Picture of man in a chair
THE L. ROY PAPP STOCK FUND, INC.
A No-Load Fund
ANNUAL REPORT
DECEMBER 31, 1998
Managed by:
L. Roy Papp & Associates
6225 North 24th Street
Suite 150
Phoenix, AZ 85016
(602)956-1115 Local
(800)421-4004
E-mail: [email protected]
Web: http://www.roypapp.com
<PAGE>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
THE L. ROY PAPP STOCK FUND, INC. AND THE STANDARD AND POOR'S 500 STOCK INDEX
CHART
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Years Since Inception
The L. Roy Papp Stock Fund, Inc. 27.0% 21.9% 17.8%
Standard &Poor's 500 Stock Index 28.6% 24.1% 18.3%
Year The L. Roy Papp Stock Fund Standard & Poor's 500 Stock Index
11/29/89 10,000 10,000
1989 10,399 10,316
1990 10,669 9,999
1991 14,274 13,049
1992 16,207 14,043
1993 16,474 15,459
1994 16,233 15,663
1995 21,578 21,549
1996 26,276 26,497
1997 34,978 35,335
1998 44,419 45,435
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE
The investment return and principal value of an investment in the Fund will
fluctuate so that Fund shares, when redeemed, may be worth more or less than
their original cost. The Standard & Poor's 500 Stock Index is an unmanaged
[market-weighted] index that includes the stocks of the 500 largest U.S.
companies; the values shown include reinvested dividends.
2
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
Dear Fellow Shareholders:
For the fourth year in a row our Fund fared very well. In 1995 we were up 32.9%,
in 1996 we were up 21.8%, in 1997 we were up 33.1%, and in 1998 we were up
27.0%. Since inception, late in 1989, we were up 344.4% at the end of 1998.
Our long-term shareholders have had a good experience; indeed, a $10,000
investment in Fund shares made only four years ago on January 1, 1995 would have
been worth $27,362 on December 31, 1998. Those of you who have been with us
since the beginning have done even better.
In our Annual Report a year ago we said that we did not believe the market would
experience a major correction in 1998. We then set forth a number of reasons for
our expectations. In fact, the stock market did experience a sharp sell off from
the middle of August through early October. This decline was not caused by the
average investor who has learned to buy and hold, but by the professionals who
hit the panic button and then theorized a series of questionable arguments that
the decline would continue. They were wrong and by mid-October the market
rallied and soon reached new highs.
Our reaction to these events was to continue to be fully invested. We understood
why the stock market was strong and we did not understand why it should become
weak. In our experience weak markets accompany major events such as the oil
embargo of 1973-74; the high rates of inflation that plagued us throughout the
late 1970's, and the Gulf War. To us, the drop last year was quite unwarranted.
We cannot know what will happen in 1999, but we can bring some facts to your
attention. The cold war is over and we are the remaining superpower. This has
enabled us to concentrate on increasing our already large lead in technology,
particularly computers and medical. Inflation is very low, and point-of-sale
technology makes inventory recessions much less likely. Since 1982 gold, oil,
and most commodities have dropped in price. This has enabled us to import the
more mundane, industrial age products and emphasize those areas in which we
enjoy international dominance.
Our securities portfolio is structured with these facts in mind. We will
continue to buy and hold great companies that will take full advantage of our
worldwide leadership in the informational age that is now upon us.
Warmest regards,
L. Roy Papp, Chairman
February 1, 1999
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. as of December 31, 1998 and 1997, including the
schedule of portfolio investments as of December 31, 1998, and the related
statements of operations and changes in net assets for the two years then ended,
and the financial highlights for each of the six years in the period then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. 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 audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998 and 1997 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, 1998 and 1997, and the results of
its operations and changes in its net assets for the two years then ended, and
its financial highlights for each of the six years in the period then ended, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona,
January 21, 1999.
4
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<TABLE>
<CAPTION>
THE L. ROY PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
Number Market
COMMON STOCKS OF SHARES VALUE
<S> <C> <C>
FINANCIAL SERVICES (20.4%)
General Electric Co.
(Diversified financial and industrial company) 45,000 $ 4,592,813
Northern Trust Corporation
(Bank specializing in trust services) 34,000 2,968,625
State Street Corporation
(Provider of U.S. and global securities custodial services) 109,200 7,596,225
T. Rowe Price Associates, Inc.
(Provides investment advisory and administrative
services to their family of no-load mutual funds) 145,000 4,966,250
-------------
20,123,913
-------------
INDUSTRIAL SERVICES (14.5%)
G&K Services Inc., Class A
(Uniform rental service) 103,000 5,484,750
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 90,000 7,177,500
Omnicom Group, Inc.
