[Sketch of L. Roy Papp appears here]
PAPP STOCK FUND, INC.
A No-Load Fund
SEMI-ANNUAL REPORT
JUNE 30, 1999
Managed by:
L. Roy Papp & Associates
6225 North 24th Street
Suite 150
Phoenix, AZ 85016
(602)956-1115 Local
(800)421-4004
E-mail: [email protected]
Web: http://www.roypapp.com
<PAGE>
PAPP STOCK FUND, INC.
Dear Fellow Shareholders:
Our Fund was up 5.8% for the six months ended June 30. Ordinarily, this would be
a perfectly acceptable performance, but the generally recognized indexes did
better. However, for the approximately nine and one-half years the Fund has been
in existence we are up 370.33%. This means that a $10,000 investment made by one
of our patient long-term shareholders when the Fund first began operations saw
it grow to over $47,000 at the end of June. It is a fine example of the magic in
long-term compounding.
Our Stock Fund is designed to provide a comprehensive investment for the common
stock portion of an investment program. We own both large and medium sized
companies, many of which sell their products worldwide, while others emphasize
the markets in the United States. While we do not own a large number of stocks,
our holdings are well diversified by industry. Nevertheless, there are certain
themes that define our investment philosophy. We purchase growth stocks which
means that our companies achieve higher sales and earnings through true volume
increases and operating efficiency, not through raising prices and taking on
substantial debt.
We continue to believe that globalization and medical and electronic technology
will be the driving forces in our economy for many more years. Companies like
IBM, Intel, and Microsoft continue to provide us with tremendous technological
advances. Most importantly, they have done so at ever lower costs which has
provided a great deflationary factor never seen before. Consequently, we have
full employment and a strong economy without inflation. Other companies in our
Fund have excelled in using technology to make their organizations more
efficient. Examples include Automatic Data Processing, State Street Corp, and
Walgreen's. In medicine, American Home Products, Medtronic, and Merck spend huge
amounts of money to keep in the forefront of product innovation.
These companies are excellent examples of the manner in which we implement our
overall investment philosophy. They are also examples of the reason we believe
our long-term investors will continue to be well rewarded.
Warmest regards,
/s/ L. Roy Papp
L. Roy Papp, Chairman
August 1, 1999
2
<PAGE>
PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Number Market
Common Stocks of Shares Value
- ----------------------------------------------------------------- ------------ -----------
Financial Services (22.8%)
General Electric Co.
<S> <C> <C>
(Diversified financial and industrial company) 45,000 $ 5,085,000
Northern Trust Corporation
(Bank specializing in trust services) 34,000 3,298,000
State Street Corporation
(Provider of U.S. and global securities custodial services) 107,200 9,152,200
T. Rowe Price Associates, Inc.
(Provides investment advisory and administrative
services to their family of no-load mutual funds) 145,000 5,564,375
-------------
23,099,575
-------------
Industrial Services (16.3%)
Automatic Data Processing, Inc.*
(Leading provider of computing and data processing services) 24,000 1,056,000
G&K Services Inc., Class A
(Uniform rental service) 103,000 5,394,625
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 90,000 7,796,250
Omnicom Group, Inc.
(Worldwide advertising agencies) 28,000 2,240,000
-------------
16,486,875
-------------
Computer Equipment (12.9%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 55,000 5,527,500
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 102,000 6,069,000
International Business Machines Corporation
(Global provider of information technology, hardware,
software and services) 11,600 1,499,300
-------------
13,095,800
-------------
Software (12.3%)
BMC Software, Inc.*
(Develops, markets, and supports data and
application management software) 30,500 1,647,000
Microsoft Corporation*
(Personal computer software) 120,000 10,822,500
-------------
12,469,500
-------------
Pharmaceutical (8.5%)
American Home Products Corporation
(Prescription pharmaceuticals) 28,000 1,610,000
Merck & Company
(Prescription pharmaceuticals) 95,000 7,030,000
-------------
8,640,000
-------------
Medical Products (5.4%)
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 70,000 5,451,250
-------------
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
Number Market
Common Stocks (continued) of Shares Value
- ----------------------------------------------------------------- ----------- ---------
<S> <C> <C>
Consumer Products (5.2%)
Clorox Company
(Manufacturer of bleach and other consumer products) 29,200 $3,118,925
Mattel, Inc.
