<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1996
Securities Act Registration No. 33-31465
Investment Company Act file No. 811-05922
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
_________________________________
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-effective Amendment No. 7 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 9 [X]
_________________________________
THE L. ROY PAPP STOCK FUND, INC.
(Registrant)
4400 North 32nd Street
Suite #280
Phoenix, Arizona 85018
Telephone number: 602/956-1115
__________________________________________
Robert L. Mueller Janet D. Olsen
L. Roy Papp & Associates Bell, Boyd & Lloyd
4400 North 32nd Street, #280 70 West Madison Street
Phoenix, Arizona 85018 Suite #3200
Chicago, Illinois 60602
(Agents for service)
Amending the Prospectus, Statement of Additional Information and Part C, and
filing exhibits.
It is proposed that this filing will become effective:
immediately upon filing pursuant to rule 485(b)
- --------
X on April 30, 1996 pursuant to rule 485(b)
- --------
60 days after filing pursuant to rule 485(a)(1)
- --------
on _____________ pursuant to rule 485(a)(1)
- --------
75 days after filing pursuant to rule 485(a)(2)
- --------
on _________ pursuant to rule 485(a)(2)
- --------
Registrant has elected to register an indefinite number of securities pursuant
to Rule 24f-2. On or about February 6, 1996, registrant filed its Rule 24f-2
Notice for the year ended December 31, 1995.
_________________________________________________________________
Page 1 of 46 sequential pages (including exhibits)
The index of exhibits is on sequential page 27
<PAGE>
The L. Roy Papp Stock Fund Inc.
Cross-reference sheet pursuant to rule 495(a) of Regulation C
Part A (Prospectus)
Item Location or Caption*
- ---- -------------------
1(a) & (b) Front Cover
2(a) Fund Expenses
(b) & (c) Not Applicable
3(a) Financial Highlights
(b) Not Applicable
(c) Other Information
4(a)(i) Other Information
(ii) Investment Objective; Investment Methods
and Risks
(b) Investment Restrictions
(c) Investment Methods and Risks
5(a) Management of the Fund
(b) Management of the Fund
Investment Advisory Agreement
(c) Investment Advisory Agreement
(d) Not Applicable
(e) Final Page
(f) Fund Expenses; Investment Advisory Agreement
(g) Not Applicable
5A The information required is included in
registrant's most recent Annual Report to Shareholders
6(a) Other Information
(b) - (d) Not Applicable
(e) Other Information
(f) Distributions
(g) Federal Income Tax
7 Purchasing Shares
(a) Not Applicable
(b) Determination of Net Asset Value
Purchasing Shares
(c) Not Applicable
(d) Front Cover
(e) & (f) Not Applicable
8(a) Redeeming Shares
(b) Purchasing Shares
(c) & (d) Redeeming Shares
9 Not Applicable
<PAGE>
Part B (Additional Information Statement)
Item Location or Caption*
- ---- -------------------
10(a) & (b) Front Cover
11 Front Cover
12 Not Applicable
13(a) - (c) Investment Policies and Restrictions
Investment Methods and Risks (in the prospectus)
(d) Portfolio Transactions
14(a) & (b) Directors and Officers
Management of the Fund (in the prospectus)
(c) Not Applicable
15(a) Not Applicable
(b) & (c) Certain Shareholders
16(a) (i) (ii) Management of the Fund (in the prospectus)
Investment Advisory Agreement (in the prospectus)
(a) (iii), (b) Investment Adviser; Investment Advisory
Agreement (in the prospectus)
(c) - (g) Not Applicable
(h) Final page of prospectus
(i) Transfer Agent
17(a) Portfolio Transactions
(b) Not Applicable
(c) & (d) Portfolio Transactions
(e) Not Applicable
18(a) & (b) Not Applicable
19(a) Purchasing and Redeeming Shares
(b) Purchasing and Redeeming Shares; Additional
Information (financial statements)
(c) Purchasing and Redeeming Shares
20 Additional Tax Information
21 Not Applicable
22(a) Not Applicable
(b) (i) Performance Information
(ii) & (iii) Not Applicable
(iv) Performance Information
23 Additional Information
- -------------
* References are to captions within the part of the registration statement to
which the particular item relates except as otherwise indicated.
<PAGE>
Prospectus
April 30, 1996
[LOGO]
THE L. ROY PAPP STOCK FUND, INC.
4400 North 32nd Street, Suite 280
Phoenix, Arizona 85018
(602)956-1115
(800)421-4004
INVESTMENT OBJECTIVE: LONG-TERM CAPITAL GROWTH
- Minimum Investment -
Initial Purchase $5,000
Subsequent Purchases and
Individual Retirement Accounts (IRAs) 1,000
NO SALES OR REDEMPTION CHARGES
(A pure no-load fund)
This prospectus sets forth concisely information a prospective investor should
know before investing in The L. Roy Papp Stock Fund, Inc. (the "Fund"). Please
retain it for future reference. An Additional Information Statement regarding
the Fund dated the date of this prospectus has been filed with the Securities
and Exchange Commission and (together with any supplement to it) is incorporated
by reference. The Additional Information Statement may be obtained at no charge
by writing or telephoning the Fund at its address or telephone number shown
above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Fund Expenses 3
Financial Highlights 4
Investment Objective 5
Investment Methods and Risks 5
Investment Restrictions 5
Purchasing Shares 6
Redeeming Shares 7
Determination of Net Asset Value 8
Management of the Fund 8
Investment Advisory Agreement 9
Distributions 10
Federal Income Tax 10
Other Information 11
</TABLE>
2
<PAGE>
FUND EXPENSES
- -------------
The following table illustrates all expenses and fees that a shareholder of the
Fund will bear, directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases................................. None
Sales Load Imposed on Reinvested Dividends...................... None
Deferred Sales Load............................................. None
Redemption Fees................................................. None
Exchange Fees................................................... None
Annual Fund Operating Expenses
(as percentages of average daily net assets)
Management Fee.................................................. 1.0%
12b-1 Fees...................................................... None
Other Expenses.................................................. 0.17%
Total Fund Operating Expenses (after any expense
reimbursement).................................................. 1.17%
Example:
The investor would pay the following expenses on a $1,000 investment in the Fund
assuming (1) a 5% annual rate of return, (2) continuance of the above operating
expense percentage, (3) reinvestment of all distributions to shareholders, and
(4) redemption at the end of each period.
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
$13 $41 $69 $150
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
3
<PAGE>
FINANCIAL HIGHLIGHTS:
- --------------------
Per share income and capital changes (for a share outstanding throughout the
period)
The following information has been audited by Arthur Andersen LLP., independent
auditors, for the years ended December 31, 1995, 1994, and 1993, and by other
auditors for prior periods, whose reports thereon are unqualified. The audited
financial statements of the Fund and the auditor's report thereon are contained
in the Fund's 1995 Annual Report, which may be obtained from the Fund upon
request at no cost. The Annual Report also includes information about the
Fund's investment performance.
<TABLE>
<CAPTION>
Years Ended December 31, Period Ended
--------------------------------------------------------------------------------- December 31,
1995 1994 1993 1992 1991 1990 1989 (A)
------------ ------------ ------------ ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $ 14.63 $ 14.98 $ 14.96 $ 13.45 $ 10.42 $ 10.38 $ 10.00
Income from Investment
Operations:
Net investment
income .07 .13 .13 .13 .15 .16 .02
Net realized and
unrealized (loss)
gain on investments 4.73 (.35) .11 1.68 3.46 .09 .38
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total from Investment
Operations 4.80 (.22) .24 1.81 3.61 .25 .40
Less Distributions:
Dividend from net
investment income (.07) (.13) (.13) (.13) (.15) (.16) (.02)
Distribution of net
realized gain (.07) - (.09) (.17) (.43) (.05) -
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total Distributions (.14) (.13) (.22) (.30) (.58) (.21) (.02)
Net Asset Value,
end of period $ 19.29 $ 14.63 $ 14.98 $ 14.96 $ 13.45 $ 10.42 $ 10.38
=========== =========== =========== =========== =========== ========== ==========
Total Return 32.93% (1.46)% 1.65% 13.54% 33.79% 2.60% 3.99%
=========== =========== =========== =========== =========== ========== ==========
Ratios/Supplemental
Data:
Net assets, end of
period $44,508,543 $36,577,759 $39,522,420 $22,874,733 $13,367,176 $6,104,345 $1,322,532
Expenses to average
net assets (B) 1.17% 1.19% 1.25% 1.25% 1.25% 1.25% 1.25%*
Net investment income
to average net
assets (C) 1.60% 2.08% 2.22% 2.28% 2.46% 2.82% 2.23%*
Portfolio turnover rate 22.39% 20.00% 15.00% 11.00% 4.00% 28.00% 0.00%
</TABLE>
* Annualized
(A) From the date of commencement of operations (November 29, 1989).
(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 1.25%,
1.26%, 1.35%, 1.92% and 1.80% for the years ended December 31, 1993, 1992,
1991, 1990 and the period ended December 31, 1989, respectively.
(C) Computed giving effect to investment adviser's expense limitation
undertaking.
4
<PAGE>
INVESTMENT OBJECTIVE
- --------------------
The Fund invests with the objective of long-term capital growth. The Fund's
investment objective is a fundamental policy that may not be changed without
shareholder approval. The investment objective is pursued as described
immediately below.
INVESTMENT METHODS AND RISKS
- ----------------------------
The Fund invests in common stocks. It may also invest in securities
convertible into common stocks to the extent of not more than 5% of net assets
(valued at time of investment). It seeks to purchase the shares of companies
that it regards as having excellent prospects for capital appreciation (measured
on an overall basis by such considerations as earnings growth over extended
periods of time, long-term dividend growth, above-average profitability created
through operating efficiency rather than financial leverage, and cash flows that
appear to confirm the sustainability of growth) at a price, relative to the
market as a whole, which does not fully reflect the superiority of a particular
company. The Fund is not designed for investors seeking income rather than
capital appreciation. Investments will not be limited by ratings or other
external criteria of quality, and investments may vary in quality measured by
such criteria, and may include speculative securities. Portfolio securities
include only issues traded in the United States on stock exchanges or in the
Nasdaq National Market. Once purchased, the shares of such companies are
ordinarily retained 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. Accordingly, it is expected that the Fund's
annual portfolio turnover rate will be less than that of most mutual funds that
invest primarily in common stocks.
Under normal circumstances, substantially all of the Fund's assets will be
invested in common stocks and, to the extent of not more than 5% of net assets
(valued at time of investment), in securities convertible into common stocks.
However, the Fund may invest up to 100% of its assets in United States
government securities, or hold cash or cash equivalents, if a temporary
defensive position is considered by the investment adviser to be advisable. To
that extent, the Fund would not be invested for the purpose of achieving its
investment objective.
The Fund is not intended to present a balanced investment program. It is not
intended to be a vehicle for short-term trading, but is intended for investment
for the long-term. The securities in which the Fund invests are subject to the
risks inherent in the respective portfolio companies and to market fluctuations,
and there can be no assurance that the Fund will achieve its investment
objective.
INVESTMENT RESTRICTIONS
- -----------------------
The Fund will not:
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;
5
<PAGE>
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.
These restrictions cannot be changed without the approval of the holders of a
"majority of the outstanding voting securities" as defined in the Investment
Company Act of 1940. All of the Fund's investment restrictions are set forth in
the Additional Information Statement.
PURCHASING SHARES (see application accompanying prospectus)
- -----------------
Shares of the Fund are purchased at the net asset value per share next
determined after receipt of the purchase order, as described under
"Determination of Net Asset Value." There are no sales commissions or
underwriting discounts. The minimum initial investment is $5,000, except for
Individual Retirement Accounts (IRAs) and minimum subsequent investments are
$1,000, excluding reinvestments of dividends and capital gains distributions.
To purchase shares, complete and sign the Share Purchase Application and mail
it, together with a check for the total purchase price, to The L. Roy Papp Stock
Fund, Inc., 4400 North 32nd Street, Suite 280, Phoenix, AZ 85018. The purchase
price is the net asset value per share as described under "Determination of Net
Asset Value".
Each investment in shares of the Fund, including dividends and capital gains
distributions reinvested in Fund shares, is acknowledged by a statement showing
the number of shares purchased, the net asset value at which the shares are
purchased, and the new balance of Fund shares owned. The Fund does not issue
stock certificates for the shares. Share balances for full and fractional
shares are carried in book entry form.
Shares may be purchased or redeemed directly through the Fund or through an
investment dealer, bank or other institution. The Fund may enter into an
arrangement with such an institution allowing the institution to process
purchase orders or redemption requests for its customers with the Fund on an
expedited basis, including requesting share redemptions by telephone. Although
these arrangements might permit one to effect a purchase or redemption of Fund
shares through the institution more quickly than would otherwise be possible,
the institution may impose charges for its services. Those charges could
constitute a significant portion of a smaller account, and might not be in a
shareholder's best interest. Shares of the Fund may be purchased or redeemed
directly from the Fund without imposition of any charges other than those
described in the prospectus.
Some financial institutions that maintain nominee accounts with the Fund for
their clients for whom they hold Fund shares charge an annual fee of up to 0.35%
of the average net assets held in such accounts for accounting, servicing, and
distribution services they provide with respect to the underlying Fund shares.
Such fees are paid by the Adviser.
The Fund reserves the right not to accept purchase orders under circumstances
or in amounts considered disadvantageous to existing shareholders.
6
<PAGE>
REDEEMING SHARES
- ----------------
The Fund will redeem all or any part of shares owned upon written request
delivered to the Fund at 4400 North 32nd Street, Suite 280, Phoenix, AZ 85018.
The redemption request must:
(1) specify the number of shares or dollar amount to be redeemed, if less than
all shares are to be redeemed;
(2) be signed by all owners exactly as their names appear on the account;
(3) include a signature guarantee from any "eligible guarantor institution" as
defined by the rules under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies and
savings associations. A notary public is not an eligible guarantor; and
(4) be accompanied by any stock certificate(s) representing the shares to be
redeemed, if they are represented by certificates.
In the case of shares registered in the name of a corporation, the redemption
request must be signed in the name of the corporation by an officer whose title
must be stated, and a certified bylaw provision or resolution of the board of
directors authorizing the officer to so act must be furnished. In the case of a
trust or a partnership, the signature must include the name of the registered
shareholder and the title of the person signing on its behalf. Under certain
circumstances, before the shares can be redeemed, additional documents may be
required in order to verify the authority of the person seeking to redeem.
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 the cost, depending upon
the value of the Fund's portfolio securities at the time of redemption. If the
net asset value of the shares in an account is less than $1,000 as a result of
previous redemptions and not market price declines, the Fund may notify the
registered holder that unless the account value is increased to at least the
minimum within 60 days the Fund will redeem all shares in the account and pay
the redemption price to the registered holder.
Payment for shares redeemed is made within seven days after receipt by the
Fund of a request for redemption in good order. However, if shares are redeemed
immediately after they are purchased, the Fund may delay paying the redemption
proceeds only until the shareholder's check for the purchase price has been
cleared, which may take up to 15 days. The Fund reserves the right to suspend
or postpone redemptions during any period when (a) trading on the New York Stock
Exchange is restricted, as determined by the Securities and Exchange Commission,
or that Exchange is closed for other than customary weekend and holiday
closings, (b) the Commission has by order permitted such suspension, or (c) an
emergency, as determined by the Commission, exists making disposal of portfolio
securities or valuation of net assets of the Fund not reasonably practicable.
7
<PAGE>
DETERMINATION OF NET ASSET VALUE
- --------------------------------
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 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 net asset value next determined after receipt of the
order.
The net asset value of a share of the Fund is determined as of the close of
trading on the New York Stock Exchange, currently 4:00 p.m. New York City time,
on any day on which that Exchange is open for trading, by dividing the market
value of the Fund's assets, less its liabilities, by the number of shares
outstanding, and rounding the result to the nearest full cent.
MANAGEMENT OF THE FUND
- ----------------------
The Board of Directors has overall responsibility for the conduct of the
Fund's affairs. The directors of the Fund, including those directors who are
also officers, and their principal business activities during the past five
years are:
L. Roy Papp, Chairman and director. Partner, L. Roy Papp & Associates
(investment manager).
Harry A. Papp, CFA, President and director. Partner, L. Roy Papp & Associates.
Robert L. Mueller, Vice President, Secretary and director.
Partner, L. Roy Papp & Associates.
Rosellen C. Papp, CFA, Vice President, Treasurer and director.
Partner, L. Roy Papp & Associates.
Bruce C. Williams, CFA, Vice President and director.
Partner, L. Roy Papp & Associates.
James K. Ballinger, director. Director of the Phoenix Art Museum.
Amy S. Clague, director. Partner, Boyd and Clague (bookkeeping services for
small companies).
Each of the following is an "interested person" of the Fund (as defined in the
Investment Company Act of 1940): L. Roy Papp as an officer of the Fund and a
partner of its investment adviser, L. Roy Papp & Associates; Harry A. Papp and
Rosellen C. Papp, as officers of the Fund, partners of the investment adviser
and as the son and daughter-in-law, respectively, of L. Roy Papp; Bruce C.
Williams as a partner of the investment adviser and an officer of the Fund;
Robert L. Mueller as a partner of the investment adviser and as an officer of
the Fund. All but Mrs. Clague and Mr. Ballinger are also personnel of the
investment adviser.
8
<PAGE>
The address of Messrs. L. Roy Papp, Harry A. Papp, Robert L. Mueller, and
Bruce C. Williams, and Ms. Rosellen C. Papp is 4400 North 32nd Street - Suite
#280, Phoenix, Arizona 85018; the address of Mr. Ballinger is 1625 North
Central Avenue, Phoenix, Arizona 85004; and the address of Mrs. Clague is 326
East Kaler Drive, Phoenix, Arizona 85020.
L. Roy Papp, Harry A. Papp and Robert L. Mueller are members of the executive
committee, which has authority during intervals between meetings of the Board of
Directors to exercise the powers of the Board, with certain exceptions.
Directors not affiliated with the investment adviser and not officers of the
Fund receive from the Fund an attendance fee of $800 for each meeting of the
Board of Directors attended.
The following are Vice Presidents of the Fund: George D. Clark, Jr., Jeffrey
N. Edwards, Victoria S. Cavallero, and Robert L. Hawley. Julie A. Hein is
Assistant Treasurer of the Fund. Mr. Clark has been a partner or associate of L.
Roy Papp & Associates since April, 1987. Mr. Edwards has been a partner or
associate of L. Roy Papp & Associates since August, 1987. Ms. Cavallero has
been a partner or associate of L. Roy Papp & Associates since September, 1987.
Mr. Hawley has been a partner or associate of L. Roy Papp & Associates since
June, 1993. Ms. Hein has been a partner or associate of L. Roy Papp &
Associates since 1989.
INVESTMENT ADVISORY AGREEMENT
- -----------------------------
L. Roy Papp & Associates serves as investment adviser to the Fund. L. Roy
Papp and Rosellen C. Papp, partners of that firm, manage the portfolio of the
Fund. Except for two years when he was 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.
The firm of L. Roy Papp & Associates is also investment adviser to
individuals, trusts, retirement plans, endowments, and foundations. Assets
under management exceed $589 million. The firm also acts as investment adviser
to Papp America-Abroad Fund, Inc. which commenced operations in 1991 and whose
assets approximate $17.5 million.
Subject to the overall authority of the Fund's Board of Directors, the adviser
furnishes continuous investment supervision and management to the Fund under an
investment advisory agreement.
The investment adviser 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. On days for which the values of the Fund's net assets
are not determined, the fee is accrued on the most recently determined net
assets adjusted for subsequent daily income and expense accruals. This fee is
higher than fees paid by most other mutual funds, but the adviser has obligated
itself to reimburse the Fund to the extent the 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.
Under the agreement, the investment adviser furnishes at its own expense
office space to the Fund and all necessary office facilities, equipment, and
personnel for managing the assets of the Fund.
9
<PAGE>
The investment adviser also pays all expenses of marketing shares of the Fund,
all expenses in determination of daily price computations, placement of
securities orders and related bookkeeping.
The Fund pays all expenses incident to its operations and business not
specifically assumed by the investment adviser, including expenses relating to
custodial, legal, and auditing charges; printing and mailing reports and
prospectuses to existing shareholders; taxes and corporate fees; maintaining
registration of the Fund under the Investment Company Act of 1940 and
registration of its shares under the Securities Act of 1933; and qualifying and
maintaining qualification of its shares under the securities laws of certain
states.
