[GRAPHIC OF L. ROY PAPP]
PAPP STOCK FUND, INC.
A No-Load Fund
SEMI-ANNUAL REPORT
JUNE 30, 2000
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. 16.1% 23.1% 17.4%
STANDARD &POOR'S 500 STOCK INDEX 7.2% 23.8% 17.4%
<TABLE>
<CAPTION>
[LINE CHART]
YEAR PAPP STOCK FUND STANDARD & POOR'S 500 STOCK INDEX
<S> <C> <C>
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
6/30/00 53,624 54,763
</TABLE>
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:
During much of 1999 and the first few months of 2000 many day-traders
and their counterparts in the momentum part of the mutual fund industry became
seduced by the lure of quick money to be made in the smaller dot-com and
biotechnology companies and bid their prices up to unsustainable levels, while
at the same time ignoring the high quality growth stocks in which our Fund
invests. Then the speculative bubble burst, many day-traders lost everything,
and the momentum mutual fund managers who had climbed aboard the bandwagon saw
their extraordinary profits evaporate.
The predictable result of this disaster, which saw the inflated prices
of many hot stocks decline by as much as 80%, was a flight to quality. As the
chart on the opposite page indicates, for the six months ended June 30, 2000 our
Fund is up 6.9% while the Standard & Poor's 500 Stock Index, against which we
measure ourselves, is down 0.4%. Since inception on November 29, 1989 we are up
445.9% while the S&P 500 is up 447.3%.
Again, we would like to repeat what we have said before: Papp Stock
Fund is designed to represent a complete investment program for the common stock
portion of an investment program. It is designed for the long-term investor (at
least three to five years) and is inappropriate for those with a short time
horizon. The Fund is not designed to be a high performance vehicle, with the
attendant risks. It is designed to provide the investors with a very high
quality group of common stocks that may be held for many years. Accordingly,
portfolio turnover is generally low and the Fund is considered to be relatively
tax efficient.
We purchase a diversified list of growth stocks. We attempt to buy
companies at a price, relative to the market as a whole, that does not reflect
the superiority of that particular company. Among the factors we consider are
earnings growth over extended periods of time, above average profitability
created through operating efficiency rather than financial leverage, and cash
flows that appear to confirm the sustainability of growth.
The majority of the companies we own are large multi-nationals because
we believe that the greatest growth in the years ahead will be found in the
globalization of the world's economies. But, we also own a number of large
companies that confine their activities to the United States. Finally, we own
some mid-sized companies that fit our investment criteria.
We continue to believe that, as in the past, well-selected common
stocks will provide a better long-term result than other forms of investment.
For those who agree with our belief, Papp Stock Fund is an appropriate
investment with a proven record.
Warmest regards,
L. Roy Papp, Chairman
July 28, 2000
P.S. On June 30, the Fund distributed $1.80 per share to shareholders of record
June 28 from net long-term capital gains realized in 2000. For those who
reinvest, the distribution simply results in a greater number of shares with a
lesser value per share.
3
<PAGE>
<TABLE>
<CAPTION>
PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
Number Market
Common Stocks of Shares Value
-------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Financial Services (18.7%)
General Electric Co.
(Diversified financial and industrial company) 109,000 $5,777,000
Northern Trust Corporation
(Bank specializing in trust services) 68,000 4,424,250
State Street Corporation
(Provider of U.S. and global securities custodial services) 100,200 10,627,463
----------
20,828,713
----------
Computer Equipment (16.6%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and supplies) 49,000 6,118,875
Intel Corporation
(Manufacturer of microprocessors, microcontrollers,
and memory chips) 86,000 11,497,125
International Business Machines Corporation
(Global provider of information technology, hardware,
software, and services) 8,600 942,238
----------
18,558,238
----------
Industrial Services (10.8%)
G&K Services Inc., Class A
(Uniform rental service) 83,000 2,080,187
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 175,000 7,525,000
Omnicom Group, Inc.
(Worldwide advertising agencies) 27,000 2,404,687
----------
12,009,874
----------
Electronic Equipment (8.9%)
American Power Conversion*
(Leading producer of uninterruptible power supply products) 194,000 7,917,625
Molex, Inc.
