[Sketch of L. Roy Papp appears here]
PAPP STOCK FUND, INC.
A No-Load Fund
ANNUAL REPORT
DECEMBER 31, 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>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
PAPP STOCK FUND, INC. AND THE STANDARD AND POOR'S 500 STOCK INDEX
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Years Since Inception
Papp Stock Fund, Inc. 15.0% 25.8% 17.5%
Standard &Poor's 500 Stock Index 21.0% 28.6% 18.4%
Year 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
1999 51,077 54,994
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 500 of the largest U.S.
companies. The values shown include reinvested dividends.
2
<PAGE>
PAPP STOCK FUND, INC.
Dear Fellow Shareholders:
Our Fund was up 15.0% last year. Ordinarily, we would be very pleased with this
result, but, as the chart on the opposite page indicates, the Standard & Poor's
500 Stock Index did even better, primarily because of rampant speculation in the
Internet and other highly volatile stocks. Our longer-term experience over the
last five years has been quite successful however. 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 its inception a little more than ten years ago our Stock Fund is up
410.8%.
The Papp Stock Fund was not designed to be a speculative investment vehicle.
Instead, it was designed to provide a comprehensive investment program for the
common stock portion of a securities portfolio. Accordingly, we buy high quality
stocks with the intention of holding them for many years. This results in a
relatively low portfolio turnover with favorable tax consequences.
We do own a fair number of medical and electronic technology stocks because we
believe these areas offer the greatest possibilities of future growth. Included
are medical related companies like Merck, Medtronic, and American Home Products
and worldwide leaders in electronic technology like Microsoft, Intel,
Hewlett-Packard, Motorola, and IBM. In addition, though, we own many companies
that are household names. Included are Clorox, General Electric, McDonalds,
Walgreens, and Wal-Mart. These are companies that have been able to use
technological innovations to make themselves more efficient and therefore more
profitable. Our schedule of Portfolio Investments, presented in this report,
contains a brief description of each of the companies owned by the Fund.
Of course we do not know how the markets will fare in 2000. We do know that the
Y2K scare is now behind us and the world did not end. We do know that the
economy is in fine shape, that unemployment is at historically low numbers, that
inflation is low, and that enterprise resource planning technology makes
inventory recessions much less likely. Nevertheless, we are well aware that an
unanticipated event could occur.
We do believe that the odds for a decent year are good because we see no evident
factors that would make it otherwise. In any event we know that the companies we
own are leaders and survivors that will take advantage of U.S. global leadership
in the informational age that is now upon us.
Warmest regards,
/s/ L. Roy Papp
L. Roy Papp, Chairman
February 8, 2000
P.S. As of today, our Fund is up 1.8% this year while the S&P 500 is down 1.8%.
3
<PAGE>
PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Number Market
Common Stocks of Shares Value
- ----------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
FINANCIAL SERVICES (21.9%)
General Electric Co.
(Diversified financial and industrial company) 43,400 $6,716,150
Northern Trust Corporation
(Bank specializing in trust services) 68,000 3,604,000
State Street Corporation
(Provider of U.S. and global securities custodial services) 107,200 7,832,300
T. Rowe Price Associates, Inc.
(No-load mutual fund company) 132,000 4,875,750
--------------
23,028,200
--------------
INDUSTRIAL SERVICES (16.3%)
Automatic Data Processing, Inc.*
(Leading provider of computing and data processing services) 19,000 1,023,625
G&K Services Inc., Class A
(Uniform rental service) 90,000 2,913,750
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 180,000 10,383,750
Omnicom Group, Inc.
(Worldwide advertising agencies) 28,000 2,800,000
--------------
17,121,125
--------------
SOFTWARE (16.1%)
BMC Software, Inc.*
(Develops data and application management software) 36,500 2,917,718
Microsoft Corporation*
(Personal computer software) 120,000 14,010,000
--------------
16,927,718
--------------
COMPUTER EQUIPMENT (14.8%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 55,000 6,266,563
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 102,000 8,395,875
International Business Machines Corporation
(Global provider of information technology, hardware,
software, and services) 8,600 928,800
--------------
15,591,238
--------------
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1999
Number Market
Common Stocks (continued) of Shares Value
- ----------------------------------------------------------------------------- -------------- --------------
<S> <C> <C>
PHARMACEUTICAL (6.9%)
American Home Products Corporation
(Prescription pharmaceuticals) 23,500 $ 926,781
Merck & Company
(Prescription pharmaceuticals) 95,000 6,370,938
--------------
7,297,719
--------------
ELECTRONIC EQUIPMENT (5.2%)
American Power Conversion*
(Leading producer of uninterruptible power supply products) 204,000 5,380,500
SPECIALTY RETAILING (5.1%)
Walgreen Company
(Retail drug store chain) 75,000 2,193,750
Wal-Mart Stores, Inc.