(Toy manufacturer) 83,000 2,194,313
-------------
5,313,238
-------------
Restaurants (4.5%)
McDonald's Corporation
(Fast food restaurants and franchising) 110,000 4,544,375
-------------
Retail Stores (4.1%)
Walgreen Company
(Retail drug store chain) 75,000 2,203,125
Wal-Mart Stores, Inc.
(Leading discount retailer) 40,000 1,930,000
-------------
4,133,125
-------------
Electrical Equipment (3.9%)
American Power Conversion*
(Leading producer of uninterruptible power supply products) 196,000 3,944,500
-------------
Consumer Services (2.2%)
Service Corporation International
(Funeral service; cemetery owner/operator) 115,000 2,213,750
-------------
Telecommunications (1.2%)
Motorola, Inc.
(Manufacturer of communication equipment) 13,000 1,231,750
-------------
Total Common Stocks - 99.3% 100,623,738
Cash and Other Assets, Less Liabilities - 0.7% 756,889
-------------
Net Assets - 100% $101,380,627
=============
Net Asset Value Per Share
(Based on 2,563,713 shares outstanding at June 30, 1999) $ 39.54
=============
</TABLE>
*Non-income producing security
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
PAPP STOCK FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
ASSETS
Investment in securities at market value (original
cost $36,299,386 at June 30, 1999) (Note 1) $ 100,623,738
Cash 1,026,124
Dividends and interest receivable 97,894
Subscriptions receivable 20,973
----------------
Total assets $ 101,768,729
================
LIABILITIES
Payable for securities purchased $ 294,210
Accrued expenses 93,892
----------------
Total liabilities $ 388,102
================
NET ASSETS
Paid-in capital $ 36,326,171
Accumulated undistributed net realized gain
on sale of investments 1,266,848
Accumulated undistributed net investment loss (536,744)
Net unrealized gain on investments 64,324,352
----------------
Net assets applicable to Fund
shares outstanding $ 101,380,627
================
Fund shares outstanding 2,563,713
================
Net Asset Value Per Share (net assets/shares
outstanding) $ 39.54
================
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
PAPP STOCK FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
INVESTMENT INCOME:
Dividends $ 332,401
Interest 12,439
----------------
Total investment income 344,840
----------------
EXPENSES:
Management fee (Note 3) 479,791
Filing fees 16,197
Legal fees 9,021
Auditing fees 6,000
Custodial fees 5,283
Printing and postage 4,157
Transfer agent fees 3,656
Directors' attendance fees 3,200
Other fees 20,234
----------------
Total expenses 547,539
----------------
Net investment loss (202,699)
----------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 9,141,466
Cost of securities sold (7,876,238)
----------------
Net realized gain on securities sold 1,265,228
----------------
Net change in unrealized gain on investments 4,503,109
----------------
Net realized and unrealized gain on investments 5,768,337
----------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 5,565,638
================
The accompanying notes are an integral part of this financial statement.
6
<PAGE>
PAPP STOCK FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, December 31,
1999 1998
----------------- --------------
FROM OPERATIONS:
<S> <C> <C>
Net investment loss $ (202,699) $ (252,172)
Net realized gain on securities sold 1,265,228 1,195,446
Net change in unrealized gain on investments 4,503,109 20,259,461
----------------- --------------
Increase in net assets resulting
from operations 5,565,638 21,202,735
----------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on securities sold - (1,193,857)
----------------- --------------
Decrease in net assets resulting from
distributions to shareholders - (1,193,857)
----------------- --------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 10,801,281 16,924,598
Net asset value of shares issued to shareholders in
reinvestment of net realized gain on securities sold - 1,079,251
Payments for redemption of shares (13,594,625) (19,224,462)
----------------- --------------
Decrease in net assets resulting
from shareholder transactions (2,793,344) (1,220,613)
----------------- --------------
Total increase in net assets 2,772,294 18,788,265
Net assets at beginning of the period 98,608,333 79,820,068
----------------- --------------
Net assets at end of period $101,380,627 $ 98,608,333
================= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PAPP STOCK FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp Stock Fund, Inc., formerly The L. Roy Papp Stock Fund, Inc., (the Fund) was
incorporated on September 15, 1989, and is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
Operations of the Fund commenced on November 29, 1989. The Fund invests for the
long-term in high quality common stocks. For the most part, the companies in
which the Fund invests occupy a dominant position in their industry and are
purchased at prices which, in the opinion of the Fund's management, do not
reflect their superior long-term growth of earnings and dividends.