DISTRIBUTIONS
- -------------
The Fund intends to distribute to shareholders substantially all net
investment income and any net capital gains realized from sales of the Fund's
portfolio securities.
Dividends and capital gain distributions, if any, are reinvested in additional
shares of the Fund unless the shareholder has requested in writing to have them
paid by check.
FEDERAL INCOME TAX
- ------------------
The Fund intends to continue to qualify as a regulated investment company
under the Internal Revenue Code so as to be relieved of federal income tax on
its capital gains and net investment income currently distributed to its
shareholders. 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 regardless of the length of time shares in
the Fund have been held. Distributions will be taxable, whether received in
cash or reinvested in shares of the Fund.
Each shareholder will be advised annually as to the source of distributions
for tax purposes. A shareholder who is not subject to income taxation will not
be required to pay tax on distributions received.
If shares are purchased shortly before a record date for a distribution the
shareholder will, in effect, receive a return of a portion of his investment,
but the distribution will be taxable to him even if the net asset value of the
shares is reduced below the shareholder's cost. However, for federal income tax
purposes the original cost would continue as the tax basis. If shares are
redeemed within six months, any loss on the sale of those shares would be long-
term capital loss to the extent of any distributions of long-term capital gains
that the shareholder has received on those shares.
If a shareholder fails to furnish his social security or other tax
identification number or to certify properly that it is correct, the Fund may be
required to withhold federal income tax at the rate of 31% ("backup
withholding") from dividend, capital gain and redemption payments to him.
Dividend and capital gain payments may also be subject to backup withholding if
the shareholder fails to certify properly that he is not subject to backup
withholding due to the under-reporting of certain income. These certifications
are contained in the Share Purchase Application which should be completed and
returned to the Fund when the initial investment is made.
10
<PAGE>
OTHER INFORMATION
- -----------------
The Fund was incorporated in Maryland on September 15, 1989, and commenced
operations as an open-end diversified management investment company on November
29, 1989. Each share of capital stock, $.01 par value, is entitled to share pro
rata in any dividends and other distributions on shares declared by the 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.
The Fund issues annual reports to shareholders containing financial statements
audited by its independent auditors, Arthur Andersen LLP. The Fund also issues
interim quarterly reports containing lists of securities owned by the Fund.
The Fund may provide information about its total return and average annual
total return in letters to shareholders or in sales materials. Total return is
the percentage change in value during the period of an investment in the Fund,
including the value of shares acquired through reinvestment of all dividend and
capital gains distributions. Average annual total return is the average annual
compounded rate of change in value represented by the total return for the
period. Performance quotations for any period when the investment adviser has
reimbursed expenses pursuant to its expense limitation obligation will be
greater than if the limitation had not been in effect. The Fund's performance
may also be compared to various indices. See the Additional Information
Statement for a more complete explanation.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, and the Fund's operating expenses. Investment performance
also reflects the risks associated with the Fund's investment objective and
policies. These factors should be considered when comparing the Fund's
investment results to those of other mutual funds and other investment vehicles.
According to the laws of Maryland, under which the Fund is incorporated, and
the Fund's bylaws, the Fund is not required to hold an annual meeting of
shareholders unless required to do so under the Investment Company Act. The
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 the 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 shareholder
communication.
Inquiries regarding the Fund should be directed to the Fund at its address or
telephone number shown on the front cover.
11
<PAGE>
The L. Roy Papp Stock Fund, Inc.
(a pure no-load fund)
Investment Adviser
L. Roy Papp & Associates
4400 North 32nd Street
Suite 280
Phoenix, AZ 85018
Telephone: (602) 956-0980
Custodian
First Interstate Bank of Arizona, N.A.
100 West Washington Street
Phoenix, AZ 85003
Transfer and Dividend Disbursing Agent
L. Roy Papp & Associates
4400 North 32nd Street
Suite 280
Phoenix, AZ 85018
Independent Auditors
Arthur Andersen LLP
Two North Central Avenue
Phoenix, AZ 85004
Legal Counsel
Bell, Boyd & Lloyd
70 West Madison Street
Chicago, IL 60602
12
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
[LOGO]
Additional Information Statement
--------------------------------
April 30, 1996
4400 North 32nd Street - Suite #280
Phoenix, Arizona 85018
Phone (602) 956-1115
(800) 421-4004
________________________________
Table of Contents
Additional Information...........................................1
Investment Policies and Restrictions.............................2
Investment Adviser...............................................3
Directors and Officers...........................................4
Performance Information..........................................4
Purchasing and Redeeming Shares..................................5
Additional Tax Information.......................................5
Portfolio Transactions...........................................5
Custodian........................................................6
Transfer Agent...................................................6
Certain Shareholders.............................................7
_______________________________
Additional Information
- ----------------------
This Additional Information Statement is not a prospectus, but provides
information that should be read in conjunction with the Fund's prospectus dated
April 30, 1996 and any supplement thereto.
The prospectus may be obtained from the Fund at no charge by writing or
telephoning the Fund at its address or telephone number shown above.
The 1995 annual report of the Fund, a copy of which accompanies this
Additional Information Statement, contains financial statements, notes thereto,
and reports of independent auditors, all of which (but no other part of the
annual report) are incorporated herein by reference.
1
<PAGE>
Investment Policies and Restrictions
- ------------------------------------
The Fund invests with the objective of long-term capital growth. Although
income is considered in the selection of securities, the Fund is not designed
for investors seeking income rather than capital appreciation. Additional
information concerning the investment policies of the Fund is contained in the
prospectus under the captions "Investment Objective" and "Investment Methods and
Risks", which is incorporated herein by reference.
In pursuing its investment objective, the Fund will not:
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);
2
<PAGE>
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 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;
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.
All 19 restrictions listed above are fundamental policies, and may be changed
only with the approval of a "majority of the outstanding voting securities" as
defined in the Investment Company Act.
Investment Adviser
- ------------------
Information on the Fund's investment adviser, L. Roy Papp & Associates, is
set forth in the prospectus under "Management of the Fund" and "Investment
Advisory Agreement", and is incorporated herein by reference. During the fiscal
periods ended December 31, 1995, 1994, and 1993 the Fund paid management fees of
$404,846, $375,888, and $342,650, respectively. During the same periods, the
Adviser reimbursed the Fund for expenses in excess of the applicable expense
limitations in the following amounts: 1993, $1,939. No reimbursement was
required in 1994 or 1995.
3
<PAGE>
Directors and Officers
- ----------------------
Information about the directors and officers of the Fund and their
principal business activities during the past five years is set forth in the
prospectus under "Management of the Fund", and is incorporated herein by
reference.
All of the directors, except James K. Ballinger and Amy S. Clague, are
partners of L. Roy Papp & Associates, the Fund's investment adviser, and serve
without any compensation from the Fund. The following table sets forth
compensation paid by the Fund to Mr. Ballinger and Mrs. Clague during the fiscal
year ended December 31, 1995. The Fund has no pension or retirement plan.
Aggregate Total Compensation from Fund
Compensation and Papp America-Abroad Fund
Name of Director From the Fund Paid to Directors
- ---------------- ------------- ----------------------------
James K. Ballinger $3,000.00 $5,000.00
Amy S. Clague $2,250.00 $3,750.00
--------- ---------
Performance Information
- -----------------------
From time to time the Fund 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(1 + T)/n/
Where: P = the amount of an assumed initial investment in Fund shares
T = average annual total return
n = number of years from initial investment to the end of the
period
ERV = ending redeemable value of shares held at the end of the
period
Applying the above method of computation to the operations of the Fund for the
one year and five years ended December 31, 1995 and from November 29, 1989 (the
commencement of the Fund's operations) through December 31, 1995, the Average
Annual Total Return would be 32.9%, 15.1% and 13.5%, respectively. Total Return
for the same periods was 32.9%, 102.4% and 115.8%, respectively.
The Fund imposes no sales charge and pays no distribution expenses. Income
taxes are not taken into account. The 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
the 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 Fund's performance may be compared
with that of market indices and other mutual funds. In addition to the above
computations, the Fund
4
<PAGE>
might use comparative performance as computed in a ranking determined by Lipper
Analytical Services, Inc., Morningstar, Inc., or that of another service.
Purchasing and Redeeming Shares
- -------------------------------
Purchases and redemptions are discussed in the Fund's prospectus under the
headings "Purchasing Shares" and "Redeeming Shares". All of that information is
incorporated herein by reference.
The 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, which information is incorporated herein by
reference.
Additional Tax Information
- --------------------------
See "Federal Income Tax" in the prospectus. All that information is
incorporated herein by reference.
Portfolio Transactions
- ----------------------
See "Management of the Fund" in the prospectus. The 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. However, there can be no assurance that the Fund will not exceed
this rate, and the portfolio turnover rate may vary from year to year.
Portfolio turnover for the year ended December 31, 1995 was 22.4%.
The investment adviser places portfolio transactions of the Fund with those
securities brokers and dealers that it believes will provide the best value in
transaction and research services for the Fund, either in a particular
transaction or over a period of time. Although some transactions involve only
brokerage services, some involve research services as well.
In valuing brokerage services, the investment 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 investment adviser makes a judgment of
the usefulness of research and other information provided by a broker to the
investment adviser in managing the Fund's investment portfolio. The
information, e.g., data or recommendations concerning particular securities,
relates to the specific transaction placed with the broker. The extent, if
5
<PAGE>
any, to which the obtaining of such information may reduce the expenses of the
adviser in providing management services to the Fund is not determinable. In
addition, it is understood by the Board of Directors that other clients of the
investment adviser might also benefit from the information obtained for the
Fund, in the same manner that the Fund might also benefit from information
obtained by the investment adviser in performing services to others.
The reasonableness of brokerage commissions paid by the Fund in relation to
transaction and research services received is evaluated by the staff of the
investment adviser on an ongoing basis. The general level of brokerage charges
and other aspects of the Fund's portfolio transactions are reviewed periodically
by the Board of Directors.
Transactions of the Fund in the over-the-counter market are executed with
primary market makers acting as principal except where it is believed that
better prices and execution may be obtained otherwise.
Subject to the overriding objective of seeking the best value in
transaction and research services for the Fund, the adviser may select those
brokers and dealers who have made recommendations resulting in sales of Fund
shares.
Although investment decisions for the Fund 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 the Fund and one or
more other advisory clients. If both the 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.
During the year ended December 31, 1995, brokerage commissions paid by the
Fund totaled $23,856 on portfolio transactions aggregating $21,247,232. All
commissions were paid to discount brokers.
Custodian
- ---------
First Interstate Bank of Arizona, N.A., P.O. Box 53434, Phoenix, Arizona
85018, is the custodian for the Fund. It is responsible for holding all
securities and cash of the Fund, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Fund, and performing
other administrative duties, all as directed by authorized persons of the Fund.
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 Fund. The Fund has authorized the custodian to deposit certain
portfolio securities in central depository systems as permitted under federal
law. The Fund 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 Fund, also acts as
transfer, dividend disbursing, and shareholder servicing agent for the Fund
pursuant to a written agreement with the Fund. 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
6
<PAGE>
administration agent functions in connection with the issuance, transfer and
redemption of the Fund's shares, and maintaining necessary records in accordance
with applicable laws, rules and regulations.
For its services L. Roy Papp & Associates receives from the Fund a monthly
fee of $.75 for each shareholder account of the Fund, $.50 for each dividend
paid on a shareholder account, and $1.00 for each purchase (other than by
reinvestment, transfer or redemption) of shares of the Fund. The Board of
Directors of the Fund has determined the charges by L. Roy Papp & Associates to
the Fund are comparable to the charges of others performing similar services.
Certain Shareholders
- --------------------
At April 1, 1996, no person was known by the Fund to own of record and
beneficially in excess of 5% of the outstanding shares of capital stock of the
Fund. At that date, 141,686 shares, or 6% of the outstanding shares, were owned
by the directors and officers of the Fund as a group.
7
<PAGE>
[LOGO]
THE L. ROY PAPP STOCK FUND, INC.
A NO-LOAD FUND
ANNUAL REPORT
DECEMBER 31, 1995
Managed by:
L. Roy Papp & Associates
4400 North 32nd Street
Suite 280 Phoenix, AZ 85018
(602)956-1115
(800)421-4004
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE L. ROY PAPP STOCK FUND, INC. AND
THE STANDARD AND POOR'S 500 STOCK INDEX
===========================================
AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------
Since
1 Year 5 Year Inception
-------------------------------------------
L. Roy Papp
Stock Fund 32.93% 15.13% 13.47%
-------------------------------------------
S & P 500 37.58% 16.60% 13.44%
===========================================
[PERFORMANCE GRAPH APPEARS HERE]
[PLOT POINTS TO COME]
2
<PAGE>
The L. Roy Papp Stock Fund, Inc.
Dear Fellow Shareholder:
Our Fund had fine results in 1995. On a total return basis, we were up 32.9%
for the year. Since inception, a little more than six years ago, we were up
114.8%. As the chart on the opposite page indicates, our long-term record
continues to surpass that of the Standard & Poor's 500 Stock Index.
In my last Annual Report to you, I noted that in 1994 we focused on building
meaningful positions in companies that are in the forefront of technological
innovation (Intel, Microsoft and Motorola) and reducing our holdings of those
consumer product companies which seem to rely more on price increases than
volume growth. We continued along this path in 1995 adding Verifone, which
makes the machine you slide your credit card into at the supermarket to record
your purchase, and Hewlett-Packard, which is already the fourth largest desktop
computer manufacturer despite having been in the business only for a few years.
Despite a weak fourth quarter occasioned by a spate of negative publicity, most
of these stocks outperformed the general stock market for the year.
Most important, however, was that we remained fully invested throughout the year
1995 and thus were able to fully participate in the remarkable increase in stock
prices. As you may have read in the newspapers, many of the market pundits
believed that stock prices would fall sharply and positioned themselves
accordingly. We disagreed with that assessment.
In my Views From Camelback Mountain letter dated December 31, 1994, I made the
following statement:
"I believe the economy will show a good steady growth for the next two or
three years. Interest rates will be more stable and climb less. I do expect
more inflation, but at a moderate rate. I continue to think stocks are
attractive for the long run and still offer the best long-term returns."
Even with the Federal Reserve cut in interest rates, I continue to believe that
our economy will grow only modestly this year. I think it will be slow with
many complaints. We expect next year to be up too, and perhaps a little bit
stronger. I am not upset with a small reduction in the budget deficit. I am
concerned that a couple years from now inflation will be a little bit higher as
will interest rates. The stock market has started the year very strongly, and I
feel hopeful that stocks will go up the rest of the year at a modest pace.
However, I would be very cautious about cyclical stocks and very long bonds.
Best regards,
/s/ L. Roy Papp
L. Roy Papp, Chairman
February 8, 1996
P.S. Today the per share net asset value of our Fund is $20.25. 3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
The L. Roy Papp Stock Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of The L.
Roy Papp Stock Fund, Inc. (the Fund) as of December 31, 1995 and 1994, including
the schedule of portfolio investments as of December 31, 1995, and the related
statements of operations, and statements of changes in net assets for the two
years then ended, and the financial highlights for the three years 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. The
financial highlights of The L. Roy Papp Stock Fund, Inc. for each of the three
years in the three-year period ended December 31, 1992, and the period from
November 29, 1989 (date of commencement of operations) through December 31,
1989, were audited by other auditors whose report dated January 29, 1993,
expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, 1995, by correspondence with the custodian.
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 L.
Roy Papp Stock Fund, Inc. as of December 31, 1995 and 1994, and the results of
its operations and changes in its net assets for the two years then ended and
its financial highlights for the three years then ended, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
January 19, 1996.
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Market
Number Value
Common Stocks of Shares (Note 1)
- -------------------------------------------------------- --------- ------------
<S> <C> <C>
ETHICAL DRUGS (12.5%)
American Home Products Corporation
(Ethical and proprietary drugs) 11,000 $1,067,000
Merck & Company
(Ethical drugs and specialty chemicals) 49,000 3,221,750
Mylan Laboratories, Inc.
(Manufacturer of prescription generic drugs) 55,150 1,296,025
----------
5,584,775
----------
CONSUMER SERVICES (11.7%)
G&K Services Class A
(Uniform rental service) 75,000 1,912,500
Service Corporation International
(Funeral service; cemetery owner/operator) 75,000 3,300,000
----------
5,212,500
----------
DISTRIBUTORS (11.0%)
Marshall Industries, Inc.*
(Distributor of industrial electronic components) 109,000 3,501,625
W.W. Grainger
(Distributor and manufacturer of electric equipment) 21,200 1,404,500
----------
4,906,125
----------
FINANCIAL SERVICES (8.7%)
Northern Trust Corporation
(Bank specializing in trust services) 25,000 1,400,000
State Street Boston Corporation
(Provider of securities custodial services) 54,600 2,457,000
----------
3,857,000
----------
RETAIL STORES (8.4%)
Albertson's Inc.
(Regional retail grocery chain) 45,800 1,505,675
May Department Stores Company
(Department store operator) 20,000 845,000
Walgreen Company
(Retail drug store chain) 47,000 1,404,125
----------
3,754,800
----------
COMPUTERS AND SOFTWARE (7.8%)
Hewlett-Packard Company
(Manufacturer of printers, computers and medical
electronic equipment) 11,000 921,250
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 20,000 1,135,000
Microsoft Corporation*
(Personal computer software) 16,000 1,404,000
----------
3,460,250
----------
CONSUMER PRODUCTS (6.9%)
Clorox Company
(Manufacturer of bleach and other consumer products) 14,600 1,045,725
Procter & Gamble Company
(Household, personal care, and food products) 14,700 1,220,100
Sara Lee Corporation
(International consumer products) 26,000 828,750
----------
3,094,575
----------
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of this schedule.
5
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Market
Number Value
Common Stocks (continued) of Shares (Note 1)
- -------------------------------------------------------------------- --------- ------------
<S> <C> <C>
TELECOMMUNICATIONS (5.9%)
Motorola, Inc.
(Manufacturer of electronic equipment) 46,000 2,622,000
-----------
ELECTRICAL EQUIPMENT (4.3 %)
Pitney Bowes, Inc.
(Manufacturer of postage meters) 14,600 686,200
Emerson Electric Company
(Manufacturer of electrical and electronic products and systems) 15,000 1,226,250
-----------
1,912,450
-----------
RESTAURANTS (4.0%)
McDonald's Corporation
(Fast food restaurants and franchising) 39,000 1,759,875
-----------
ENVIRONMENTAL/RECYCLING (1.9%)
Bandag, Inc. Class A
(Provider of tire retreading equipment and materials) 7,100 376,300
Intermagnetics General*
(Manufacturer of superconductive magnetic systems
and environmentally acceptable refrigerant) 22,500 472,500
-----------
848,800
-----------
MISCELLANEOUS (8.7%)
International Flavors & Fragrances, Inc.
(Creator and manufacturer of flavors and fragrances) 20,000 960,000
Mattel, Inc.
(Toy manufacturer) 64,000 1,968,000
Verifone, Inc.*
(Supplier of transaction automation systems) 33,000 944,625
-----------
3,872,625
-----------
TOTAL COMMON STOCKS - 99.3% 44,219,525
CASH AND OTHER ASSETS, LESS LIABILITIES - .7% 289,018
-----------
NET ASSETS - 100% $44,508,543
===========
NET ASSET VALUE PER SHARE
(Based on 2,307,757 shares outstanding at December 31, 1995) $19.29
===========
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of this schedule.
