ====== ====== ====== ======
Total Return.............................. 14.01% 23.83% 29.92% 27.65% 37.05%
Ratios/Supplemental Data
Net assets, end of period.................$242,610,345 $342,814,636 $288,249,294 $29,623,497 $15,988,267
Expenses to average net assets(a)..... 1.07% 1.08% 1.11% 1.25% 1.22%
Investment income to average net assets(b) 0.61% 0.82% 1.24% 1.30% 1.50%
Portfolio turnover rate............... 5.47% 24.97% 4.71% 12.29% 26.65%
</TABLE>
- --------------
NOTES TO FINANCIAL HIGHLIGHTS:
(a) If the Fund had paid all of its expenses and there had been no
reimbursement by the investment adviser, this ratio would have been 1.30%
for the year ended December 31, 1996.
(b) Computed giving effect to investment adviser's expense limitation
undertaking.
18
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997(a)
----------------- ----------------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period............. $15.57 $12.10 $10.00
Income from Operations
Net investment income............................ (0.12) (0.06) 0.00
Net realized and unrealized gain
(loss) on investments........................ 3.99 3.53 2.11
Total from Operations........................ 3.87 3.47 2.11
Less Distributions
Dividends from net investment income......... --- --- 0.00
Distribution of net realized gain............ --- --- (0.01)
Total Distributions.............................. --- --- (0.01)
Net asset value, end of period................... $19.44 $15.57 $12.10
====== ====== ======
Total Return..................................... 24.86% 28.68% 21.11%
Ratios/Supplemental Data
Net assets at end of period ..................... $16,478,700 14,705,830 $13,741,389
Expenses to average net assets (b)........... 1.25% 1.25% 1.25%*
Ratio of net income to average net assets(c). 0.58% 0.79% 1.30%*
Portfolio turnover rate...................... 17.52% 13.73% 14.30%*
</TABLE>
PAPP FOCUS FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998(d)
----------------- --------------------
<S> <C> <C>
Net asset value, beginning of period..................... $13.33 $10.00
Income from Operations
Net investment loss...................................... (0.11) (0.06)
Net realized and unrealized gain
on investments....................................... 0.19 3.39
Total from Operations................................ 0.08 3.33
Less Distributions
Dividends from net investment income................. --- ---
Distribution of net realized gain.................. --- ---
Total Distributions.................................... --- ---
Net asset value, end of period........................... $13.41 $13.33
====== ======
Total Return............................................. 0.60% 33.30%
Ratios/Supplemental Data
Net assets, end of period................................ $3,951,395 $4,031,393
Expenses to average net assets (e)................... 1.25% 1.25%*
Investment income to average net assets (c).......... 0.54% 0.70%*
Portfolio turnover rate.............................. 53.85% 50.37%*
</TABLE>
- --------------
NOTES TO FINANCIAL HIGHLIGHTS:
* 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%, 1.41% and 1.55%, for the years ended December 31, 1999, 1998 and
the period ended December 31, 1997, respectively.
(c) Computed giving effect to investment adviser's expense limitation
undertaking.
(d) From the date of commencement of operations (March 2, 1998).
(e) If the Fund had paid all of its expenses and there had been no
reimbursement by the investment adviser, this ratio would have been
1.63% and 1.38% for the periods ended December 31, 1999 and 1998,
respectively.
19
<PAGE>
PAPP SMALL & MID-CAP GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998(a)
----------------- --------------------
<S> <C> <C>
Net asset value, beginning of period..................... $16.20 $15.00
Income from Operations
Net investment loss...................................... (0.14) ---
Net realized and unrealized gain
on investments....................................... 2.25 1.20
Total from Operations................................ 2.11 1.20
Less Distributions
Dividends from net investment income................. --- ---
Distribution of net realized gain.................. --- ---
Total Distributions.................................... --- ---
Net asset value, end of period........................... $18.31 $16.20
====== ======
Total Return............................................. 13.40% 8.00%
Ratios/Supplemental Data
Net assets, end of period (in thousands)................. $4,325,499 $1,566,225
Ratio of expenses to average net assets (b).......... 1.25% 1.25%*
Investment income to average net assets (c).......... 0.32% 1.01%*
Portfolio turnover rate.............................. 53.07% 0.00%*
</TABLE>
- --------------
NOTES TO FINANCIAL HIGHLIGHTS:
* Annualized
(a) From the date of commencement of operations (December 15, 1998).
(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
1.68% and 1.56% for the periods ended December 31, 1999 and 1998,
respectively.
(c) Computed giving effect to investment adviser's expense limitation
undertaking.
20
<PAGE>
THE PAPP FAMILY OF FUNDS
(Pure no-load funds)
Additional sources of information are available to you. The Statement
of Additional Information, incorporated by reference into this Prospectus,
contains detailed information on the Funds' policies and operation. Shareholder
reports contain management's discussion of the market conditions, investment
strategies and performance results that significantly affected each Fund's
performance as of the end of the Fund's latest semi-annual or annual fiscal year
end. You may obtain free copies of the Funds' annual and semi-annual reports,
the Statement of Additional Information, request other information and discuss
your questions about each Fund by writing or calling:
Papp Funds
6225 North 24th Street, Suite 150
Phoenix, Arizona 85016
(602)956-1115
(800)421-4004
When the Funds receive a request for the Statement of Additional
Information, the annual report or the semi-annual report, the Funds will send
the requested documents within 3 business days of the receipt of the request.
In addition, you may obtain this and other information about each Fund
directly from the Securities and Exchange Commission (SEC). You may visit the
SEC online at http://www.sec.gov or in person at the SEC's Public Reference Room
in Washington D.C. You may obtain information about the Public Reference Room by
calling the SEC at (202) 942-8090. After paying the appropriate duplicating fee,
you may also obtain copies by writing to the SEC's Public Reference Section at
450 5th Street, N.W., Washington, DC 20549-6009 or by email request at
[email protected].
Stock Fund 811-05922
America-Abroad Fund 811-06402
America-Pacific Rim Fund 811-08005
Focus Fund 811-08601
Small & Mid-Cap Growth Fund 811-09055
21
<PAGE>
[DRAWING OF L. ROY PAPP]
THE PAPP FAMILY OF FUNDS
Statement of Additional Information
May 1, 2000
6225 North 24th Street - Suite #150
Phoenix, Arizona 85016
(602) 956-1115
(800) 421-4004
Email: [email protected]
Internet: http://www.roypapp.com
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This Statement of Additional Information relates to Papp Stock Fund,
Inc., Papp America-Abroad Fund, Inc., Papp America-Pacific Rim Fund, Inc., Papp
Focus Fund, Inc. and Papp Small & Mid-Cap Growth Fund, Inc. (each a "Fund", and
collectively the "Funds"). This Statement of Additional Information is not a
prospectus, but provides information that should be read in conjunction with the
Funds' prospectus dated May 1, 2000 and any supplement to the prospectus. You
may obtain free copies of the prospectus by writing or calling the Funds at the
address or telephone number shown above.
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Table of Contents
Page
Information about the Funds and Their Shares................................2
Investment Policies.........................................................2
Investment Restrictions.....................................................3
Investment Adviser..........................................................6
Management of the Funds.....................................................7
Code of Ethics..............................................................9
Principal Shareholders......................................................9
Portfolio Transactions and Brokerage.......................................10
Performance Information....................................................11
Purchasing and Redeeming Shares............................................12
Additional Tax Information.................................................13
Custodian..................................................................13
Transfer Agent.............................................................13
Financial Statements.......................................................14
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1
<PAGE>
Information about the Funds and Their Shares
Each Fund is an open-end management investment company that is
organized as a Maryland Corporation. All of the Funds are diversified except
Focus Fund which is non-diversified. Papp Stock Fund, Inc. was incorporated on
September 15, 1989, and commenced operations on November 29, 1989. Prior to
April 1999, Papp Stock Fund, Inc. was named The L. Roy Papp Stock Fund, Inc.
Papp America-Abroad Fund, Inc. was incorporated on August 15, 1991, and
commenced operations on December 6, 1991. Papp America-Pacific Rim Fund, Inc.
was incorporated on December 18, 1996 and commenced operations on March 14,
1997. Papp Focus Fund was incorporated on December 17, 1997 and commenced
operations on March 2, 1998. Papp Small & Mid-Cap Growth Fund was incorporated
on September 15, 1998 and commenced operations on December 15, 1998. L. Roy Papp
& Associates provides investment advisory services to the Funds.
Each share of capital stock of a Fund, $.01 par value, is entitled to
share pro rata in any dividends and other distributions on shares of that Fund
declared by its board of directors, to one vote per share in elections of
directors and other matters presented to shareholders, and to equal rights per
share in the event of liquidation.
According to Maryland law and each Fund's bylaws, the Funds are not
required to hold annual meetings of shareholders unless required to do so under
the Investment Company Act. A Fund will call a meeting of shareholders for the
purpose of voting upon the question of removal of a director or directors when
requested in writing to do so by record holders of at least 10% of that Fund's
outstanding common shares, and in connection with such meeting will comply with
the provisions of section 16(c) of the Investment Company Act concerning
assistance with a record shareholder communication asking other record
shareholders to join in that request.
Investment Policies
The Funds invest with the objective of long-term capital growth. A
Fund's investment objective may not be changed without the approval of a
majority of that Fund's outstanding shares. The investment objectives of the
Funds are more fully described in the prospectus under the caption of
"Investment Objective" for each Fund and under the caption "Investment
Objectives and Methods." The primary manner in which the Funds pursue their
investment objectives is discussed in the prospectus under the captions
"Investment Objectives and Methods" and "Risk Factors."
Temporary Investments. The Funds may, from time to time, take temporary
defensive positions that are inconsistent with their principal investment
strategies. If the adviser believes a temporary defensive position is necessary
in view of market conditions, a Fund may hold cash or invest up to 100% of its
assets in high-quality short-term government or corporate obligations. Taking a
temporary defensive position may prevent a Fund from achieving its investment
objective.
Portfolio Turnover. Each of Stock Fund, America-Abroad Fund and
America-Pacific Rim Fund expects that its annual portfolio turnover rate will
not exceed 25% under normal conditions, a turnover rate less than that of most
mutual funds that invest primarily in common stocks. Each of Focus Fund and
Small & Mid-Cap Growth Fund expects that its annual portfolio turnover rate will
not exceed 50% under normal conditions, a turnover rate less than that of most
mutual funds that invest primarily in a small number of securities or in small
and mid-capitalization securities, respectively. However, there can be no
assurance that the Funds will not exceed this rate, and the portfolio turnover
rate may vary from year to year. In particular, the turnover rate of Focus Fund
may vary significantly from year to year because of the need to maintain the
portfolio diversification required by the Internal Revenue Code and the small
number of portfolio holdings.
2
<PAGE>
Investment Restrictions
Each Fund has adopted certain fundamental investment restrictions that
may not be changed without the approval of a majority of that Fund's outstanding
shares. The Funds' fundamental investment restrictions are as follows:
PAPP STOCK FUND AND PAPP AMERICA-ABROAD FUND.
Neither Fund may:
1. To the extent of 75% of its assets (valued at time of
investment), invest more than 5% of its assets (valued at such
time) in securities of any one issuer, except in obligations of
the United States Government and its agencies and
instrumentalities;
2. Acquire securities of any one issuer that at time of
investment (a) represent more than 10% of the voting securities
of the issuer or (b) have a value greater than 10% of the value
of the outstanding securities of the issuer;
3. Invest more than 5% of its assets (valued at time of
investment) in securities of issuers with less than three years'
operation (including predecessors);
4. Invest more than 5% of its assets (valued at time of
investment) in securities that are not readily marketable;
5. Invest more than 25% of its assets (valued at time of
investment) in securities of companies in any one industry;
6. Invest in repurchase agreements or reverse repurchase
agreements;
7. Acquire securities of other investment companies except (a) by
purchase in the open market, where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission and (b) where the acquisition
results from a dividend or a merger, consolidation or other
reorganization [in addition to this investment restriction, the
Investment Company Act of 1940 provides that the Fund may neither
purchase more than 3% of the voting securities of any one
investment company nor invest more than 10% of the Fund's assets
(valued at time of investment) in all investment company
securities purchased by the Fund];
8. Purchase or retain securities of a company if all of the
directors and officers of the Fund and of its investment adviser
who individually own beneficially more than 1/2% of the
securities of the company collectively own beneficially more than
5% of such securities;
9. Borrow money except from banks for temporary or emergency
purposes in amounts not exceeding 10% of the value of the Fund's
assets at the time of borrowing (the Fund will not purchase
additional securities when its borrowings exceed 5% of the value
of its assets);
10. Pledge, mortgage or hypothecate its assets, except for
temporary or emergency purposes and then to an extent not greater
than 15% of its assets at cost;
11. Underwrite the distribution of securities of other issuers, or
acquire "restricted" securities that, in the event of a resale,
might be required to be registered under the
3
<PAGE>
Securities Act of 1933 on the ground that the Fund could be
regarded as an underwriter as defined by that Act with respect to
such resale;
12. Purchase or sell real estate or interests in real estate,
although it may invest in marketable securities of enterprises
that invest in real estate or interests in real estate;
13. Purchase or sell commodities, commodity contracts or options;
14. Make margin purchases or short sales of securities;
15. Invest in companies for the purpose of management or the
exercise of control;
16. Make loans (but this restriction shall not prevent the Fund
from investing in debt securities, subject to the 5% limitation
stated in restriction 4 above);
17. Invest in or write puts, calls, straddles or spreads;
18. Invest in oil, gas or other mineral exploration or development
programs, although it may invest in marketable securities of
enterprises engaged in oil, gas or mineral exploration; and
19. Invest more than 5% of its net assets (valued at time of
investment) in warrants, nor more than 2% of its net assets in
warrants that are not listed on the New York or American Stock
Exchanges.
