<PAGE>
[LINE DRAWING OF L. ROY PAPP]
PAPP AMERICA-ABROAD FUND, INC.
A No-Load Fund
ANNUAL REPORT
DECEMBER 31, 1996
Managed by:
L. Roy Papp & Associates
4400 North 32/nd/ Street
Suite 280
Phoenix, AZ 85018
(602)956-1115 Local
(800)421-4004
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
Dear Fellow Shareholder,
Our Fund did well in 1996, being up 27.7% for the year which was significantly
better than the major market indexes. This followed a good 1995 when we were up
37.1%. Since inception, a little more than five years ago, we were up 122.5% at
year-end. As the chart on the opposite page indicates, our long-term performance
comfortably exceeds that of the Morgan Stanley World Index. As of this writing,
we are up 7.9% in 1997. While we believe it will be difficult to match the
performance of 1995 and 1996, we are pleased that Morningstar Investor ranks our
Fund as the top performing "Large Growth" fund in the nation for the three years
ended December 31, 1996.
I am frequently asked whether the stock market is overpriced. My reply is I do
not think so. The market appears high if your reference point is book value or
many other historical yardsticks. If we were investing in companies requiring
large amounts of capital such as steel, automobiles, chemicals, and utilities, I
would be very worried about their cyclical nature and the possibility of rising
interest rates.
But, we live in a rapidly changing economic society and the rate of change keeps
on accelerating. Companies whose future is linked to technological innovations
like Intel, Microsoft, and Motorola reinvest their earnings primarily in
research and development rather than still more plants and equipment. These
companies reported quarterly earnings well in excess of analysts' expectations
and deserve to sell at a premium to the market as a whole.
Looking at stocks versus U.S. Treasuries, if one purchased a five year U.S.
Treasury today he would pay the equivalent of 16 times earnings while he would
pay about 19 times earnings for the typical stock. After five years, inflation
and taxes would negate practically all of his return on the Treasury while the
rising earnings of a good growth stock would more than justify the initial
differential in the price/earnings ratio. This is borne out by the fact that,
looking at historical results over the last 50 years, the after-inflation return
on stocks has been 3 1/2 to 5 times as large as the return on U.S. Treasuries.
In recent years the media has drawn these facts to the public's attention, and
this has resulted in enormous purchases of common stocks and mutual funds.
We organized Papp America-Abroad Fund because our clients wanted to benefit from
the increased globalization of the world's economies without incurring the many
risks and expenses associated with the direct purchase of foreign stocks. We
believed this goal could be accomplished with mainly United States companies, a
large part of whose earnings come from foreign countries, because these
companies have the technological leadership, marketing expertise, and quality
products wanted by the rest of the world. This belief has proven correct because
the international trade of U.S. multinational companies has grown much faster
than their domestic activities.
Our Fund is designed for those patient, long-term investors who share these
goals.
Best regards,
/s/ L. Roy Papp
--------------------------------
L. Roy Papp, Chairman
February 7, 1997
3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of the
Papp America-Abroad Fund, Inc.:
We have audited the accompanying statements of assets and liabilities of the
Papp America-Abroad Fund, Inc. (the Fund) as of December 31, 1996 and 1995,
including the schedule of portfolio investments as of December 31, 1996, and the
related statements of operations and statements of changes in net assets for the
two years then ended, and the financial highlights for the four years 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 Papp America-Abroad Fund, Inc. for the
year ended December 31, 1992, and the period from December 6, 1991 (date of
commencement of operations) through December 31, 1991, 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 audits 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, 1996, 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
Papp America-Abroad Fund, Inc. as of December 31, 1996 and 1995, and the results
of its operations and changes in its net assets for the two years then ended and
its financial highlights for the four years then ended, in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Phoenix, Arizona,
January 14, 1997.
4
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Number Market
Common Stocks of Shares Value
- -------------------------------------------------------------------- --------- -----------
<S> <C> <C>
Industrial Services (13.7%)
Air Express International
(Air freight forwarding) 32,000 $1,032,000
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 30,800 1,463,000
Manpower, Inc.