(Supplier of interconnection products) 58,000 2,030,000
----------
9,947,625
----------
Software (8.0%)
Microsoft Corporation*
(Personal computer software) 111,000 8,880,000
----------
Pharmaceutical (7.4%)
American Home Products Corporation
(Prescription pharmaceuticals) 17,500 1,028,125
Merck & Company
(Prescription pharmaceuticals) 95,000 7,279,375
----------
8,307,500
----------
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
4
<PAGE>
<CAPTION>
PAPP STOCK FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 2000
(UNAUDITED)
Common Stocks (continued) Number of Shares Market Value
-------------------------------------------------------------------------- ---------------- ------------
<S> <C> <C>
Medical Products (6.1%)
Medtronic, Inc.
(Manufacturer of implantable biomedical devices) 137,000 $6,824,312
------------
Specialty Retailing (5.7%)
Walgreen Company
(Retail drug store chain) 100,000 3,218,750
Wal-Mart Stores, Inc.
(Leading discount retailer) 54,000 3,111,750
------------
6,330,500
------------
Investment Management (5.3%)
T. Rowe Price Associates, Inc.
(No-load mutual fund company) 140,000 5,950,000
------------
Restaurants (4.0%)
McDonald's Corporation
(Fast food restaurants and franchising) 138,000 4,545,375
------------
Consumer Products (4.0%)
Clorox Company
(Manufacturer of bleach and other consumer products) 100,000 4,481,250
------------
Financial Processing (2.1%)
Automatic Data Processing, Inc.
(Leading provider of computing and data processing services) 31,500 1,687,218
First Data Corp
(Leading provider of credit card processing and money transfer services) 14,000 694,750
------------
2,381,968
------------
Instruments & Testing (1.3%)
Agilent Technologies, Inc.*
(Designs and manufactures test and measurment systems for the
electronics and healthcare industries) 19,070 1,406,413
------------
Telecommunications (0.9%)
Motorola, Inc.
(Manufacturer of communication equipment) 36,000 1,046,251
------------
Total Common Stocks - 99.8% 111,498,019
Cash and Other Assets, Less Liabilities - 0.2% 176,470
------------
Net Assets - 100% $111,674,489
============
Net Asset Value Per Share
(Based on 2,581,203 shares outstanding at June 30, 2000) $ 43.26
============
</TABLE>
*Non-income producing security
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
<TABLE>
<CAPTION>
PAPP STOCK FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 2000
(UNAUDITED)
ASSETS
<S> <C>
Investment in securities at market value (original
cost $36,322,868 at June 30, 2000) (Note 1) $111,498,019
Cash 201,317
Dividends and interest receivable 88,861
------------
Total assets $111,788,197
============
LIABILITIES
Accrued expenses $ 113,708
============
NET ASSETS
Paid-in capital $ 37,476,917
Accumulated undistributed net realized gain
on sale of investments (1,258)
Accumulated undistributed net investment loss (976,321)
Net unrealized gain on investments 75,175,151
------------
Net assets applicable to Fund shares outstanding $111,674,489
============
Fund shares outstanding 2,581,203
============
Net Asset Value Per Share (net assets/shares
outstanding) $ 43.26
============
The accompanying notes are an integral part of this financial statement.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAPP STOCK FUND, INC.