PAPP AMERICA-PACIFIC RIM FUND, PAPP FOCUS FUND AND PAPP SMALL & MID-CAP
GROWTH FUND.
No Fund may:
1. (for Papp America-Pacific Rim Fund and Papp Small & Mid-Cap
Growth Fund only) To the extent of 75% of its assets (valued at
time of investment), invest more than 5% of its assets (valued at
such time) in securities of any one issuer, except in obligations
of the United States Government and its agencies and
instrumentalities;
2. Acquire securities of any one issuer that at time of
investment (a) represent more than 10% of the voting securities
of the issuer or (b) have a value greater than 10% of the value
of the outstanding securities of the issuer;
3. Invest more than 25% of its assets (valued at time of
investment) in securities of companies in any one industry;
4. (for Papp America-Pacific Rim Fund only) Invest in repurchase
agreements or reverse repurchase agreements;
5. Borrow money except from banks for temporary or emergency
purposes in amounts not exceeding 10% of the value of the Fund's
assets at the time of borrowing (the Fund will not purchase
additional securities when its borrowings exceed 5% of the value
of its assets);
6. Underwrite the distribution of securities of other issuers, or
acquire "restricted" securities that, in the event of a resale,
might be required to be registered under the Securities Act of
1933 on the ground that the Fund could be regarded as an
underwriter as defined by that Act with respect to such resale;
4
<PAGE>
7. Purchase or sell commodities, commodity contracts or options;
8. Make margin purchases or short sales of securities;
9. Invest in companies for the purpose of management or the
exercise of control;
10. (for Papp America-Pacific Rim Fund only) Make loans (but this
restriction shall not prevent the Fund from investing in debt
securities, subject to the 5% limitation stated in restriction 5
above);
(for Focus Fund and Papp Small & Mid-Cap Growth Fund only)
Make loans (but this restriction shall not prevent the Fund from
investing in debt securities); and
11. Issue any senior security except to the extent permitted under
the Investment Company Act of 1940.
Papp America-Pacific Rim Fund, Papp Focus Fund and Papp Small & Mid-Cap
Growth Fund have also adopted the following restrictions that may be changed by
the Board of Directors without shareholder approval:
a. Invest more than 5% of its assets (valued at time of
investment) in securities of issuers with less than three years'
operation (including predecessors);
b. (For Papp America-Pacific Rim Fund and Papp Focus Fund only)
Invest more than 5% of its assets (valued at time of investment)
in securities that are not readily marketable; and
c. Acquire securities of other investment companies except (a) by
purchase in the open market, where no commission or profit to a
sponsor or dealer results from such purchase other than the
customary broker's commission and (b) where the acquisition
results from a dividend or a merger, consolidation or other
reorganization [in addition to this investment restriction, the
Investment Company Act of 1940 provides that the Fund may neither
purchase more than 3% of the voting securities of any one
investment company nor invest more than 10% of the Fund's assets
(valued at time of investment) in all investment company
securities purchased by the Fund].
In addition, neither Papp Stock Fund and Papp America-Abroad Fund
intends to issue any senior security except to the extent permitted under the
Investment Company Act of 1940. None of Papp America-Pacific Rim Fund, Papp
Focus Fund and Papp Small & Mid Cap Growth Fund intends to purchase or
sell real estate or interests in real estate, although each may invest in
marketable securities of enterprises that invest in real estate or interests in
real estate.
5
<PAGE>
Investment Adviser
L. Roy Papp & Associates provides investment advisory services to the
Funds. The adviser is an Arizona general partnership owned and controlled by its
partners, of whom there were ten at the date of this Statement of Additional
Information: L. Roy Papp, Harry A. Papp, Robert L. Mueller, Rosellen C. Papp,
Bruce C. Williams, George D. Clark, Jr., Jeffrey N. Edwards, Robert L. Hawley,
Victoria S. Cavallero, and Julie A. Hein.
Subject to the overall authority of each Fund's board of directors, the
adviser furnishes continuous investment supervision and management to the Funds
under an investment advisory agreement. As compensation for its investment
advisory and administrative services, the investment adviser receives from each
Fund, a monthly fee, at an annual rate of 1% of that Fund's average daily net
assets. The adviser has agreed to reimburse the Funds to the extent a Fund's
total annual expenses, excluding taxes, interest and extraordinary litigation
expenses, during any of its fiscal years, exceed 1.25% of its average daily net
asset value in such year.
The table below shows gross advisory fees paid by the Funds and any
expense reimbursements by the Adviser to them, which are described in the
prospectus.
<TABLE>
<CAPTION>
FEES PAID DURING YEAR FEES PAID DURING YEAR FEES PAID DURING YEAR
FUND ENDED DECEMBER 31, 1999 ENDED DECEMBER 31, 1998 ENDED DECEMBER 31, 1997
---- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C>
Papp Stock Fund
Advisory Fee $966,638 $875,849 $690,660
Papp America-Abroad Fund
Advisory Fee $2,877,790 $3,292,225 $1,599,574
Papp America-Pacific Rim Fund
Advisory Fee $140,437 $140,635 $77,151*
Reimbursement $20,357 $21,864 $21,456*
Papp Focus Fund
Advisory Fee $41,681 $21,018* n/a
Reimbursement $15,959 $2,950*
Papp Small & Mid-Cap Growth Fund
Advisory Fee $33,639 $543* n/a
Reimbursement $14,585 $164*
</TABLE>
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* From the Fund's commencement of operations.
Information is indicated as not applicable ("n/a") for periods prior to a Fund's
commencement of operations.
Under the Advisory Agreements, the adviser furnishes at its own expense
office space to the Funds and all necessary office facilities, equipment, and
personnel for managing the assets of the Funds. The adviser also pays all
expenses of marketing shares of the Funds, all expenses in determination of
daily price computations, placement of securities orders and related
bookkeeping.
The Funds pay all expenses incident to their operations and business
not specifically assumed by the investment adviser, including expenses relating
to custodial, legal, and auditing charges;
6
<PAGE>
printing and mailing reports and prospectuses to existing shareholders; taxes
and corporate fees; maintaining registration of the Funds under the Investment
Company Act and registration of their shares under the Securities Act of 1933;
and complying with the securities laws of certain states.
The Advisory Agreements provide that the adviser shall not be liable
for any loss suffered by the Funds or their shareholders as a consequence of any
act or omission in connection with services under the Agreement, except by
reason of the adviser's willful misfeasance, bad faith, gross negligence, or
reckless disregard of its obligations and duties under the Advisory Agreements.
The Advisory Agreements may be continued from year to year only so long
as the continuance is approved annually (a) by the vote of a majority of the
directors of each Fund who are not "interested persons" of the Fund or the
adviser cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the board of directors or by the vote of a majority (as
defined in the 1940 Act) of the outstanding shares of the Fund. The Agreement
will terminate automatically in the event of its assignment (as defined in the
1940 Act).
Management of the Funds
The board of directors has overall responsibility for the conduct of
each Fund's affairs. The directors of each Fund (except as noted), including
those directors who are also officers, other officers of each Fund, and their
principal business activities during the past five years, are:
L. Roy Papp,* Chairman and director. Age 73. Partner, L. Roy Papp &
Associates.
Harry A. Papp,*+ CFA, President and director. Age 45. Partner, L. Roy
Papp & Associates.
Robert L. Mueller,* Vice President, Secretary and director. Age 72.
Partner, L. Roy Papp & Associates.
Rosellen C. Papp,*+ CFA, Vice President, Treasurer and director. Age
44. Partner, L. Roy Papp & Associates.
Bruce C. Williams,* CFA, Vice President and director. Age 47. Partner,
L. Roy Papp & Associates.
James K. Ballinger, director. Age 49. Director of the Phoenix Art
Museum.
Amy S. Clague, director. Age 66. Partner, Boyd and Clague (bookkeeping
services for small companies).
Carolyn P. O'Malley, director of Papp America-Pacific Rim Fund, Papp
Focus Fund and Papp Small & Mid-Cap Growth Fund. Age 51. Director of
the Desert Botanical Garden since 1994.
George D. Clark, Jr., Vice President. Age 60. Partner, L. Roy Papp &
Associates.
Jeffrey N. Edwards, Vice President. Age 42. Partner, L. Roy Papp &
Associates.
Robert L. Hawley, Vice President. Age 41. Partner, L. Roy Papp &
Associates.
- ----------------------
* Indicates an "interested person" of the Fund, as defined in the Investment
Company Act of 1940
+ Harry A. Papp is the son of L. Roy Papp and Rosellen C. Papp is the
daughter-in-law of L. Roy Papp.
7
<PAGE>
Victoria S. Cavallero, Vice President. Age 42. Partner, L. Roy Papp &
Associates.
Julie A. Hein, Vice President and Assistant Treasurer. Age 39.
Partner, L. Roy Papp & Associates since 1996; prior thereto, associate
of L. Roy Papp & Associates.
The address of Messrs. L. Roy Papp, Harry A. Papp, Robert L. Mueller,
Bruce C. Williams, Ms. Rosellen C. Papp and each of the officers, is 6225 North
24th Street, Suite 150, Phoenix, Arizona 85016; the address of Mr. Ballinger is
1625 North Central Avenue, Phoenix, Arizona 85004; the address of Mrs. Clague is
326 East Kaler Drive, Phoenix, Arizona 85020; and the address of Mrs. O'Malley
is 1201 N. Galvin Parkway, Phoenix, Arizona 85008.
As of April 1, 2000, the directors and officers of the Funds
beneficially owned, in the aggregate, the following percentages of the
outstanding shares of the Funds:
- ------------------------------------------- --------------------------
FUND SHARES (%)
- ------------------------------------------- --------------------------
Stock Fund 4.7%
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America-Abroad Fund 0.9%
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America-Pacific Rim Fund 11.9%
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Focus Fund 27.3%
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Small & Mid Cap Growth Fund 36.4%
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L. Roy Papp, Harry A. Papp, and Robert L. Mueller are the members of
the executive committee for each of the Funds, which has authority during
intervals between meetings of the boards of directors to exercise the powers of
the Board, with certain exceptions. All of the directors and the officers,
except Mr. Ballinger, Mrs. Clague, and Mrs. O'Malley are partners of L. Roy Papp
& Associates, the Funds' adviser, and serve without any compensation from the
Funds.
The following table sets forth the compensation the Funds paid to Mr.
Ballinger, Mrs. Clague, and Mrs. O'Malley during the fiscal year ended December
31, 1999. None of the Papp Funds has any pension or retirement plans.
<TABLE>
<CAPTION>
PAPP PAPP AMERICA- PAPP SMALL & TOTAL
PAPP STOCK AMERICA-ABROAD PACIFIC RIM PAPP FOCUS MID-CAP GROWTH COMPENSATION
NAME FUND FUND FUND FUND FUND ALL FUNDS
---- ---------- -------------- ------------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
James K. Ballinger $4,000 $5,400 $1,300 $400 $400 $11,500
Amy S. Clague 4,000 5,400 1,300 400 400 11,500
Carolyn P. O'Malley n/a n/a 1,300 400 400 2,100
</TABLE>
8
<PAGE>
Code of Ethics
The 1940 Act and rules thereunder require that the Funds and the adviser
establish standards and procedures for the detection and prevention of certain
conflicts of interest, including activities by which persons having knowledge of
the investments and investment intentions of the Funds might take advantage of
that knowledge for their own benefit. The Funds and the adviser have adopted a
Code of Ethics to meet those concerns and legal requirements. Although the Code
does not prohibit employees who have knowledge of the investments and investment
intentions of the Funds from engaging in personal securities investing, it does
regulate such personal securities investing by these employees as a part of the
effort by the Funds and the adviser to detect and prevent conflicts of interest.
Principal Shareholders
The only persons known to own of record or "beneficially" (within the
meaning of that term as defined in rule 13d-3 under the Securities Exchange Act
of 1934) 5% or more of the outstanding shares of a Fund as of April 1, 2000
were:
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PERCENTAGE
---------------- ------ ----------
STOCK FUND
<S> <C> <C>
Charles Schwab & Co., Inc.* 458,899.1350 18.66%
101 Montgomery Street
San Francisco, CA 94104
AMERICA-ABROAD FUND
Charles Schwab & Co., Inc.* 2,811,816.5050 46.90%
101 Montgomery Street
San Francisco, CA 94104
National Financial Services* 711,083.8680 11.86%
1 World Financial Center, 200 Liberty Street
New York, NY 10281
AMERICA-PACIFIC RIM FUND
Charles Schwab & Co., Inc.* 217,420.8190 25.59%
101 Montgomery Street
San Francisco, CA 94104
Marco Capital Group 46,303.4540 5.45%
2009 Independence Drive
Sherman, TX 75091
NA Bank & Co 46,300.1630 5.45%
P. O. Box 2180
Tulsa, OK 74101-2180
FOCUS FUND
L. Roy Papp 42,008.0320 15.56%
6225 North 24th Street
Phoenix, AZ 85016
Marco Capital Group 20,080.3210 7.44%
2009 Independence Drive
Sherman, TX 75091
Frank & Nancy Russell 17,985.2640 6.66%
5104 N. 32nd Street, #349
Phoenix, AZ 85018
9
<PAGE>
SMALL & MID CAP GROWTH FUND
Marco Capital Group 48,770.2740 20.43%
2009 Independence Drive
Sherman, TX 75091
L. Roy Papp 26,459.9480 11.08%
6225 North 24th Street
Phoenix, AZ 85016
Sunchase Investment Company 15,433.6310 6.47%
9520 North Max Avenue, #3
Oklahoma City, OK 73120
RKS, Inc. 11,970.0690 5.01%
5600 North Palo Cristi Road
Paradise Valley, AZ 85253
*As a nominee for its customers.