(Leading discount retailer) 45,000 3,110,625
--------------
5,304,375
--------------
MEDICAL PRODUCTS (4.8%)
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 138,000 5,028,375
--------------
RESTAURANTS (4.2%)
McDonald's Corporation
(Fast food restaurants and franchising) 110,000 4,434,375
--------------
CONSUMER PRODUCTS (2.8%)
Clorox Company
(Manufacturer of bleach and other consumer products) 58,400 2,941,900
--------------
TELECOMMUNICATIONS (1.8%)
Motorola, Inc.
(Manufacturer of communication equipment) 13,000 1,914,250
--------------
TOTAL COMMON STOCKS - 99.9% 104,969,775
Cash and Other Assets, Less Liabilities - 0.1% 131,689
--------------
Net Assets - 100% $105,101,464
==============
NET ASSET VALUE PER SHARE
(Based on 2,490,466 shares outstanding at December 31, 1999) $ 42.20
==============
*Non-income producing security
The accompanying notes are an integral part of this financial statement.
</TABLE>
5
<PAGE>
PAPP STOCK FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
ASSETS
Investment in securities at market value (original
cost $32,828,830 and $38,518,613 at December 31,
1999 and 1998, respectively) (Note 1) $104,969,775 $98,339,856
Cash (67,513) 185,252
Dividends and interest receivable 104,717 108,935
Receivable for investment securities sold 94,485 -
--------------- ---------------
Total assets $105,101,464 $98,634,043
=============== ===============
LIABILITIES
Redemptions payable $ - $ 25,710
=============== ===============
NET ASSETS
Paid-in capital $ 33,660,552 $39,120,298
Accumulated undistributed net realized gain
on sale of investments - 1,589
Accumulated undistributed net investment loss (700,033) (334,797)
Net unrealized gain on investments 72,140,945 59,821,243
--------------- ---------------
Net assets applicable to Fund shares outstanding $105,101,464 $98,608,333
=============== ===============
Fund shares outstanding 2,490,466 2,639,729
=============== ===============
Net Asset Value Per Share (net assets/shares
outstanding) $ 42.20 $ 37.36
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
6
<PAGE>
PAPP STOCK FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $669,064 $676,151
Interest 20,655 34,484
--------------- ---------------
Total investment income 689,719 710,635
--------------- ---------------
EXPENSES:
Management fee (Note 3) 966,638 875,849
Filing fees 31,706 30,687
Accounting fees 13,500 12,500
Custodial fees 11,708 8,775
Printing and postage fees 8,237 7,487
Directors' attendance fees 8,000 5,600
Transfer agent fees 7,076 11,075
Legal fees 6,015 4,857
Other fees 2,075 5,977
--------------- ---------------
Total expenses 1,054,955 962,807
--------------- ---------------
Net investment loss (365,236) (252,172)
--------------- ---------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 13,935,942 10,660,777
Cost of securities sold (12,069,568) (9,465,331)
--------------- ---------------
Net realized gain on investments sold 1,866,374 1,195,446
Net change in unrealized gain on investments 12,319,702 20,259,461
--------------- ---------------
Net realized and unrealized gain on investments 14,186,076 21,454,907
--------------- ---------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $13,820,840 $21,202,735
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PAPP STOCK FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (365,236) $ (252,172)
Net realized gain on investments sold 1,866,374 1,195,446
Net change in unrealized gain on investments 12,319,702 20,259,461
------------- -------------
Increase in net assets resulting
from operations 13,820,840 21,202,735
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold (1,867,963) (1,193,857)
------------- -------------
Decrease in net assets resulting from
distributions to shareholders (1,867,963) (1,193,857)
------------- -------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 14,327,952 16,924,598
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
net realized gain on investments sold 1,722,264 1,079,251
Payments for redemption of shares (21,509,962) (19,224,462)
------------- -------------
Decrease in net assets resulting
from shareholder transactions (5,459,746) (1,220,613)
------------- -------------
Total increase in net assets 6,493,131 18,788,265
Net assets at beginning of the period 98,608,333 79,820,068
------------- -------------
Net assets at end of period $105,101,464 $98,608,333
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
PAPP STOCK FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp Stock Fund, Inc., formerly The L. Roy Papp Stock Fund, Inc., (the Fund) was
incorporated on September 15, 1989, and is registered under the Investment
Company Act of 1940 as an open-end diversified management investment company.
Operations of the Fund commenced on November 29, 1989. The Fund invests for the
long-term in high quality common stocks. For the most part, the companies in
which the Fund invests occupy a dominant position in their industry and are
purchased at prices which, in the opinion of the Fund's management, do not
reflect their superior long-term growth of earnings and dividends.
