<PAGE>
[ARTWORK]
PAPP AMERICA-ABROAD FUND, INC.
A No-Load Fund
SEMI-ANNUAL REPORT
JUNE 30, 1998
Managed by:
L. Roy Papp & Associates
P.O. Box 15508
Phoenix, AZ 85060-5508
(602)956-1115 Local
(800)421-4004
E-mail: [email protected]
Web: http://www.roypapp.com
----------------------
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
Dear Fellow Shareholder:
Our Fund had a good second quarter because we were up during the period along
with other large-cap growth funds. Practically every other group small,
medium, sector, foreign and commodity funds were down. During the last three
and one half years we were up 152% which means that a $10,000 investment made on
January 1, 1995 was worth $25,188 at the end of June, 1998. Thus, the long-term
investor did very well while the short-term trader or market timer was not very
successful.
About a month ago many economists and forecasters discovered that the Japanese
economy was going into depression (of course this began nine years ago). The
last nine years have taken most of the risk out of the Japanese market even
though there is still some left. Fortunately, after this rumor was reported the
market decided not to worry about it. This is the type of thing that causes
people to sell stocks for foolish reasons rather than continue their long-term
investment strategy.
Conditions today are far different than they were during World War II and the
Cold War that followed. Comparing our economy with the economy of 1929 is
nothing but an exercise in futility. We see a healthy economy with a lot of
pluses that never existed before, one of the most important being that the media
has educated the public that common stocks have been four times as productive as
bonds over the last seventy years after adjusting for inflation. We also are
the undisputed leaders in the world's technology. Our people are better
educated and more entrepreneurial in their attitudes than Europe and much of the
rest of the world. For better or for worse the world is infatuated with
American culture. No matter where you go there are American Jeans, Pop Music,
McDonald's, and Barbie dolls. This reflects our dominance in the global
cultural marketplace.
All of the above have helped to cause higher stock prices than historical norms,
but if you look through the windshield rather than through the rear view mirror
this market does not seem unreasonable. We continue to believe that for the
long-term the United States stock market is probably the least risky and most
attractive place to be.
Best regards,
L. Roy Papp, Chairman
July 20, 1998
2
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PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Number Market
Common Stocks of Shares Value
- ------------------------------------------------------------------------ --------- ------------
<S> <C> <C>
Computers and Software (18.1%)
American Power Conversion *
(Leading producer of uninterruptible power supply products) 680,000 $20,400,000
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 230,000 13,771,250
Intel Corporation
(Manufacturer of microprocessors, microcontrollers, and
memory chips) 250,000 18,531,250
Microsoft Corporation*
(Personal computer software) 96,000 10,404,000
-----------
63,106,500
-----------
Industrial Services (13.7%)
Air Express International
(Air freight forwarding) 480,000 12,840,000
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 370,000 22,454,375
Manpower, Inc.
(Provider of non-government employment services) 445,000 12,765,937
-----------
48,060,312
-----------
Health Care (11.4%)
Abbott Laboratories
(Healthcare products) 180,000 7,357,500
Johnson & Johnson
(Healthcare products) 205,000 15,118,750
Merck & Company
(Ethical drugs and specialty chemicals) 130,000 17,387,500
-----------
39,863,750
-----------
Electrical Equipment (10.4%)
Emerson Electric Company
(Manufacturer of electrical and electronic products and systems) 170,000 10,263,750
General Electric Co.
(Diversified industrial company) 172,000 15,652,000
Molex, Inc.
(Supplier of electrical, electronic, and fiber optic interconnection 450,000 10,518,750
products and systems) -----------
36,434,500
-----------
Direct Marketing (7.7%)
Viking Office Products *
(Direct international marketer of office products to small and
medium sized businesses) 860,000 26,982,500
-----------
Consumer Products (6.5%)
Coca Cola Company
(Dominant international soft drink company) 16,000 1,368,000
Gillette Company
(Personal care products and batteries) 27,000 1,530,563
Mattel, Inc.