</TABLE>
Portfolio Transactions and Brokerage
The adviser places portfolio transactions of the Funds with those
securities brokers and dealers that it believes will provide the best value in
transaction and research services for the Funds, either in a particular
transaction or over a period of time. Although most transactions involve only
brokerage services, a very few involve research services as well.
In valuing brokerage services, the adviser makes a judgment as to which
brokers are capable of providing the most favorable net price (not necessarily
the lowest commission considered alone) and the best execution in a particular
transaction. Best execution connotes not only general competence and reliability
of a broker, but specific expertise and effort of a broker in overcoming the
anticipated difficulties in fulfilling the requirements of particular
transactions, because the problems of execution and the required skills and
effort vary greatly among transactions.
In valuing research services, the adviser makes a judgment of the
usefulness of research and other information provided by a broker to the
investment adviser in managing the Funds' investment portfolios. The
information, e.g., data or recommendations concerning particular securities,
relates to the specific transaction placed with the broker. The extent, if any,
to which the obtaining of such information may reduce the expenses of the
adviser in providing management services to the Funds is not determinable. In
addition, it is understood by the board of directors of each Fund that other
clients of the adviser might also benefit from the information obtained for that
Fund, in the same manner that the Fund might also benefit from information
obtained by the adviser in performing services to others.
The reasonableness of brokerage commissions paid by the Funds in
relation to transaction and research services received is evaluated by the staff
of the adviser on an ongoing basis. The general level of brokerage charges and
other aspects of the Funds' portfolio transactions are reviewed periodically by
each Fund's board of directors.
Transactions of the Funds in the over-the-counter market are executed
with primary market makers acting as principal except where the adviser believes
that better prices and execution may be obtained otherwise.
Although investment decisions for the Funds are made independently from
those for other investment advisory clients of L. Roy Papp & Associates, it may
develop that the same investment decision is made for both a Fund and one or
more other advisory clients. If both a Fund and other clients purchase or sell
the same class of securities on the same day, the transactions will be allocated
as to amount and price in a manner considered equitable to each.
10
<PAGE>
During fiscal years 1999, 1998, and 1997, the Funds paid the following
commissions to brokers.
<TABLE>
<CAPTION>
FUND BROKERAGE COMMISSIONS PAID DURING YEAR ENDED DECEMBER 31,
---- 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Stock Fund $13,640 $11,124 $5,842
America-Abroad Fund 92,014 94,329 117,210
America-Pacific Rim Fund 3,457 8,377 14,072
Focus Fund 2,818 3,766 n/a
Small & Mid-Cap Growth Fund 3,706 1,295 n/a
</TABLE>
Performance Information
From time to time the Funds may quote total return figures. "Total
Return" for a period is the percentage change in value during the period of an
investment in Fund shares, including the value of shares acquired through
reinvestment of all dividends and capital gains distributions. "Average Annual
Total Return" is the average annual compounded rate of change in value
represented by the Total Return Percentage for the period.
Average Annual Total Return is computed as follows:
ERV = P(l+T)n
Where: P = a hypothetical initial investment of $1,000
T = average annual total return
n = number of years from initial investment to the
end of the period
ERV = ending redeemable value of a hypothetical
$1,000 investment made at the beginning of the
period at the end of the period (or fractional
portion thereof)
11
<PAGE>
For example, total return and average annual total return for the
following periods ended December 31, 1999 of an investment of $1,000 in each of
the Funds were:
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL TOTAL
RETURN (%) RETURN (%)
---------- --------------
Stock Fund
<S> <C> <C>
1 Year............................................ 14.99% 14.99%
Five Years........................................ 214.63% 25.77%
Ten Years......................................... 391.23% 17.25%
Life of the Fund (November 29, 1989).............. 410.83% 17.54%
America-Abroad Fund
1 Year............................................ 14.01% 14.01%
Five Years........................................ 220.88% 26.26%
Life of the Fund (December 6, 1991)............... 308.34% 19.04%
Pacific-Rim Fund
1 Year............................................ 24.86% 24.86%
Life of the Fund (March 14, 1997)................. 94.59% 26.87%
Focus Fund
1 Year............................................ .60% .60%
Life of the Fund (March 2, 1998).................. 34.10% 17.31%
Small & Mid-Cap Growth Fund
1 Year............................................ 13.04% 13.04%
Life of the Fund (December 15, 1998).............. 22.08% 21.06%
</TABLE>
The Funds impose no sales charge and pay no distribution expenses.
Income taxes are not taken into account. Each Fund's performance is a function
of conditions in the securities markets, portfolio management, and operating
expenses. Although information such as that shown above is useful in reviewing a
Fund's performance and in providing some basis for comparison with other
investment alternatives, it should not be used for comparison with other
investments using different reinvestment assumptions or time periods.
In advertising and sales literature, the Funds' performance may be
compared with that of market indices and other mutual funds. In addition to the
above computations, the Funds might use comparative performance as computed in a
ranking determined by Lipper, Inc., Morningstar, Inc., or that of another
service.
Purchasing and Redeeming Shares
Purchases and redemptions are discussed in the Funds' prospectus under
the headings "Purchasing Shares" and "Redeeming Shares." All of that information
is incorporated herein by reference.
Each Fund's net asset value is determined on days on which the New York
Stock Exchange is open for trading, which regularly is every day except Saturday
and Sunday. However, the Exchange is also closed on New Year's Day, Martin
Luther King, Jr. Day, the third Monday in February, Good Friday, the last Monday
in May, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and if
one of those holidays should fall on a Saturday or a Sunday, on the preceding
Friday or the
12
<PAGE>
following Monday, respectively. Net asset value will not be computed on the days
of observance of those holidays, unless, in the judgment of the board of
directors, it should be determined on any such day, in which case the
determination will be made as of 1:00 p.m., Phoenix time. The net asset value
per share of each Fund is determined by dividing the value of all its securities
and other assets, less its liabilities, by the number of shares of the Fund
outstanding.
Each Fund has elected to be governed by rule 18f-1 under the Investment
Company Act pursuant to which it is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Fund during any
90-day period for any one shareholder. Redemptions in excess of the above
amounts will normally be paid in cash, but may be paid wholly or partly by a
distribution in kind of securities.
Redemptions will be made at net asset value. See "Determination of Net
Asset Value" in the prospectus.
Additional Tax Information
Each Fund intends to continue to qualify to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended, so as to be relieved of federal income tax on its capital gains and net
investment income currently distributed to its shareholders. If a Fund should
fail to qualify for pass-through tax treatment under Subchapter M, then it would
be required to pay tax on any income and realized capital gains, reducing the
amount of income and realized capital gains that would otherwise be available
for distribution to shareholders of that Fund.
A Fund may elect to pass through to its shareholders their
proportionate share of income, war profits, and excess profits taxes that it
pays to foreign countries and United States possesions with respect to stock or
securities in foreign corporations, provided more than 50% of the total assets
of such Fund consists of such stock or securities and the Fund meets the
distribution requirements applicable to regulated investment companies. However,
no Fund expects its holdings in foreign stock or securities to comprise more
than 50% of its total net assets. Accordingly, a Fund that pays foreign taxes
will likely deduct any such taxes, rather than passing such taxes through to
shareholders to be claimed as deductions or credits on the latters' returns.
For more information on taxation, see "Federal Income Tax" in the
prospectus.
Custodian
Founders Bank of Arizona, 7335 E. Doubletree Ranch Road, Scottsdale,
Arizona 85258, is the custodian for the Funds. It is responsible for holding all
securities and cash of the Funds, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Funds, and performing
other administrative duties, all as directed by authorized persons of the Funds.
The custodian does not exercise any supervisory function in such matters as
purchase and sale of portfolio securities, payment of dividends, or payment of
expenses of the Funds. The Funds have authorized the custodian to deposit
certain portfolio securities in central depository systems as permitted under
federal law. The Funds may invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.
Transfer Agent
L. Roy Papp & Associates, the investment adviser to the Funds, also
acts as transfer, dividend disbursing, and shareholder servicing agent for the
Funds pursuant to a written agreement with the Funds. Under the agreement, L.
Roy Papp & Associates is responsible for administering and performing transfer
agent functions, for acting as service agent in connection with dividend and
distribution functions, for performing shareholder account administration agent
functions in connection with the issuance, transfer and redemption of the Funds'
shares, and maintaining necessary records in accordance with applicable laws,
rules and regulations.
For its services L. Roy Papp & Associates receives from the Funds a
monthly fee of $.75 for each Fund shareholder account, $.50 for each dividend
paid on a shareholder account, and $1.00 for each purchase (other than by
reinvestment, transfer or redemption) of Fund shares. The board of directors of
each Fund has determined the charges by L. Roy Papp & Associates to the Funds
are
13
<PAGE>
comparable to the charges of others performing similar services. L. Roy Papp &
Associates has agreed to make no charges for the provision of these services to
Papp Small & Mid-Cap Growth Fund until January 1, 2001.
Financial Statements
The financial statements included in this prospectus and statement of
additional information have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon such reports given upon the authority of said
firm as experts in accounting and auditing.
14
<PAGE>
PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks of Shares Value
- ------------------------------------------------- ------------ -------------
FINANCIAL SERVICES (21.9%)
General Electric Co.
(Diversified financial and industrial company) 43,400 $6,716,150
Northern Trust Corporation
(Bank specializing in trust services) 68,000 3,604,000
State Street Corporation
(Provider of U.S. and global securities
custodial services) 107,200 7,832,300
T. Rowe Price Associates, Inc.
(No-load mutual fund company) 132,000 4,875,750
-------------
23,028,200
-------------
INDUSTRIAL SERVICES (16.3%)
Automatic Data Processing, Inc.*
(Leading provider of computing and
data processing services) 19,000 1,023,625
G&K Services Inc., Class A
(Uniform rental service) 90,000 2,913,750
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 180,000 10,383,750
Omnicom Group, Inc.
(Worldwide advertising agencies) 28,000 2,800,000
-------------
17,121,125
-------------
SOFTWARE (16.1%)
BMC Software, Inc.*
(Develops data and application
management software) 36,500 2,917,718
Microsoft Corporation*
(Personal computer software) 120,000 14,010,000
-------------
16,927,718
-------------
COMPUTER EQUIPMENT (14.8%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 55,000 6,266,563
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 102,000 8,395,875
International Business Machines Corporation
(Global provider of information technology, hardware,
software, and services) 8,600 928,800
-------------
15,591,238
-------------
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
15
<PAGE>
PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks (continued) of Shares Value
- ------------------------------------------------- ------------ -------------
PHARMACEUTICAL (6.9%)
American Home Products Corporation
(Prescription pharmaceuticals) 23,500 $926,781
Merck & Company
(Prescription pharmaceuticals) 95,000 6,370,938
-------------
7,297,719
-------------
ELECTRONIC EQUIPMENT (5.2%)
American Power Conversion*
(Leading producer of uninterruptible
power supply products) 204,000 5,380,500
------------
SPECIALTY RETAILING (5.1%)
Walgreen Company
(Retail drug store chain) 75,000 2,193,750
Wal-Mart Stores, Inc.
(Leading discount retailer) 45,000 3,110,625
-------------
5,304,375
-------------
MEDICAL PRODUCTS (4.8%)
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 138,000 5,028,375
------------
RESTAURANTS (4.2%)
McDonald's Corporation
(Fast food restaurants and franchising) 110,000 4,434,375
------------
CONSUMER PRODUCTS (2.8%)
Clorox Company
(Manufacturer of bleach and other consumer products) 58,400 2,941,900
------------
TELECOMMUNICATIONS (1.8%)
Motorola, Inc.
(Manufacturer of communication equipment) 13,000 1,914,250
-------------
TOTAL COMMON STOCKS - 99.9% 104,969,775
CASH AND OTHER ASSETS, LESS LIABILITIES - 0.1% 131,689
-------------
NET ASSETS - 100% $105,101,464
=============
Net Asset Value Per Share
(Based on 2,490,466 shares outstanding at December 31, 1999) $42.20
=============
*Non-income producing security
The accompanying notes are an integral part of this financial statement.