(Worldwide advertising agencies) 28,000 1,624,000
-------------
14,286,250
-------------
COMPUTER EQUIPMENT (11.2%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 58,000 3,962,125
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 51,000 6,046,687
International Business Machines
(Global provider of information technology, hardware,
software and services) 5,800 1,071,550
-------------
11,080,362
-------------
SOFTWARE (9.0%)
Microsoft Corporation*
(Personal computer software) 64,000 8,876,000
-------------
PHARMACEUTICAL (8.8%)
American Home Products Corporation
(Ethical and proprietary drugs) 30,000 1,689,375
Merck & Company
(Ethical drugs) 47,500 7,015,156
-------------
8,704,531
-------------
MEDICAL PRODUCTS (7.2%)
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 70,000 5,197,500
Safeskin Corp. *
(Leading manufacturer of hypoallergenic disposable latex
examination gloves) 78,000 1,881,750
-------------
7,079,250
-------------
*Non-income producing security.
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<CAPTION>
THE L. ROY PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1998
Number Market
COMMON STOCKS (CONTINUED) OF SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT (6.7%)
American Power Conversion*
(Leading producer of uninterruptible power supply products) 98,000 $ 4,746,875
Emerson Electric Company
(Manufacturer of electrical and electronic products and systems) 30,000 1,815,000
-------------
6,561,875
-------------
CONSUMER PRODUCTS (5.7%)
Clorox Company
(Manufacturer of bleach and other consumer products) 29,200 3,410,925
Mattel, Inc.
(Toy manufacturer) 98,000 2,235,625
-------------
5,646,550
-------------
CONSUMER SERVICES (4.7%)
Service Corporation International
(Funeral service; cemetery owner/operator) 122,000 4,643,625
-------------
RESTAURANTS (4.4%)
McDonald's Corporation
(Fast food restaurants and franchising) 56,000 4,291,000
-------------
DISTRIBUTORS (3.5%)
Marshall Industries, Inc.*
(Distributor of industrial electronic components) 87,000 2,131,500
Sigma-Aldrich Corp.
(Develops, manufactures and distributes specialty chemicals) 46,000 1,351,250
-------------
3,482,750
-------------
RETAIL STORES (2.4%)
Walgreen Company
(Retail drug store chain) 40,000 2,342,500
-------------
TELECOMMUNICATIONS (1.2%)
Motorola, Inc.
(Manufacturer of communication equipment) 20,000 1,221,250
-------------
TOTAL COMMON STOCKS - 99.7% 98,339,856
CASH AND OTHER ASSETS, LESS LIABILITIES - 0.3% 268,477
-------------
NET ASSETS - 100% $ 98,608,333
=============
NET ASSET VALUE PER SHARE
(Based on 2,639,729 shares outstanding at December 31, 1998) $ 37.36
=============
*Non-income producing security
The accompanying notes are an integral part of these financial statements.
6
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<TABLE>
<CAPTION>
THE L. ROY PAPP STOCK FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
---- ----
<S> <C> <C>
Investment in securities at market value (original
cost $38,518,613 and $39,547,255 at December 31, 1998
and 1997, respectively) (Note 1) $ 98,339,856 $ 79,109,038
Cash 185,252 610,468
Dividends and interest receivable 108,935 100,562
--------------- --------------
Total assets $ 98,634,043 $ 79,820,068
=============== ==============
LIABILITIES
Redemptions payable $ 25,710 $ -
=============== ==============
NET ASSETS
Paid-in capital $ 39,119,178 $ 40,339,790
Accumulated undistributed net realized gain
on sale of investments 2,709 1,120
Accumulated undistributed net investment loss (334,797) (82,625)
Net unrealized gain on investments 59,821,243 39,561,783
--------------- --------------
Net assets applicable to Fund shares outstanding $ 98,608,333 $ 79,820,068
=============== ==============
Fund shares outstanding 2,639,729 2,680,437
=============== ==============
Net Asset Value Per Share (net assets/shares
outstanding) $ 37.36 $ 29.78
=============== ==============
The accompanying notes are an integral part of these financial statements.
7
</TABLE>
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<TABLE>
<CAPTION>
THE L. ROY PAPP STOCK FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 676,151 $ 644,793
Interest 34,484 38,555
-------------- -------------
Total investment income 710,635 683,348
-------------- -------------
EXPENSES:
Management fee (Note 3) 875,849 690,660
Filing fees 30,687 30,697
Accounting 12,500 19,776
Transfer agent fees 11,075 9,189
Custodial 8,775 6,031
Printing and postage 7,487 6,012
Directors' attendance fees 5,600 6,400
Legal 4,857 2,145
Other fees 5,977 2,079
-------------- -------------
Total expenses 962,807 772,989
-------------- -------------
Net investment loss (252,172) (89,641)
-------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 10,660,777 4,191,708
Cost of securities sold (9,465,331) (3,052,372)
---------------- --------------
Net realized gain on investments sold 1,195,446 1,139,336
Net change in unrealized gain on investments 20,259,461 17,054,879
-------------- -------------
Net realized and unrealized gain on investments 21,454,907 18,194,215
-------------- -------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 21,202,735 $ 18,104,574
============== =============
The accompanying notes are an integral part of these financial statements.