The policies described below are followed by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
INVESTMENT IN SECURITIES
For purposes of computing the net asset value of a share of the Fund, securities
traded on securities exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales prices at the time
of valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Other securities traded over-the-counter are valued at the most
recent bid quotations. Securities for which quotations are not available and any
other assets are valued at a fair value as determined in good faith by the Board
of Directors. The price per share for a purchase order or redemption request is
the net asset value next determined after receipt of the order.
The Fund's net asset value per share (NAV) is the value of a single share. It is
computed by dividing the market value of a Fund's assets, less its liabilities,
by the number of shares outstanding, and rounding the result to the nearest full
cent. The NAV is determined as of the close of trading on the New York Stock
Exchange, currently 4:00 p.m. New York City time, on any day on which that
Exchange is open for trading.
Investment transactions are accounted for on the trade date (the date the order
to buy or sell is executed). Dividend income is recorded on the ex-dividend date
and interest is recorded on the accrual basis. Realized gains and losses from
investment transactions and unrealized appreciation or depreciation are
calculated on the identified cost basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
8
<PAGE>
FEDERAL INCOME TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code which are applicable to regulated investment companies. The Code requires
that substantially all of the Fund's taxable income, as well as any net realized
gain on sales of investments, are to be distributed to the shareholders. The
Fund has complied with this policy and, accordingly, no provision for federal
income taxes is required.
(2) DIVIDENDS AND DISTRIBUTIONS:
Dividends and capital gain distributions are reinvested in additional shares of
the Fund unless the shareholder has requested in writing to be paid by check.
Dividends and distributions payable to its shareholders are recorded by the Fund
on the ex-dividend date.
On December 28, 1998, a distribution was declared from net realized long-term
capital gains of approximately $.4565 a share, aggregating $1,193,857. The
distribution was paid on December 31, 1998, to shareholders of record on
December 29, 1998.
(3) TRANSACTIONS WITH AFFILIATES:
The Fund has an investment advisory and management services agreement with L.
Roy Papp & Associates (Manager). The Manager receives from the Fund, as
compensation for its services, a fee accrued daily and payable monthly at an
annual rate of 1% of the Fund's net assets. The Manager will reimburse the Fund
to the extent the Fund's regular operating expenses during any of its fiscal
years exceed 1.25% of its average daily net asset value in such year. The Fund
incurred fees of $3,656 and $11,075 in 1999 and 1998, respectively, from the
Manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $800 for each meeting of the Board of
Directors attended on behalf of the Fund. Certain officers and/or directors of
the Fund are also partners of the Manager and shareholders in the Fund. The Fund
made no payments to its officers or directors, except to independent directors
as stated above.
(4) PURCHASES AND SALES OF SECURITIES:
For the six months ended June 30, 1999 and the year ended December 31, 1998
investment transactions excluding short-term investments were as follows:
1999 1998
-------------- --------------
Purchases at cost $ 5,657,010 $ 8,436,689
Sales 9,141,466 10,660,777
9
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At June 30, 1999, there were 25,000,000 shares of $.01 par value capital stock
authorized. Transactions in capital shares of the Fund were as follows:
Proceeds Shares
--------------- ------------
Six months ended June 30, 1999
Shares issued $ 10,801,281 291,268
Dividends and distributions reinvested - -
Shares redeemed (13,594,625) (367,284)
--------------- ------------
Net decrease $ (2,793,344) (76,016)
=============== ============
Year ended December 31, 1998
Shares issued $ 16,924,598 520,158
Dividends and distributions reinvested 1,079,251 28,794
Shares redeemed (19,224,462) (589,660)
--------------- ------------
Net decrease $ (1,220,613) (40,708)
=============== ============
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
1999 1998
--------------- ----------------
Market value $100,623,738 $ 98,339,856
Original cost (36,299,386) (38,518,613)
--------------- ----------------
Net unrealized appreciation $ 64,324,352 $ 59,821,243
=============== ================
As of June 30, 1999, gross unrealized gains on investments in which market value
exceeded cost totaled $64,324,352. There were no gross unrealized losses on any
of the Fund's investments at June 30, 1999.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $59,821,243. There were no gross unrealized losses
on any of the Fund's investments at December 31, 1998.