16
<PAGE>
PAPP STOCK FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
-------------- ------------
Investment in securities at market value (original
cost $32,828,830 and $38,518,613 at December 31,
1999 and 1998, respectively) (Note 1) $104,969,775 $98,339,856
Cash (67,513) 185,252
Dividends and interest receivable 104,717 108,935
Subscriptions receivable 94,485 -
-------------- ------------
Total assets $105,101,464 $98,634,043
LIABILITIES
Redemptions payable $ - $ 25,710
============== ============
NET ASSETS
Paid-in capital $ 33,660,552 $39,120,298
Accumulated undistributed net realized gain
on sale of investments - 1,589
Accumulated undistributed net investment loss (700,033) (334,797)
Net unrealized gain on investments 72,140,945 59,821,243
-------------- ------------
Net assets applicable to Fund
shares outstanding $105,101,464 $98,608,333
============== ============
Fund shares outstanding 2,490,466 2,639,729
============== ============
Net Asset Value Per Share (net assets/shares
outstanding) $ 42.20 $ 37.36
============== ============
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
PAPP STOCK FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------------- --------------
INVESTMENT INCOME:
Dividends $ 669,064 $ 676,151
Interest 20,655 34,484
--------------- --------------
Total investment income 689,719 710,635
--------------- --------------
EXPENSES:
Management fee (Note 3) 966,638 875,849
Filing fees 31,706 30,687
Accounting fees 13,500 12,500
Custodial fees 11,708 8,775
Printing and postage fees 8,237 7,487
Directors' attendance fees 8,000 5,600
Transfer agent fees 7,076 11,075
Legal fees 6,015 4,857
Other fees 2,075 5,977
--------------- --------------
Total expenses 1,054,955 962,807
--------------- --------------
Net investment loss (365,236) (252,172)
--------------- --------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 13,935,942 10,660,777
Cost of securities sold (12,069,568) (9,465,331)
--------------- --------------
Net realized gain on investments sold 1,866,374 1,195,446
Net change in unrealized
gain on investments 12,319,702 20,259,461
--------------- --------------
Net realized and unrealized
gain on investments 14,186,076 21,454,907
--------------- --------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $13,820,840 $21,202,735
=============== ==============
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
PAPP STOCK FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------------- --------------
FROM OPERATIONS:
Net investment loss $ (365,236) $ (252,172)
Net realized gain on investments sold 1,866,374 1,195,446
Net change in unrealized
gain on investments 12,319,702 20,259,461
--------------- --------------
Increase in net assets resulting
from operations 13,820,840 21,202,735
--------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold (1,867,963) (1,193,857)
--------------- --------------
Decrease in net assets resulting from
distributions to shareholders (1,867,963) (1,193,857)
--------------- --------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 14,327,952 16,924,598
Net asset value of shares issued to
shareholders in reinvestment of net
investment income and net realized
gain on investments sold 1,722,264 1,079,251
Payments for redemption of shares (21,509,962) (19,224,462)
--------------- --------------
Decrease in net assets resulting
from shareholder transactions (5,459,746) (1,220,613)
--------------- --------------
Total increase in net assets 6,493,131 18,788,265
Net assets at beginning of the period 98,608,333 79,820,068
--------------- --------------
Net assets at end of period $105,101,464 $98,608,333
=============== ==============
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
PAPP STOCK FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp Stock Fund, Inc., formerly The L. Roy Papp Stock Fund, Inc., (the Fund) was
incorporated on September 15, 1989, and is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
Operations of the Fund commenced on November 29, 1989. The Fund invests for the
long-term in high quality common stocks. For the most part, the companies in
which the Fund invests occupy a dominant position in their industry and are
purchased at prices which, in the opinion of the Fund's management, do not
reflect their superior long-term growth of earnings and dividends.
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.
20
<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.
On December 29, 1999, a distribution was declared from net realized long-term
capital gains of approximately $.76 a share, aggregating $1,867,963. The
distribution was paid on December 31, 1999, to shareholders of record on
December 29, 1999.
On December 28, 1998, a distribution was declared from net realized long-term
capital gains of approximately $.46 a share, aggregating $1,193,857. The
distribution was paid on December 31, 1998, to shareholders of record on
December 29, 1998.
(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. The Fund
incurred fees of $7,076 and $11,075 in 1999 and 1998, respectively, from the
Manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $800 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 years ended December 31, 1999 and 1998 investment transactions excluding
short-term investments were as follows:
1999 1998
---------------- --------------
Purchases at cost $ 6,379,785 $ 8,436,689
Sales 13,935,942 10,660,777
21
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1999, there were 25,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
Proceeds Shares
---------------- --------------
Year ended December 31, 1999
Shares issued $14,327,952 382,946
Dividends and distributions reinvested 1,722,264 40,797
Shares redeemed (21,509,962) (573,006)
---------------- --------------
Net decrease $(5,459,746) (149,263)
================ ==============
Year ended December 31, 1998
Shares issued $16,924,598 520,158
Dividends and distributions reinvested 1,079,251 28,794
Shares redeemed (19,224,462) (589,660)
---------------- --------------
Net decrease $(1,220,613) (40,708)
================ ==============
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
1999 1998
---------------- --------------
Market value $104,969,775 $ 98,339,856
Original cost (32,828,830) (38,518,613)
---------------- --------------
Net unrealized appreciation $ 72,140,945 $ 59,821,243
================ ==============
As of December 31, 1999, gross unrealized gains on investments in which market
value exceeded cost totaled $72,140,945. There were no gross unrealized losses
on any of the Fund's investments at December 31, 1999.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $59,821,243. There were no gross unrealized losses
on any of the Fund's investments at December 31, 1998.
22
<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 periods, divided by the weighted average of the
daily net assets of the Fund.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $37.36 $29.78 $22.70 $19.29 $14.63
Income from operations:
Net investment (loss)/income (0.15) (0.09) (0.04) 0.01 0.07
Net realized and unrealized gain
on investments 5.75 8.13 7.55 4.16 4.73
-------------- --------------- --------------- --------------- -------------
Total from operations 5.60 8.04 7.51 4.17 4.80
Less distributions:
Dividend from net investment
Income - - - (0.01) (0.07)
Distribution of net realized gain (0.76) (0.46) (0.43) (0.75) (0.07)
-------------- --------------- --------------- --------------- -------------
Total distributions (0.76) (0.46) (0.43) (0.76) (0.14)
Net asset value, end of period $42.20 $37.36 $29.78 $22.70 $19.29
============== =============== ============== =============== =============
Total return 14.99% 26.99% 33.12% 21.77% 32.93%
============== =============== ============== =============== =============
Ratios/Supplemental Data:
Net assets, end of period $105,101,464 $98,608,333 $79,820,068 $53,277,087 $44,508,543
Expenses to average net
assets 1.09% 1.10% 1.12% 1.16% 1.17%
Investment income to
average net assets (A) 0.71% 0.82% 1.00% 1.19% 1.60%
Portfolio turnover rate 6.60% 9.74% 6.19% 14.47% 22.39%
</TABLE>
(A) Computed giving effect to investment adviser's expense limitation
undertaking.
23
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Papp Stock Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of Papp
Stock Fund, Inc. as of December 31, 1999 and 1998, including the schedule of
portfolio investments as of December 31, 1999, and the related statements of
operations and changes in net assets for the two years then ended, and the
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1999 and 1998, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Papp
Stock Fund, Inc. as of December 31, 1999 and 1998, and the results of its
operations and changes in its net assets for the two years then ended, and its
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/s/ Arthur Anderson LLP
Phoenix, Arizona,
January 27, 2000.
24
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks of Shares Value
- ------------------------------------------------ --------------- -------------
COMPUTER EQUIPMENT (21.2%)
EMC Corp. *
(Manufacturer of enterprise
computer storage systems) 56,000 $ 6,118,000
Hewlett-Packard Company
(Manufacturer of printers, computers,
and medical electronic equipment) 95,000 10,824,063
Intel Corporation
(Manufacturer of microprocessors,
microcontrollers, and memory chips) 367,000 30,208,687
International Business Machines Corporation
(Global provider of information technology,
hardware, software, and services) 40,000 4,320,000
-------------
51,470,750
-------------
FINANCIAL SERVICES (16.3%)
American International Group
(Major international insurance
holding company) 56,250 6,082,031
General Electric Co.
(Diversified financial and industrial company) 93,000 14,391,750
State Street Corporation
(Provider of U.S. and global
securities custodial services) 260,000 18,996,250
-------------
39,470,031
-------------
ELECTRONIC EQUIPMENT (16.0%)
American Power Conversion *
(Leading producer of uninterruptible
power supply products) 1,036,300 27,332,412
Molex, Inc.
(Supplier of interconnection products) 253,000 11,448,250
-------------
38,780,662
-------------
INDUSTRIAL SERVICES (14.3%) Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 565,000 32,593,438
Omnicom Group, Inc.
(Worldwide advertising agencies) 20,000 2,000,000
-------------
34,593,438
-------------
SOFTWARE (10.6%) BMC Software, Inc. *
(Develops data and application
management software) 68,000 5,435,750
Microsoft Corporation*
(Personal computer software) 173,000 20,197,750
-------------
25,633,500
-------------
PHARMACEUTICAL (6.9%)
Merck & Company
(Prescription pharmaceuticals) 248,000 16,631,500
-------------
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
25
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks (continued) of Shares Value
- ------------------------------------------------ --------------- -------------
RESTAURANTS (4.2%)
McDonald's Corporation
(Fast food restaurants and franchising) 254,000 $10,239,375
-------------
SPECIALTY RETAILING (3.8%)
Office Depot *
(Leading retailer and direct marketer
of office supplies) 840,500 9,192,969
-------------
MEDICAL PRODUCTS (3.5%)
Johnson & Johnson
(Healthcare products) 86,500 8,055,313
Medtronic, Inc.
(Manufacturer of implantable
biomedical devices) 10,000 364,375
-------------
8,419,688
-------------
TELECOMMUNICATIONS (1.3%)
Cisco Systems, Inc. *
(Leading supplier of computer
internetworking systems) 20,000 2,142,500
L.M. Ericsson Telephone AB
(Manufacturer of telecom systems
and cellular handsets) 15,000 985,312
-------------
3,127,812
-------------
MISCELLANEOUS (1.4%)
Gillette Company
(Personal care products and batteries) 22,000 906,125
Steiner Leisure Ltd. *
(Provider of spa services, beauty salons,
and health clubs on cruise ships) 160,750 2,682,516
-------------
3,588,641
-------------
Total Common Stocks - 99.4% 241,148,366
Cash and Other Assets, Less Liabilities - 0.6% 1,461,979
-------------
Net Assets - 100% $242,610,345
=============
Net Asset Value Per Share
(Based on 6,882,729 shares outstanding at December 31, 1999) $35.25
=============
*Non-income producing security.
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31,1999 AND 1998
ASSETS
1999 1998
--------------- ---------------
Investment in securities at market value
(original cost $128,437,747 and
$248,043,277 at December 31,
1999 and 1998, respectively) (Note 1) $241,148,366 $338,929,906
Cash 1,043,700 6,522,782
Dividends and interest receivable 182,268 361,875
Receivable for investment securities sold 236,011 -
--------------- ---------------
Total assets $242,610,345 $345,814,563
=============== ===============
LIABILITIES
Redemptions payable $ - $ 240,533
Payable for investment securities purchased - 2,759,394
--------------- ---------------
Total Liabilities $ - $ 2,999,927
=============== ===============
NET ASSETS
Paid-in capital $130,597,831 $252,595,092
Accumulated undistributed net realized gain
on sale of investments 219 371
Accumulated undistributed net investment loss (698,324) (667,456)
Net unrealized gain on investments 112,710,619 90,886,629
--------------- ---------------
Net assets applicable to Fund shares
outstanding $ 242,610,345 $342,814,636
=============== ===============
Fund shares outstanding 6,882,729 10,670,513
=============== ===============
Net Asset Value Per Share (net assets/shares
outstanding) $ 35.25 $ 32.13
=============== ===============
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
------------- -------------
INVESTMENT INCOME:
Dividends $1,700,480 $2,686,890
Interest 65,112 224,020
Foreign taxes withheld (9,894) (20,469)
------------- -------------
Total investment income 1,755,698 2,890,441
------------- -------------
EXPENSES:
Management fee (Note 3) 2,877,790 3,292,225
Filing fees 52,812 116,312
Printing and postage fees 41,376 46,725
Custodial 35,688 28,994
Transfer agent fees 31,635 40,994
Accounting 16,000 14,500
Directors' attendance fees 10,800 6,300
Legal 4,957 4,534
Other fees 2,197 14,073
------------- -------------
Total expenses 3,073,255 3,564,657
------------- -------------
Net investment loss (1,317,557) (674,216)
------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 145,756,212 92,997,025
Cost of securities sold (135,222,930) (92,579,267)
------------- -------------
Net realized gain on investments sold 10,533,282 417,758
Net change in unrealized gain on investments 21,823,990 65,360,302
------------- -------------
Net realized and unrealized gain on investments 32,357,272 65,778,060
------------- -------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $31,039,715 $65,103,844
============= =============
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
--------------- ---------------
FROM OPERATIONS:
Net investment loss $(1,317,557) $ (674,216)
Net realized gain on investments sold 10,533,282 417,758
Net change in unrealized gain on investments 21,823,990 65,360,302
--------------- ---------------
Increase in net assets resulting from
operations 31,039,715 65,103,844
--------------- ---------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold (9,235,258) (417,387)
--------------- ---------------
Decrease in net assets resulting from
distributions to shareholders (9,235,258) (417,387)
--------------- ---------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 63,363,641 168,123,001
Net asset value of shares issued to
shareholders in reinvestment of net
investment income and net realized
gain on investments sold 8,582,551 374,828
Payments for redemption of shares (193,954,940) (178,618,944)
--------------- ---------------
Decrease in net assets resulting
from shareholder transactions (122,008,748) (10,121,115)
--------------- ---------------
Total (decrease)/increase in net assets (100,204,291) 54,565,342
Net assets at beginning of the period 342,814,636 288,249,294
--------------- ---------------
Net assets at end of period $ 242,610,345 $ 342,814,636
--------------- ---------------
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp America-Abroad Fund, Inc. (the Fund) was incorporated on August 15, 1991,
and is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Operations of the Fund commenced on
December 6, 1991. The Fund invests with the objective of long-term capital
growth in the common stocks of United States companies that have substantial
international activities and, to a much lesser extent, in the common stocks of
foreign enterprises that are traded publicly in United States securities
markets.