8
</TABLE>
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<TABLE>
<CAPTION>
THE L. ROY PAPP STOCK FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
----------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (252,172) $ (89,641)
Net realized gain on investments sold 1,195,446 1,139,336
Net change in unrealized gain on investments 20,259,461 17,054,879
---------------- ----------------
Increase in net assets resulting
from operations 21,202,735 18,104,574
---------------- ----------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold (1,193,857) (1,139,336)
---------------- ----------------
Decrease in net assets resulting from
distributions to shareholders (1,193,857) (1,139,336)
---------------- ----------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 16,924,598 23,054,309
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
net realized gain on investments sold 1,079,251 1,023,261
Payments for redemption of shares (19,224,462) (14,499,827)
---------------- ----------------
(Decrease)/increase in net assets resulting
from shareholder transactions (1,220,613) 9,577,743
---------------- ----------------
Total increase in net assets 18,788,265 26,542,981
Net assets at beginning of the period 79,820,068 53,277,087
---------------- ----------------
Net assets at end of period $ 98,608,333 $ 79,820,068
================ ================
The accompanying notes are an integral part of these financial statements.
9
</TABLE>
<PAGE>
THE L. ROY PAPP STOCK FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(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 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 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>
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.
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.
On December 19, 1997, a distribution was declared from net realized long-term
capital gains of approximately $.3850 a share, aggregating $1,016,066. A
distribution was also declared from net realized short-term capital gains of
approximately $.0467 a share, aggregating $123,270. The distribution was paid on
December 31, 1997, to shareholders of record on December 19, 1997.
(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 $11,075 and $9,189 in 1998 and 1997, 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.
11
<PAGE>
(4) PURCHASES AND SALES OF SECURITIES:
For the years ended December 31, investment transactions excluding short-term
investments were as follows:
1998 1997
-------------- -----------
Purchases at cost $ 8,436,689 $ 12,654,701
Sales 10,660,777 4,191,708
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1998, there were 25,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
PROCEEDS SHARES
Year ended December 31, 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)
=============== ===============
Year ended December 31, 1997
Shares issued $ 23,054,309 816,722
Dividends and distributions reinvested 1,023,261 34,835
Shares redeemed (14,499,827) (517,899)
-------------- --------------
Net increase $ 9,577,743 333,658
=============== ==============
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows at December 31:
1998 1997
-------------- ----------------
Market value $ 98,339,856 $ 79,109,038
Original cost (38,518,613) (39,547,255)
--------------- -----------------
Net unrealized appreciation $ 59,821,243 $ 39,561,783
============== ================
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.
As of December 31, 1997, gross unrealized gains on investments in which market
value exceeded cost totaled $39,852,457 and gross unrealized losses on
investments in which cost exceeded market value totaled $290,674.
12
<PAGE>
(7) SELECTED FINANCIAL HIGHLIGHTS:
The following selected per share data has been calculated using revenues and
expenses for the periods indicated, divided by the weighted average number of
shares outstanding during the periods. The ratios are calculated using the
revenues and expenses for the periods, divided by the weighted average of the
daily net assets of the Fund.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period$ 29.78 $ 22.70 $ 19.29 $ 14.63 $ 14.98 $ 14.96 $ 13.45
Income from operations:
Net investment income (loss) (.09) (.04) .01 .07 .13 .13 .13
Net realized and unrealized gain
(loss) on investments 8.13 7.55 4.16 4.73 (.35) .11 1.68
---- ---- ---- ---- ----- --- ----
Total from operations 8.04 7.51 4.17 4.80 (.22) .24 1.81
Less distributions:
Dividend from net investment
Income - - (.01) (.07) (.13) (.13) (.13)
Distribution of net realized gain (.46) (.43) (.75) (.07) - (.09) (.17)
----- ----- ----- ----- -------- ----- -----
Total distributions (.46) (.43) (.76) (.14) (.13) (.22) (.30)
-----
Net asset value, end of period $ 37.36 $ 29.78 $ 22.70 $ 19.29 $ 14.63 $ 14.98 $ 14.96
======== ======== ======== ======== ======== ========== ========
Total return 26.99% 33.12% 21.77% 32.93% (1.46)% 1.65% 13.54%
====== ====== ====== ====== ======= ====== ======
Ratios/Supplemental Data:
Net assets, end of period $ 98,608,333 $ 79,820,068 $ 53,277,087 $ 44,508,543 $ 36,577,759 $ 39,522,420 $ 22,874,733
Expenses to average net 1.10% 1.12% 1.16% 1.17% 1.19% 1.25% 1.25%
assets (B)
Net investment income to
Average net assets (C) .82% 1.00% 1.19% 1.60% 2.08% 2.22% 2.28%
Portfolio turnover rate 9.74% 6.19% 14.47% 22.39% 20.00% 15.00% 11.00%
Average commission per share (D) $ .0269 $ .0247 $ .0442
- ------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Period
Ended Dec.