(Provider of non-government employment services) 48,500 1,576,250
----------
4,071,250
----------
Computers and Software (11.5%)
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 14,400 723,600
Intel Corporation
(Manufacturer of microprocessors, microcontrollers, and
memory chips) 13,000 1,702,188
Microsoft Corporation*
(Personal computer software) 12,000 991,500
----------
3,417,288
----------
HealthCare (10.5%)
Abbott Laboratories
(Healthcare products) 10,900 553,175
Johnson & Johnson
(Healthcare products) 23,500 1,169,125
Merck & Company
(Ethical drugs and specialty chemicals) 17,600 1,394,800
----------
3,117,100
----------
Electrical Equipment (8.6%)
General Electric Co.
(Diversified industrial company) 15,000 1,483,125
Emerson Electric Company
(Manufacturer of electrical and electronic products and systems) 10,900 1,054,575
----------
2,537,700
----------
Distributors (8.3%)
Arrow Electronics, Inc.*
(Distributor of electronic components and computer products) 20,500 1,096,750
Sigma-Aldrich Corp.
(Develops, manufactures, and distributes specialty chemicals) 22,000 1,373,625
----------
2,470,375
----------
Consumer Products (8.0%)
Gillette Company
(Shaving and personal care) 16,000 1,244,000
Procter & Gamble Company
(Household, personal care, and food products) 10,400 1,118,000
----------
2,362,000
----------
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
5
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Number Market
Common Stocks (continued) of Shares Value
- -------------------------------------------------------------- --------- -----------
<S> <C> <C>
Food and Beverage (6.8%)
CPC International
(International food processor) 13,500 $ 1,046,250
Coca Cola Company
(Dominant international soft drink company) 18,600 978,825
-----------
2,025,075
-----------
Financial Services (6.2%)
State Street Boston Corporation
(Provider of U.S. and global securities custodial services) 28,300 1,825,350
-----------
Telecommunications ( 4.2%)
Motorola, Inc.
(Manufacturer of electronic equipment) 20,400 1,252,050
-----------
Restaurants ( 2.8%)
McDonald's Corporation
(Fast food restaurants and franchising) 18,400 832,600
-----------
Miscellaneous ( 17.9%)
Exxon Corp.
(Worldwide integrated oil company) 3,500 343,000
Intermagnetics General*
(Manufacturer of superconductive magnetic systems
and environmentally acceptable refrigerants) 15,364 184,367
Mattel, Inc.
(Toy manufacturer) 47,000 1,304,250
Millipore Corporation
(Leading supplier of purification products) 36,000 1,489,500
Pall Corporation
(Manufacturer of fluid filters and equipment for
fluid processing) 12,700 323,850
Reuters Holdings P.L.C.
(International news agency) 5,000 382,500
VeriFone, Inc.*
(Supplier of transaction automation systems) 42,000 1,239,000
-----------
5,266,467
-----------
Total Common Stocks - 98.5% 29,177,255
Cash and Other Assets, Less Liabilities - 1.5% 446,242
-----------
Net Assets $29,623,497
===========
Net Asset Value Per Share
(Based on 1,473,039 shares outstanding at December 31, 1996) $ 20.11
===========
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of this financial statement.
6
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
Investment in securities at market value (original
cost $19,817,375 and $10,558,570 at December 31,
1996 and 1995, respectively) (Note 1) $29,177,255 $15,884,263
Cash 403,963 83,326
Dividends and interest receivable 42,332 20,678
----------- -----------
Total assets $29,623,550 $15,988,267
=========== ===========
LIABILITIES
Redemptions Payable $ 53 $ --
=========== ===========
NET ASSETS
Paid-in capital applicable to 1,473,039 outstanding
shares at December 31, 1996 and 970,561 outstanding
shares at December 31, 1995 $20,263,617 $10,662,574
Net unrealized gain on investments 9,359,880 5,325,693
----------- -----------
Net assets $29,623,497 $15,988,267
=========== ===========
Net Asset Value Per Share (net assets/shares
outstanding) $ 20.11 $ 16.47
=========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
7
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 265,241 $ 201,325
Interest 10,180 7,941
Foreign taxes withheld (878) (1,754)
---------- ----------
Total investment income 274,543 207,512
---------- ----------
EXPENSES:
Management fee (Note 3) 211,223 137,892
Filing fees 26,353 4,584
Accounting 10,850 9,700
Custodial 8,140 4,963
Legal 6,173 1,118
Directors' attendance fees 4,600 3,500
Transfer agent fees 3,872 2,425
Other fees 3,420 3,675
---------- ----------
Total expenses 274,631 167,857
---------- ----------
Less fees waived by adviser (Note 3) (10,602) --
---------- ----------
Net expenses 264,029 167,857
---------- ----------
Net investment income 10,514 39,655
---------- ----------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 2,584,954 3,627,982
Cost of securities sold 1,550,633 3,353,223
---------- ----------
Net realized gain on investments sold 1,034,321 274,759
Net change in unrealized gain on investments 4,034,187 3,960,701
---------- ----------
Net realized and unrealized gain on investments 5,068,508 4,235,460
---------- ----------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,079,022 $4,275,115
========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
8
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 10,514 $ 39,655