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.
30
<PAGE>
(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 December 29, 1999, a distribution was declared from net realized long-term
capital gains of approximately $1.39 a share aggregating $9,235,258. The
distribution was paid on December 31, 1999, to shareholders of record on
December 29, 1999.
On December 28, 1998, a distribution was declared from net realized long-term
capital gains of approximately $.04 a share aggregating $417,387. The
distribution was paid on December 31, 1998, to shareholders of record on
December 29, 1998.
(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. The Fund
incurred fees of $31,635 and $40,994 in 1999 and 1998, respectively, from the
manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $1,100 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.
(4) PURCHASES AND SALES OF SECURITIES:
For the years ended December 31, investment transactions excluding short-term
investments were as follows:
1999 1998
----------------- ---------------
Purchases at cost $ 15,617,398 $80,372,065
Sales 145,756,212 92,997,025
31
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1999, there were 25,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
Proceeds Shares
----------------- ---------------
Year ended December 31, 1999
Shares issued $ 63,363,641 2,000,223
Dividends and distributions reinvested 8,582,551 242,584
Shares redeemed (193,954,940) (6,030,591)
----------------- ---------------
Net decrease $(122,008,748) (3,787,784)
================= ===============
Year ended December 31, 1998
Shares issued $ 168,123,001 6,037,848
Dividends and distributions reinvested 374,828 11,761
Shares redeemed (178,618,944) (6,473,298)
----------------- ---------------
Net decrease $(10,121,115) (423,689)
================= ===============
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows at December 31:
1999 1998
----------------- ---------------
Market value $241,148,365 $338,929,906
Original cost (128,437,746) (248,043,277)
----------------- ---------------
Net unrealized appreciation $112,710,619 $90,886,629
================= ===============
As of December 31, 1999, gross unrealized gains on investments in which market
value exceeded cost totaled $114,096,795 and gross unrealized losses on
investments in which cost exceeded market value totaled $1,386,176.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $104,546,063 and gross unrealized losses on
investments in which cost exceeded market value totaled $13,659,434.
32
<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 periods, divided by the weighted average of the
daily net assets of the Fund.
<TABLE>
<CAPTION>
Year Ended December 31
1999 1998 1997 1996 1995
------------- ------------- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $32.13 $25.98 $20.11 $16.47 $12.24
Income from operations:
Net investment (loss)/income (0.23) (0.05) 0.01 0.01 0.04
Net realized and unrealized gain
on investments 4.74 6.24 6.00 4.48 4.52
------------- ------------- ------------ ------------- ---------------
Total from operations 4.51 6.19 6.01 4.49 4.56
Less distributions:
Dividend from net investment
Income - - (0.01) (0.01) (0.04)
Distribution of net realized gain (1.39) (0.04) (0.13) (0.84) (0.29)
Total distributions (1.39) (0.04) (0.14) (0.85) (0.33)
------------- ------------ ------------ -------------- ---------------
Net asset value, end of period $35.25 $32.13 $25.98 $20.11 $16.47
============= ============ ============ ============== ===============
Total return 14.01% 23.83% 29.92% 27.65% 37.05%
============= ============ ============ ============== ===============
Ratios/Supplemental Data:
Net assets, end of period $242,610,345 $342,814,636 $288,249,294 $29,623,497 $15,988,267
Expenses to average net
assets 1.07% 1.08% 1.11% 1.25% 1.22%
Investment income to
Average net assets (B) 0.61% 0.82% 1.24% 1.30% 1.50%
Portfolio turnover rate 5.47% 24.97% 4.71% 12.29% 26.65%
</TABLE>
(A) If the Fund had paid all of its expenses and there had been no
reimbursement by the investment adviser, this ratio would have been 1.30%
for the year ended December 31, 1996.
(B) Computed giving effect to investment adviser's expense limitation
undertaking.
33
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Papp America-Abroad Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of the
Papp America-Abroad Fund, Inc. as of December 31, 1999 and 1998, including the
schedule of portfolio investments as of December 31, 1999, and the related
statements of operations and changes in net assets for the two years then ended,
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1999 and 1998 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Papp America-Abroad Fund, Inc. as of December 31, 1999 and 1998, and the results
of its operations and changes in its net assets for the two years then ended,
and its financial highlights for each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
/s/ Arthur Anderson LLP
Phoenix, Arizona,
January 27, 2000.
34
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks of Shares Value
- ------------------------------------------- -------------- ---------------
COMPUTER EQUIPMENT (19.6%)
Hewlett-Packard Company
(Manufacturer of printers, computers,
and medical electronic equipment) 8,500 $968,469
Intel Corporation
(Manufacturer of microprocessors,
microcontrollers, and memory chips) 16,000 1,317,000
International Business Machines Corporation
(Global provider of information technology,
hardware, software, and services) 3,500 378,000
National Instruments Corporation *
(Supplier of computer based
instrumentation products) 15,000 573,750
---------------
3,237,219
---------------
ELECTRONIC EQUIPMENT (16.6%)
Agilent Technologies, Inc.
(Designs and manufactures test
and measurement systems for the
electronics and healthcare industries) 6,800 525,725
American Power Conversion *
(Leading producer of uninterruptible
power supply products) 48,000 1,266,000
Molex, Inc.
(Supplier of interconnection products) 21,000 950,250
---------------
2,741,975
---------------
FINANCIAL SERVICES (16.4%)
American International Group
(Major international insurance
holding company) 10,000 1,081,250
General Electric Co.
(Diversified financial
and industrial company) 5,500 851,125
State Street Corporation
(Provider of U.S. and
global securities custodial services) 10,500 767,156
---------------
2,699,531
---------------
Industrial Services (16.3%)
Expeditors International of Washington, Inc.
(International air freight forwarding) 23,000 1,007,688
G & K Services, Inc. Class A
(Uniform rental service) 14,500 469,437
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 21,000 1,211,438
---------------
2,688,563
---------------
*Non-income producing security.
The accompanying notes are an integral part of this financial statements.
35
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks (continued) of Shares Value
- ------------------------------------------- -------------- ---------------
MEDICAL PRODUCTS (10.1%)
Medtronic, Inc.
(Manufacturer of implantable
biomedical devices) 22,000 $801,625
ResMed, Inc.*
(Developer and manufacturer of
respiratory products) 4,000 167,000
Stryker Corp.
(Developer and manufacturer of
surgical and medical devices) 10,000 696,250
---------------
1,664,875
---------------
PHARMACEUTICAL (7.3%)
Eli Lilly & Co.
(Prescription pharmaceuticals) 7,500 498,750
Pfizer, Inc.
(Prescription pharmaceuticals) 6,000 194,625
Warner-Lambert Company
(Prescription pharmaceuticals) 6,000 491,625
---------------
1,185,000
---------------
TELECOMMUNICATIONS (5.5%)
L. M. Ericsson Telephone AB
(Manufacturer of telecom systems and
cellular handsets) 12,000 788,250
Cable & Wireless HKT Ltd.
(International telecommunications services) 4,000 116,500
---------------
904,750
---------------
RESTAURANTS (4.5%)
McDonald's Corporation
(Fast food restaurants and franchising) 18,500 745,781
---------------
Consumer Products (2.3%)
Clorox Company
(Manufacturer of bleach and
other consumer products) 7,500 377,812
---------------
Software (1.0%)
Microsoft Corporation*
(Personal computer software) 1,500 175,125
---------------
Total Common Stocks - 99.6% 16,420,631
Cash and Other Assets, Less Liabilities - 0.4% 58,069
Net Assets - 100.0% ---------------
$16,478,700
===============
Net Asset Value Per Share
(Based on 847,668 shares outstanding at December 31, 1999) $19.44
===============
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
36
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31,1999 AND 1998
ASSETS
1999 1998
---------------- -----------------
Investment in securities at market value
(original cost $9,070,690 and $10,351,153
at December 31, 1999 and 1998,
respectively) (Note 1) $16,420,631 $14,584,338
Cash 16,847 194,464
Dividends and interest receivable 9,473 13,729
Receivable for investment securities sold 31,749 -
---------------- -----------------
Total assets $16,478,700 $14,792,531
================ =================
LIABILITIES
Payable for investment securities purchased $ - $ 73,500
Redemptions payable - 13,201
---------------- -----------------
Total liabilities $ - $ 86,701
================ =================
NET ASSETS
Paid-in capital $ 9,317,394 $10,846,991
Accumulated undistributed net realized loss
on sale of investments (30,836) (310,322)
Accumulated undistributed net investment loss (157,799) (64,024)
Net unrealized gain on investments 7,349,941 4,233,185
---------------- -----------------
Net assets applicable to Fund
shares outstanding $16,478,700 $14,705,830
================ =================
Fund shares outstanding 847,668 944,775
================ =================
Net Asset Value Per Share (net assets/shares
outstanding) $ 19.44 $ 15.57
================ =================
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------------- -----------------
INVESTMENT INCOME:
Dividends $ 76,658 $ 105,405
Interest 6,584 7,005
Foreign taxes withheld (1,542) (2,089)
---------------- -----------------
Total investment income 81,700 110,321
---------------- -----------------
EXPENSES:
Management fee (Note 3) 140,437 140,635
Filing fees 20,734 31,885
Accounting fees 11,000 7,500
Custodial fees 7,034 5,609
Legal fees 5,471 4,811
Directors' attendance fees 3,900 2,300
Printing and postage fees 3,519 1,571
Other fees 3,809 2,795
---------------- -----------------
Total expenses 195,904 197,106
---------------- -----------------
Less fees waived by adviser (Note 3) (20,357) (21,864)
---------------- -----------------
Net expenses 175,547 175,242
---------------- -----------------
Net investment loss (93,847) (64,921)
---------------- -----------------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Proceeds from sales of securities 4,024,592 4,544,223
Cost of securities sold (3,745,114) (4,854,545)
---------------- -----------------
Net realized gain/(loss)
on investments sold 279,478 (310,322)
Net change in unrealized gain on investments 3,116,756 3,833,105
---------------- -----------------
Net realized and unrealized
gain on investments 3,396,234 3,522,783
---------------- -----------------
Net increase in net assets
resulting from operations $3,302,387 $3,457,862
================ =================
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------------- -----------------
FROM OPERATIONS:
Net investment loss $ (93,847) $ (64,921)
Net realized gain/(loss) on
investments sold 279,478 (310,322)
Net change in unrealized
gain on investments 3,116,756 3,833,105
---------------- -----------------
Increase in net assets
resulting from operations 3,302,387 3,457,862
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold - -
---------------- -----------------
Decrease in net assets resulting
from distributions to
shareholders - -
---------------- -----------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 2,214,299 4,267,258
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 (3,743,816) (6,760,679)
---------------- -----------------
Decrease in net assets
resulting from shareholder
transactions (1,529,517) (2,493,421)
---------------- -----------------
Total increase in net assets 1,772,870 964,441
Net assets at beginning of the period 14,705,830 13,741,389
---------------- -----------------
Net assets at end of period $16,478,700 $14,705,830
================ =================
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
PAPP AMERICA-PACIFIC RIM FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(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.
40
<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 $20,357 and $21,864 was required in 1999
and 1998 respectively. The Fund incurred fees of $2,408 as of December 31, 1999
from the manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $350 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 years ended December 31, 1999 and December 31, 1998 investment
transactions excluding short-term investments were as follows:
1999 1998
---------------- ----------------
Purchases at cost $2,464,651 $1,908,840
Sales 4,024,592 4,544,223
41
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 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
Period ended December 31, 1999
Shares issued $ 2,214,299 141,621
Dividends and distributions reinvested - -
Shares redeemed (3,743,816) (238,728)
---------------- ----------------
Net decrease $(1,529,517) (97,107)
================ ================
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 $16,420,631 $ 14,584,338
Original cost (9,070,690) (10,351,153)
================ ================
Net unrealized appreciation $ 7,349,941 $ 4,233,185
================ ===============
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.
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.
42
<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.
Years ended Period Ended
December 31, December 31,
1999 1998 1997(A)
--------------- --------------- -------------
Net asset value, beginning
of period $15.57 $12.10 $10.00
Income from operations:
Net investment income (0.12) (0.06) -
Net realized and unrealized
gain (loss) on investments 3.99 3.53 2.11
--------------- --------------- -------------
Total from operations 3.87 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 $19.44 $15.57 $12.10
=============== =============== =============
Total return 24.86% 28.68% 21.11%
=============== =============== =============
Ratios/Supplemental Data:
Net assets, end of period $16,478,700 $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) 0.58% 0.79% 1.30%*
Portfolio turnover rate 17.52% 13.73% 14.30%
* 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%,
1.41% and 1.55%, for the years ended December 31, 1999, 1998 and the
period ended December 31, 1997, respectively.
(C) Computed giving effect to investment adviser's expense limitation
undertaking.