10
<PAGE>
(7) SELECTED FINANCIAL HIGHLIGHTS:
The following selected per share data has been calculated using revenues and
expenses for the periods indicated, divided by the weighted average number of
shares outstanding during the periods. The ratios are calculated using the
revenues and expenses for the periods, divided by the weighted average of the
daily net assets of the Fund.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
-------------- -------------- -------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 37.36 $ 29.78 $ 22.70 $ 19.29 $ 14.63 $ 14.98
Income from operations:
Net investment (loss)/income (0.09) (0.09) (0.04) 0.01 0.07 0.13
Net realized and unrealized gain/
(loss) on investments 2.27 8.13 7.55 4.16 4.73 (0.35)
-------------- -------------- -------------- -------------- ------------ -----------
Total from operations 2.18 8.04 7.51 4.17 4.80 (0.22)
Less distributions:
Dividend from net investment
Income - - - (0.01) (0.07) (0.13)
Distribution of net realized gain - (0.46) (0.43) (0.75) (0.07) -
-------------- -------------- -------------- -------------- ------------ -----------
Total distributions - (0.46) (0.43) (0.76) (0.14) (0.13)
Net asset value, end of period $ 39.54 $ 37.36 $ 29.78 $ 22.70 $ 19.29 $ 14.63
============== ============== ============== ============== ============ ===========
Total return 5.84% 26.99% 33.12% 21.77% 32.93% 1.46%
============== ============== ============== ============== ============ ===========
Ratios/Supplemental Data:
Net assets, end of period $ 101,380,627 $ 98,608,333 $ 79,820,068 $ 53,277,087 $44,508,543 $ 36,577,759
Expenses to average net
assets 1.14%* 1.10% 1.12% 1.16% 1.17% 1.19%
Investment income to
average net assets (A) 0.71%* 0.82% 1.00% 1.19% 1.60% 2.08%
Portfolio turnover rate 11.66%* 9.74% 6.19% 14.47% 22.39% 20.00%
</TABLE>
* Annualized
(A) Computed giving effect to investment adviser's expense limitation
undertaking.
11
<PAGE>
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 Julie A. Hein
George D. Clark, Jr. Robert L. Mueller
Jeffrey N. Edwards Rosellen C. Papp
Robert L. Hawley Bruce C. Williams
SECRETARY - Robert L. Mueller
TREASURER - Rosellen C. Papp
ASSISTANT TREASURER - Julie A. Hein
INVESTMENT ADVISER
L. Roy Papp & Associates
6225 North 24th Street, Suite 150
Phoenix, Arizona 85016
Telephone: (602) 956-1115
E-mail: [email protected]
Web: http://www.roypapp.com
CUSTODIAN
Founders Bank of Arizona
7335 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
SHAREHOLDER SERVICES AND TRANSFER AGENT
L. Roy Papp & Associates
6225 North 24th Street, Suite 150
Phoenix, Arizona 85016
Telephone: (602) 956-1115, (800) 421-4004
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
501 North 44th Street, Suite 300
Phoenix, Arizona 85008
LEGAL COUNSEL
Bell, Boyd & Lloyd
70 West Madison Street
Chicago, Illinois 60602
This report is submitted for the general information of the shareholders of the
Fund. The report is not authorized for distribution to prospective investors in
the Fund unless it is accompanied or preceded by a currently effective
prospectus of the Fund. No sales charge to the shareholder or to the new
investor is made in offering the shares of the Fund.