6
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Investment in securities at market value (identified
cost $29,651,819 and $32,814,161 at December 31,
1995 and 1994, respectively) (Note 1) $44,219,525 $36,288,475
Cash 411,707 269,856
Dividends and interest receivable 63,889 78,710
----------- -----------
Total assets $44,695,121 $36,637,041
=========== ===========
LIABILITIES
Redemption payable $ 186,578 $ 59,282
----------- -----------
Total liabilities 186,578 59,282
----------- -----------
NET ASSETS
Paid-in capital applicable to 2,307,757 outstanding
shares at December 31, 1995 and 2,500,328
outstanding shares at December 31, 1994 29,940,837 33,104,504
Undistributed net realized loss on investments - (1,059)
Net unrealized gain on investments 14,567,706 3,474,314
----------- -----------
Net assets $44,508,543 $36,577,759
=========== ===========
Net Assets Value Per Share (net assets/share
outstanding) $ 19.29 $ 14.63
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 622,720 $ 763,730
Interest 23,975 17,599
----------- ----------
Total investment income 646,695 781,329
----------- ----------
EXPENSES:
Management fee (Note 3) 404,846 375,888
Filing fees 21,032 28,722
Accounting 12,700 13,625
Transfer agent fees 7,907 9,242
Directors' attendance fees 5,250 6,000
Custodial 8,281 5,831
Printing and postage 5,858 5,811
Legal 1,049 1,477
Other fees 5,393 1,762
----------- ----------
Total expenses 472,316 448,358
----------- ----------
Net investment income 174,379 332,971
----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Proceeds from sales of securities 12,294,010 9,421,746
Cost of securities sold 12,115,564 9,422,805
----------- ----------
Net realized gain (loss) on investments sold 178,446 (1,059)
Net change in unrealized gain (loss)
on investments 11,093,392 (921,745)
----------- ----------
Net realized and unrealized gain (loss)
on investments 11,271,838 (922,804)
----------- ----------
Net increase (decrease) in net assets resulting
from operations $11,446,217 $ (589,833)
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 174,379 $ 332,971
Net realized gain (loss) on investments sold 178,446 (1,059)
Net change in unrealized gain (loss) on investments 11,093,392 (921,745)
----------- -----------
Increase (decrease) in net assets resulting
from operations 11,446,217 (589,833)
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (174,379) (332,971)
Net realized gain on investments sold (177,387) -
----------- -----------
Total distribution to shareholders (351,766) (332,971)
----------- -----------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 2,657,765 3,951,287
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
net realized gain on investments sold 310,260 287,472
Payments for redemption of shares (6,131,692) (6,260,616)
----------- -----------
Decrease in net assets resulting
from shareholder transactions (3,163,667) (2,021,857)
----------- -----------
Total increase (decrease) in net assets 7,930,784 (2,944,661)
Net assets at beginning of the year 36,577,759 39,522,420
----------- -----------
Net assets at end of year $44,508,543 $36,577,759
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) SIGNIFICANT ACCOUNTING POLICIES:
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 good 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.
(a) Investment in Securities
For purposes of computing the net asset value of a share of the Fund, securities
traded on securities exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales prices at the time
of valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Other securities traded over-the-counter are valued at the most
recent bid quotations. Securities for which quotations are not available and
any other assets are valued at a fair value as determined in good faith by the
Board of Directors. The price per share for a purchase order or redemption
request is the net asset value next determined after receipt of the order.
The net asset value of a share of the Fund is determined as of the close of
trading on the New York Stock Exchange, currently 4:00 p.m. New York City time,
on any day on which that Exchange is open for trading, by dividing the market
value by the number of shares outstanding, and rounding the result to the
nearest full cent.
Investment transactions are accounted for on the trade date (the date the order
to buy or sell is executed). Dividend income is recorded on the ex-dividend
date and interest is recorded on the accrual basis. Realized gains and losses
from investment transactions and unrealized appreciation or depreciation are
calculated on the identified cost basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
10
<PAGE>
(b) Federal Income Taxes
The Fund's policy is to comply with the requirements of the Internal Revenue
Code which are applicable to regulated investment companies. The Code requires
that substantially all of the Fund's taxable income, as well as any net realized
gain on sales of investments, is to be distributed to the shareholders. The
Fund has complied with this policy and, accordingly, no provision for federal
income taxes is required.
(2) DIVIDENDS AND DISTRIBUTIONS:
Dividends and capital gain distributions are reinvested in additional shares of
the Fund unless the shareholder has requested in writing to be paid by check.
On December 21, 1995, a dividend of approximately $.029793 a share, aggregating
$68,704, was declared from net investment income earned during 1995. A
distribution was also declared from net realized long-term capital gains of
approximately $.076922 a share, aggregating $177,387. The dividend and
distribution were paid on December 29, 1995, to shareholders of record on
December 20, 1995.
On June 21, 1995, a dividend of approximately $.044 a share, aggregating
$105,675, was declared from net investment income earned during 1995. The
dividend was paid on June 30, 1995, to shareholders of record on June 20, 1995.
On December 21, 1994, a dividend of approximately $.061835 a share, aggregating
$154,296, was declared from net investment income earned during 1994. The
dividend was paid on December 30, 1994, to shareholders of record on December
20, 1994.
On June 22, 1994, a dividend of approximately $.0686 a share, aggregating
$178,675, was declared from net investment income earned during 1994. The
dividend was paid on June 30, 1994, to shareholders of record on June 22, 1994.
Dividends and distributions payable to its shareholders are recorded by the Fund
on the ex-dividend date. At December 31, 1994, there was an undistributed net
realized loss on investment transactions of $1,059. This loss was offset
against the net realized gains which were distributed in 1995.
(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 $7,907 and $9,242 in 1995 and 1994, respectively, from the
Manager for its services as shareholder services and transfer agent.
11
<PAGE>
The Fund's independent directors receive $750 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, investment transactions excluding short-term
investments were as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Purchases at cost $ 8,953,222 $7,423,574
Sales 12,294,010 9,421,746
</TABLE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1995, there were 5,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
<TABLE>
<CAPTION>
Proceeds Shares
------------ ---------
<S> <C> <C>
Year ended December 31, 1995
Shares issued $ 2,657,765 155,585
Dividends and distributions reinvested 310,260 16,810
Shares redeemed (6,131,692) (364,966)
----------- --------
Net decrease $(3,163,667) (192,571)
=========== ========
Year ended December 31, 1994
Shares issued $ 3,951,287 268,337
Dividends and distributions reinvested 287,472 19,941
Shares redeemed (6,260,616) (425,997)
----------- --------
Net decrease $(2,021,857) (137,719)
=========== ========
</TABLE>
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
<TABLE>
<CAPTION>
1995 1994
----------- ------------
<S> <C> <C>
Market value $44,219,525 $36,288,475
Original cost 29,651,819 32,814,161
----------- -----------
Net unrealized appreciation $14,567,706 $ 3,474,314
=========== ===========
</TABLE>
As of December 31, 1995, gross unrealized gains on investments in which market
value exceeded cost totaled $14,619,841 and gross unrealized losses on
investments in which cost exceeded market value totaled $52,135.
12
<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>
Years Ended December 31, Period Ended
---------------------------------------------------------------------------------- December 31,
1995 1994 1993 1992 1991 1990 1989 (A)
------------ ------------ ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $ 14.63 $ 14.98 $ 14.96 $ 13.45 $ 10.42 $ 10.38 $ 10.00
Income from Investment
Operations:
Net investment
income .07 .13 .13 .13 .15 .16 .02
Net realized and
unrealized (loss)
gain on investments 4.73 (.35) .11 1.68 3.46 .09 .38
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total from Investment
Operations 4.80 (.22) .24 1.81 3.61 .25 .40
Less Distributions:
Dividend from net
investment income (.07) (.13) (.13) (.13) (.15) (.16) (.02)
Distribution of net
realized gain (.07) - (.09) (.17) (.43) (.05) -
----------- ----------- ----------- ----------- ----------- ---------- ----------
Total Distributions (.14) (.13) (.22) (.30) (.58) (.21) (.02)
Net Asset Value,
end of period $ 19.29 $ 14.63 $ 14.98 $ 14.96 $ 13.45 $ 10.42 $ 10.38
=========== =========== =========== =========== =========== ========== ==========
Total Return 32.93% (1.46)% 1.65% 13.54% 33.79% 2.60% 3.99%
=========== =========== =========== =========== =========== ========== ==========
Ratios/Supplemental
Data:
Net assets, end of
period $44,508,543 $36,577,759 $39,522,420 $22,874,733 $13,367,176 $6,104,345 $1,322,532
Expenses to average
net assets (B) 1.17% 1.19% 1.25% 1.25% 1.25% 1.25% 1.25%*
Net investment income
to average net
assets (C) 1.60% 2.08% 2.22% 2.28% 2.46% 2.82% 2.23%*
Portfolio turnover rate 22.39% 20.00% 15.00% 11.00% 4.00% 28.00% 0.00%
</TABLE>
* Annualized
(A) From the date of commencement of operations (November 29, 1989).
(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 1.25%, 1.26%, 1.35%,
1.92% and 1.80% for the years ended December 31, 1993, 1992, 1991, 1990 and
the period ended December 31, 1989, respectively.
(C) Computed giving effect to investment adviser's expense limitation
undertaking.
13
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
DIRECTORS
James K. Ballinger L. Roy Papp
Amy S. Clague Rosellen C. Papp
Robert L. Mueller Bruce C. Williams
Harry A. Papp
OFFICERS
Chairman - L. Roy Papp President - Harry A. Papp
VICE PRESIDENTS
Victoria S. Cavallero Robert L. Mueller
George D. Clark, Jr. Rosellen C. Papp
Jeffrey N. Edwards Bruce C. Williams
Robert L. Hawley
SECRETARY - Robert L. Mueller
TREASURER - Rosellen C. Papp
ASSISTANT TREASURER - Julie A. Hein
INVESTMENT ADVISER
L. Roy Papp & Associates
4400 North 32nd Street, Suite 280
Phoenix, Arizona 85018
Telephone: (602) 956-1115
CUSTODIAN
First Interstate Bank of Arizona
100 West Washington Street
Phoenix, Arizona 85003
SHAREHOLDER SERVICES AND TRANSFER AGENT
L. Roy Papp & Associates
4400 North 32nd Street, Suite 280
Phoenix, Arizona 85018
Telephone: (602) 956-1115
(800) 421-4004
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2 North Central Avenue, Suite 1000
Phoenix, Arizona 85004
LEGAL COUNSEL
Bell, Boyd & Lloyd
70 West Madison Street
Chicago, Illinois 60602
This report is submitted for the general information of the shareholders of the
Fund. The report is not authorized for distribution to prospective investors in
the Fund unless it is accompanied or preceded by a currently effective
prospectus of the Fund. No sales charge to the shareholder or to the new
investor is made in offering the shares of the Fund.
<PAGE>
Part C
------
Other Information
-----------------
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
--------------------
(1) Financial statements included in Part B of this amendment (incorporated by
reference to 1995 annual report of registrant; a copy of that annual
report is attached hereto but, except for those portions incorporated by
reference, is furnished for the information of the Commission and is not
deemed to be filed as part of this amendment):
Schedule of portfolio investments - December 31, 1995
Report of independent auditors
Statements of assets and liabilities - December 31, 1995 and 1994
Statements of operations - years ended December 31, 1995 and 1994
Statements of changes in net assets - years ended December 31, 1995 and
1994
Notes to financial statements
(2) Financial statements included in Part C of this amendment:
None
Note: The following schedules have been omitted for the following reasons:
Schedule I - The required information is presented in the statement of
investments at December 31, 1995.
Schedules II, IV, and V - The required information is not present.
(b) Exhibits
1. Articles of Incorporation
2. Bylaws
3. None
C-1
<PAGE>
4. Form of stock certificate
5. Investment Advisory Agreement
6. None
7. None
8. Custodian Agreement
9. Transfer Agency Agreement with L. Roy Papp & Associates dated
November 7, 1989
10. Opinion and consent of Bell, Boyd & Lloyd
11. Consent of independent auditors dated April 24, 1996
12. None
13. Initial Subscription Agreement
13.1 New Account Purchase Application
14. None
15. None
16. Schedule of Computation of Performance Quotations
17. Financial Data Schedule
18. Not Applicable
Item 25. Persons Controlled By or Under Common Control with Registrant
- ------- -------------------------------------------------------------
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 captions "Management of the Fund" and "Investment Advisory Agreement"
and in the Additional Information Statement under the captions "Directors and
Officers" and "Investment Adviser" is incorporated by reference.
Item 26. Number of Holders of Securities
- ------- -------------------------------
Number of Record Holders
Title of Class At March 31, 1996
-------------- ------------------------
Capital Stock $.01 par value 1,001
Item 27. Indemnification
- ------- ---------------
Section 2-418 of the General Corporation Law of Maryland authorizes the
registrant to indemnify its directors and officers under specified
circumstances.
Section 17(h) of the Investment Company Act provides that neither the
articles of incorporation of the registrant, nor any other instrument pursuant
to which the registrant is organized or administered, shall contain any
provision that protects or purports to protect any director or officer of the
registrant against any liability to the registrant or its security holders to
which he 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 office.
C-2
<PAGE>
Section 9.01 of Article IX 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.
In the absence of a final decision on the merits by a court or other body
before which a proceeding was brought that a person to be indemnified
(indemnitee) was not liable by reason of his willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office, the registrant will not indemnify any person unless a determination
that the indemnitee was not so liable shall have been made on behalf of the
registrant by (a) vote of a majority of directors who are neither "interested
persons" of the registrant as defined in section 2(a)(19) of the Act nor parties
to the proceeding (disinterested, non-party directors), or (b) an independent
legal counsel in a written opinion. The registrant will not advance attorneys'
fees or other expenses incurred by an indemnitee in connection with a proceeding
unless the registrant receives an undertaking by or on behalf of the indemnitee
to repay the advance (unless it is ultimately determined that he is entitled to
indemnification) and (a) the indemnitee shall provide a security for his
undertaking, or (b) a majority of the disinterested, non-party directors of the
registrant, or an independent legal counsel in a written option, shall
determine, based on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the indemnitee
ultimately will be found entitled to indemnification.
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 issue.
Item 28. Business and Other Connections of Investment Adviser
- ------- ----------------------------------------------------
The information in the prospectus under the captions "Management of the
Fund" and "Investment Advisory Agreement" 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 29. Principal Underwriters
- ------- ----------------------
None
C-3
<PAGE>
Item 30. Location of Accounts and Records
- ------- --------------------------------
Rosellen C. Papp, Treasurer
Papp America-Abroad Fund, Inc.
4400 North 32nd Street, Suite 280
Phoenix, AZ 85018
Item 31. Management Services
- ------- -------------------
None
Item 32. Undertakings
- ------- ------------
a) Not applicable
b) Not applicable
c) Registrant undertakes to deliver to each person to whom a
prospectus is delivered, upon request and without charge, a copy
of Registrant's Annual Report to Shareholders.
The registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of a director or directors when requested
to do so by the record holders of at least 10% of the registrant's outstanding
common shares, and in connection with such meeting to comply with provisions of
section 16(c) of the Investment Company Act of 1940.
C-4
<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 registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this amendment
to the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Phoenix, and the State of Arizona on
the 26th day of April, 1996.
The L. Roy Papp Stock Fund, Inc.
By: /s/ L. Roy Papp
--------------------------
L. Roy Papp, Chairman
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the 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 )
- ------------------------- (principal executive and )
L. Roy Papp financial officer) )
)
)
/s/ Harry A. Papp Director and President )
- ------------------------- )
Harry A. Papp )
)
/s/ Robert L. Mueller Director, Vice President ) April 26, 1996
- ------------------------- and Secretary )
Robert L. Mueller )
)
/s/ Bruce C. Williams Director and Vice President )
- ------------------------- )
Bruce C. Williams )
)
/s/ Rosellen C. Papp Director, Vice President and )
- ------------------------- Treasurer (principal accounting )
Rosellen C. Papp officer) )
)
/s/ James K. Ballinger Director )
- ------------------------- )
James K. Ballinger )
)
/s/ Amy S. Clague Director )
- ------------------------- )
Amy S. Clague )
</TABLE>
<PAGE>
INDEX FOR EXHIBITS
FILED WITH THIS AMENDMENT
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1. Articles of Incorporation
2. Bylaws
3. None
4. Form of stock certificate
5. Investment Advisory Agreement
6. None
7. None
8. Custodian Agreement
9. Transfer Agency Agreement with L. Roy Papp & Associates dated
November 7, 1989
10. Opinion and consent of Bell, Boyd & Lloyd
11. Consent of independent auditors dated April 24, 1996
12. None
13. Initial Subscription Agreement
13.1 New Account Purchase Application
14. None
15. None
16. Schedule of Computation of Performance Quotations
17. Financial Data Schedule
18. Not Applicable
<PAGE>
EXHIBIT 1
THE L. ROY PAPP STOCK FUND, INC.
Articles of Incorporation
The undersigned, being a natural person and acting as incorporator, hereby
adopts the following articles of incorporation for the purpose of forming a
business corporation under and by virtue of the general laws of the state of
Maryland.
FIRST. Incorporation. The incorporator is R. James Gormley who is at
least eighteen years of age and whose address is 70 West Madison Street, Suite
3200, Chicago, Illinois 60602. He is forming the corporation named in these
articles of incorporation under the general laws of the state of Maryland.
SECOND. Name. The name of the corporation is The L. Roy Papp Stock Fund,
Inc.
THIRD. Purposes. The purposes for which the corporation is formed are:
1. To engage in the business of an open-end management investment
company.
2. To invest and reinvest in, to buy or otherwise acquire, to hold for
investment or otherwise, and to sell or otherwise dispose of:
a. Securities of all kinds, however evidenced, and rights or
warrants to acquire securities, of private and public companies,
corporations, associations, trusts and other enterprises and
organizations;
b. Obligations issued or guaranteed by national and state
governments and their instrumentalities and subdivisions;
c. Deposits in banks, savings banks, trust companies and savings and
loan associations;
d. Assets and interests other than securities or deposits.
FOURTH. Address and resident agent. The post office address of the
principal office of the corporation in the State of Maryland is c/o The
Corporation Trust, Incorporated, 32 South Street, Baltimore, Maryland 21202.
The name and post office address of the resident agent of the corporation in the
State of Maryland is The Corporation Trust, Incorporated, 32 South Street,
Baltimore, Maryland 21202. The resident agent is a Maryland Corporation.
FIFTH. Authorized stock. The total number of shares of stock which the
corporation initially shall have authority to issue is 5,000,000 shares, all of
which shall be capital stock, $.01 par value per share (capital stock), having
an aggregate par value of $50,000. The board of directors of the corporation
may, as long as the corporation is registered as an open-end investment company
under the Investment Company Act of 1940, increase or decrease the aggregate
number of shares of capital stock or the number of shares of stock of any class
that the corporation shall have authority to issue.
<PAGE>
SIXTH. Sale and redemption of shares.
A. Sale of shares. The board of directors may authorize the sale from
time to time of shares of capital stock, whether now or hereafter authorized,
for such consideration as the board of directors considers advisable, but not
less than either par value or the net asset value of the shares which is next
computed after the time of receipt of an unconditional order for purchase of the
shares, except as may be permitted by or pursuant to the Investment Company Act
of 1940 and other applicable law.
Stock may be issued in fractions of whole shares, to which attach pro rata
all of the rights of whole shares, including the right of voting and of receipt
of dividends, except that there shall be no right of receipt of a certificate
representing any fraction of a whole share.
B. Redemption of shares. Any stockholder of the corporation may at any
time require the corporation to redeem all or any part of the shares of capital
stock registered in the name of such stockholder, except as specified below, at
the net asset value of the shares which is next computed after the time of
receipt of an order for redemption of the shares in good form.
An order for redemption in good form shall mean receipt by the corporation
or its designated agent of a written unconditional and irrevocable instruction
of the stockholder to redeem, in form acceptable to the corporation or its
designated agent, together with any certificates which may have been issued
therefor, endorsed or accompanied by proper instrument of transfer, and such
other documents as the corporation or its designated agent may require.
Payment for shares redeemed shall be made within seven days after receipt
of an order for redemption of the shares in good form. However, the right of
redemption of shares may be suspended, and the payment for shares previously
redeemed may be postponed, by or under the authority of the board of directors
for the whole or any part of any period during which such suspension or
postponement is permitted by the Investment Company Act of 1940, or by rule or
order of the Securities and Exchange Commission pursuant to that Act.
The corporation shall have the right at any time without prior notice to
the stockholder to redeem shares of any stockholder for their then current net
asset value per share if at such time the shares registered in the name of the
stockholder have an aggregate net asset value of less than $2,500, subject to
such terms and conditions as the board of directors may approve, and subject to
the corporation's giving general notice to all stockholders of its intention to
avail itself of such right, either by publication in the corporation's
prospectus, if any, or by such other means as the board of directors may
determine.
Subject to the rules and regulations of the Securities and Exchange
Commission, the corporation may pay the redemption price in whole or in part by
a distribution in kind of securities from the portfolio of the corporation, in
lieu of money, valuing such securities at their value employed for determining
the net asset value governing such redemption price, and selecting the
securities in such manner as may be determined to be fair and equitable by or
under the authority of the board of directors.
2
<PAGE>
C. Determination of net asset value of shares. The net asset value shall
be determined as of such times as the board of directors shall prescribe by
resolution, subject to applicable rules and regulations, if any, of the
Securities and Exchange Commission. In the absence of any such resolution of
the board of directors, the net asset value shall be determined as of the time
of the close of trading on the New York Stock Exchange on any day on which that
exchange is open for trading and there is a purchase or redemption of shares of
the corporation.