43
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Papp America-Pacific Rim Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of the
Papp America-Pacific Rim Fund, Inc. as of December 31, 1999 and 1998, including
the schedule of portfolio investments as of December 31, 1999, and the related
statements of operations and changes in net assets for the two years then ended,
and the financial highlights for the two years then ended and for the period
from March 14, 1997 (date of commencement of operations) through December 31,
1997. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1999 and 1998, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Papp America-Pacific Rim Fund, Inc. as of December 31, 1999 and 1998, and the
results of its operations and changes in its net assets for the two years then
ended, and its financial highlights for the two years then ended and for the
period from March 14, 1997 (date of commencement of operations) through December
31, 1997, in conformity with generally accepted accounting principles.
/s/ Arthur Anderson LLP
Phoenix, Arizona,
January 27, 2000.
44
<PAGE>
PAPP FOCUS FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks of Shares Value
- ----------------------------------------------------- ------------ ------------
FINANCIAL SERVICES (18.4%)
American International Group
(Major international insurance holding company) 1,737 $187,813
State Street Corporation
(Provider of U.S. and global securities
custodial services) 2,600 189,962
T. Rowe Price Associates, Inc.
(No-load mutual fund company) 9,500 350,906
------------
728,681
------------
INDUSTRIAL SERVICES (14.1%)
G & K Services, Inc. Class A
(Uniform rental service) 5,500 178,063
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 6,600 380,737
------------
558,800
------------
COMPUTER EQUIPMENT (12.8%)
Intel Corporation
(Manufacturer of microprocessors,
microcontrollers, and memory chips) 3,900 321,019
International Business Machines Corporation
(Global provider of information technology, hardware,
software, and services) 1,700 183,600
------------
504,619
------------
SOFTWARE (11.4%)
BMC Sofware, Inc. *
(Develops data and application management software) 2,400 191,850
Microsoft Corporation *
(Personal computer software) 2,200 256,850
------------
448,700
------------
ELECTRONIC EQUIPMENT (10.0%)
American Power Conversion *
(Leading producer of uninterruptible
power supply products) 15,000 395,625
------------
*Non-income producing security
The accompanying notes are an integral part of this financial statement.
45
<PAGE>
PAPP FOCUS FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks (continued) of Share Value
- --------------------------------------------- -------------- -------------
SPECIALTY RETAILING (9.5%)
Office Depot *
(Large retailer and direct marketer
of office supplies) 17,500 $191,406
Wal-Mart Stores, Inc.
(Leading discount retailer) 2,650 183,181
------------
374,587
------------
PHARMACEUTICAL (6.1%)
Merck & Company
(PRESCRIPTION PHARMACEUTICALS) 3,600 241,425
------------
MEDICAL PRODUCTS (4.8%)
Medtronic, Inc.
(Manufacturer of implantable
biomedical devices) 5,200 189,475
------------
BIOTECHNOLOGY (4.7%)
Techne Corporation *
(Leading producer of raw materials
for biotechnology industry) 3,400 187,213
------------
RESTAURANTS (4.3%)
McDonald's Corporation
(Fast food restaurants and franchising) 4,200 169,313
------------
TOTAL COMMON STOCKS - 96.1% 3,798,438
CASH AND OTHER ASSETS, LESS LIABILITIES - 3.9% 152,957
------------
NET ASSETS - 100% $3,951,395
============
Net Asset Value Per Share
(Based on 294,581 shares outstanding at December 31, 1999) $13.41
============
*Non-income producing security
The accompanying notes are an integral part of this financial statement.
46
<PAGE>
PAPP FOCUS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
------------- -------------
Investment in securities at market value
(original cost $ 2,905,207 and
$ 2,989,269 at December 31, $3,798,438 $ 3,844,641
1999 and 1998, respectively) (Note 1)
Cash 114,489 216,460
Dividends and interest receivable 3,207 2,172
Receivable for investments shares sold 35,261 118,542
------------- -------------
Total assets $3,951,395 $ 4,181,815
============= =============
LIABILITIES
Payable for securities purchased $ - $ 150,422
============= =============
NET ASSETS
Paid-in capital $3,132,537 $ 3,220,821
Accumulated undistributed net realized loss
on sale of investments (33,506) (33,408)
Accumulated undistributed net investment loss (40,867) (11,392)
Net unrealized gain on investments 893,231 855,372
------------- -------------
Net assets applicable to Fund shares outstanding $3,951,395 $ 4,031,393
============= =============
Fund shares outstanding 294,581 302,478
============= =============
Net Asset Value Per Share (net assets/share
outstanding) $13.41 $ 13.33
============= =============
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
PAPP FOCUS FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE PERIOD
FROM MARCH 2, 1998 THROUGH DECEMBER 31, 1998
1999 1998
------------ -------------
INVESTMENT INCOME:
Dividends $17,688 $10,881
Interest 4,939 3,998
------------ -------------
Total investment income 22,627 14,879
------------ -------------
EXPENSES:
Management fee (Note 3) 41,681 21,018
Filing fees 7,669 1,190
Custodial fees 6,871 2,810
Accounting fees 6,750 1,500
Legal fees 3,369 987
Directors' attendance fees 1,200 1,100
Other fees 521 616
------------ -------------
Total expenses 68,061 29,221
------------ -------------
Less fees waived by adviser (Note 3) (15,959) (2,950)
------------ -------------
Net expenses 52,102 26,271
------------ -------------
Net investment loss (29,475) (11,392)
------------ -------------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Proceeds from sales of securities 2,279,973 1,203,246
Cost of securities sold (2,280,071) (1,236,654)
------------ -------------
Net realized loss on investments sold (98) (33,408)
Net change in unrealized
gain on investments 37,859 855,372
------------ -------------
Net realized and unrealized
gain on investments 37,761 821,964
------------ -------------
Net increase in net assets
resulting from operations $8,286 $810,572
============ =============
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
PAPP FOCUS FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM MARCH 2, 1998 THROUGH DECEMBER 31, 1998
1999 1998
-------------- -------------
FROM OPERATIONS:
Net investment loss (29,475) $(11,392)
Net realized loss on investments sold (98) (33,408)
Net change in unrealized gain on investments 37,859 855,372
-------------- -------------
Increase in net assets resulting from
Operations 8,286 810,572
-------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold - -
-------------- -------------
Decrease in net assets resulting from
distributions to shareholders - -
-------------- -------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 1,288,280 3,532,754
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 (1,376,564) (311,933)
-------------- -------------
(Decrease)/Increase in net assets resulting
from shareholder transactions (88,284) 3,220,821
-------------- -------------
Total (decrease)/increase in net assets (79,998) 4,031,393
Net assets at beginning of the period 4,031,393 -
-------------- -------------
Net assets at end of period $3,951,395 $4,031,393
============== =============
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
PAPP FOCUS FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp Focus Fund, Inc. (the Fund) was incorporated on December 16, 1997 and is
registered under the Investment Company Act of 1940 as an open-end,
non-diversified management investment company. Operations of the Fund commenced
on March 2, 1998. The Fund invests with the objective of long-term capital
growth in the common stocks of a relatively small number of companies.
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.
50
<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. To date, the Fund has not declared any dividends or
distributions.
(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 $15,959 and $2,950 was required in 1999
and 1998, respectively.
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.
(4) PURCHASES AND SALES OF SECURITIES:
For the year ended December 31,1999 and for the period from March 2, 1998 (date
of commencement of operations) to December 31, 1998, investment transactions
excluding short-term investments were as follows:
1999 1998
------------ ------------
Purchase at cost $2,196,009 $4,225,923
Sales 2,279,973 1,203,246
51
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1999, there were 25,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
Proceeds Shares
------------ ------------
Year ended December 31, 1999
Shares issued $1,288,280 99,296
Dividends and distributions reinvested - -
Shares redeemed (1,376,564) (107,193)
------------ ------------
Net decrease $ (88,284) (7,897)
============ ============
Period ended December 31, 1998
Shares issued $3,532,754 330,351
Dividends and distributions reinvested - -
Shares redeemed (311,933) (27,873)
------------ ------------
Net increase $3,220,821 302,478
============ ============
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
1999 1998
------------ ------------
Market value $3,798,438 $3,844,641
Original cost (2,905,207) (2,989,269)
------------ ------------
Net unrealized appreciation $ 893,231 $ 855,372
============ ============
As of December 31, 1999, gross unrealized gains on investments in which market
value exceeded cost totaled $1,001,308 and gross unrealized losses on
investments in which cost exceeded market value totaled $108,077.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $855,372. There were no gross unrealized losses on
any of the Fund's investments at December 31, 1998.
52
<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>
Year Ended December 31, Period Ended December 31,
1999 1998(A)
------------------ -----------------
<S> <C> <C>
Net asset value, beginning
of period $ 13.33 $ 10.00
Income from operations:
Net investment loss (0.11) (0.06)
Net realized and unrealized
gain on investments 0.19 3.39
----------------- ------------------
Total from operations 0.08 3.33
Less Distributions:
Dividend from investment
income - -
Distribution of net realized
gain - -
----------------- ------------------
Total distributions - -
Net asset value, end of period $ 13.41 $ 13.33
================= ===================
Total return 0.60% 33.30%
================= ===================
Ratios/Supplemental Data:
Net assets, end of period $ 3,951,395 $ 4,031,393
Expenses to average
net assets (B) 1.25% 1.25%*
Investment income to
average net assets (C) 0.54% .70%*
Portfolio turnover rate 53.85% 50.37%*
</TABLE>
* Annualized
(A) From the date of commencement of operations (March 2, 1998).
(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 1.63%
and 1.38% for the periods ended December 31, 1999 and 1998.
(C) Computed giving effect to investment adviser's expense limitation
undertaking.
53
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Papp Focus Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of the Papp
Focus Fund, Inc. as of December 31, 1999 and 1998, including the schedule of
portfolio investments, as of December 31, 1999, and the related statements of
operations, changes in net assets, and the financial highlights for the year
ended December 31, 1999, and for the period from March 2, 1998 (date of
commencement of operations) through December 31, 1998. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 and 1998, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Papp Focus Fund, Inc. as of December 31, 1999 and 1998, and the results of its
operations, changes in its net assets, and its financial highlights for the year
ended December 31, 1999 and the period from March 2, 1998 (date of commencement
of operations) through December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Arthur Anderson LLP
Phoenix, Arizona,
January 27, 2000.
54
<PAGE>
PAPP SMALL & MID-CAP GROWTH FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Number Market
Common Stocks of Shares Value
- --------------------------------------------------------- -------------- ------------
<S> <C> <C>
FINANCIAL SERVICES (20.4%)
Bisys Group *
(Provider of administration and information services
to the financial services industry) 3,000 $195,750
Concord EFS, Inc.*
(Electronic transaction authorization, processing
and settlement services) 2,000 51,500
Federated Investors
(Major U.S. investment management company) 9,900 198,619
Investors Financial Services Corp.
(Provides asset administration services to
the financial services industry) 3,000 138,000
T. Rowe Price Associates, Inc.
(No-load mutual fund company) 5,000 184,688
U.S. Trust Corporation
(Provider of investment management, private banking,
and fiduciary services) 1,400 112,262
------------
880,819
------------
INDUSTRIAL SERVICES (16.4%)
Cambridge Technology Partners, Inc. *
(International professional services business) 2,200 57,750
Cintas Corp.
(Leading uniform and textile rental company) 1,000 53,125
Expeditors International of Washington, Inc.
(International air freight forwarding) 3,400 148,963
Forrester Research *
(Leading provider of strategic technology research) 2,600 179,075
G & K Services, Inc. Class A
(Uniform rental service) 1,800 58,275
Young & Rubicam Inc.
(Worldwide advertising agency) 3,000 212,250
------------
709,438
------------
ELECTRONIC EQUIPMENT (15.3%)
American Power Conversion Corporation *
(Leading producer of uninterruptible power supply products) 8,000 211,000
Molex, Inc.
(Supplier of interconnection products) 4,000 181,000
National Instruments Corp. *
(Supplier of computer based instrumentation products) 3,750 143,437
Symbol Technologies, Inc.
(Leading manufacturer of bar code driven
mobile computing systems) 2,000 127,125
------------
662,562
------------
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
55
<PAGE>
<TABLE>
<CAPTION>
PAPP SMALL & MID-CAP GROWTH FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks (continued) of Shares Value
- --------------------------------------------------------- -------------- ------------
<S> <C> <C>
HEALTH CARE SERVICES (7.5%)
Covance, Inc. *
(Leading contract research organization
to the drug industry) 4,000 $43,250
Express Scripts, Inc.*
(Leading independent pharmacy benefit manager) 1,500 96,000
IMS Health, Inc.
(Leading provider of information solutions
and market research to
pharmaceutical industry) 3,000 81,563
Patterson Dental Company *
(Leading distributor of dental
supplies in the U.S. and Canada) 2,500 106,563
------------
327,376
------------
TELECOMMUNICATIONS (7.5%)
ADC Telecommunications, Inc. *
(Manufacturer and developer of data
and voice networking products) 2,500 181,406
Plantronics, Inc. *
(Manufactures lightweight telephone headsets) 2,000 143,125
------------
324,531
------------
SPECIALTY RETAILING (6.7%)
Dollar General Corporation
(Operates self-service discount stores) 5,000 113,750
Family Dollar Stores, Inc.
(Self-service discount store chain) 4,400 71,775
Office Depot *
(Leading retailer and direct marketer of office supplies) 9,500 103,906
------------
289,431
------------
MEDICAL PRODUCTS (6.6%)
Del Global Technologies
(Designs, manufactures, and
markets medical imaging systems) 17,000 131,750
ResMed Inc. *
(Developer and manufacturer of respiratory products) 2,000 83,500
Stryker Corp.