The policies described below are followed by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
INVESTMENT IN SECURITIES
For purposes of computing the net asset value of a share of the Fund, securities
traded on securities exchanges, or in the over-the-counter market in which
transaction prices are reported, are valued at the last sales prices at the time
of valuation or, lacking any reported sales on that day, at the most recent bid
quotations. Other securities traded over-the-counter are valued at the most
recent bid quotations. Securities for which quotations are not available and any
other assets are valued at a fair value as determined in good faith by the Board
of Directors. The price per share for a purchase order or redemption request is
the net asset value next determined after receipt of the order.
The Fund's net asset value per share (NAV) is the value of a single share. It is
computed by dividing the market value of a Fund's assets, less its liabilities,
by the number of shares outstanding, and rounding the result to the nearest full
cent. The NAV is determined as of the close of trading on the New York Stock
Exchange, currently 4:00 p.m. New York City time, on any day on which that
Exchange is open for trading.
Investment transactions are accounted for on the trade date (the date the order
to buy or sell is executed). Dividend income is recorded on the ex-dividend date
and interest is recorded on the accrual basis. Realized gains and losses from
investment transactions and unrealized appreciation or depreciation are
calculated on the identified cost basis.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those estimates.
9
<PAGE>
FEDERAL INCOME TAXES
The Fund's policy is to comply with the requirements of the Internal Revenue
Code which are applicable to regulated investment companies. The Code requires
that substantially all of the Fund's taxable income, as well as any net realized
gain on sales of investments, are to be distributed to the shareholders. The
Fund has complied with this policy and, accordingly, no provision for federal
income taxes is required.
(2) DIVIDENDS AND DISTRIBUTIONS:
Dividends and capital gain distributions are reinvested in additional shares of
the Fund unless the shareholder has requested in writing to be paid by check.
Dividends and distributions payable to its shareholders are recorded by the Fund
on the ex-dividend date.
On December 29, 1999, a distribution was declared from net realized long-term
capital gains of approximately $.76 a share, aggregating $1,867,963. The
distribution was paid on December 31, 1999, to shareholders of record on
December 29, 1999.
On December 28, 1998, a distribution was declared from net realized long-term
capital gains of approximately $.46 a share, aggregating $1,193,857. The
distribution was paid on December 31, 1998, to shareholders of record on
December 29, 1998.
(3) TRANSACTIONS WITH AFFILIATES:
The Fund has an investment advisory and management services agreement with L.
Roy Papp & Associates (Manager). The Manager receives from the Fund, as
compensation for its services, a fee accrued daily and payable monthly at an
annual rate of 1% of the Fund's net assets. The Manager will reimburse the Fund
to the extent the Fund's regular operating expenses during any of its fiscal
years exceed 1.25% of its average daily net asset value in such year. The Fund
incurred fees of $7,076 and $11,075 in 1999 and 1998, respectively, from the
Manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $800 for each meeting of the Board of
Directors attended on behalf of the Fund. Certain officers and/or directors of
the Fund are also partners of the Manager and shareholders in the Fund. The Fund
made no payments to its officers or directors, except to independent directors
as stated above.
(4) PURCHASES AND SALES OF SECURITIES:
For the years ended December 31, 1999 and 1998 investment transactions excluding
short-term investments were as follows:
1999 1998
--------------- ----------------
Purchases at cost $ 6,379,785 $ 8,436,689
Sales 13,935,942 10,660,777
10
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1999, there were 25,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
Proceeds Shares
----------------- --------------
Year ended December 31, 1999
Shares issued $ 14,327,952 382,946
Dividends and distributions reinvested 1,722,264 40,797
Shares redeemed (21,509,962) (573,006)
----------------- --------------
Net decrease $ (5,459,746) (149,263)
================= ==============
Year ended December 31, 1998
Shares issued $ 16,924,598 520,158
Dividends and distributions reinvested 1,079,251 28,794
Shares redeemed (19,224,462) (589,660)
----------------- --------------
Net decrease $ (1,220,613) (40,708)
================= ==============
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
1999 1998
----------------- --------------
Market value $104,969,775 $98,339,856
Original cost (32,828,830) (38,518,613)
----------------- --------------
Net unrealized appreciation $72,140,945 $59,821,243
================= ==============
As of December 31, 1999, gross unrealized gains on investments in which market
value exceeded cost totaled $72,140,945. There were no gross unrealized losses
on any of the Fund's investments at December 31, 1999.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $59,821,243. There were no gross unrealized losses
on any of the Fund's investments at December 31, 1998.