The net asset value of each share of the corporation shall be determined by
or under the authority of the board of directors in accordance with the
provisions of and the rules of the Securities and Exchange Commission under the
Investment Company Act of 1940 and, as to matters of accounting, in conformity
with generally accepted accounting principles. The board of directors may
appoint persons to assist it in the determination of the value of assets,
liabilities and net asset value per share, and to make the actual calculations
pursuant to the direction of the board of directors.
D. No preemptive rights. No holder of shares of the corporation, whether
now or hereafter authorized, shall be entitled as of right to acquire from the
corporation any shares of the corporation, whether now or hereafter authorized.
SEVENTH. Bylaws. The board of directors is authorized to adopt, alter and
repeal the bylaws of the corporation, except to the extent that the bylaws
provide otherwise.
EIGHTH. Majority votes of stockholders. Notwithstanding any provision of
the laws of the state of Maryland requiring approval by the stockholders of any
action by the affirmative vote of a greater proportion than a majority of the
votes entitled to be cast on the matter, any such action may be taken or
authorized upon the concurrence of at least a majority of the aggregate number
of votes entitled to be cast thereon.
NINTH. Limitation of Liability. To the fullest extent permitted by
Maryland statutory or decisional law, as amended or interpreted, no director or
officer of the corporation shall be personally liable to the corporation or to
its stockholders for money damages; provided, however, that this article shall
not protect any director or officer of the corporation against any liability to
the corporation or to its stockholders 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.
No amendment of the charter of the corporation or repeal of any of its
provisions shall limit or eliminate the benefits provided to directors and
officers under this provision in connection with any act or omission that
occurred prior to such amendment or repeal.
TENTH. Board of directors.
1. The number of directors of the corporation, until such number shall be
changed by the bylaws of the corporation, is three.
3
<PAGE>
2. The names of the persons who will serve as directors of the corporation
until the first annual meeting of stockholders and until their successors are
elected and qualify are as follows:
Robert L. Mueller Harry A. Papp
L. Roy Papp
ELEVENTH. Right to name. The corporation acknowledges that it is adopting
its corporate name through permission of L. Roy Papp & Associates, an Arizona
proprietorship, and agrees that L. Roy Papp & Associates reserves to itself and
any successor to its business the right to grant the nonexclusive right to use
the name "L. Roy Papp" or "Papp" or "---- Papp Fund" or any similar name to any
other corporation or entity, including but not limited to any investment company
of which L. Roy Papp & Associates or any subsidiary or affiliate thereof or any
successor to the business thereof shall be the investment adviser.
TWELFTH. Amendment of articles of incorporation. The corporation reserves
the right to amend, alter, change or repeal any provision contained in its
articles of incorporation, in the manner now or hereafter prescribed by statute,
and any contract rights conferred upon the stockholders are granted subject to
this reservation.
IN WITNESS WHEREOF, I have signed these articles of incorporation and have
acknowledged the same to be my act on this 14th day of September, 1989
/s/ R. James Gormley
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R. James Gormley
WITNESS:
/s/ Joel M. Alam
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Joel Alam
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EXHIBIT 2
The L. Roy Papp Stock Fund, Inc.
BYLAWS
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ARTICLE I
OFFICES
Section 1.01. Principal office. The principal office of the corporation
in the State of Maryland shall be located in the City of Baltimore.
Section 1.02. Other offices. The corporation may also have offices at
such other places both within and without the State of Maryland as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. Place of meetings. All meetings of the stockholders shall
be held in the City of Phoenix, State of Arizona, or at such other place in the
United States as shall be designated from time to time by the board of
directors, at such time and place as shall be stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2.02. Annual meeting. As long as the corporation is registered as
an investment company under the Investment Company Act of 1940, the corporation
shall not be required to hold an annual meeting of stockholders during any year
in which none of the following is required to be acted on by stockholders under
that Act: (1) an election of directors; (2) approval of an investment advisory
agreement; (3) ratification of a selection of independent public accountants;
and (4) approval of a distribution agreement. If there is to be an annual
meeting, it shall be held on the third Tuesday of April if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 2:00 p.m., or
at such other date and time within the month of April as shall be designated
from time to time by the board of directors and stated in the notice of the
meeting, at which they shall elect a board of directors and transact such other
business as may properly be brought before the meeting.
Section 2.03. Special meetings. Special meetings of stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the articles
of incorporation, may be called at any time by the chairman, the president or
the board of directors. Special meetings of stockholders shall be called by the
secretary upon the written request of stockholders entitled to cast a least 25
percent of all the votes entitled to be cast at such meeting, provided that {a)
such request shall state the purpose or purposes of the meeting and the matters
proposed to be acted on at it; and (b) the stockholders requesting the meeting
shall have paid to the corporation the reasonably estimated cost of preparing
and mailing the notice thereof, which the secretary shall
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determine and specify to such stockholders. Upon payment of these costs to the
corporation, the secretary shall notify each stockholder entitled to notice of
the meeting. Unless requested by stockholders entitled to cast a majority of all
votes entitled to be cast at the meeting, a special meeting need not be called
to consider any matter which is substantially the same as a matter voted on at
any special meeting of stockholders held during the preceding twelve months.
Section 2.04. Stockholders entitled to vote; number of votes. If a record
date has been fixed for the determination of stockholders entitled to notice of
or to vote at any meeting of stockholders, each stockholder of the corporation
shall be entitled to vote, in person or by proxy, each share of stock (or
fraction thereof) registered in his name on the books of the corporation
outstanding at the close of business on such record date, with one vote (or
fraction of a vote) for each share (or fraction thereof) so outstanding.
Section 2.05. Notice of meetings. Written notice of each meeting of
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting or if otherwise required by law, the purpose or purposes for
which the meeting is called, shall be given, not less than 10 nor more than 90
days before the date of the meeting, to each stockholder entitled to vote at
such meeting.
Section 2.06. Quorum; adjournment. The holders of a majority of the stock
entitled to vote at a meeting of stockholders, present in person or represented
by proxy, shall constitute a quorum at the meeting for the transaction of
business except as otherwise provided by statute or by the articles of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of stockholders, the stockholders entitled to vote thereat present
in person or represented by proxy shall have the power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present or represented. At any adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than 120 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder entitled to vote at the meeting.
Section 2.07. Proxies. No proxy shall be valid more than eleven months
after its date, unless it provides for a longer period.
Section 2.08. Action without meeting. Any action required or permitted to
be taken at a meeting of stockholders may be taken without a meeting if a
unanimous written consent which sets forth the action is signed by each
stockholder entitled to vote on the matter is filed with the record of
stockholders' meetings.
Section 2.09. Stock ledger. The secretary of the corporation shall cause
an original or duplicate stock ledger to be maintained at the office of the
corporation's transfer agent.
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ARTICLE III
DIRECTORS AND COMMITTEES
Section 3.01. Function and powers. The business and affairs of the
corporation shall be managed under the direction of its board of directors. All
powers of the corporation may be exercised by or under the authority of the
board of directors except as conferred on or reserved to the stockholders by
statute or the articles of incorporation or these bylaws.
Section 3.02. Number. The number of directors which shall constitute the
entire board of directors may be fixed by a vote of the majority of the
directors from time to time-but shall in no event be less than three nor more
than nine.
Section 3.03. Election and term of office. The directors shall be elected
at the annual meeting of the stockholders (if any such meeting is held), except
as provided in Section 3.04 of this article, and each director elected shall
hold office until his successor is elected and qualifies or until his earlier
resignation or removal. Directors need not be stockholders.
Section 3.04. Vacancies. Any vacancy occurring in the board of directors
for any cause other than by reason of an increase in the number of directors may
be filled by a majority of the remaining members of the board of directors,
although such majority is less than a quorum; provided, however, that no vacancy
shall be so filled unless immediately thereafter at least two-thirds of the
directors then holding office shall have been elected to such office by the
stockholders, and provided further that if at any time (other than prior to the
first annual meeting of stockholders) less than a majority of the directors
holding office at that time were elected by the stockholders, a meeting of the
stockholders shall be held promptly and in any event within 60 days for the
purpose of electing directors to fill any existing vacancy in the board of
directors, unless the Securities and Exchange Commission shall by order extend
such period under the authority granted by section 16(a) of the Investment
Company Act of 1940. A director elected to fill a vacancy shall be elected to
hold office until the next annual meeting of stockholders or until his successor
is elected and qualifies.
Section 3.05. Annual and regular meetings. The board of directors from
time to time may provide for the holding of annual and regular meetings of the
board and fix their time and place.
Section 3.06. Special meetings. Special meetings of the board may be
called by the chairman on three days' notice to each director, either personally
or by mail or by telegram. Special meetings shall be called by the chairman or
secretary in like manner and on like notice on the written request of a majority
of the directors or a majority of the members of the executive committee.
Section 3.07. Quorum and voting. At all meetings of the board one-half of
the directors in office shall constitute a quorum for the transaction of
business, but in no event shall less than one-third of the directors currently
prescribed by resolution of the board of directors constitute a quorum. The act
of a majority of the directors present at any meeting at which there is a quorum
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shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or the articles of incorporation or these
bylaws. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 3.08. Telephone meetings. Members of the board of directors or
any committee thereof may participate in a meeting of such board or committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time, and participation by such means shall constitute presence in person at the
meeting.
Section 3.09. Action without meeting. Unless otherwise restricted by
statute or the articles of incorporation or these bylaws, any action required or
permitted to be taken at any meeting of the board of directors or of any
committee thereof may be taken without a meeting if a unanimous written consent
which sets forth the action is signed by each member of the board or committee,
as the case may be, and filed with the minutes of proceedings of the board or
committee.
Section 3.10. Committees. The board of directors may, by resolution
passed by a majority of the entire board, designate an executive committee and
other committees, each committee to consist of two or more directors of the
corporation. In the absence of a member of a committee, the members thereof
present at any meeting, whether or not they constitute a quorum, may appoint
another member of the board of directors to act at the meeting in the place of
any such absent member.
Section 3.11. Executive committee. Unless otherwise provided by
resolution of the board of directors, the executive committee shall have and may
exercise all powers of the board of directors in the management of the business
and affairs of the corporation that may lawfully be exercised by an executive
committee, except the power to: (i) declare dividends or distributions on stock;
(ii) issue stock, except as provided by statute; (iii) recommend to the
stockholders any action which requires stockholder approval; (iv) amend the
bylaws; or (v) approve any merger or share exchange which does not require
stockholder approval.
Section 3.12. Other committees. To the extent provided by resolution of
the board of directors, other committees of the board shall have and may
exercise any of the powers that may lawfully be granted to the executive
committee.
Section 3.13. Minutes of committee meetings. Each committee shall keep
regular minutes of its meetings and report the same to the board of directors
when required.
Section 3.14. Expenses and compensation of directors. The directors may
be paid their expenses, if any, of attendance at each meeting of the board of
directors and may be paid a fixed sum for attendance at each meeting of the
board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
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receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
ARTICLE IV
NOTICES
Section 4.01. Type of notice. Whenever, under the provisions of any
statute or the articles of incorporation or these bylaws, notice is required to
be given to any director or stockholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 4.02. Waiver of notice. Whenever the provisions of any statute or
the articles of incorporation or these bylaws require notice of the time, place
or purpose of a meeting of the board of directors or a committee of the board,
or of stockholders, each person who is entitled to the notice waives notice if:
(a) before or after the meeting he signs a waiver of notice which is filed with
the records of the meeting; or (b) he is present at the meeting or, in the case
of a stockholders' meeting, is represented by proxy.
ARTICLE V
OFFICERS
Section 5.01. Officers. The officers of the corporation shall be elected
by the board of directors and shall be a chairman, a president, one or more vice
president, a secretary and a treasurer. The board of directors may also appoint
one or more vice chairmen, assistant secretaries and assistant treasurers. Any
number of offices may be held by the same person, unless the articles of
incorporation or these bylaws otherwise provide, except that no one may serve
concurrently as both president and vice president. A person who holds more than
one office may not act in more than one capacity to execute, acknowledge or
verify an instrument required by law to be executed, acknowledged or verified by
more than one officer.
Section 5.02. Annual elections. The board of directors annually shall
elect a chairman, a president, one or more vice presidents, a secretary and a
treasurer.
Section 5.03. Other officers and agents. The board of directors may
appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the board.
Section 5.04. Remuneration. The salaries or other remuneration, if any,
of all officers of the corporation shall be fixed by the board of directors.
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Section 5.05. Term of office; removal; vacancies. The officers of the
corporation shall hold office until their respective successors are chosen and
qualify. Any officer elected or appointed by the board of directors may be
removed at any time by the affirmative vote of a majority of the board of
directors, when the board in its judgment finds that the best interests of the
corporation will be served by such action. The removal of an officer or agent
does not prejudice any of his contract rights. Any vacancy occurring in any
office of the corporation shall be filled by the board of directors.
Section 5.06. The chairman. The chairman: (a) shall be the chief
executive officer of the corporation; (b) shall preside at all meetings of the
board of directors and stockholders; and (c) shall have general and active
management of the business of the corporation and shall see that all orders and
resolutions of the board of directors are carried into effect. The chairman may
execute bonds, mortgages and other contracts requiring a seal, under the seal of
the corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation.
Section 5.07. The vice chairman. In the absence of the chairman, the vice
chairman (or in the event there be more than one vice chairman, the vice
chairmen in the order designated, or in the absence of any designation, then in
the order of their appointment) shall preside at all meetings of the board of
directors and stockholders.
Section 5.08. The president. The president shall be the chief operating
officer of the corporation. In the absence of the chairman, or in the event of
his inability of refusal to act, the president shall perform the duties of the
chairman (except that the president shall not preside at a meeting of the board
of directors or stockholders if there is a vice chairman present) and when so
acting shall have all the powers of, and be subject to all of the restrictions
upon, the chairman. The president may execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
Section 5.09. The vice presidents. In the absence of the president or in
the event of his inability or refusal to act, the vice president (or in the
event there be more than one vice president, the vice presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the president, and when so acting shall
have all the powers of and be subject to all the restrictions upon the
president. The vice president shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
Section 5.10. The secretary. The secretary: (a) shall attend all meetings
of the board of directors and all meetings of stockholders and record all the
proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the standing committees when required; (b) shall give,
or cause to be given, notice of all meetings of the stockholders and special
meetings of the board of directors, and shall perform such other duties as may
be
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prescribed by the board of directors, the chairman or the president, under whose
supervision the secretary shall be; and (c) shall have custody of the corporate
seal of the corporation and shall have authority to affix the same to any
instrument requiring it, and when so affixed it may be attested by his
signature.
Section 5.11. The assistant secretary. The assistant secretary, or if
there be more than one, the assistant secretaries in the order determined by the
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
secretary and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.
Section 5.12. The treasurer. The treasurer: (a) shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; (b) shall deposit with the corporation's custodian all moneys and
other valuable effects in the name and to the credit of the corporation; (c)
shall direct the custodian to make such disbursements of the funds of the
corporation as may be ordered by the board of directors, taking proper vouchers
for such disbursements; and (d) shall render to the president and the board of
directors, at its regular meetings, or when the board of directors so requires,
an account of all his transactions as treasurer and financial statements of the
corporation.
Section 5.13. The assistant treasurer. The assistant treasurer, or if
there shall be more than one, the assistant treasurers in the order determined
by the board of directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the treasurer and shall perform such other duties and have such other powers
as the board of directors may from time to time prescribe.
ARTICLE VI
CAPITAL STOCK
Section 6.01. Certificates of stock. Every holder of stock in the
corporation shall be entitled, upon request, to have a certificate or
certificates, signed by, or in the name of the corporation by, the chairman, the
president or a vice president and the treasurer, an assistant treasurer, the
secretary or an assistant secretary of the corporation, certifying the number of
full shares owned by him in the corporation. No certificates shall be issued
for fractional shares. Where a certificate is countersigned by a transfer agent
other than the corporation or its employee, any other signature on the
certificate may be facsimile. In case any officer or transfer agent who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer or transfer agent before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer or transfer agent at the date of issue.
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Section 6.02. Lost certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
The issuance of a new certificate under this section does not constitute an
overissue of the shares it represents,
Section 6.03. Transfers of stock. The shares of stock of the corporation
shall be transferable on the books of the corporation at the request of the
record holder thereof in person or by a duly authorized attorney, upon
presentation to the corporation or its transfer 'agent of a duly executed
assignment or authority to transfer, or proper evidence of succession, and, if
the shares are represented by a certificate, a duly endorsed certificate or
certificates of stock surrendered for cancellation, and with such proof of the
authenticity of the signatures as the corporation or its transfer agent may
reasonably require. The transfer shall be recorded on the books of the
corporation, the old certificates, if any, shall be cancelled, and the new
record holder, upon request, shall be entitled to a new certificate or
certificates.
Section 6.04. Fixing of record date. The board of directors may fix in
advance a date as a record date for the determination of the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
provided that such record date shall not be prior to the close of business on
the day the record date is fixed nor be a date more than 90 days, and in the
case of a meeting of stockholders not less than 10 days, prior to the date on
which the particular action requiring such determination of stockholders is to
be taken. In such case only such stockholders as shall be stockholders of
record on the record date so fixed shall be entitled to such notice of, and to
vote at, such meeting or adjournment, or to give such consent, or to receive
payment of such dividend or other distribution, or to receive such allotment of
rights, or to exercise such rights, or to take such other action, as the case
may be, notwithstanding any transfer of any shares on the books of the
corporation after any such record date.
Section 6.05. Registered stockholders. The corporation shall be entitled
to treat the holder of record of shares as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by statute.
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ARTICLE VII
CUSTODIAN
Section 7.01. Qualifications. The corporation shall at all times employ,
pursuant to a written contract, a bank or trust company having an aggregate
capital, surplus and undivided profits (as shown in its last published report)
of at least $2,000,000 as custodian to hold the funds; and securities of the
corporation.
Section 7.02. Contract. Such contract shall be upon such terms and
conditions and may provide for such compensation as the board of directors deems
necessary or appropriate, provided such contract shall further provide that the
custodian shall deliver securities owned by the corporation only upon sale of
such securities for the account of the corporation and receipt of payment
therefore by the custodian or when such securities may be called, redeemed,
retired or otherwise become payable. Such limitation shall not, however,
prevent:
(a) the delivery of securities for examination to the broker selling
the same in accord with the "street delivery" custom whereby such securities are
delivered to such broker in exchange for a delivery receipt exchanged on the
same day for an uncertified check of such broker to be presented on the same day
for certification;
(b) the delivery of securities of an issuer in exchange for or
conversion into other securities alone or cash and other securities pursuant to
any plan of merger, consolidation, reorganization, recapitalization or
readjustment of the securities of such issuer;
(c) the conversion by the custodian of securities owned by the
corporation pursuant to the provisions of such securities into other securities;
(d) the surrender by the custodian of warrants, rights or similar
securities owned by the corporation in the exercise of such warrants, rights or
similar securities, or the surrender of interim receipts or temporary securities
for definitive securities;
(e) the delivery of securities as collateral on borrowing effected by
the corporation;
(f) the delivery of securities owned by the corporation as a
redemption in kind of securities issued by the corporation.
The custodian shall deliver funds of the corporation only upon the purchase of
securities for the portfolio of the corporation and the delivery of such
securities to the custodian, but such limitation shall not prevent the release
of funds by the custodian for redemption of shares issued by the corporation,
for payment of interest, dividend disbursements, taxes and management fees, for
payments in connection with the conversion, exchange or surrender of securities
owned by the corporation as set forth in sub-paragraphs (b), (c) and (d) above
and for operating expenses of the corporation.
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Section 7.03. Termination of contract. The contract of employment of the
custodian shall be terminable by either party on 60 days' written notice to the
other party. Upon any termination, the board of directors shall use its best
efforts to obtain a successor custodian, but lacking success in the appointment
of a successor custodian, the question of whether the corporation shall be
liquidated or shall function without a custodian shall be submitted to the
stockholders before delivery of any funds or securities of the corporation to
any person other than a successor custodian, including a temporary successor
selected by the retiring custodian. If a successor custodian is found, the
retiring custodian shall deliver funds and securities owned by the corporation
directly to the successor custodian.