(Developer and manufacturer of surgical
and medical devices) 1,000 69,625
------------
284,875
------------
SOFTWARE (5.3%)
BMC Software, Inc. *
(Develops data and application management software) 2,000 159,875
SunGard Data Systems, Inc. *
(Develops software for investment support systems) 2,900 68,875
------------
228,750
------------
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
56
<PAGE>
<TABLE>
<CAPTION>
PAPP SMALL & MID-CAP GROWTH FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks (continued) of Shares Value
- --------------------------------------------------------- -------------- ------------
<S> <C> <C>
BIOTECHNOLOGY (3.8% )
Techne Corp. *
(Leading producer of raw materials for
biotechnology industry) 3,000 $165,187
------------
BROADCASTING AND PUBLISHING (3.0%)
Central Newspapers, Inc.
(Newspaper publisher) 2,000 78,750
Saga Communications, Inc.*
(Owns/operates radio and television stations) 2,500 50,625
------------
129,375
------------
CONSUMER SERVICES (2.2%)
Steiner Leisure Ltd. *
(Provider of spa services, beauty salons, and health
clubs on cruise ships) 5,800 96,788
------------
EVENT SERVICES (2.0%)
VIAD Corp.
(Provider convention/tradeshow management services and provides
money orders and other cash access services) 3,000 83,625
------------
EDUCATIONAL PROVIDER (1.4%)
Apollo Group, Inc.*
(Leading provider of higher education
programs for working adults) 3,000 60,187
------------
TOTAL COMMON STOCKS - 98.1% 4,242,944
CASH AND OTHER ASSETS, LESS LIABILITIES - 1.9% 82,555
------------
NET ASSETS - 100% $4,325,499
============
Net Asset Value Per Share
(Based on 236,188 shares outstanding at December 31, 1999) $18.31
============
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of this financial statement.
57
<PAGE>
<TABLE>
<CAPTION>
PAPP SMALL & MID-CAP GROWTH FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 AND 1998
1999 1998
------------ ------------
ASSETS
<S> <C> <C>
Investment in securities at market value (original
cost $3,593,090 and $1,399,845 at December 31,
1999 and 1998, respectively) (Note 1) $4,242,944 $1,505,194
Cash 80,923 134,603
Dividends and interest receivable 1,632 1,101
Receivable for investments sold - 18,000
------------ ------------
Total assets $4,325,499 $1,658,898
============ ============
LIABILITIES
Payable for securities purchased - 92,673
------------ ------------
Total liabilities $ - $ 92,673
============ ============
NET ASSETS
Paid-in capital $3,702,254 $1,460,455
Accumulated undistributed net realized gain
on sale of investments 4,523 -
Accumulated undistributed net investment (loss)/income (31,132) 421
Net unrealized gain on investments 649,854 105,349
------------ ------------
Net assets applicable to Fund
shares outstanding $4,325,499 $1,566,225
============ ============
Fund shares outstanding 236,188 96,681
------------ ------------
Net Asset Value Per Share (net assets/share outstanding) $ 18.31 $ 16.20
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
<TABLE>
<CAPTION>
PAPP SMALL & MID-CAP GROWTH FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND FOR THE
PERIOD FROM DECEMBER 15, 1998 THROUGH DECEMBER 31, 1998
1999 1998
------------ ----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $7,717 $ 377
Interest 3,200 723
------------ ----------
Total investment income 10,917 1,100
------------ ----------
EXPENSES:
Management fee (Note 3) $33,639 $ 543
Filing fees 7,410 -
Accounting fees 5,750 -
Custody fees 4,990 -
Legal Fees 3,150 -
Directors' attendance fees 1,200 300
Printing fees 495 -
------------ ----------
Total expenses 56,634 843
------------ ----------
Less fees waived by adviser (Note 3) (14,585) (164)
------------ ----------
Net expenses 42,049 679
------------ ----------
Net investment (loss)/income (31,132) 421
------------ ----------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Proceeds from sale of securities 1,750,454 -
Cost of securities sold (1,745,931) -
------------ ----------
Net realized gain on investments sold 4,523 -
Net change in unrealized gain on investments 544,505 105,349
------------ ----------
Net realized and unrealized gain on investments 549,028 105,349
------------ ----------
Net increase in net assets resulting from operations $517,896 $105,770
============ ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
59
<PAGE>
<TABLE>
<CAPTION>
PAPP SMALL & MID-CAP GROWTH FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND
FOR THE PERIOD FROM DECEMBER 15, 1998 TO DECEMBER 31, 1998
1999 1998
------------ ----------
<S> <C> <C>
FROM OPERATIONS:
Net investment (loss)/income $(31,132) $421
Net realized gain on investments sold 4,523 -
Net change in unrealized gain on investments 544,505 105,349
------------ ----------
Increase in net assets resulting from
Operations 517,896 105,770
------------ ----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - prior year (421) -
Net realized gain on investments sold - -
------------ ----------
Decrease in net assets resulting from
distributions to shareholders (421) -
------------ ----------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 2,770,330 1,460,455
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
net realized gain on investments sold 266 -
Payments for redemption of shares (528,797) -
------------ ----------
Increase in net assets resulting
from shareholder transactions 2,241,799 1,460,455
------------ ----------
Total increase in net assets 2,759,274 1,566,225
------------ ----------
Net assets at beginning of the period 1,566,225 -
------------ ----------
Net assets at end of period $4,325,499 $1,566,225
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
PAPP SMALL & MID-CAP GROWTH FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp Small & Mid-Cap Growth Fund, Inc. (the Fund) was incorporated on September
15, 1998 and is registered under the Investment Company Act of 1940 as an
open-end diversified management investment company. Operations of the Fund
commenced on December 15, 1998. The Fund invests with the objective of long-term
capital growth in the common stocks of small and mid-capitalization companies.
The investment adviser paid all start up costs, and the Fund will not reimburse
them.
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.
61
<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. During the year the Fund distributed $421 of net
investment income from the prior year.
(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 $14,585 and $164 was required in 1999
and 1998, respectively.
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.
(4) PURCHASES AND SALES OF SECURITIES:
For the year ended December 31, 1999 and for the period from December 15, 1998
(date of commencement of operations) to December 31, 1998, investment
transactions excluding short-term investments were as follows:
1999 1998
------------ ------------
Purchases at cost $3,939,176 $1,399,845
Sales 1,750,454 -
62
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1999, there were 25,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
Proceeds Shares
------------ ------------
Year ended December 31, 1999
Shares issued $2,770,330 171,664
Dividends and distributions
reinvested 266 21
Shares redeemed (528,797) (32,178)
------------ ------------
Net increase $2,241,799 139,507
============ ============
Period ended December 31, 1998
Shares issued $1,460,455 96,681
Dividends and distributions
reinvested - -
Shares redeemed - -
------------ ------------
Net increase $1,460,455 96,681
============ ============
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
1999 1998
------------ ------------
Market value $4,242,944 $1,505,194
Original cost (3,593,090) (1,399,845)
------------ ------------
Net unrealized appreciation $ 649,854 $ 105,349
============ ============
As of December 31, 1999, gross unrealized gains on investments in which market
value exceeded cost totaled $989,503 and gross unrealized losses on investments
in which cost exceeded market value totaled $339,649.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $125,365 and gross unrealized losses on investments
in which cost exceeded market value totaled $20,016.
63
<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.
Net asset value, beginning
of period $16.20 $15.00
Income from operations:
Net investment loss (0.14) -
Net realized and unrealized
gain on investments 2.25 1.20
---------- ----------
Total from operations 2.11 1.20
Less Distributions:
Dividend from investment
income - -
Distribution of net realized
gain - -
---------- ----------
Total distributions - -
Net asset value, end of period $18.31 $16.20
========== ==========
Total return 13.04% 8.00%
========== ==========
Ratios/Supplemental Data:
Net assets, end of period $4,325,499 $1,566,225
Expenses to average
net assets (B) 1.25% 1.25%*
Investment income to
average net assets (C) 0.32% 1.01%*
Portfolio turnover rate 53.07% 0.00%
* Annualized
(A) From the date of commencement of operations (December 15, 1998).
(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 1.68 and 1.56%, for the periods ended December 31, 1999 and
1998, respectively.
(C) Computed giving effect to investment adviser's expense limitation
undertaking.
64
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Papp Small & Mid-Cap Growth Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of the Papp
Small & Mid-Cap Growth Fund, Inc. as of December 31, 1999 and 1998, including
the schedule of portfolio investments as of December 31, 1999, and the related
statements of operations, changes in net assets, and the financial highlights
for the year ended December 31, 1999, and for the period from December 15, 1998
(date of commencement of operations) through December 31, 1998. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 and 1998, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Papp Small & Mid-Cap Growth Fund, Inc. as of December 31, 1999 and 1998, and the
results of its operations, changes in its net assets, and its financial
highlights for the year ended December 31, 1999 and the period from December 15,
1998 (date of commencement of operations) through December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Arthur Anderson LLP
- ---------------------------
Arthur Anderson LLP
Phoenix, Arizona,
January 27, 2000.
65
<PAGE>
Part C
Other Information
ITEM 23. Exhibits
Note: As used herein, "Registration Statement" means the Registrant's
Registration Statement on Form N-1A, no. 333-65609, filed on October
13, 1998.
(a) Articles of Incorporation (incorporated by reference to
exhibit 1 to the Registration Statement)
(b) By-Laws of the Registrant (incorporated by reference to
exhibit 2 to the Registration Statement)
(c) None
(d) Investment Advisory Agreement (incorporated by reference to
exhibit 5 to the Registration Statement)
(e) None
(f) None
(g) Custodian Agreement (incorporated by reference to exhibit 8 to
the Registration Statement)
(h) Transfer Agency Agreement (incorporated by reference to
exhibit 9 to the Registration Statement)
(i) Consent of Piper Marbury Rudnick & Wolfe LLP
(j) Consent of Independent Auditors
(k) None
(l) Initial Subscription Agreement (incorporated by reference to
exhibit 13 to the Registration Statement)
(m) None
(n) None
(p) Code of Ethics
(q) New Account Purchase Application (incorporated by reference to
exhibit 19 to the Registration Statement)
Item 24. Persons Controlled By or Under Common Control with Registrant
- ------- -------------------------------------------------------------
<PAGE>
The registrant does not consider that there are any persons directly
or indirectly controlling, controlled by, or under common control with, the
registrant within the meaning of this item. The information in the prospectus
under the caption "Management" and in the Statement of Additional Information
under the captions "Investment Adviser" and "Management of the Funds" is
incorporated by reference.
Item 25. Indemnification
- ------- ---------------
Section 2-418 of the General Corporation Law of Maryland authorizes the
registrant to indemnify its directors and officers except under specified
circumstances. Section 7.01 of Article VII of the bylaws of the registrant
(exhibit 2 to the registration statement, which is incorporated herein by
reference) provides in effect that the registrant shall provide certain
indemnification of its directors and officers. In accordance with section 17(h)
of the Investment Company Act, this provision of the bylaws shall not protect
any person against any liability to the registrant or its shareholders to which
he or she would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issuer.
Item 26. Business and Other Connections of Investment Adviser
- ------- ----------------------------------------------------
The information in the prospectus under the caption "Management" is
incorporated by reference. Neither L. Roy Papp & Associates nor any of its
partners has at any time during the past two years been engaged in any other
business, profession, vocation or employment of a substantial nature either for
its, his or her own account or in the capacity of director, officer, employee,
partner or trustee.
Item 27. Principal Underwriters
- ------- ----------------------
None
Item 28. Location of Accounts and Records
- ------- --------------------------------
<PAGE>
Rosellen C. Papp, Treasurer
Papp Small & Mid-Cap Growth Fund, Inc.
6225 North 24th Street, Suite 150
Phoenix, Arizona 85016
Item 29. Management Services
- ------- -------------------
None
Item 30. Undertakings
- ------- ------------
Not applicable.
<PAGE>
Index of Exhibits Filed with this Amendment
Exhibit Exhibit
Number -------
-------
(i) Consent of Piper Marbury Rudnick & Wolfe LLP
(j) Consent of Independent Auditors
(p) Code of Ethics
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this post-effective amendment pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Phoenix, Arizona on April 28, 2000.
Papp Small & Mid-Cap Growth Fund, Inc.
By: /s/ L. Roy Papp
L. Roy Papp, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ L. Roy Papp Director and Chairman )
- ------------------------------------
L. Roy Papp (principal executive and )
financial officer) )
)
/s/ Harry A. Papp Director and President )
- ------------------------------------
Harry A. Papp )
)
)
/s/ Robert L. Mueller Director, Vice President )
- ------------------------------------
Robert L. Mueller and Secretary )
)
) April 28, 2000
/s/ Bruce C. Williams Director and Vice President )
- ------------------------------------
Bruce C. Williams )
)
/s/ Rosellen C. Papp Director, Vice President )
- ------------------------------------
Rosellen C. Papp and Treasurer (principal )
accounting officer) )
)
/s/ James K. Ballinger Director )
- ------------------------------------
James K. Ballinger )
)
/s/ Amy S. Clague Director )
- ------------------------------------
Amy S. Clague )
)
/s/ Carolyn P. O'Malley Director )
- ------------------------------------
Carolyn P. O'Malley
</TABLE>
EXHIBIT (I)
PIPER MARBURY RUDNICK & WOLFE LLP
6225 Smith Avenue
Baltimore, Maryland 21209-3600
www.piperrudnick.com
PHONE (410) 580-3000
FAX (410) 580-3001
April 28, 2000
PAPP SMALL & MID-CAP GROWTH FUND, INC.