STATEMENT OF OPERATIONS
JUNE 30, 2000
(UNAUDITED)
<S> <C>
INVESTMENT INCOME:
Dividends $ 301,625
Interest 19,315
------------
Total investment income 320,940
------------
EXPENSES:
Management fee (Note 3) 520,402
Filing fees 19,665
Auditing fees 8,200
Legal fees 5,109
Printing and postage fees 5,018
Transfer agent fees 4,958
Custodial fees 4,942
Directors' attendance fees 3,200
Other fees 26,514
------------
Total expenses 598,008
------------
Net investment loss (277,068)
------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 8,451,317
Cost of securities sold (3,973,571)
------------
Net realized gain on investments sold 4,477,746
Net change in unrealized gain on investments 3,034,206
Net realized and unrealized gain on investments 7,511,952
------------
INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 7,234,884
============
The accompanying notes are an integral part of this financial statement.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PAPP STOCK FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND
THE YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
2000 1999
----------- -------------
<S> <C> <C>
FROM OPERATIONS:
Net investment loss $ (277,068) $ (365,236)
Net realized gain on investments sold 4,477,746 1,866,374
Net change in unrealized gain on investments 3,034,206 12,319,702
----------- -------------
Increase in net assets resulting
from operations 7,234,884 13,820,840
----------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on investments sold (4,479,004) (1,867,963)
----------- ------------
Decrease in net assets resulting from
distributions to shareholders (4,479,004) (1,867,963)
----------- ------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 14,870,576 14,327,952
Net asset value of shares issued to shareholders in
reinvestment of net realized gain on investments sold 4,060,927 1,722,264
Payments for redemption of shares (15,114,358) (21,509,962)
------------ ------------
Increase/(decrease) in net assets resulting
from shareholder transactions 3,817,145 (5,459,746)
------------ ------------
Total increase in net assets 6,573,025 6,493,131
Net assets at beginning of the period 105,101,464 98,608,333
------------ ------------
Net assets at end of period $111,674,489 $105,101,464
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
PAPP STOCK FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
(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.
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 June 28, 2000, a distribution was declared from net realized long-term
capital gains of $1.80 a share, aggregating $4,479,004. The distribution was
paid on June 30, 2000, to shareholders of record on June 28, 2000.
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.
9
<PAGE>
(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 $4,958 in 2000 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, 2000 and the year ended December 31, 1999
investment transactions excluding short-term investments were as follows:
2000 1999
---------- ----------
Purchases at cost $7,467,609 $6,379,785
Sales 8,451,317 13,935,942
(5) CAPITAL SHARE TRANSACTIONS:
At June 30, 2000, 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, 2000
Shares issued $14,870,576 344,643
Distributions reinvested 4,060,927 95,844
Shares redeemed (15,114,358) (349,750)
----------- -----------
Net increase $ 3,817,145 90,737
=========== ===========
Year ended December 31, 1999
Shares issued $14,327,952 382,946
Distributions reinvested 1,722,264 40,797
Shares redeemed (21,509,962) (573,006)
----------- -----------
Net decrease $(5,459,746) (149,263)
=========== ===========
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
2000 1999
------------- ------------
Market value $111,498,019 $104,969,775
Original cost (36,322,868) (32,828,830)
------------ ------------
Net unrealized appreciation $ 75,175,151 $ 72,140,945
============ ============
As of June 30, 2000, gross unrealized gains on investments in which market value
exceeded cost totaled $75,330,600 and gross unrealized losses on investments in
which cost exceeded market value totaled $155,449.
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.
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,
2000 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 42.20 $ 37.36 $ 29.78 $ 22.70 $ 19.29 $ 14.63
Income from operations:
Net investment (loss)/income (0.10) (0.15) (0.09) (0.04) 0.01 0.07
Net realized and unrealized gain
on investments 2.96 5.75 8.13 7.55 4.16 4.73
------------ ------------ ----------- ----------- ----------- -----------
Total from operations 2.86 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 (1.80) (0.76) (0.46) (0.43) (0.75) (0.07)
------------ ------------ ----------- ----------- ----------- -----------
Total distributions (1.80) (0.76) (0.46) (0.43) (0.76) (0.14)
Net asset value, end of period $ 43.26 $ 42.20 $ 37.36 $ 29.78 $ 22.70 $ 19.29
============ ============ =========== =========== =========== ===========
Total return 6.87% 14.99% 26.99% 33.12% 21.77% 32.93%
============ ============ =========== =========== =========== ===========
Ratios/Supplemental Data:
Net assets, end of period $111,674,489 $105,101,464 $98,608,333 $79,820,068 $53,277,087 $44,508,543
Expenses to average net
assets 1.15%* 1.09% 1.10% 1.12% 1.16% 1.17%
Investment income to
average net assets (A) 0.61%* 0.71% 0.82% 1.00% 1.19% 1.60%
Portfolio turnover rate 14.26%* 6.60% 9.74% 6.19% 14.47% 22.39%
</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.