Section 7.04. Agents of custodian. The provisions of any other section of
these bylaws to the contrary notwithstanding, any contract of employment of a
custodian to hold the funds and securities of the corporation may authorize the
custodian, upon approval of the board of directors, to appoint other banks or
trust companies meeting the requirements of this article, domestic and foreign
(including domestic and foreign branches), to perform all or a part of the
duties of the custodian under its contract with the corporation. In the case of
foreign banks, no authorization or appointment providing for the holding of
funds or securities of the corporation (other than in connection with the
clearing of transactions of exchanges of securities) shall become effective
unless permitted by an appropriate order, rule or written advice of the
Securities and Exchange Commission.
Section 7.05. Negotiable instruments. Except as otherwise authorized by
the board of directors, all checks and drafts for the payment of money shall be
signed in the name of the corporation by the custodian, and all requisitions or
orders for the payment of money by the custodian or for the issue of checks and
drafts therefor, all promissory notes, all assignments of shares or securities
standing in the name of the corporation, and all requisitions or orders for the
assignment of shares or securities standing in the name of the custodian or its
nominee, or for the execution of powers to transfer the same, shall be signed in
the name of the corporation by not less than two of its officers. Promissory
notes, checks or drafts payable to the corporation may be endorsed only to the
order of the custodian or its agent.
ARTICLE VIII
SECURITIES TRANSACTIONS
Section 8.01. Transactions with directors and officers. The corporation
shall not purchase any securities (other than shares issued by the corporation)
from, or sell any securities (other than shares issued by the corporation and
securities paid in satisfaction of shares deposited for redemption during a
period during which the corporation is redeeming its shares principally in kind)
to, any director or officer of the corporation, or any director, officer or
partner of any firm which acts as investment adviser or principal underwriter
for the corporation acting as principal, except to the extent permitted to do so
under the Investment Company Act of 1940 or the rules or regulations thereunder
or by appropriate order or written advice of the Securities and Exchange
Commission.
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Section 8.02. Ownership of same issuer by corporation and directors or
officers. The corporation will not purchase or retain securities of a company
if all of the directors and officers of the corporation and of its investment
adviser who individually own beneficially more than 1/2% of the securities of
the company collectively own more than 5% of such securities.
Section 8.03. Positions of directors and officers in stock of corporation.
No director or officer of the corporation or of its investment adviser shall
take a long or short position in the capital stock of the corporation, except
that officers or directors may purchase capital stock in the corporation for
investment purposes at the same price as that available to the public at the
time of purchase.
ARTICLE IX
INDEMNIFICATION
Section 9.01. Indemnification of directors and officers. Each person who
is or was a director or officer of the corporation and each person who serves or
served at the request of the corporation as a director or officer of another
enterprise shall be indemnified by the corporation in accordance with, and to
the fullest extent authorized by, the General Corporation Law of the State of
Maryland as it may be in effect from time to time, provided that this section
shall not protect any director or officer of the corporation against any
liability to the corporation or to its stockholders to which he 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 office.
ARTICLE X
GENERAL PROVISIONS
Section 10.01. Dividends.
(a) The board of directors, from time to time as it may deem
advisable, may declare and pay dividends in cash or other property of the
corporation, out of any source available for dividends, to the stockholders
according to their respective rights and interests and in accordance with the
applicable provisions of the articles of incorporation.
(b) The board of directors may prescribe from time to time that
dividends declared are payable at the election of any of the stockholders,
either in cash or in shares of the corporation.
(c) The board of directors shall cause any dividend payment to be
accompanied by a written statement if paid wholly or partly from any source
other than:
(i) the corporation's accumulated undistributed net income
(determined in accordance with generally accepted accounting principles and the
rules and regulations of the Securities and Exchange Commission then in effect)
and not including profits or losses realized upon the sale of securities or
other properties; or
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(ii) the corporation's net income so determined for the current
or preceding fiscal year.
Such statement shall adequately disclose the source or sources of such payment
and the basis of calculation, and shall be in such form as the Securities and
Exchange Commission may prescribe.
Section 10.02. Fiscal Year. The fiscal year of the corporation shall end
on December 31.
Section 10.03. Seal. The corporate seal shall have inscribed thereon the
name of the corporation and the words, "Corporate Seal, Maryland". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or by placing the word "seal" adjacent to the signature of the
authorized officer of the corporation. Any officer or director of the
corporation shall have authority to affix the corporate seal of the corporation
to any document requiring the same.
ARTICLE XI
AMENDMENTS
Section 11.01. General. Except as provided in section 11.02, these bylaws
may be altered, amended or repealed, and new bylaws may be adopted solely by the
board of directors, at any meeting of the board of directors.
Section 11.02. Amendment by stockholders only. Section 2.06 of article
II, section 3.04 of article III, article VII, article VIII, and subsection
10.01(c) of article X of these bylaws may be altered, amended or repealed only
with the approval of the holders of a "majority of the outstanding voting
securities" of the corporation, as that term is defined in section 2(a)(42) of
the Investment Company Act of 1940.
I, THE UNDERSIGNED, being the secretary of The L. Roy Papp Stock Fund,
Inc. DO HEREBY CERTIFY the foregoing to be the bylaws of said corporation, as
adopted at a meeting of the directors held on the 3rd day of October, 1989.
/s/ Robert L. Mueller
---------------------
Secretary
12
<PAGE>
NUMBER SHARES
RP [LOGO]
SEE REVERSE FOR CUSIP 698876109
CERTAIN DEFINITIONS
THE L. ROY PAPP STOCK FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
THIS CERTIFIES that is the owner of
full paid and nonassessable shares of the capital stock, $.01 par value per
share, of
THE L. ROY PAPP STOCK FUND, INC.
transferable on the books of the corporation by the holder hereof in person or
by attorney upon surrender of this certificate duly endorsed or assigned. This
certificate and the shares represented hereby are subject to the laws of the
State of Maryland and to the articles of incorporation and bylaws of the
corporation and amendments thereof.
This certificate is not valid until countersigned by the Transfer Agent.
Witness the seal of the corporation and the signatures of its duly
authorized officers.
Dated
[CORPORATE SEAL]
- -------------------------------------- ----------------------------------------
SECRETARY PRESIDENT
COUNTERSIGNED
L. ROY PAPP & ASSOCIATES
BY TRANSFER AGENT
- ----------------------------------
AUTHORIZED SIGNATURE
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C>
TEN COM--as tenants in common UNIF GIFT MIN ACT--________ Custodian ________
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act _________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
TRANSFER FORM
COMPLETE THIS FORM ONLY WHEN TRANSFERRING TO ANOTHER PERSON
For value received _____________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(please typewrite name and address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the capital stock represented by the within certificate and do hereby
irrevocably constitute and appoint ___________________________________ attorney,
to transfer the same on the books of the within-named corporation, with full
power of substitution in the premises.
Dated _________________________________
SIGNATURE GUARANTEED BY
- -------------------------------------- ----------------------------------------
SIGNATURE(S)
Signature guarantee must be made by a member or a member organization of the New
York Stock Exchange, or by a commercial bank (not a savings bank), or by a trust
company.
NOTICE: The signature(s) to the assignment must correspond with the name as
written upon the face of the certificate in every particular, without alteration
or enlargement or any change whatever.
----------
REDEMPTION FORM
COMPLETE THIS FORM ONLY WHEN REDEEMING SHARES
The undersigned hereby tenders the within certificate properly endorsed in
blank or in favor of the corporation with any requisite guarantee of signature
and supporting papers and requests the redemption of __________________________
___________________________________________________________ (__________) Shares
(Indicate the number of shares to be redeemed. A new certificate will be issued
for any unredeemed balance)
of capital stock represented by the within certificate in accordance with the
terms of the articles of incorporation of the corporation.
Dated _________________________________
SIGNATURE GUARANTEED BY
- -------------------------------------- ----------------------------------------
SIGNATURE(S)
Signature guarantee must be made by a member or a member organization of the New
York Stock Exchange, or by a commercial bank (not a savings bank), or by a trust
company.
NOTICE: The signature(s) to the assignment must correspond with the name as
written upon the face of the certificate in every particular, without alteration
or enlargement or any change whatever.
----------------------------------------
----------------------------------------
Address
- --------------------------------------------------------------------------------
THIS SPACE MUST NOT BE COVERED IN ANY WAY
<PAGE>
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
THE L. ROY PAPP STOCK FUND, INC., a Maryland corporation registered under the
Investment Company Act of 1940 (1940 Act) as an open-end diversified management
investment company (Fund), and L. Roy Papp & Associates, an Arizona partnership
registered under the Investment Advisers Act of 1940 as an investment adviser
(Manager), agree that:
1. Engagement of Manager. Manager shall manage the investment and
reinvestment of the assets, and the other operations, of Fund, subject to the
supervision of the board of directors of Fund, for the period and on the terms
set forth in this agreement. Manager shall give due consideration to the
investment objectives, policies and restrictions and the other statements
concerning Fund in Fund's articles of incorporation, bylaws, and registration
statements under the 1940 Act and the Securities Act of 1933 (1933 Act), and to
the provisions of the Internal Revenue Code applicable to Fund as a regulated
investment company. Manager shall be deemed for all purposes to be an
independent contractor and not an agent of Fund, and unless otherwise expressly
provided or authorized, shall have no authority to act or represent Fund in any
way.
Manager is authorized to make decisions to buy and sell securities for
Fund, to place Fund's portfolio transactions with broker-dealers, and to
negotiate the terms of such transactions, including brokerage commissions on
brokerage transactions, on behalf of Fund.
2. Expenses to be paid by Manager. Manager shall furnish, at its own
expense, office space to Fund and all necessary office facilities, equipment and
personnel for managing the assets of Fund. Manager shall also assume and pay
all other expenses incurred by it in connection with managing the assets of
Fund, all expenses of marketing shares of Fund, all expenses in determination of
daily price computations, placement of securities orders and related
bookkeeping, and one-half of all fees, dues and other expenses related to
membership of Fund in any trade association or other investment company
organization.
3. Expenses to be paid by Fund. Fund shall pay all expenses incident to
its operations and business not specifically assumed by Manager pursuant to
paragraphs 2 and 5, including without limitation: the fees of Manager pursuant
to paragraph 4; all charges of depositories, custodians, and other agencies for
the safekeeping and servicing of its cash, securities, and other property and of
its transfer agents and registrars and its dividend disbursing and redemption
agents, if any; all charges of legal counsel and of independent auditors; all
compensation of directors other than those affiliated with Manager, and all
expenses incurred in connection with their services to Fund; all expenses of
publication of notices and reports to its shareholders and to governmental
bodies or regulatory agencies; all expenses of proxy solicitations of Fund or
its board of directors; all expenses of shareholder meetings; all expenses of
typesetting of Fund's prospectus and of printing and mailing copies of the
prospectus furnished to each then-existing shareholder or beneficial owner; all
taxes and corporate fees payable to federal, state or other governmental
agencies, domestic or foreign; all stamp or other transfer taxes; all expenses
of printing and mailing certificates for shares of Fund; all expenses of bond
and insurance coverage required by law or deemed advisable by Fund's board of
directors;
<PAGE>
all expenses of maintaining the registration of Fund under the 1940 Act; all
expenses of maintaining the registration of shares of Fund under the 1933 Act
and of qualifying and maintaining qualification of shares of Fund under the
securities laws of such United States jurisdictions as Fund may from time to
time reasonably designate; and one-half of all fees, dues and other expenses
related to membership of Fund in any trade association or other investment
company organization. In addition to the payment of expenses, Fund shall also
pay all brokers' commissions and other charges relative to the purchase and sale
of portfolio securities.
4. Compensation of Manager. For the services to be rendered and the
charges and expenses to be assumed and to be paid by Manager hereunder, Fund
shall pay to Manager a quarterly fee of 1/4 of 1% of the net asset value of
Fund as determined by valuations made as of the beginning of each calendar
quarter, which fee shall be payable in three equal monthly installments on the
last business day of each month during such quarter.
5. Limitation of expenses of Fund. The total expenses of Fund, excluding
taxes, interest and extraordinary litigation expenses, but including fees paid
to Manager, during any of the Fund's fiscal years, shall not exceed the lesser
of (i) 1.25% of its average daily net asset value in such year or (ii) the most
restrictive limits prescribed by any state in which Fund's shares are then being
offered for sale, and Manager agrees to reimburse Fund for any sums expended for
such expenses in excess of that amount. Brokers' commissions and other charges
relative to the purchase and sale of portfolio securities shall not be regarded
as expenses.
6. Services of Manager no exclusive. The services of Manager to Fund
hereunder are not to be deemed exclusive, and Manager shall be free to render
similar services to others so long as its services under this agreement are not
impaired by such other activities.
7. Limitation of liability of Manager. Manager shall not be liable to
Fund or its shareholders for any loss suffered by Fund or its shareholders from
or as a consequence of any act or omission of Manager, or of any of the
partners, employees or agents of Manager, in connection with or pursuant to this
agreement, except by reason of willful misfeasance, bad faith or gross
negligence on the part of Manager in the performance of its duties or by reason
of reckless disregard by Manager of its obligations and duties under this
agreement.
8. Duration and renewal. Unless terminated as provided in section 9, this
agreement shall continue in effect until two years from the date of execution,
and thereafter from year to year only so long as such continuance is
specifically approved at least annually (a) by a majority of those directors who
are not interested persons of Fund or of Manager, voting in person at a meeting
called for the purpose of voting on such approval, and (b) by either the board
of directors of Fund or vote of the holders of a "majority of the outstanding
shares of Fund" (which term as used throughout this agreement shall be construed
in accordance with the definition of "vote of a majority of the outstanding
voting securities of a company" in section 2(a)(42) of the 1940 Act).
2
<PAGE>
9. Termination. This agreement may be terminated at any time, without
payment of any penalty, by the board of directors of Fund, or by a vote of the
holders of a majority of the outstanding shares of Fund, upon 60 days' written
notice to Manager. This agreement may be terminated by Manager at any time upon
60 days' written notice to Fund. This agreement shall terminate automatically
in the event of its assignment (as defined in section 2(a)(4) of the 1940 Act).
10. Use of Manager's name. Fund may use the name The L. Roy Papp Stock
Fund, Inc. or any other name using or derived from the name "L. Roy Papp" only
for so long as this agreement or any extension, renewal or amendment hereof
remains in effect, including any similar agreement with any organization which
shall have succeeded to the business of Manager as investment adviser. At such
time as this agreement or any extension, renewal or amendment hereof, or such
other similar agreement shall no longer be in effect, Fund will (by corporate
action, if necessary) cease to use any name using or derived from the name "L.
Roy Papp," any name similar thereto or otherwise connected with Manager, or with
any organization that shall have succeeded to Manager's business as investment
adviser.
11. Amendment. This agreement may not be amended without the affirmative
vote (a) of a majority of those directors who are not "interested persons" (as
defined in section 2(a)(19) of the 1940 Act) of Fund or of Manager, voting in
person at a meeting called for the purpose of voting on such approval, and (b)
of the holders of a "majority of the outstanding voting securities" of Fund as
defined in section 2(a)(42) of the 1940 Act.
Dated November 7, 1989
The L. Roy Papp Stock Fund, Inc.
By /s/ Harry Papp
------------------------------
President
L. Roy Papp & Associates
By /s/ L. Roy Papp
------------------------------
A General Partner
3
<PAGE>
EXHIBIT 8
CUSTODY AGREEMENT
-----------------
Agreement made as of the 7th day of November, 1989, between The L. Roy Papp
Stock Fund, Inc., a corporation organized and existing under the laws of the
State of Maryland, and registered under the Investment Company Act of 1940 as an
investment company, having its principal office and place of business at 4400
North 32nd Street, Suite 280, Phoenix, Arizona 85018 (hereinafter called the
"Fund"), and First Interstate Bank of Arizona, a national association authorized
to do a banking business, whose mailing address is P.O. Box 53434, Phoenix,
Arizona 85072-3434 (hereinafter called the "Custodian").
WITNESSETH
WHEREAS, the Fund desires to engage the Custodian to hold assets of the
Fund; and
WHEREAS, the Custodian is willing to hold and administer assets of the Fund
in accordance with this Agreement;
NOW, THEREFORE, the Fund and the Custodian in consideration of the mutual
promises hereinafter set forth do hereby covenant and agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include the Treasurer, the
Controller or any other person, whether or not any such person is an Officer or
employee of the Fund, duly authorized by the Board of Directors of the Fund to
give Oral Instructions or Written Instructions on behalf of the Fund and listed
in the Certificate annexed hereto as Appendix A or such other Certificate as may
be received by the Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury book-entry
system for United States and federal agency securities, its successor or
successors and its nominee or nominees.
3. "Certificate" shall mean any notice, instruction, or other instrument
in writing, authorized or required by this Agreement to be given to the
Custodian which is actually received by the Custodian and signed on behalf of
the Fund by any two Officers of the Fund.
4. "Depository" shall mean The Depository Trust Company, ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees, provided the Custodian has
received a certified copy of a resolution of the Fund's Board of Directors
specifically approving deposits in DTC. The term "Depository" shall further mean
and include any other person authorized to act as a depository under the
1
<PAGE>
Investment Company Act of 1940, its successor or successors and its nominee or
nominees, specifically identified in a certified copy of a resolution of the
Fund's Board of Directors specifically approving deposits therein by the
Custodian.
5. "Money Market Security" shall be deemed to include, without limitation,
debt obligations issued or guaranteed as to principal and interest by the
government of the United States or agencies or instrumentalities thereof,
commercial paper, certificates of deposit and bankers' acceptances, repurchase
and reverse repurchase agreements with respect to the same and bank time
deposits, where the purchase and sale of such securities normally requires
settlement in federal funds on the same day as such purchase or sale.
6. "Officers" shall be deemed to include the Chairman, President, any Vice
President, the Secretary, the Treasurer, the Controller, any Assistant
Secretary, any Assistant Treasurer or any other person or persons duly
authorized by the Board of Directors of the Fund to execute any Certificate,
instruction, notice or other instrument on behalf of the Fund and listed in the
Certificate annexed hereto as Appendix B or such other Certificate as may be
received by the Custodian from time to time.
7. "Oral Instructions" shall mean verbal instructions actually received by
the Custodian from an Authorized Person or from a person reasonably believed by
the Custodian to be an Authorized Person.
8. "Security" shall be deemed to include, without limitation, Money Market
Securities, bonds, debentures, corporate debt securities, notes, common stock,
securities convertible into common stock, preferred stock, mortgages or other
obligations, and any certificates, receipts, warrants or other instruments
representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interest therein, or any property
or assets.
9. "Written Instructions" shall mean written communications actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person by telex or any other such
system whereby the receivee or such communications is able to verify by codes or
otherwise with a reasonable degree of certainty the authenticity of the sender
of such communication.
ARTICLE II
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian of
Securities and moneys owned by the Fund during the period of this Agreement.
2. The Custodian hereby accepts appointment as such custodian and agrees
to perform the duties thereof as hereinafter set forth.
2
<PAGE>
ARTICLE III
CUSTODY OF CASH AND SECURITIES
1. The Fund will deliver or cause to be delivered to the Custodian all
Securities and all moneys owned by it, including cash received for the issuance
of its shares, at any time during the period of this Agreement except for such
moneys as may be deposited by the Fund from time to time in a checking account
maintained by the Fund in accordance with the rules and regulations of the
Securities and Exchange Commission under the Investment Company Act of 1940. The
Custodian will not be responsible for such Securities and such moneys until
actually received by it. The Custodian will be entitled to reverse any credits
made on the Fund's behalf, where such credits have been previously made and
moneys are not finally collected. The Fund shall deliver to the Custodian a
certified resolution of the Board of Directors of the Fund approving,
authorizing and instructing the Custodian on a continuous and on-going basis to
deposit in the Book-Entry System all Securities eligible for deposit therein and
to utilize the Book-Entry System to the extent possible in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Prior to a deposit of
Securities of the Fund in a Depository the Fund shall deliver to the Custodian a
certified resolution of the Board of Directors of the Fund approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities eligible for deposit
therein and to utilize the Depository to the extent possible in connection with
its performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral, provided however, that the
Custodian shall not deposit any Securities of the Fund with a Depository, or
leave on deposit any Securities so deposited, unless the Custodian's rights
against the Depository include the right to recover from the Depository, for the
benefit of the Fund, any loss sustained in connection with the Securities of the
Fund deposited by the Custodian with the Depository, as a result of negligence
or willful misconduct on the part of the Depository or any agent or custodian of
it. Securities and moneys of the Fund deposited in either the Book-Entry System
or a Depository will be represented in accounts which include only assets held
by the Custodian for customers, including, but not limited to, accounts in which
the Custodian acts in a fiduciary or representative capacity.