11
<PAGE>
(7) SELECTED FINANCIAL HIGHLIGHTS:
The following selected per share data has been calculated using revenues and
expenses for the periods indicated, divided by the weighted average number of
shares outstanding during the periods. The ratios are calculated using the
revenues and expenses for the periods, divided by the weighted average of the
daily net assets of the Fund.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 37.36 $ 29.78 $ 22.70 $ 19.29 $ 14.63
Income from operations:
Net investment (loss)/income (0.15) (0.09) (0.04) 0.01 0.07
Net realized and unrealized gain
on investments 5.75 8.13 7.55 4.16 4.73
--------------- -------------- ------------ ------------- -------------
Total from operations 5.60 8.04 7.51 4.17 4.80
Less distributions:
Dividend from net investment
Income - - - (0.01) (0.07)
Distribution of net realized gain (0.76) (0.46) (0.43) (0.75) (0.07)
--------------- -------------- ------------ ------------- -------------
Total distributions (0.76) (0.46) (0.43) (0.76) (0.14)
Net asset value, end of period $ 42.20 $ 37.36 $ 29.78 $ 22.70 $ 19.29
=============== ============== ============ ============= =============
Total return 14.99% 26.99% 33.12% 21.77% 32.93%
=============== ============== ============ ============= =============
Ratios/Supplemental Data:
Net assets, end of period $105,101,464 $98,608,333 $79,820,068 $53,277,087 $44,508,543
Expenses to average net
assets 1.09% 1.10% 1.12% 1.16% 1.17%
Investment income to
average net assets (A) 0.71% 0.82% 1.00% 1.19% 1.60%
Portfolio turnover rate 6.60% 9.74% 6.19% 14.47% 22.39%
(A) Computed giving effect to investment adviser's expense limitation undertaking.
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Papp Stock Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of Papp
Stock Fund, Inc. as of December 31, 1999 and 1998, including the schedule of
portfolio investments as of December 31, 1999, and the related statements of
operations and changes in net assets for the two years then ended, and the
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1999 and 1998, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Papp
Stock Fund, Inc. as of December 31, 1999 and 1998, and the results of its
operations and changes in its net assets for the two years then ended, and its
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
/S/ Arthur Andersen LLP
Phoenix, Arizona,
January 27, 2000.
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 $1.2
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 45 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
22 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>
AN INTRODUCTION TO THE PAPP MUTUAL FUNDS
The Papp Mutual Funds invest in high quality common stocks carefully selected
for the possibility of long-term capital growth. All the funds are "pure"
no-load in that there are no sales commissions, redemption fees, or 12b-1
charges. Because the Funds invest for the long-term, portfolio turnover is low
and the Funds do not ordinarily produce large taxable capital gains. They are
designed for the long-term (3 to 5 years) investor and are not appropriate for
those with short-term time horizons. The partners and employees of L. Roy Papp &
Associates have invested a significant part of their own assets in the Funds,
either personally or through the Firm's 401K Plan.
The Papp Stock Fund is structured to provide a comprehensive investment for the
common stock portion of an investment program through the purchase and retention
of a diversified, high quality group of securities. It owns the common stocks of
very large United States companies, many of which derive a large percentage of
their earnings from overseas activities where we believe the strong growth of
recent years will continue. It also owns large and medium sized American
companies which have all of their operations within our country.
Papp America-Abroad Fund invests primarily in United States companies, a large
portion of whose earnings come from foreign countries. It is our belief that it
is far safer to participate in the increased globalization of the world's
economies through ownership of multinational U.S. companies, thereby avoiding
many risks and expenses associated with the direct purchase of foreign stocks
such as different accounting and financial reporting standards, lack of
liquidity, greater price volatility, and lack of SEC protection. While the Fund
owns some medium sized companies, for the most part it invests in large
companies that have the experience and expertise to successfully compete on the
international level.
Papp America-Pacific Rim Fund reflects our belief that the best prospect for
growth over the next several decades lies in our large and rapidly growing trade
with the nations bordering the Pacific Ocean. Like our other Funds, the Pacific
Rim Fund invests mainly in American companies, but its primary thrust is to seek
out and purchase those companies that have established a strong and growing
presence in the Pacific Rim area. We believe this Fund is appropriate for that
part of an investor's assets dedicated to long-term growth.
Papp Focus Fund is a non-diversified investment company that will own a maximum
of 16 stocks under normal market conditions. While we believe that a strategy of
investing in a limited number of securities has the potential for higher total
returns, this may increase volatility, so prospective shareholders should
carefully consider whether their investment strategy parallels that of the Fund.
Papp Small & Mid-Cap Growth Fund invests primarily in the common stocks and
securities convertible into common stocks of small and medium sized companies.
We believe that carefully selected small and medium sized companies offer
attractive capital growth possibilities significantly above that of the general
U.S. economy. While these companies, during some periods, will perform better
than the stocks of large companies, they also may involve greater volatility and
be subject to competitive pressures.
15
<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.
