<PAGE>
Dear Shareholder:
A few days ago the Hong Kong stock market came down with pneumonia, then most of
the world caught the Asian flu. We, on the other hand, appear to have
contracted only the 24 hour variety.
U.S. money is a world commodity because the U.S. dollar, aided by computers, can
give us the value of every country's currency in seconds. Switzerland has
finally joined the rest of the world and will not use gold as a currency
reserve. Thus, the U.S. dollar has become the world's currency. In mere
seconds, a currency can be converted from one country's stocks and bonds into
cash and then moved to another nation's stocks, bonds, real estate, or cash
equivalents. All of this can be done in a moment with modern electronics and
computers and has resulted in our living in a truly international world.
Because of the problems facing Malaysia, Thailand, and other Southeast Asia
nations, most economists have reduced their estimates for next year's growth in
those countries, but they would still be growing faster than the United States
or Europe. More important is the fact that all Southeast Asia is only two or
three percent of our gross domestic product. Our economy will not be damaged.
Our economy is in very good shape (even Mr. Greenspan said so) and I see no
recession for at least the next two years. Globalization and technology will
drive us for a long time. I believe the stock market had another correction,
which could continue for a while before we start up again. Stocks continue to
be the best long-term investment.
The events of the past several days again spotlight the folly inherent in market
timing and other short-term judgments. We have always said that a successful
investor is a patient, long-term investor and our Funds are designed with that
philosophy in mind.
Warmest regards,
L. Roy Papp, Chairman
October 29, 1997
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Number Market
Common Stocks of Shares Value
- --------------------------------------------------- --------- ------
<S> <C> <C>
Financial Services ( 16.4%)
Northern Trust Corporation
(Bank specializing in trust services) 36,000 $ 2,128,500
State Street Corporation
(Provider of securities custodial services) 109,200 6,654,375
T. Rowe Price Associates, Inc.
(Provides investment advisory and administrative
services to their family of no-load mutual funds) 64,000 4,304,000
-----------
13,086,875
-----------
Computers and Software ( 15.5%)
Hewlett-Packard Company
(Manufacturer of printers, computers and medical
electronic equipment) 56,000 3,895,500
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 46,000 4,246,375
Microsoft Corporation*
(Personal computer software) 32,000 4,234,000
-----------
12,375,875
-----------
Industrial Services ( 14.2%)
G&K Services Inc., Class A
(Uniform rental service) 103,000 3,579,250
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 90,000 4,618,125
Manpower, Inc.
(Provider of non-government employment services) 80,000 3,160,000
-----------
11,357,375
-----------
Distributors ( 10.5%)
Arrow Electronics, Inc.*
(Distributor of electronic components and computer products) 19,000 1,102,000
Marshall Industries, Inc.*
(Distributor of industrial electronic components) 109,000 4,223,750
Sigma-Aldrich Corp.
(Develops, manufactures, and distributes specialty chemicals) 66,000 2,173,875
W.W. Grainger
(Distributor and manufacturer of electric equipment) 10,000 890,000
-----------
8,389,625
-----------
Pharmaceutical ( 7.3%)
American Home Products Corporation
(Ethical and proprietary drugs) 15,000 1,095,000
Merck & Company
(Ethical drugs and specialty chemicals) 47,500 4,747,031
-----------
5,842,031
-----------
</TABLE>
*Non-income producing security.
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Number Market
Common Stocks (continued) of Shares Value
- -------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Electrical Equipment (6.2%)
General Electric Co.
(Diversified industrial company) 43,000 $ 2,926,688
Emerson Electric Company
(Manufacturer of electrical and electronic products and systems) 35,000 2,016,875
-----------
4,943,563
-----------
Consumer Services (5.1%)
Service Corporation International
(Funeral service; cemetery owner/operator) 127,000 4,087,812
-----------
Telecommunications (4.2%)
Motorola, Inc.
(Manufacturer of electronic equipment) 47,000 3,378,125
-----------
Retail Stores (3.9%)
Albertson's Inc.
(Regional retail grocery chain) 30,800 1,074,150
Walgreen Company
(Retail drug store chain) 80,000 2,050,000
-----------
3,124,150
-----------
Restaurants (3.3%)
McDonald's Corporation
(Fast food restaurants and franchising) 56,000 2,667,000
-----------
Consumer Products (2.7%)
Clorox Company
(Manufacturer of bleach and other consumer products) 29,200 2,164,450
-----------
Miscellaneous (9.8%)
Mattel, Inc.
(Toy manufacturer) 98,000 3,246,250
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 55,000 2,585,000
Millipore Corporation
(Leading supplier of purification products) 40,000 1,965,000
-----------
7,796,250
-----------
Total Common Stocks - 99.1% 79,213,131
Cash and Other Assets, Less Liabilities - .9% 705,698
-----------
Net Assets - 100% $79,918,829
===========
Net Asset Value Per Share
(Based on 2,631,831 shares outstanding at September 30, 1997) $ 30.37
===========
</TABLE>
<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
Assistant Secretary - Barbara D. Perleberg
Treasurer - Rosellen C. Papp
Assistant Treasurer - Julie A. Hein
Investment Adviser
L. Roy Papp & Associates
4400 North 32nd Street, Suite 280
Phoenix, Arizona 85018
Telephone: (602) 956-1115
E-mail: [email protected]
Web: http://www.roypapp.com
Custodian
Founders Bank of Arizona
7335 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
Shareholder Services and Transfer Agent
L. Roy Papp & Associates
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.