2. The Custodian shall credit to a separate account in the name of the
Fund all moneys received by it for the account of the Fund, and shall disburse
the same only:
(a) In payment for Securities purchased, as provided in Article IV
hereof;
(b) In payment of dividends or distributions as provided in Article V
hereof;
(c) In payment of original issue or other taxes, as provided in
Article VI hereof;
3
<PAGE>
(d) In payment for capital stock of the Fund redeemed by it, as
provided in Article VI hereof;
(e) Pursuant to Certificates setting forth the name and address of the
person to whom the payment is to be made, and the purpose for which payment is
to be made, or
(f) In payment of the fees and in reimbursement of the expenses and
liabilities of the Custodian, as provided in Article IX hereof.
3. On each business day the Custodian shall furnish the Fund with
confirmations and a summary of all transfers to or from the account of the Fund
during the preceding business day. Where Securities are transferred to the
account of the Fund, the Custodian shall also by book entry or otherwise
identify as belonging to the Fund a quantity of Securities in a fungible bulk of
Securities registered in the name of the Custodian (or its nominee) or shown on
the Custodian's account on the books of the Book-Entry System or the Depository.
At least monthly and from time to time, the Custodian shall furnish the Fund
with a detailed statement of the Securities and moneys held for the Fund under
this Agreement.
4. All Securities held for the Fund, which are issued or issuable only in
bearer form, except such Securities as are held in the Book-Entry System, shall
be held by the Custodian in that form; all other Securities held for the Fund
may be registered in the name of the Fund, in the name of any duly appointed
registered nominee of the Custodian as the Custodian may from time to time
determine, or in the name of the Book-Entry System or the Depository or their
successor or successors, or their nominee or nominees. The Fund agrees to
furnish to the Custodian appropriate instruments to enable the Custodian to hold
or deliver in proper form for transfer, or to register in the name of its
registered nominee or in the name of the Book-Entry System or the Depository any
Securities which it may hold for the account of the Fund and which may from time
to time be registered in the name of the Fund. The Custodian shall hold all such
Securities which are not held in the Book-Entry System or in the Depository in a
separate account in the name of the Fund physically segregated at all times from
those of any other person or persons.
5. Unless otherwise instructed to the contrary by a Certificate, the
Custodian by itself, or through the use of the Book-Entry System or the
Depository with respect to Securities therein deposited, shall with respect to
all Securities held for the Fund in accordance with this Agreement:
(a) Collect all income due or payable;
(b) Present for payment and collect the amount payable upon all
Securities which may mature or be called redeemed, or retired, or otherwise
become payable;
(c) Surrender Securities in temporary form for definitive Securities;
(d) Execute, as custodian, any necessary declarations or certificates
of ownership under the Federal Income Tax Laws or the laws or regulations of any
other taxing authority now or hereafter in effect; and
4
<PAGE>
(e) Hold directly, or through the Book-Entry System or the Depository
with respect to Securities therein deposited, for the account of the Fund all
rights and similar securities issued with respect to any Securities held by the
Custodian hereunder.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository shall:
(a) Execute and deliver to such persons as may be designated in such
Certificate proxies, consents, authorizations, and any other instruments whereby
the authority of the Fund as owner of any Securities may be exercised;
(b) Deliver any Securities held for the Fund in exchange for other
Securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(c) Deliver any Securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold under the terms of this
Agreement such certificate of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery; and
(d) Make such transfers or exchanges of the assets of the Fund and take
such other steps as shall be stated in said order to be for the purpose of
effectuating any duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
1. Promptly after each purchase of Securities by the Fund, the Fund shall
deliver to the Custodian (i) with respect to each purchase of Securities which
are not Money Market Securities, a Certificate, and (ii) with respect to each
purchase of Money Market Securities, a Certificate, Oral Instructions, or
Written Instructions, specifying with respect to each such purchase: (a) the
name of the issuer and the title of the Securities, (b) the number of shares or
the principal amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person from whom or the
broker through whom the purchase was made. The Custodian shall upon receipt of
Securities purchased by or for the Fund pay out of the moneys held for the
account of the Fund the total amount payable to the person from whom or the
broker through whom the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Certificate, Oral Instructions, or
Written Instructions.
2. Promptly after each sale of Securities by the Fund, the Fund shall
deliver to the Custodian (i) with respect to each sale of Securities which are
not Money Market Securities, a Certificate, and (ii) with respect to each sale
of Money Market Securities, a Certificate, Oral
5
<PAGE>
Instructions, or Written Instructions, specifying with respect to each such
sale: (a) the name of the issuer and the title of the Security, (b) the number
of shares or principal amount sold, and accrued interest, if any, (c) the date
of sale, (d) the sale price per unit, (e) the total amount payable to the Fund
upon such sale, and (f) the name of the broker through whom or the person to
whom the sale was made. The Custodian shall deliver the Securities upon receipt
of the total amount payable to the Fund upon such sale, provided that the same
conforms to the total amount payable as set forth in such Certificate, Oral
Instructions, or Written Instructions. Subject to the foregoing, the Custodian
may accept payment, and may deliver Securities and arrange for payment, in
accordance with the customs prevailing in the principal United States financial
centers among dealers in Securities.
ARTICLE V
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. In connection with any dividend or distribution declared with respect to
shares of capital stock of the Fund, the Fund shall furnish to the Custodian a
copy of the resolution of the Board of Directors, certified by the Secretary or
any Assistant Secretary, either (i) setting forth the date of the declaration of
such dividend or distribution, the date of payment thereof, the record date as
of which shareholders entitled to payment shall be determined, the amount
payable per share to the shareholders of record as of that date and the total
amount payable to the Dividend Agent of the Fund on the payment date, or (ii)
authorizing the declaration of dividends and distribution on a daily basis and
authorizing the Custodian to rely on a Certificate, Oral Instructions or Written
Instructions setting forth the date of the declaration of such dividend or
distribution, the date of payment thereof, the record date as of which
shareholders entitled to payment shall be determined, the amount payable per
share to the shareholders of record as of that date and the total amount payable
to the Dividend Agent on the payment date.
2. Upon the payment date specified in such resolution, Certificate, Oral
Instructions, or Written Instructions, as the case may be, the Custodian shall
pay out of the moneys held for the account of the Fund the total amount payable
to the Dividend Agent of the Fund.
ARTICLE VI
SALE AND REDEMPTION OF SHARES OF CAPITAL STOCK OF THE FUND
1. Whenever the Fund shall sell any shares of its capital stock, it shall
deliver to the Custodian a Certificate specifying:
(a) The number of shares sold, trade date, and price; and
(b) The amount of money to be received by the Custodian for the sale
of such shares.
2. Upon receipt of such money from the Transfer Agent, the Custodian shall
credit such money to the account of the Fund.
6
<PAGE>
3. Upon issuance of any shares of the capital stock of the Fund in
accordance with the foregoing provisions of this Article, the Custodian shall
pay, out of the money held for the account of the Fund, all original issue or
other taxes required to be paid by the Fund in connection with such issuance
upon the receipt of a Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund shall redeem any
shares of its capital stock, it shall furnish to the Custodian a Certificate
specifying:
(a) The number of shares of capital stock redeemed; and
(b) The amount to be paid for the shares of capital stock redeemed.
5. Upon receipt from the Transfer Agent of an advice setting forth the
number of shares of capital stock received by the Transfer Agent for redemption
and that such shares are valid and in good form for redemption, the Custodian
shall make payment to the Transfer Agent out of the moneys held for the account
of the Fund of the total amount specified in the Certificate issued pursuant to
the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
shares of the capital stock of the Fund, whenever shares of the capital stock of
the Fund are redeemed pursuant to any check redemption privilege which may from
time to time be offered by the Fund, the Custodian, unless otherwise instructed
by a Certificate, shall, upon receipt of an advice from the Fund or its agent
setting forth that the redemption is in good form for redemption in accordance
with the check redemption procedure, honor the check presented as part of such
check redemption privilege out of the money held in the account of the Fund for
such purposes.
ARTICLE VII
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian should in its sole discretion advance funds on behalf
of the Fund which results in an overdraft because the moneys held by the
Custodian for the account of the Fund shall be insufficient to pay the total
amount payable upon a purchase of Securities as set forth in a Certificate or
Oral Instructions issued pursuant to Article IV, or which results in an
overdraft for some other reason, or if the Fund is for any other reason indebted
to the Custodian, (except a borrowing for investment or for temporary or
emergency purpose using Securities as collateral pursuant to a separate
agreement and subject to the provisions of paragraph 2 of this Article VII),
such overdraft or indebtedness shall be deemed to be a loan made by the
Custodian to the Fund payable on demand and shall bear interest from the date
incurred at the rate per annum (based on a 360-day year for the actual number of
days involved) equal to 1/2% over the prime commercial lending rate of First
Interstate Bank of Arizona in effect from time to time, such rate to be adjusted
on the effective date of any change in such prime commercial lending rate but in
no event to be less than 6% per annum. Any such overdraft or indebtedness shall
be reduced by an amount equal to the total of all amounts due the Fund which
have not been collected by the Custodian on behalf of the Fund when due because
of the failure of the Custodian to timely make demand or presentment for
payment. In addition, the Fund hereby
7
<PAGE>
agrees that the Custodian shall have a continuing lien and security interest in
and to any property at any time held by it for the benefit of the Fund or in
which the Fund may have an interest which is then in the Custodian's possession
or control or in possession or control of any third party acting in the
Custodian's behalf. The Fund authorizes the Custodian, in its sole discretion,
at any time to charge any such overdraft or indebtedness together with interest
due thereon against any balance of account standing to the Fund's credit on the
Custodian's books.
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities as collateral for such borrowings, a notice or
undertaking on the form currently employed by any such bank setting forth the
amount which such bank will loan to the Fund against delivery of a stated amount
of collateral. The Fund shall promptly deliver to the Custodian a Certificate
specifying with respect to each such borrowing: (a) the name of the bank, (b)
the amount and terms of the borrowing, which may be set forth by incorporating
by reference an attached promissory note, duly endorsed by the Fund, or other
loan agreement, (c) the time and date, if known, on which the loan is to be
entered into, (d) the date on which the loan becomes due and payable, (e) the
total amount payable to the Fund on the borrowing date, (f) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (g) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the name of the
issuer, the title and number of shares or the principal amount or any particular
Securities to be delivered as collateral by the Custodian, the Custodian shall
not be under any obligation to deliver any Securities.
ARTICLE VIII
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. If the Fund is permitted by the terms of its Articles of Incorporation
and as disclosed in its most recent and currently effective prospectus to lend
its portfolio Securities, within 24 hours after each loan of portfolio
Securities the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan: (a) the name of the
issuer and the title of the Securities, (b) the number of shares or the
principal amount
8
<PAGE>
loaned, (c) the date of loan and delivery, (d) the total amount to be delivered
to the Custodian against the loan of the Securities, including the amount of
cash collateral and the premium, if any, separately identified, and (e) the name
of the broker, dealer, or financial institution to which the loan was made. The
Custodian shall deliver the Securities thus designated to the broker, dealer or
financial institution to which the loan was made upon receipt of the total
amount designated as to be delivered against the loan of Securities. The
Custodian may accept payment in connection with a delivery otherwise than
through the Book-Entry System or Depository only in the form of a certified or
bank cashier's check payable to the order of the Fund or the Custodian drawn on
New York Clearing House funds and may deliver Securities in accordance with the
customs prevailing among dealers in securities.
2. Promptly after each termination of the loan of Securities by the Fund,
the Fund shall deliver or cause to be delivered to the Custodian a Certificate
specifying with respect to each such loan termination and return of securities:
(a) the name of the issuer and the title of the Securities to be returned, (b)
the number of shares or the principal amount to be returned, (c) the date of
termination, (d) the total amount to be delivered by the Custodian (including
the cash collateral for such Securities minus any offsetting credits as
described in said Certificate), and (e) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the moneys held for the account of the Fund, the total amount
payable upon such return of Securities as set forth in the Certificate.
ARTICLE IX
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, neither the Custodian nor its nominee
shall be liable for any loss or damage, including counsel fees, resulting from
its action or omission to act or otherwise, except for any such loss or damage
arising out of its own negligence or willful misconduct. The Custodian may, with
respect to questions of law, apply for and obtain the advice and opinion of
counsel to the Fund or of its own counsel, at the expense of the Fund, and shall
be fully protected with respect to anything done or omitted by it in good faith
in conformity with such advice or opinion. The Custodian shall promptly notify
the Fund whenever it intends to apply for and obtain advice or an opinion of
counsel at the expense of the Fund. The Custodian shall be liable to the Fund
for any loss or damage resulting from the use of the Book-Entry System or any
Depository arising by reason of any negligence, misfeasance or willful
misconduct on the part of the Custodian or any of its employees or agents. In
the event that the Custodian should determine that there has been any loss or
damage involving Securities of the Fund deposited with any Depository, the
Custodian will enforce, for the benefit of the Fund, the Custodian's rights
against the Depository in connection with any of the Securities of the Fund
deposited by the Custodian with the Depository. The Custodian shall credit to
the Fund's account hereunder the amount, if any, recovered by the Custodian from
or for the account of, any Depository as reimbursement for the loss of, or
damage to, any Securities deposited by the Custodian hereunder with said
Depository.
9
<PAGE>
2. Without limiting the generality of the foregoing, the Custodian shall be
under no obligation to inquire into, and shall not be liable for:
(a) The validity of the issue of any Securities purchased by or for
the Fund, the legality of the purchase thereof, or the propriety of the amount
paid therefor;
(b) The legality of the sale of any Securities by or for the Fund, or
the propriety of the amount for which the same are sold;
(c) The legality of the issue or sale of any shares of the capital
stock of the Fund, or the sufficiency of the amount to be received therefor;
(d) The legality of the redemption of any shares of capital stock of
the Fund, or the propriety of the amount to be paid therefor;
(e) The legality of the declaration or payment of any dividend by the
Fund;
(f) The legality of any borrowing by the Fund using Securities as
collateral; or
(g) The legality of any loan of portfolio Securities pursuant to
Article VIII of this Agreement, nor shall the Custodian be under any duty or
obligation to see to it that any cash collateral delivered to it by a broker,
dealer, or financial institution or held by it at any time as a result of such
loan of portfolio Securities of the Fund is adequate collateral for the Fund
against any loss it might sustain as a result of such loan. The Custodian
specifically, but not by way of limitation, shall not be under any duty or
obligation periodically to check or notify the Fund that the amount of such cash
collateral held by it for the Fund is sufficient collateral for the Fund, but
such duty or obligation shall be the sole responsibility of the Fund. In
addition, the Custodian shall be under no duty or obligation to see that any
broker, dealer or financial institution to which portfolio Securities of the
fund are lent pursuant to Article VIII of this Agreement makes payment to it of
any dividends or interest which are payable to or for the account of the Fund
during the period of such loan or at the termination of such loan, provided,
however, that the Custodian shall promptly notify the Fund in the event that
such dividends or interest are not paid and received when due.
3. The Custodian shall not be liable for, or considered to be the Custodian
of, any money, whether or not represented by any check, draft, or other
instrument for the payment of money, received by it on behalf of the Fund until
the Custodian actually receives and collects such money directly or by the final
crediting of the account representing the Fund's interest at the Book-Entry
System or the Depository.
4. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount due to the Fund from the Transfer Agent of
the Fund nor to take any action to effect payment or distribution by the
Transfer Agent of the Fund of any amount paid by the Custodian to the Transfer
Agent of the Fund in accordance with this Agreement.
10
<PAGE>
5. The Custodian shall not be under any duty or obligation to take action
to effect collection of any amount, if the Securities upon which such amount is
payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
6. The Custodian may appoint one or more banking institutions as Depository
or Depositories or as Sub-Custodian or Sub-Custodians, including, but not
limited to, banking institutions located in foreign countries, of Securities and
moneys at any time owned by the Fund, upon terms and conditions approved in a
Certificate.
7. The Custodian shall not be under any duty or obligation to ascertain
whether any Securities at any time delivered to or held by it for the account of
the Fund are such as properly may be held by the Fund under the provisions of
its Articles of Incorporation.
8. The Custodian shall be entitled to receive and the Fund agrees to pay to
the Custodian all out-of-pocket expenses and such compensation as may be agreed
upon from time to time between the Custodian and the Fund. The Custodian may
charge such compensation and any expenses incurred by the Custodian in the
performance of its duties pursuant to such agreement against any money held by
it for the account of the Fund. The Custodian shall also be entitled to charge
against any money held by it for the account of the Fund the amount of any loss,
damage, liability or expense, including counsel fees, for which it shall be
entitled to reimbursement under the provisions of this Agreement. The expenses
which the Custodian may charge against the account of the Fund include, but are
not limited to, the expenses of Sub-Custodians and foreign branches of the
Custodian incurred in settling outside of New York City transactions involving
the purchase and sale of Securities of the Fund.
9. The Custodian shall be entitled to rely upon any Certificate, notice or
other instrument in writing received by the Custodian and reasonably believed by
the Custodian to be a Certificate. The Custodian shall be entitled to rely upon
any Oral Instructions and any Written Instructions actually received by the
Custodian pursuant to Articles IV or V hereof. The Fund agrees to forward to the
Custodian a Certificate or facsimile thereof confirming such Oral Instructions
or Written Instructions in such manner so that such Certificate or facsimile
thereof is received by the Custodian, whether by hand delivery, telecopier or
other similar device, or otherwise, by the close of business of the same day
that such Oral Instructions or Written Instructions are given to the Custodian.
The Fund agrees that the fact that such confirming Certificate or facsimile
thereof is not received by the Custodian shall in no way affect the validity of
the transactions or enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no liability to the Fund in
acting upon Oral Instructions or Written Instructions given to the Custodian
hereunder concerning such transactions provided such instructions reasonably
appear to have been received from an Authorized Person.
10. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other
11
<PAGE>
applicable securities laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records during
the Custodian's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by the Custodian to the
Fund or the Fund's authorized representative at the Fund's expense.
11. The Custodian shall promptly provide the Fund with any report obtained
by the Custodian on the system of internal accounting control of the Book-Entry
System or the Depository and with such reports on its own systems of internal
accounting control as the Fund may reasonably request from time to time.
12. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with the Custodian's payment or non-payment of checks pursuant to
paragraph 6 of Article VI as part of any check redemption privilege program of
the Fund, except for any such liability, claim, loss and demand arising out of
the Custodian's own negligence or willful misconduct.
13. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE X
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving to
the other party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating a successor custodian or custodians, each of which shall be a
bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event such notice is given by the Custodian, the
Fund shall, on or before the termination date, deliver to the Custodian a copy
of a resolution of its Board of Directors, certified by the Secretary or any
Assistant Secretary, designating a successor custodian or custodians. In the
absence of such designation by the Fund, the Custodian may designate a successor
custodian which shall be a bank or trust company having not less than $2,000,000
aggregate capital, surplus and undivided profits. Upon the date set forth in
such notice this Agreement shall terminate, and the Custodian shall upon receipt
of a notice of acceptance by the successor custodian on that date deliver
directly to the successor custodian all Securities and moneys then owned by the
Fund and held by it as Custodian, after deducting all fees, expenses and other
amounts for the payment or reimbursement of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the Custodian
in accordance with the preceding paragraph, the Fund shall upon the date
specified in the notice of
12
<PAGE>
termination of this Agreement and upon the delivery by the Custodian of all
Securities (other than Securities held in the Book-Entry System which cannot be
delivered to the fund) and moneys then owned by the Fund be deemed to be its own
custodian and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty with respect to
Securities held in the Book Entry System which cannot be delivered to the Fund
to hold such Securities hereunder in accordance with this Agreement.
ARTICLE XI
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Officers of the Fund under its corporate seal, setting forth the names
and the signatures of the present Authorized Persons. The Fund agrees to furnish
to the Custodian a now Certificate in similar form in the event that any such
present Authorized Person ceases to be an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such new
Certificate shall be received, the Custodian shall be fully protected in acting
under the provisions of this Agreement upon Oral Instructions or signatures of
the present Authorized Persons as set forth in the last delivered Certificate.
2. Annexed hereto as Appendix B is a Certificate signed by two of the
present Officers of the Fund under its corporate seal, setting forth the names
and the signatures of the present Officers of the Fund. The Fund agrees to
furnish to the Custodian a new Certificate in similar form in the event any such
present Officer ceases to be an Officer of the Fund, or in the event that other
or additional Officers are elected or appointed. Until such new Certificate
shall be received, the Custodian shall be fully protected in acting under the
provisions of this Agreement upon the signatures of the Officers as set forth in
the last delivered Certificate.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the custodian and mailed to it at its offices at P.O. Box 53456,
Phoenix, Arizona 86072-3456, or at such other place as the Custodian may from
time to time designate in writing.
4. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at 4400 North 32nd
Street, Suite 280, Phoenix, Arizona 85018 or at such other place as the Fund may
from time to time designate in writing.
5. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.
6. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of its Board of Directors.
13
<PAGE>
7. This Agreement shall be construed in accordance with the laws of the
State of Arizona.
8. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but such counterparts shall, together,
constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate Officers, thereunto duly authorized and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
The L. Roy Papp Stock Fund, Inc.
By /s/ L. Roy Papp
-----------------------------------
Chairman
Attest:
/s/ Robert L. Mueller
--------------------------------
Secretary
First Interstate Bank of Arizona
By /s/ Harold C. Dubecher
-----------------------------------
Vice President
Attest:
[Illegible]
--------------------------------
Assistant Secretary
14
<PAGE>
EXHIBIT 8
APPENDIX A
We, L. Roy Papp, Chairman, and Robert L. Mueller, Secretary, of The L. Roy Papp
Stock Fund, Inc., a Maryland corporation (the "Fund"), do hereby certify that
the following individuals have been duly authorized by the Board of Directors of
the Fund, in conformity with the Fund's Articles of Incorporation and Bylaws, to
give Oral Instructions and Written Instructions on behalf of the Fund, and the
signatures set forth opposite their respective names are their true and correct
signatures:
Name Signatures
- ---- ----------
L. Roy Papp /s/ L. Roy Papp
----------------------------------
Harry A. Papp /s/ Harry A. Papp
----------------------------------
Robert L. Mueller /s/ Robert L. Mueller
----------------------------------
Rosellen C. Papp /s/ Rosellen C. Papp
----------------------------------
Richard A. Steuk /s/ Richard A. Steuk
----------------------------------
/s/ L. Roy Papp
----------------------------------
L. Roy Papp, Chairman
/s/ Robert L. Mueller
----------------------------------
Robert L. Mueller, Secretary
<PAGE>
EXHIBIT 8
APPENDIX B
We, L. Roy Papp, chairman, and Robert L. Mueller, secretary, of The L. Roy Papp
Stock Fund, Inc., a Maryland corporation ("The Fund") do hereby certify that the
following individuals serve in the positions with the Fund set forth below their
respective names and have been duly elected by the Board of Directors of the
Fund to such positions and qualified therefor in conformity with the Fund's
Articles of Incorporation and Bylaws, and the signatures set forth opposite
their respective names are their true and correct signatures:
Name Signatures
- ---- ----------
L. Roy Papp /s/ L. Roy Papp
Chairman ----------------------------------
Harry A. Papp /s/ Harry A. Papp
President ----------------------------------
Robert L. Mueller /s/ Robert L. Mueller
Vice President and Secretary ----------------------------------
Rosellen C. Papp /s/ Rosellen C. Papp
Vice President and Treasurer ----------------------------------
Richard A. Steuk /s/ Richard A. Steuk
Vice President ----------------------------------
/s/ L. Roy Papp
----------------------------------
L. Roy Papp, Chairman
/s/ Robert L. Mueller
----------------------------------
Robert L. Mueller, Secretary
<PAGE>
EXHIBIT 8
CERTIFICATION
The undersigned, Robert L. Mueller, hereby certifies that he is the duly
elected and acting Secretary of The L. Roy Papp Stock Fund, Inc. (the "Fund"),
and further certifies that the following resolutions were adopted by the Board
of Directors of the Fund at a meeting held on October 3, 1989, at which a quorum
was at all times present and that such resolutions have not been modified or
rescinded and are in full force and effect as of the date hereof:
RESOLVED, that First Interstate Bank of Arizona of Phoenix, Arizona, is
designated as the custodian for the Fund;
RESOLVED FURTHER, that the officers of the Fund are authorized in the name
and on behalf of the Fund to enter into an agreement with First Interstate Bank
of Arizona in the form presented to this meeting, together with such changes
therein as may be approved by the officers executing the agreement, such
approval to be evidenced by such officers' execution thereof;
RESOLVED FURTHER, that the officers of the Fund are authorized and directed
to take such further action as they may consider necessary or advisable to
effectuate such agreement, and the secretary is directed to file a copy of the
form of agreement presented to this meeting with the records of the Fund;
RESOLVED FURTHER, that communication to the custodian from the Fund may be
made by the use of a facsimile communication device whereby pictures of
instructions, including the signatures of signatories, are transmitted to the
custodian, and that the directors are satisfied that use of such equipment
provides one of a number of adequate safeguards for the Fund's assets; and
RESOLVED FURTHER, that the custodian is authorized to use the Federal
Reserve/Treasury Book Entry System in connection with the purchase, holding and
sale by the Fund of securities issued by the U.S. Government and its agencies
and the facilities of The Depository Trust Company in connection with all other
securities owned by the Fund in accordance with the terms of the custodian
agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of The L. Roy
Papp Stock Fund, Inc. as of November 7, 1989.
/s/ Robert L. Mueller
----------------------------------
Secretary
(corporate seal)
<PAGE>
EXHIBIT 8
FEE SCHEDULE
Commencing on the date shares of The L. Roy Papp Stock Fund, Inc. (The
"Fund") are first offered for sale to the public, compensation payable by the
Fund to First Interstate Bank of Arizona (the "Custodian") pursuant to Article
IX-8 of the Custody Agreement between the Fund and the Custodian dated November
7, 1989 shall be as follows:
ANNUAL BASE FEE $1,250.00
PLUS:
Annual charge for each issue held $ 25.00
Charge for each transaction $ 50.00
Transactions are defined as a purchase, a sale, a call or a maturity.
It is understood that additional fees, as agreed to between Custodian and
Fund, may become payable by Fund should Fund engage in certain activities,
including but not limited to, the lending of portfolio securities of the Fund,
which result in the incurring of additional expenses by the Custodian.
Approved:
The L. Roy Papp Stock Fund, Inc.
By: /s/ Robert L. Mueller
---------------------------------
Vice President
First Interstate Bank of Arizona
By: /s/ Carol J. Jones
---------------------------------
Vice President
<PAGE>
EXHIBIT 9
TRANSFER AGENCY AGREEMENT
L. ROY PAPP & ASSOCIATES, an Arizona partnership (The "Transfer Agent"),
and THE L. ROY PAPP STOCK FUND, INC., a Maryland corporation registered with the
Securities and Exchange Commission as an open-end investment company (the
"Fund"), agree that:
1. Definitions. Whenever used in this agreement, the following words and
phrases, unless the context otherwise requires, have the following meanings:
(a) "Articles of Incorporation" means the Articles of Incorporation of the
Fund as they may be amended from time to time;
(b) "Authorized Person" includes the Chairman, the President, any Vice
President, the Secretary or any Assistant Secretary, the Treasurer or any
Assistant Treasurer, of the Fund, or any other person, whether or not such
person is an Officer or employee of the Fund, duly authorized to give Oral
Instructions and Written Instructions on behalf of the Fund as indicated in a
certification pursuant to Section 6(d) or 6(e) as may be received by the
Transfer Agent from time to time;
(c) "Certificate" means any notice, instruction or other instrument in
writing, authorized or required by this agreement to be given to the Transfer
Agent, which is actually received by the Transfer Agent and signed on behalf of
the Fund by any two Officers thereof;
(d) "Commission" means the Securities and Exchange Commission;
(e) "Custodian" means the custodian of the securities and moneys owned by
the Fund, which is to be First Interstate Bank of Arizona unless and until the
Transfer Agent shall receive a certificate otherwise;
(f) "Directors" means the duly elected Directors of the Fund; "Board of
Directors" means the Board of Directors of the Fund, of which the Directors are
members;
(g) "Fund" means The L. Roy Papp Stock Fund, Inc., a Maryland corporation;
(h) The "1940 Act" means the Investment Company Act of 1940 and the Rules
and Regulations of the Commission thereunder;
(i) "Officer" means the Chairman, the President, and Vice President, the
Secretary and the Treasurer of the Fund;
(j) "Oral Instructions" means instructions orally communicated and actually
received by the Transfer Agent from an Authorized Person or from a person
reasonably believed by the Transfer Agent to be an Authorized Person;
(k) "Prospectus" means the prospectus of the Fund relating to the Fund's
Shares that became effective most recently under the Securities Act of 1933, and
as it may subsequently have been supplemented;
<PAGE>
(l) "Shares" means capital stock, $.01 par value per share, of the Fund;
(m) "Shareholder" means registered owner of Shares;
(n) "Written Instructions" means a written communication actually received
by the Transfer Agent from an Authorized Person or from a person reasonably
believed by the Transfer Agent to be an Authorized Person by telex or any other
such system whereby the receiver of such communication is able to verify through
codes or otherwise with a reasonable degree of certainty the authenticity of the
sender of such communication;
2. Representation of Transfer Agent. The Transfer Agent does hereby
represent and warrant to the Fund that it is duly registered as a transfer agent
as provided in section 17A(c) of the Securities Exchange Act of 1934, as
amended.
3. Appointment of the Transfer Agent. The Fund appoints the Transfer Agent
as transfer agent for all of the Shares and as shareholder servicing agent for
the Fund. The Transfer Agent accepts such appointments and agrees to perform
the duties herein set forth.
4. Compensation.
(a) The Fund shall compensate the Transfer Agent for its services rendered
under this agreement in accordance with the fees set forth in the fee schedule
annexed hereto and incorporated herein.
(b) The compensation agreed to hereunder may be adjusted from time to time
by attaching a revised fee schedule, dated and signed by an Officer of each
party hereto, to this agreement.
(c) The Transfer Agent shall present a bill to the Fund as soon as
practicable after the end of each calendar month, detailed in accordance with
the fee schedule. The Fund shall promptly pay to the Transfer Agent the amount
of such billing.
5. Documents. In connection with the appointment of the Transfer Agent,
the Fund shall, on or before the date this Agreement goes into effect, file with
the Transfer Agent a copy of each of the following documents:
(a) The Articles of Incorporation, as then in effect;
(b) The bylaws of the Fund, as then in effect;
(c) The resolution of the Board of Directors authorizing this agreement;
(d) A specimen of the certificate for Shares in the form approved by the
Board of Directors, with a Certificate of the Secretary as to such approval;
2
<PAGE>
(e) All account application forms and other documents relating to
shareholder accounts or relating to any plan, program or service offered by the
Fund relating to the sale, holding or redemption of Shares.
6. Further Documentation. The Fund shall also furnish from time to time a
copy of each of the following documents:
(a) Each registration statement filed with the Commission, and all related
amendments and orders relating to the sale of Shares;
(b) Each amendment to the Articles of Incorporation and to the bylaws of
the Fund;
(c) Copies of each resolution of the Directors designating Authorized
Persons to give instructions to the Transfer Agent;
(d) A certificate of any change in any Officer or Director of the Fund;
(e) Specimens of each new certificate for Shares, accompanied by a
resolution of Board of Directors approving such form of certificate; and
(f) Such other certificates, documents or opinions as may mutually be
deemed necessary or appropriate for the Transfer Agent in the proper performance
of its duties.
7. Representations of the Fund. The Fund represents to the Transfer Agent
that, as of the date of this agreement, it is authorized to issue 5,000,000
Shares. When Shares are hereafter issued in accordance with the terms of sale
in the Prospectus, such Shares shall be validly issued, full paid and
nonassessable by the Fund.
8. Duties of the Transfer Agent.
(a) The Transfer Agent shall be responsible for administering and
performing the functions required for the Shares, for acting as service agent in
connection with dividends and distributions on the Shares, and for performing
shareholder account administrative agent functions in connection with the
issuance, transfer and redemption or repurchase (including coordination with the
Custodian) of the Shares. The details of the operating standards and procedures
to be followed shall be determined from time to time by agreement between the
Transfer Agent and the Fund, and where appropriate, the Custodian.
(b) The Transfer Agent shall create and maintain all necessary records
including those specified in Section 17 hereof, in accordance with all
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and those records pertaining to the
various functions performed by it hereunder. All records shall be available for
inspection and use by the Fund, including after termination of this agreement.
Where applicable, such records shall be maintained by the Transfer Agent for the
periods and in the places required by Rule 31a-2 under the 1940 Act.
3
<PAGE>
(c) The Transfer Agent shall make available during regular business hours
all records and other data created and maintained pursuant to this agreement,
for reasonable audit and inspection by the Fund and any person retained by the
Fund. Upon reasonable notice by the Fund, the Transfer Agent shall make
available during regular business hours its facilities and premises employed in
connection with its performance of this agreement for reasonable visitation by
the Fund and any person retained by the Fund.
(d) At the expense of the Fund, the Transfer Agent shall maintain an
adequate supply of the blank Share certificates to meet the Fund's and Transfer
Agent's requirements therefor. Each Share certificate shall be issued to
represent whole Shares only (but not fractions of any whole Share), and shall be
properly signed, manually or by facsimile, upon issuance of the Certificate.
Notwithstanding the death, resignation, or removal of any Officer of the Fund
whose signature appears on such certificate, the Transfer Agent may continue to
countersign certificates that bear such signature until otherwise directed by
the Fund.
(e) The Transfer Agent shall issue replacement Share certificates in lieu
of certificates that have been lost, stolen or destroyed, without any further
action by the Board of Directors or any Officer of the Fund, in each case upon
receipt by the Transfer Agent of properly executed affidavits and lost
certificate bonds for an appropriate amount that it considers reasonably
adequate for the protection of the Fund and the Transfer Agent, in form
satisfactory to the Transfer Agent, in which the Fund and the Transfer Agent are
obligees under the bonds.
(f) The Transfer Agent shall maintain records of the name of each
registered owner of Shares, the number of Shares to the nearest one-thousandth
of a Share) owned by such registered owner and in the aggregate by all
registered owners, of each certificate for whole shares, if any, issued to
represent any Shares owned by such registered owner, and, to the extent it is
able to do so, the address and tax identification number of each registered
owner. The Transfer Agent shall maintain a stop transfer record of certificates
for Shares lost or replaced or both.
(g) The Transfer Agent shall address and mail all communications by the
Fund to its Shareholders, including reports to Shareholders, dividend and
distribution notices, and notices of and proxy materials for meetings of
Shareholders.
(h) The Transfer Agent shall investigate all Shareholder inquiries relating
to accounts of the respective Shareholders, and shall answer all correspondence
from Shareholders, and to the extent appropriate, from securities brokers and
others, relating to its duties hereunder, and such other correspondence as may
from time to time be mutually agreed upon between the Transfer Agent and the
Fund.
(i) The Transfer Agent shall furnish the Fund with reports of registration
of ownership of Shares, such periodic and special reports as the Fund may
reasonably request and the Transfer Agent can reasonably provide, and such other
information, including Shareholder lists and statistical information concerning
Shareholder accounts, as may be agreed upon from time to time between the Fund
and the Transfer Agent.
4
<PAGE>
(j) In connection with special and annual meetings of Shareholders, the
Transfer Agent shall prepare lists of Shareholders, shall mail to the
Shareholders notices of the meetings and proxy materials, shall furnish to the
Fund affidavits of such mailings, shall process and tabulate the voting
instructions of the proxies returned by or for Shareholders, shall report to the
Fund on such returns and tabulations, shall report at each meeting on the number
of Shares represented at the meeting by proxy and, separately, by Shareholders
in person, shall act as teller at the meeting, and shall certify the voting of
holders of Shares.
9. Sales of Fund Shares.
(a) Whenever the Fund shall sell any of its Shares, the Fund shall deliver
or cause to be delivered to the Transfer Agent a Certificate duly specifying:
(i) the number of Shares sold, trade date and price per Share and the total
price; (ii) the amount of money to be delivered to the Custodian from the sale
of such Shares; and (iii) in the case of a new account, a new account
application or sufficient information with which to establish an account.
(b) The Transfer Agent shall, upon receipt by it of a check or other medium
of payment identified by it as funds or a claim of funds in payment of the
purchase price for sales of Shares (and where required, payable or endorsed to
the Transfer Agent as agent for, or identified as being for the account of, the
Fund), promptly deposit such check or other payment to the appropriate account
postings necessary to reflect the sale according to arrangements to be made
between it and the Custodian. The Transfer Agent will notify the Fund, or its
designee, and the Custodian of all purchases and related account adjustments.
(c) Upon receipt of the notification required under paragraph (a) hereof,
the Transfer Agent shall issue to the purchaser a confirmation of the
information received under paragraph 9(a) (including, if needed, a request for
additional information needed for the account records).
(d) Upon the issuance of any Shares in accordance with the foregoing
provisions of this Section, the Transfer Agent shall not be responsible for the
payment of any original issue or other taxes required to be paid by the Fund in
connection with such issuance.
(e) The Transfer Agent may establish such additional rules and regulations
governing the transfer or registration of certificates for Shares as it may deem
advisable and as are consistent with rules and regulations generally adopted by
bank transfer agents, except as it may be instructed otherwise by an Officer.
10. Failure of Payment. In the event that any check or other order for
the payment of the price of Shares sold by the Fund is for any reason not paid
upon demand for payment, the Transfer Agent will: (i) give prompt notice to the
Fund or its designee of such failure of payment; (ii) place a stop transfer
order against all Shares that were to have been issued in consideration for such
failed payment; and (iii) take such other steps as the Transfer Agent may, in
its discretion, deem appropriate or as the Fund or its designee may instruct.
5
<PAGE>
11. Redemptions. The Transfer Agent shall duly process demands by
Shareholders for redemption of Shares only in accordance with the requirements
and procedures set forth in the Prospectus, except as and to the extent waived
or otherwise specified by an Officer in any individual redemption.
12. Transfers and Exchanges. The Transfer Agent shall duly process
transfers of registered ownership of Shares only in accordance with the
requirements and procedures set forth in the Prospectus applicable to
redemptions (modified, if necessary, to accommodate any difference in a transfer
from a redemption), except as and to the extent waived or otherwise specified by
an Officer in any individual transaction.
13. Right to Seek Assurances. The Transfer Agent reserves the right not
to process a transfer or redemption of Shares until it is satisfied that the
requested transfer or redemption is legally authorized, and it shall incur no
liability for the refusal, in good faith, to make transfers or redemptions which
the Transfer Agent, in its judgment, deems improper or unauthorized, or until it
is satisfied that there is no basis for any claims adverse to such transfer or
redemption. The Transfer Agent may, in effecting transfers, rely upon the
provisions of the Uniform Act for the Simplification of Fiduciary Security
Transfers of Arizona or the Uniform Commercial Code of Arizona, as they may be
amended from time to time, which in the opinion of legal counsel for the Fund or
of its own legal counsel protect it in not requiring certain documents in
connection with the transfer or redemption of Shares, and the Fund shall
indemnify the Transfer Agent for any act done or omitted by it in reliance upon
such laws or opinions of counsel of the Fund or of its own counsel.
14. Distributions.
(a) The Fund shall promptly notify the Transfer Agent of the declaration of
any dividend or other distribution on Shares. The Fund shall furnish to the
Transfer Agent a resolution of the Board of Directors certified by the Secretary
declaring a dividend or distribution of a specified amount per Share or in the
aggregate, the medium of payment if payable other than in United States dollars,
and the record date and the payable date of the distribution if the declaration
was in an aggregate amount. In the event that the amount of the dividend or
distribution is declared in the aggregate, then promptly after the record date a
Certificate will be furnished to the Transfer Agent stating the per share
equivalent of the aggregate amount as of the record date.
(b) The Transfer Agent shall, on or before the payable date of any dividend
or distribution, notify the Custodian of the estimated amount of cash required
to pay the dividend or distribution, and the Fund agrees that, on or before the
mailing date of such dividend or distribution, it shall instruct the Custodian
to place in a dividend disbursing account funds equal to the cash amount to be
paid. As of the first calendar day after the record date, the Transfer Agent
shall record in the Share accounts of those registered Shareholders whose
dividends or distributions are to be reinvested in Shares the number and price
of the Shares so acquired priced at the applicable net asset value. The
Transfer Agent shall calculate, prepare and mail checks to Shareholders whose
dividends and other distributions are to be received by them in money.
6
<PAGE>
(c) The Transfer Agent shall replace lost checks upon receipt of properly
executed affidavits, and will maintain stop payment orders against replaced
checks.
(d) The Transfer Agent shall not be liable for the propriety of payments
made in accordance with the resolutions of the Board of Directors.
(e) If the Transfer Agent does not receive from the Custodian sufficient
cash to make payment to all Shareholders as of the record date, the Transfer
Agent shall, upon notifying the Fund, withhold payment to all Shareholders of
record as of the record date until such sufficient cash is provided to the
Transfer Agent.