Net realized gain on investments sold 1,034,321 274,759
Net change in unrealized gain on investments 4,034,187 3,960,701
----------- -----------
Increase in net assets resulting from
operations 5,079,022 4,275,115
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income (10,514) (39,655)
Net realized gain on investments sold (1,034,321) (245,291)
----------- -----------
Decrease in net assets resulting from
distributions to shareholders (1,044,835) (284,946)
----------- -----------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 9,114,588 1,509,716
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
net realized gain on investments sold 996,599 277,836
Payments for redemption of shares (510,144) (1,362,651)
----------- -----------
Increase in net assets resulting
from shareholder transactions 9,601,043 424,901
----------- -----------
Total increase in net assets 13,635,230 4,415,070
Net assets at beginning of the period 15,988,267 11,573,197
----------- -----------
Net assets at end of period $29,623,497 $15,988,267
=========== ===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
9
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) SIGNIFICANT ACCOUNTING POLICIES:
Papp America-Abroad Fund, Inc. (the Fund) was incorporated on August 15, 1991,
and is registered under the Investment Company Act of 1940 as an open-end
diversified management investment company. Operations of the Fund commenced on
December 6, 1991. The Fund invests with the objective of long-term capital
growth in the common stocks of United States companies that have substantial
international activities and, to a much lesser extent, in the common stocks of
foreign enterprises that are traded publicly in United States securities
markets.
The policies described below are followed by the Fund in the preparation of its
financial statements in conformity with generally accepted accounting
principles.
(a) 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>
(b) 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.
On December 18, 1996, a dividend of approximately $.0073 a share, aggregating
$10,514 was declared from net investment income earned during 1996. A
distribution was also declared from net realized long-term capital gains of
approximately $.2713 a share aggregating $388,302. Also a distribution was
declared from net realized short-term capital gains of approximately $.0723 a
share aggregating $102,964. The dividend and distribution were paid on December
31, 1996, to shareholders of record on December 17, 1996.
On June 20, 1996, a distribution of approximately $.50 a share, aggregating
$543,055, was declared from net realized capital gains earned during 1996. The
distribution was paid on June 28, 1996, to shareholders of record on June 19,
1996.
On December 21, 1995, a dividend of approximately $.010567 a share, aggregating
$10,435, was declared from net investment income earned during 1995. A
distribution was also declared from net realized long-term capital gains of
approximately $.256864 a share, aggregating $245,291. The dividend and
distribution were paid on December 29, 1995, to shareholders of record on
December 20, 1995.
On June 21, 1995, a dividend of approximately $.031 a share, aggregating
$29,220, was declared from net investment income earned during 1995. The
dividend was paid on June 30, 1995, to shareholders of record on June 20, 1995.
Dividends and distributions payable to its shareholders are recorded by the Fund
on the ex-dividend date.
(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. A
management fee expense reimbursement of $10,602 was required in 1996. The Fund
incurred fees of $3,872 and $2,425 in 1996 and 1995, respectively, from the
manager for its services as shareholder services and transfer agent.
11
<PAGE>
The Fund's independent directors receive $600 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, investment transactions excluding short-term
investments were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Purchases at cost $10,809,437 $3,875,066
Sales 2,583,120 3,627,982
</TABLE>
(5) CAPITAL SHARE TRANSACTIONS:
At December 31, 1996, there were 5,000,000 shares of $.01 par value capital
stock authorized. Transactions in capital shares of the Fund were as follows:
<TABLE>
<CAPTION>
Proceeds Shares
----------- -------
<S> <C> <C>
Year ended December 31, 1996
Shares issued $ 9,114,588 478,153
Dividends and distributions reinvested 996,599 52,290
Shares redeemed (510,144) (27,965)
----------- -------
Net increase $ 9,601,043 502,478
=========== =======
Year ended December 31, 1995
Shares issued $ 1,509,716 105,481
Dividends and distributions reinvested 277,836 17,193
Shares redeemed (1,362,651) (97,341)
----------- -------
Net increase $ 424,901 25,333
=========== =======
</TABLE>
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Market value $29,177,255 $15,884,263
Original cost 19,817,375 10,558,570
----------- -----------
Net unrealized appreciation $ 9,359,880 $ 5,325,693
=========== ===========
</TABLE>
As of December 31, 1996, gross unrealized gains on investments in which market
value exceeded cost totaled $9,467,081 and gross unrealized losses on
investments in which cost exceeded market value totaled $107,201.