6225 North 24th Street
Suite #150
Phoenix, Arizona 85016
REGISTRATION STATEMENT ON FORM N-1A
Ladies and Gentlemen:
Please refer to our opinion letter to you of December 10, 1998,
concerning certain matters of Maryland law relating to the incorporation and the
issuance of shares of capital stock of Papp Small & Mid-Cap Growth Fund, Inc., a
Maryland corporation (the "Fund"). We hereby confirm the opinion stated in that
letter, as of the date thereof, and consent to your filing of a copy of such
opinion with Post-Effective Amendment No. 2 to the Fund's Registration Statement
pursuant to the Investment Company Act of 1940, as amended, Registration No.
811-09055 (collectively, the "Amendment"), relating to up to 25,000,000 shares
of its Common Stock, par value $.01 per share, of the Fund.
Very truly yours,
/s/ Piper Marbury Rudnick & Wolfe LLP
EXHIBIT J
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made a part of this
prospectus and statement of additional information. It should be noted that we
have not audited any financial statements of the Papp Family of Funds subsequent
to December 31, 1999 or performed any audit procedures subsequent to the date of
our reports.
/s/ARTHUR ANDERSEN LLP
Phoenix, Arizona,
April 24, 2000.
EXHIBIT P
L. ROY PAPP & ASSOCIATES
PAPP STOCK FUND, INC.
PAPP AMERICA-ABROAD FUND, INC.
PAPP AMERICA-PACIFIC RIM FUND, INC.
PAPP FOCUS FUND, INC.
PAPP SMALL & MID-CAP GROWTH FUND, INC.
CODE OF ETHICS
Adopted December 21, 1994
The purpose of this Code of Ethics ("Code") is to establish standards
and procedures to be followed by the partners and employees of L. Roy Papp &
Associates ("Adviser") and by the unaffiliated directors of The Papp Mutual
Funds ("Funds") to avoid any conflict of interest, or the appearance of any
conflict of interest, between the interests of the Funds and their shareholders,
the interests of the investment counsel Clients of the Adviser, and the
interests of the Adviser and its partners and employees.
This Code of Ethics has been adopted by the Boards of Directors of the
Funds and by the Adviser to address these concerns and to meet the legal
requirements imposed by the Investment Company Act and the rules thereunder.
GENERAL PRINCIPLES
Prohibitions
The Investment Company Act and rules make it illegal for any person
covered by the Code, directly or indirectly, in connection with the purchase or
sale of a security held or to be acquired by the Funds to:
(a) employ any device, scheme or artifice to defraud the Funds;
(b) make to the Funds any untrue statement of a material fact or omit
to state to the Funds a material fact necessary in order to make
the statements made, in light of the circumstances under which
they are made, not misleading;
(c) engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Funds; or
(d) engage in any manipulative practice with respect to the Funds.
Personal Securities Transactions
L. Roy Pap & Associates believes its professional staff should own
equity securities and that, for the most part, these should be the same
securities as those owned by the Clients and the Funds, because only through a
personal financial involvement with the product the Adviser recommends to its
Clients and Funds can their aspirations and frustrations be fully understood.
1
<PAGE>
Concurrent with this belief however is the recognition that the interests of the
Clients and Funds must come first and that even perceived conflicts of interest
must be avoided.
A purpose of this Code is to regulate the personal securities
transactions by personnel of the Adviser and the unaffiliated directors of the
Funds as part of an effort to detect and prevent conduct that might violate the
general prohibitions outlined above. A personal securities transaction is a
transaction in a security in which a person subject to this Code has a
beneficial interest. Security is interpreted very broadly for this purpose, and
includes any right to acquire any security, for example, an option or warrant.
One has a beneficial interest in a security that is owned individually, jointly,
or as a guardian, executor, or trustee, or in which he or his spouse, minor
children, or other dependents living in his household, have an interest.
In any situation where the potential for conflict exists, transactions
for the Clients and Funds must take precedence over any personal transaction.
In small firm like L. Roy Papp & Associates all personnel are involved
in a variety of tasks and at one time or another are likely to know what
securities the Firm or Funds are purchasing or selling. Accordingly, the
following restrictions apply to all of the partners and employees of the Firm.
However, a number of them do not apply to the unaffiliated directors of the
Funds in their capacities as such.
Restrictions on Personal Securities Transactions
The following restrictions apply to all partners and employees of the
Adviser and to the unaffiliated directors of the Funds. No partner or employee
of the Adviser or unaffiliated director of a Fund shall:
(a) Knowingly sell to or purchase from the Funds any security or
other property, except for securities issued by the Funds.
(b) Purchase or sell for his or her personal account and benefit or
for the account and benefit of any relative, any security which
the person knows or has reason to believe is being purchased or
sold or considered for purchase or sale by the Funds or Clients
of the Adviser, until the Funds' or Clients' transactions have
been completed or consideration of such transactions has been
abandoned.
This section shall not restrict purchases or sales for the accounts of
the Adviser's Clients provided that the Funds and the Adviser's other Clients
are treated fairly and equitably in connection with those purchases and sales. A
Client of the Adviser who pays a fee for the Adviser's services shall be treated
in the same manner as any other Client, even if the Client is related to a
partner or employee of the Adviser or is an entity in which a partner or
employee of the Adviser has an equity interest. At the date of adoption of this
Code, such Clients include Marco Investment Company and Hillcrest Enterprises,
both limited partnerships, in which Bruce C. Williams, a person subject to the
Code, has an equity interest and Morris Carll, who is a relative of Rosellen C.
Papp, a person subject to the Code.
The following restrictions apply only to the partners and employees of
L. Roy Papp & Associates:
2
<PAGE>
(c) Purchases of any security in an initial public offering is
prohibited. This is a flat prohibition and no exceptions will be
permitted.
(d) No security shall be acquired in a private placement without the
express written prior approval of Robert L. Mueller (hereafter,
the "Compliance Officer") or L. Roy Papp (hereafter, "LRP"). In
deciding whether that approval should be granted, the Compliance
Officer or LRP will consider whether the investment opportunity
should be reserved for the Funds and their shareholders and
whether the opportunity has been offered because of the person's
relationship with the Funds. A partner or employee of the Adviser
who has been authorized to acquire a security in a private
placement must disclose that investment if he or she later
participates in consideration of an investment in that security
by the Funds or by Investment Advisory Clients of the Adviser.
Any investment decision relating to that security must be made by
other personnel.
(e) Short-term trading in securities on the Adviser's active eligible
list by partners and employees of the Adviser is prohibited. Any
profits realized from the purchase and sale, or sale and
purchase, of the same or equivalent securities within 60 calendar
days must be disgorged even if the person is unaware of the
violation.
(f) No partner or employee of the Adviser may accept any gift or
other thing of more than de minimus value from any person or
other entity that does business with the Adviser or Funds.
However, it is not the intent of this Code to prohibit the
everyday courtesies of business life.
(g) No partner or employee of the Adviser may serve as a member of
the Board of Directors or as a trustee of a publicly held
company without the prior written approval of the Compliance
Officer or LRP, based on a determination that the board
service would not be inconsistent with the interests of the
Clients of the Adviser and the Funds and their shareholders.
If a partner or employee of the Adviser is serving as a board
member of a publicly held company, that person shall not
participate in making investment decisions relating to the
securities of the company on whose board he or she sits.
Compliance Procedures
A. All personal securities transactions by partners and employees of
the Adviser must be conducted through brokerage accounts that have been
identified to the Compliance Officer.
B. All personal securities transactions by partners and employees of
the Adviser, except transactions deemed exempt (as described in the section
entitled "Exempt Transactions") must be cleared in advance with the Compliance
Officer or LRP. If the proposed trade is not executed within two business days
after pre-clearance, the pre-clearance will expire and the request must be made
again.
C. No personal securities transaction by a partner or employee of the
Adviser will be pre-cleared if the Funds or any Investment Counsel Client has a
conflicting order pending or is actively considering a purchase or sale of the
same security. A conflicting order is any order for the same security, or an
option on that order, which has not been fully executed. A purchase or sale of a
security is being "actively considered" if a recommendation to purchase or sell
has been
3
<PAGE>
made for the Funds or any Investment Counsel Client and is pending, or, with
respect to the person making the recommendation, that person is seriously
considering making the recommendation. It is the obligation of the partners and
employees of the Adviser to check with the portfolio managers to determine that
no conflicts exist when they are contemplating a personal securities
transaction.
Under most circumstances, a personal securities transaction by a
partner or employee of the Adviser will not be approved until the first business
day after completion of any transactions for the Funds or an investment counsel
account of the Adviser.
However, depending on the circumstances, the Compliance Officer or LRP
may extend the period to seven days. Such circumstances include the urgency of
the partner or employee of the Adviser to buy or sell a given security and the
amount of trading of a particular security, e.g., Microsoft, which trades daily
in the millions of shares versus Bandag, whose stock trades only a few thousand
shares daily.
D. Each partner and employee of the Adviser shall disclose his or her
personal securities holdings upon the commencement of employment with the
Adviser and annually thereafter.
E. (1) An unaffiliated director of the Funds shall report to the
Compliance Officer any personal securities transaction where the unaffiliated
director, at the time of the transaction, knew, or in the ordinary course of
fulfilling his or her duties as an unaffiliated director, should have known that
on the day of his or her transaction, or within 15 days before or after that
day, a purchase or sale of that security was made by or considered for the
Funds.
(2) All partners and employees of the Adviser shall identify to the
Compliance Officer any brokerage account in which they have a beneficial
interest by instructing the broker to deliver to the Compliance Officer
duplicate confirmations of all transactions and duplicate monthly statements.
(3) Any personal securities transaction by a partner or employee of
the Adviser which for any reason does not appear in the brokerage records
described above shall be reported to the Compliance Officer within 10 days after
the transaction takes place.
F. Reports filed by the unaffiliated directors of the Funds or by
partners and employees of the Adviser may be in any form (including copies of
confirmations or monthly statements) but must include: (i) the date of the
transaction, the title and number of shares, and the principal amount of each
security involved; (ii) the nature of the transaction (i.e., purchase, sale,
gift, or other type of acquisition or disposition); (iii) the price at which the
transaction was effected; (iv) the name the broker, dealer, or bank with or
through whom the transaction was effected; and (v) the name of the reporting
person.
G. The Compliance Officer shall monitor the trading patterns of all
partners and employees of the Adviser.
H. Each partner and employee of the Adviser and each unaffiliated
director of the Funds is required to certify annually that he or she has read
and understands the Code and recognizes that he or she is subject to the Code.
Each partner and employee of the Adviser is required to certify annually that he
or she has disclosed or reported all personal securities transactions required
to be disclosed or reported under the Code.
4
<PAGE>
I. The officers of the Funds shall prepare an annual report to the
Boards of Directors of the Funds that:
1. summarizes existing procedures concerning personal investing and
any changes in those procedures during the past year;
2. identifies any violations of the Code during the past year
requiring significant remedial action; and
3. identifies any recommended changes in existing restrictions or
procedures based upon experience under the Code, evolving
industry practices, or developments in applicable laws or
regulations.
Exempt Transactions
The provisions of this Code are intended to restrict the personal
investment activities of persons subject to the Code only to the extent
necessary to accomplish the purposes of the Code. Therefore, the provisions of
the Code shall not apply to the following transactions, except that they must be
reported to the Compliance Officer as set forth hereinbefore:
A. Purchases or sales effected in any account over which the persons
subject to this Code have no direct or indirect influence or
control.
B. Purchases or sales of U.S. Government securities; shares of
open-end investment companies, including but not limited to
shares of the Funds; bank certificates of deposit or commercial
paper; municipal bonds; and securities not actively followed by
the Adviser, that is, securities not on the Adviser's active
eligible list.
C. Purchases or sales which are non-volitional on the part of either
the person subject to this Code or the Funds;
D. Purchases which are part of an automatic dividend reinvestment
plan;
E. Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of securities to the
extent such rights were acquired from such issuer.
Failure To Comply
Compliance with this Code of Ethics is a condition of employment by the
Adviser and retention of positions with the Funds. Taking into consideration all
relevant circumstances, LRP will determine what action is appropriate for any
breach of the provisions of the Code, except by an unaffiliated board member.
Possible actions include letters of sanction, suspension, or termination of
employment or removal from office. The Boards of the Funds shall determine what
action is appropriate for any breach of the provisions of the Code by an
unaffiliated Board member, which may include removal from the Board.
Reports filed pursuant to the Code will be maintained in confidence but
will be reviewed by the Compliance Officer and LRP to verify compliance with the
Code. Additional information may be required to clarify the nature of particular
transactions.
5
<PAGE>
Retention of Records
The Secretary of the Funds shall maintain the records listed below for
a period of five years at the Funds' principal place of business in an easily
accessible place:
A. a list of persons subject to the Code during the period;
B. receipts signed by all persons subject to the Code acknowledging
receipt of copies of the Code and that they are subject to it;
C. a copy of each Code of Ethics that has been in effect at any time
during the period; and
D. a copy of each report filed pursuant to the Code and a record of
any known violations and actions taken as a result thereof during
the period.
* * * * * *
I affirm that I have received a copy of this Code of Ethics and have
read and understand it. I will comply with the Code in all respects.
Date: __________________________ __________________________________________
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