15. Other Duties. In addition to the duties expressly provided for
herein, the Transfer Agent shall perform such other duties and functions and
shall be paid such amounts therefore as may from time to time be agreed in
writing.
16. Taxes. The Transfer Agent shall file such appropriate information
returns concerning the payment of dividends and capital gains distributions with
the proper Federal, state and local authorities as are required by law to be
filed by the Fund and shall withhold such sums as are required to be withheld by
applicable law.
17. Books and Records.
(a) The Transfer Agent shall maintain records showing for each
Shareholder's account the following: (i) names, addresses and tax identification
numbers; (ii) numbers of shares held; (iii) historical information regarding the
account of each Shareholder, including dividends paid and date and price of all
transactions on a Shareholder's account; (iv) any stop or restraining order
placed against a Shareholder's account; (v) information on withholdings; (vi)
any capital gain or dividend reinvestment order, plan application, dividend
address and correspondence relating to the current maintenance of a
Shareholder's account; (vii) certificate numbers and denominations of all Shares
represented by certificates; (viii) any information required in order for the
Transfer Agent to perform the calculations contemplated or required by this
agreement; and (ix) such other information and data as may be required by law.
(b) Any records required to be maintained by Rule 31a-1 under the 1940 Act
will be preserved for the periods prescribed in Rule 31a-2 under the 1940 Act.
Such records may be inspected by the Fund at reasonable times. The Transfer
Agent may, at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Transfer Agent's files,
records and documents created and maintained by the Transfer Agent in
performance of its services or for its protection.
18. Reliance by Transfer Agent; Instructions
(a) The Transfer Agent shall be protected in acting upon any paper or
document believed by it to be genuine and to have been signed by an Authorized
Person, and shall not be held to have any notice of any change of authority of
any person until receipt of written certification thereof from the Fund. It
shall also be protected in processing Share certificates that
7
<PAGE>
it reasonably believes to bear the proper manual or facsimile signatures of the
Officers of the Fund, but shall be responsible for the proper countersignature
of the Transfer Agent.
(b) At any time the Transfer Agent may apply to any Authorized Person of
the Fund for Written Instructions, and at the expense of the Fund, may seek
advice from legal counsel for the Fund or its own legal counsel, with respect to
any matter arising in connection with this agreement, and it shall not be liable
for any action taken or not taken or suffered by it in good faith in accordance
with such Written Instructions or with the opinion of such counsel and, apart
from that, in the exercise of reasonable care. In addition, the Transfer Agent,
its officers, agents or employees, shall accept instructions or requests given
to them by any person representing or acting on behalf of the Fund only if said
representative is known by the Transfer Agent, its officers, agents or
employees, to be an Authorized Person. The Transfer Agent shall have no duty or
obligation to inquire into, nor shall the Transfer Agent be responsible for, the
legality of any act done by it upon the request or direction of Authorized
Persons of the Fund.
(c) Notwithstanding any of the foregoing provisions of this agreement, the
Transfer Agent shall be under no duty or obligation to inquire into, and shall
not be liable for: (i) the legality of the issue or sale of any Shares of the
Fund, nor the sufficiency of the amount to be received therefor; (ii) the
legality of the redemption of any Shares of the Fund, nor the propriety of the
amount to be paid therefor; (iii) the legality of the declaration of any
dividend by the Fund, nor the legality of the issue of any dividend by the Fund,
nor the legality of the issue of any Shares of the Fund in payment of any stock
dividend; or (iv) the legality of any recapitalization or readjustment of the
Shares of the Fund.
19. Standard of Care and Indemnification.
(a) The Transfer Agent may, in connection with this agreement, employ
agents or attorneys in fact, or both, and shall not be liable for any loss
arising out of or in connection with its actions (which includes the actions of
its agents and attorneys in fact) under this agreement so long as it (which
includes its agents and attorneys in fact) acts in good faith and with due
diligence, and is not negligent or guilty of any willful misconduct.
(b) The Fund hereby agrees to indemnify and hold harmless the Transfer
Agent from and against any and all claims, demands, expenses and liabilities
(whether with or without basis in fact or law) of any and every nature which the
Transfer Agent may sustain or incur or which may be asserted against the
Transfer Agent by any person by reason of, or as a result of: (i) any action
taken or omitted to be taken by the Transfer Agent in good faith in reliance
upon any Certificate, instrument, order or stock certificate believed by it to
be genuine and to be signed, countersigned or executed by any duly authorized
person, upon the Oral Instructions or Written Instructions of an Authorized
Person of the Fund or upon the opinion of legal counsel for the Fund or its own
counsel; or (ii) any action taken or omitted to be taken by the Transfer Agent
in good faith in reliance upon any law, act, regulation or interpretation of the
same even though the same may thereafter have been altered, changed, amended or
repealed. However, indemnification hereunder shall not apply to actions or
omissions of the Transfer Agent or its
8
<PAGE>
partners, employees or agents in case of its own negligence, willful misconduct,
bad faith, or reckless disregard of its or their own duties hereunder.
(c) The Transfer Agent hereby agrees to indemnify and hold harmless the
Fund from and against any and all claims, demands, expenses and liabilities
(whether with or without basis in fact or law) of any and every nature which the
Fund may sustain or incur or which may be asserted against the Fund by any
person by reason of, or as a result of, the negligence or misconduct of the
Transfer Agent or its agents or contractors. However, indemnification hereunder
shall not apply to actions or omissions of the Fund or its directors, officers,
employees or agents in case of its own negligence, willful misconduct, bad
faith, or reckless disregard of its own or their own duties hereunder.
20. Affiliation Between Fund and Transfer Agent. It is understood that
the partners and employees of the Transfer Agent may be interested in the Fund
as directors, officers, employees, agents, Shareholders, or otherwise. The fact
that any officer, director, employee, agent or Shareholder (or two or more of
them) of the Fund is or may be an affiliated person (as defined in the 1940 Act)
of the Transfer Agent shall not affect the validity of this agreement.
21. Term.
(a) This agreement shall become effective on November 7, 1989 (the
"Effective Date") and shall continue in effect from year to year thereafter, on
and after two years from the Effective Date, so long as such continuance is
specifically approved at least annually both (i) by either the Board of
Directors, or by the vote of a majority of the outstanding voting securities of
the Fund (as defined in the 1940 Act), and (ii) by a vote of the majority of the
Directors who are not interested persons of the Fund (as defined in the 1940
Act), voting in person at a meeting of the Board of Directors called for the
purpose of voting on such approval.
(b) This agreement may be terminated at any time, without payment of
penalty, by the Board of Directors of the Fund, or by a vote of the holders of a
majority of the outstanding voting securities of the Fund, on not more than 60
days' written notice to the Transfer Agent. In the event such notice is given
by the Fund, it shall be accompanied by a resolution of the Board of Directors
certified by the Secretary, electing to terminate this agreement and designating
a successor transfer agent. This agreement may be terminated by the Transfer
Agent at any time upon 60 days' written notice to the Fund. This agreement
shall terminate automatically in the event of its assignment (as defined in
Section 2(a)(4) of the 1940 act).
22. Amendment. This agreement may not be amended or modified in any
manner except by a written agreement executed by both parties to this agreement,
and approved in the manner required by subparagraph 21(a) for the continuation
of the agreement.
23. Subcontracting. The Fund agrees that Transfer Agent may, in its
discretion, subcontract for certain of the services to be provided hereunder;
provided, however, that the Transfer Agent shall continue to be responsible to
the Fund for the performance of those services to the extent specified in this
agreement.
9
<PAGE>
24. Security. The Transfer Agent represents and warrants that, to the
best of its knowledge, the various procedures and systems which the Transfer
Agent has implemented with regard to safeguarding from loss or damage
attributable to fire, theft or any other cause (including provision for twenty-
four hours a day restricted access) the Fund's blank checks, records and other
data and the Transfer Agent's records, data, equipment, facilities and other
property used in the performance of its obligations hereunder are adequate and
that it will make such changes therein from time to time as in its judgment are
required for the secure performance of its obligations hereunder. The parties
shall review such systems and procedures on a periodic basis.
25. Confidentiality of Records. The Transfer Agent agrees not to disclose
any information received from the Fund to any person except the Transfer Agent's
employees and agents, and shall use its best efforts to maintain such
information as confidential. Upon termination of this agreement, the Transfer
Agent shall return to the Fund all records in the possession and control of the
Transfer Agent related to the Fund's activities, other than the Transfer Agent's
own business records.
26. Miscellaneous.
(a) This agreement shall be construed in accordance with the laws of the
State of Arizona.
(b) This agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original: but such counterparts shall, together,
constitute only one instrument.
Dated November 7, 1989
L. ROY PAPP & ASSOCIATES
By: /s/ L. Roy Papp
------------------------------------
L. Roy Papp, a general partner
THE L. ROY PAPP STOCK FUND, INC.
By: /s/ Harry A. Papp
------------------------------------
Harry A. Papp, President
10
<PAGE>
FEE SCHEDULE
Commencing on the date shares of The L. Roy Papp Stock Fund, Inc. (the
"Fund") are first offered for sale to the public, compensation payable by the
Fund to L. Roy Papp & Associates (the "Transfer Agent") pursuant to Section 4 of
the Transfer Agency agreement between the Fund and the Transfer Agent dated
November 7, 1989 shall be as follows:
Monthly fee per Shareholder account $ .75
Fee per Shareholder-initiated transaction--
purchase (other than by reinvestment in Fund
shares) transfer or redemption 1.00
Fee per account for dividend or distribution paid
(other than by reinvestment in Fund shares) .50
There is no charge for the processing changes in account information or for
furnishing information with respect to any account, and there is no charge for
opening a new account other than the $1 fee assessed for the initial purchase. A
dividend and distribution payable on the same date shall result in the
imposition of only one fee per account. The full monthly account fee will be
payable on an account that is open for any portion of a month. It is understood
that the Transfer Agent will make no charges for its services hereunder until
January 1, 1992.
Approved:
THE L. ROY PAPP STOCK FUND, INC. L. ROY PAPP & ASSOCIATES
By: /s/ Harry S. Papp By: /s/ L. Roy Papp
----------------------- ------------------------
President a general partner
11
<PAGE>
EXHIBIT 9.1
I hereby certify that I am the duly elected and acting Secretary of The L. Roy
Papp Stock Fund, Inc. and that the following resolution amending the Transfer
Agency Agreement between The Fund and L. Roy Papp & Associates was unanimously
adopted at a duly constituted meeting of the Board of Directors of said Fund
held June 21, 1995:
RESOLVED, that Section 18(a) of the Transfer Agency Agreement dated November 7,
1989 between the Fund and L. Roy Papp & Associates is amended to read as
follows:
"18. Reliance by Transfer Agent; Instructions.
(a) The Transfer Agent shall be protected in acting upon any paper or
document believed by it to be genuine and to have been signed by two Authorized
Persons, and shall not be held to have any notice of any change of authority of
any person until receipt of written certification thereof from the Fund. It
shall also be protected in processing Share certificates that it reasonably
believes to bear the proper manual of facsimile signatures of the Officers of
the Fund, but shall be responsible for the proper countersignature of the
Transfer Agent."
/s/ Robert L. Mueller
------------------------------------
Robert L. Mueller, Secretary
July 20, 1995
Accepted:
/s/ Bruce C. Williams
- ------------------------------
a general partner of
L. Roy Papp & Associates
<PAGE>
EXHIBIT 10
BELL, BOYD & LLOYD
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, Illinois 60602-4207
November 10, 1989
The L. Roy Papp Stock Fund, Inc.
4400 North 32nd Street
Suite 280
Phoenix, Arizona 85018
Dear Sirs:
We have acted as counsel for The L. Roy Papp Stock Fund, Inc. , a Maryland
corporation (the "Fund"), in connection with the registration under the
Securities Act of 1933 (the "Act") of an indefinite number of shares of its
capital stock, $0.01 par value per share (the "shares"), pursuant to the Fund's
registration statement, no. 33-31465, on form N-1A (the "registration
statement"). In this connection, we have examined originals, or copies certified
or otherwise identified to our satisfaction, of such documents, corporate and
other records, certificates and other papers as we deemed it necessary to
examine for the purpose of this opinion, including the articles of incorporation
and bylaws of the Fund, resolutions of the board of directors authorizing the
issuance of the shares, the form of certificates to evidence the shares, and the
registration statement.
Based upon the foregoing examination, we are of the opinion that:
1. The Fund is a corporation duly organized and legally existing in good
standing under the laws of Maryland.
2. Upon the issuance and delivery of the shares in accordance with the
articles of incorporation of the Fund and the resolutions of the board
of directors authorizing the issuance of its shares and the receipt by
the Fund of a purchase price of not less than the net asset value or
the par value per share, the shares will be legally issued and
outstanding, fully paid and nonassessable.
<PAGE>
The L. Roy Papp Stock Fund, Inc.
November 10, 1989
Page 2
In giving the opinion expressed in subparagraph 2 above, we have assumed
that the number of shares issued at any time will not exceed the total number of
shares authorized to be issued by the Fund's articles of incorporation.
We consent to the filing of this opinion as an exhibit to the registration
statement. In giving this consent we do not admit that we are in the category of
persons whose consent is required under section 7 of the Act.
Very truly yours,
BELL, BOYD & LLOYD
<PAGE>
Exhibit 11
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
April 24, 1996.
<PAGE>
EXHIBIT 13
The L. Roy Papp Stock Fund, Inc.
Subscription Agreement
----------------------
1. Subscription for Shares. I agree to purchase from The L. Roy Papp
Stock Fund, Inc. 10,000 shares of capital stock of the Fund for a price of $10
per share, on the terms and conditions set forth herein and in the preliminary
prospectus described below, and agree to tender $100,000 in payment therefor at
such time as the board of directors or the president determines.
I understand that the Fund filed a registration statement with the
Securities and Exchange Commission on Form N-1A, which contains the preliminary
prospectus describing the Fund and the stock. I acknowledge receipt of a copy of
the preliminary prospectus.
I recognize that the Fund will not be fully operational until it commences
a public offering of its hares. Accordingly, a number of features of the Fund
described in the preliminary prospectus, including, without limitation, the
declaration and payment of dividends, and redemption of shares upon request of
shareholders, are not, in fact, in existence at the present time and will not be
instituted until the Fund's registration statement becomes effective under the
Securities Act of 1933.
2. Representations and Warranties. I represent and warrant as follows:
(a) I am aware that no federal or state agency has made any finding or
determination as to the fairness for investment, nor any recommendation nor
endorsement, of the shares:
(b) I have such knowledge and experience of financial and business
matters as will enable me to utilize the information made available to me
in connection with the offering of the shares to evaluate the merits and
risks of the prospective investment and to make an informed investment
decision;
(c) I recognize that the Fund has only recently been organized and has
no financial or operating history and, further, that investment in the Fund
involves certain risks, and I have taken full cognizance of and understand
all of the risks related to the purchase of the shares and I acknowledge
that I have suitable financial resources and anticipated income to bear the
economic risk of such an investment;
(d) I am purchasing the shares for my own account, for investment, and
not with any intention of redemption, distribution, or resale of the
shares, either in whole or in part;
(e) I will not sell the shares purchased by me without registration of
them under the Securities Act of 1933 or exemption therefrom;
<PAGE>
EXHIBIT 13.1
THE L. ROY PAPP STOCK FUND, INC.
[LOGO]
4400 North 32nd Street
Suite 280
NEW ACCOUNT PURCHASE APPLICATION PHOENIX, ARIZONA 85018
(602) 956-1115
(800) 421-4004
Dated:
---------------------------
Make checks payable to, and mail to: The L. Roy Papp Stock Fund, Inc., 4400
North 32nd Street, Suite 280, Phoenix, AZ 85018
................................................................................
1 AMOUNT OF PURCHASE: $________ ($5,000 minimum for new account, except for
Individual Retirement Accounts (IRAs) where the minimum is $1,000)
................................................................................
2 REGISTRATION: (check one)
[_] Individual or
Joint Account:____________________________ _____________________________
(Individual) (Joint Tenant, if any)
[_] Transfer (or Gift) to Minor:_______________, Custodian for__________________
(Custodian) (Minor)
Under the Uniform Transfers (or Gifts) to Minors Act of____________________
(State of residence)
[_] IRA:____________________________ Custodian for_____________________________
(Custodian) (Individual)
IRA IRA Rollover (circle one)
[_] Other: (Corporations, Trusts, or others):__________________________________
(Trustee(s), corporation, partnership or other entity)
________________________________________________________________________________
................................................................................
3 ADDRESS OF RECORD:___________________________________________________________
City________________________ State______ Zip________ Telephone ( )__________
4 CITIZENSHIP: [_] United States [_] Other (specify)
................................................................................
5 SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER:________________________________
Page 1 of 2
(Please complete both sides of this application)
<PAGE>
NEW ACCOUNT PURCHASE APPLICATION
6 DISTRIBUTIONS - Dividends and capital gain distributions will be reinvested
automatically in additional shares (whole and fractional) unless the Fund is
otherwise instructed in writing. If you wish all or a portion of distributions
to be paid in cash, please so indicate.
[_] Pay income dividends [_] Pay any capital gains
in cash distributions in cash
................................................................................
7 AGREEMENT - By signing this Application, I certify that I have received and
read the prospectus and agree to its terms and that all information provided in
the Application is correct.
................................................................................
8 TAX CERTIFICATIONS - Under penalties of perjury, I certify that:
1. the number shown on this Application is my correct Social Security or
other tax identification number (or I am waiting for a number to be
issued to me), and
2. I am not subject to backup withholding, either because the IRS has not
notified me that I am subject to backup withholding for failure to report
dividend or interest income, or because the IRS has notified me that I am
no longer subject to backup withholding.
The IRS does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding (under
the heading "Tax Certifications").
................................................................................
SIGNATURE:
________________________________ ______________________________________
(signature of shareholder) (signature of joint investor, if any)
................................................................................
Each transaction in your account will be confirmed in writing. The Fund does
not issue stock certificates. All full and fractional shares are held in book
entry form.
Page 2 of 2
(Please complete both sides of this application)
<PAGE>
Exhibit 16
Schedule of Computation
of Performance Quotations
The L. Roy Papp Stock Fund, Inc.
Total Return Calculation
As of December 31, 1995
<TABLE>
<CAPTION>
Net Asset Value Annualized
Beginning Per Share at Shares Net Asset Value Average
of Principal Beginning Shares at End Per Share at Redemption Value Total Total Total
Period Invested of Period Acquired of Period End of Period End of Period Return Return % Years Return %
- --------- --------- -------------- -------- --------- --------------- ---------------- -------- -------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1/1/95 $1,000.00 $14.63 68.353 68.914 $19.29 $1,329.35 $ 329.35 32.9% 1 32.9%
1/1/91 $1,000.00 $10.42 95.969 104.927 $19.29 $2,024.04 $1,024.04 102.4% 5 15.1%
11/29/89 $1,000.00 $10.00 100.000 111.920 $19.29 $2,158.90 $1,158.90 115.89% 6.093 13.5%
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information extracted from
NSAR 1995 & 1995 Audited F/S and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 29,651,819
<INVESTMENTS-AT-VALUE> 44,219,525
<RECEIVABLES> 63,889
<ASSETS-OTHER> 411,707
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 44,695,121
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 186,578
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,940,837
<SHARES-COMMON-STOCK> 2,307,757
<SHARES-COMMON-PRIOR> 2,500,328
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,567,706
<NET-ASSETS> 44,508,543
<DIVIDEND-INCOME> 622,720
<INTEREST-INCOME> 23,975
<OTHER-INCOME> 0
<EXPENSES-NET> 472,316
<NET-INVESTMENT-INCOME> 174,379
<REALIZED-GAINS-CURRENT> 178,446
<APPREC-INCREASE-CURRENT> 11,093,392
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 174,379
<DISTRIBUTIONS-OF-GAINS> 177,387
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 155,585
<NUMBER-OF-SHARES-REDEEMED> 364,966
<SHARES-REINVESTED> 16,810
<NET-CHANGE-IN-ASSETS> 11,446,217
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 404,846
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 472,316
<AVERAGE-NET-ASSETS> 42,174
<PER-SHARE-NAV-BEGIN> 14.63
<PER-SHARE-NII> .07
<PER-SHARE-GAIN-APPREC> 4.73
<PER-SHARE-DIVIDEND> .07
<PER-SHARE-DISTRIBUTIONS> .07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 19.29
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