31,
Year Ended December 31,
----------------------------------------
1991 1990 1989 (A)
---- ---- --------
Net asset value, beginning of period $ 10.42 $ 10.38 $ 10.00
Income from operations:
Net investment income (loss) .15 .16 .02
Net realized and unrealized gain
(loss) on investments 3.46 .09 .38
---- --- ---
Total from operations 3.61 .25 .40
Less distributions:
Dividend from net investment
Income (.15) (.16) (.02)
Distribution of net realized gain (.43) (.05) -
----- ----- --------
Total distributions (.58) (.21) (.02)
Net asset value, end of period $ 13.45 $ 10.42 $ 10.38
======== ======== ==========
Total return 33.79% 2.60% 3.99%
====== ===== =====
Ratios/Supplemental Data:
Net assets, end of period $ 13,367,176 $ 6,104,345 $ 1,322,532
Expenses to average net 1.25% 1.25% 1.25%*
assets (B)
Net investment income to
Average net assets (C) 2.46% 2.82% 2.23%*
Portfolio turnover rate 4.00% 28.00% 0.00%
Average commission per share (D)
- ---------------------------------------------------------------------------
</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. (D) This disclosure was not required for years prior to 1996.
13
<PAGE>
FACTS ABOUT THE FUND
INVESTMENT OBJECTIVE - The Fund, which commenced operations on November 29,
1989, 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. Once purchased, the shares of these companies are ordinarily retained
so long as management believes that the prospects for appreciation continue to
be favorable and that the securities are not greatly overvalued in the
marketplace.
THE INVESTMENT ADVISER - The Fund's assets are managed by L. Roy Papp &
Associates, the largest investment counseling firm in Arizona, with over $1.3
billion in total assets managed for individuals, trusts, corporations, and
charitable and educational institutions. Founded in 1978, the firm is solely in
the investment management business. The firm is an independent general
partnership. Of its ten general partners, seven hold the Chartered Financial
Analyst (CFA) designation.
EXPERIENCED MANAGEMENT - The securities portfolio of the Fund is managed by L.
Roy Papp and Rosellen C. Papp. Mr. Papp, the founder of L. Roy Papp &
Associates, has over 44 years experience in the field of investment management.
Prior to founding L. Roy Papp & Associates, he was a senior partner of a large
investment counseling firm in Chicago, Illinois and the United States Director
and Ambassador to the Asian Development Bank, Manila, Philippines. He received
his M.B.A. degree from the Wharton School, University of Pennsylvania and his
A.B. degree from Brown University.
Rosellen C. Papp, the director of research at L. Roy Papp & Associates, has over
21 years experience in security and financial analysis. She holds a Master of
Management degree in finance from the Kellogg Graduate School of Management,
Northwestern University and a B.B.A. degree from the University of Michigan. She
is a Chartered Financial Analyst and member of the International Society of
Financial Analysts.
"PURE" NO-LOAD - The Fund is a "pure" no-load fund in that there are no
"loading" charges or sales commissions paid in connection with the purchase of
its shares. In addition, there are no deferred sales loads, no redemption fees,
and no 12b-1 fees. The Fund's investment adviser receives an annual management
fee of 1% which is based on the Fund's average daily net asset value. Other
expenses such as auditing charges, legal fees, and custodial expenses are
limited to 1/4% of the Fund's average daily net asset value; therefore, the
Fund's annual expenses may not exceed 1 1/4%.
SUITABILITY - The Fund is suitable only for long-term investors seeking capital
appreciation over time. Included are individuals of most ages, institutional
accounts such as pension and profit sharing plans, retirement accounts such as
IRA's, educational accounts for young children, and many personal trusts. The
Fund is not suitable for those with high current income needs, aggressive
investors who desire maximum short-term results and are willing to assume the
attendant risks, and those with relatively short time horizons who may require
their capital in the near-term.
14
<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 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.
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