As of December 31, 1995, gross unrealized gains on investments in which market
value exceeded cost totaled $5,328,808 and gross unrealized losses on
investments in which cost exceeded market value totaled $3,115.
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, Period Ended
------------------------------------------------------------------------ December 31,
1996 1995 1994 1993 1992 1991 (A)
------------- ------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 16.47 $ 12.24 $ 11.45 $ 11.67 $ 10.98 $ 10.00
Income from operations:
Net investment income .01 .04 .10 .10 .11 .02
Net realized and unrealized
gain (loss) on investments 4.48 4.52 .79 (.11) .71 .98
----------- ----------- ----------- ----------- ---------- ----------
Total from operations 4.49 4.56 .89 (.01) .82 1.00
Less distributions:
Dividend from net investment
income (.01) (.04) (.10) (.09) (.11) (.02)
Distribution of net realized
gain (.84) (.29) -- (.12) (.02) --
----------- ----------- ----------- ----------- ---------- ----------
Total distributions (.85) (.33) (.10) (.21) (.13) (.02)
Net asset value, end of period $ 20.11 $ 16.47 $ 12.24 $ 11.45 $ 11.67 $ 10.98
=========== =========== =========== =========== ========== ==========
Total return 27.65% 37.05% 7.77% (.08)% 7.44% 9.94%
=========== =========== =========== =========== ========== ==========
Ratios/Supplemental Data:
Net assets, end of period $29,623,497 $15,988,267 $11,573,197 $10,934,293 $5,013,407 $1,369,899
Expenses to average
net assets (B) 1.25% 1.22% 1.25% 1.25% 1.25% 1.25%*
Net investment income to
average net assets (C) 1.30% 1.50% 2.07% 2.28% 2.28% 4.51%*
Portfolio turnover rate 12.29% 26.65% 16.00% 8.00% 16.00% 0.00%
Average commission rate $0.0487
</TABLE>
* Annualized
(A) From the date of commencement of operations (December 6, 1991).
(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 1.30%, 1.30%, 1.33%,
3.16%, and 2.07% for the years ended December 31, 1996, 1994, 1993, 1992 and
the period ended December 31, 1991.
(C) Computed giving effect to investment adviser's expense limitation
undertaking.
13
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
Directors
James K. Ballinger L. Roy Papp
Amy S. Clague Rosellen C. Papp
Robert L. Mueller Bruce C. Williams
Harry A. Papp
Officers
Chairman - L. Roy Papp President - Harry A. Papp
Vice Presidents
Victoria S. Cavallero Robert L. Mueller
George D. Clark, Jr. Rosellen C. Papp
Jeffrey N. Edwards Bruce C. Williams
Robert L. Hawley
Secretary - Robert L. Mueller
Assistant Secretary - Barbara D. Perleberg
Treasurer - Rosellen C. Papp
Assistant Treasurer - Julie A. Hein
Investment Adviser
L. Roy Papp & Associates
4400 North 32nd Street, Suite 280
Phoenix, Arizona 85018
Telephone: (602) 956-1115
Custodian
Founders Bank of Arizona
7335 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
Shareholder Services and Transfer Agent
L. Roy Papp & Associates
4400 North 32nd Street, Suite 280
Phoenix, Arizona 85018
Telephone: (602) 956-1115
(800) 421-4004
Independent Public Accountants
Arthur Andersen LLP
2 North Central Avenue, Suite 1000
Phoenix, Arizona 85004
Legal Counsel
Bell, Boyd & Lloyd
70 West Madison Street
Chicago, Illinois 60602
This report is submitted for the general information of the shareholders of
the Fund. The report is not authorized for distribution to prospective
investors in the Fund unless it is accompanied or preceded by a currently
effective prospectus of the Fund. No sales charge to the shareholder or to
the new investor is made in offering the shares of the Fund.