(Toy manufacturer) 425,000 17,982,813
Unilever Group
(Producer and marketer of branded and packaged consumer goods) 24,000 1,894,500
-----------
22,775,876
-----------
</TABLE>
*Non-income producing security.
3
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PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Number Market
Common Stocks (continued) of Shares Value
- ------------------------------------------------------------------ --------- ------------
<S> <C> <C>
Financial Services (6.3%)
State Street Corporation
(Provider of U.S. and global securities custodial services) 315,000 $ 21,892,500
------------
Consumer Services (5.4%)
Service Corporation International
(Funeral service, cemetery owner/operator) 440,000 18,865,000
------------
Distributors (5.2%)
Arrow Electronics, Inc.*
(Distributor of electronic components and computer products) 363,200 7,899,600
Sigma-Aldrich Corp.
(Develops, manufactures, and distributes specialty chemicals) 280,000 9,835,000
------------
17,734,600
------------
Telecommunications (4.5%)
Hong Kong Telecommunications, Ltd.
(International telecommunications services) 390,000 7,361,250
Motorola, Inc.
(Manufacturer of communication equipment) 160,000 8,410,000
------------
15,771,250
------------
Restaurants (4.4%)
McDonald's Corporation
(Fast food restaurants and franchising) 225,000 15,525,000
------------
Miscellaneous (4.9%)
Exxon Corp.
(Worldwide integrated oil company) 20,000 1,426,250
Illinois Tool Works, Inc.
(Manufacturer of tools, fasteners, and packaging systems) 102,000 6,802,125
Steiner Leisure Ltd. *
(Provider of spa services, beauty salons, and health
clubs on cruise ships) 303,750 9,188,437
------------
17,416,812
------------
Total Common Stocks - 98.5% 344,428,600
Cash and Other Assets, Less Liabilities - 1.5% 5,165,844
------------
Net Assets - 100% $349,594,444
============
Net Asset Value Per Share
(Based on 12,141,070 shares outstanding at June 30, 1998) $ 28.79
============
</TABLE>
*Non-income producing security.
4
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PAPP AMERICA-ABROAD FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Investment in securities at market value (identified
cost $281,883,278 at June 30, 1998) (Note 1) $344,428,600
Cash 4,225,295
Dividends and interest receivable 463,417
Receivable for investment securities sold 1,056,000
------------
Total assets $350,173,312
============
LIABILITIES
Redemptions Payable $ 277,558
Accrued Expenses 301,310
------------
Total Liabilities $ 578,868
============
NET ASSETS
Paid-in capital applicable to 12,141,070 outstanding
shares at June 30, 1998 $287,049,122
Net unrealized gain on investments 62,545,322
------------
Net assets $349,594,444
============
Net Asset Value Per Share (net assets/shares
outstanding) $ 28.79
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends $ 1,441,692
Interest 163,784
Foreign taxes withheld (270)
-----------
Total investment income 1,605,206
-----------
EXPENSES:
Management fee (Note 3) 1,728,772
Filing fees 101,455
Printing and Postage 26,075
Transfer agent fees 17,661
Custodial 10,679
Accounting 9,000
Directors' attendance fees 2,300
Legal 2,059
Other fees 27,272
-----------
Total expenses 1,925,273
-----------
Net investment loss (320,067)
-----------
REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Proceeds from sales of securities 28,219,500
Cost of securities sold 30,588,023
-----------
Net realized loss on investments sold (2,368,523)
Net change in unrealized gain on investments 37,018,995
-----------
Net realized and unrealized gain on investments 34,650,472
-----------
Net increase in net assets resulting from operations $34,330,405
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1998 December 31, 1997
----------------- ------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment (loss)/income $ (320,067) $ 200,654
Net realized (loss)/gain on investments sold (2,368,523) 1,389,343
Net change in unrealized gain on investments 37,018,995 16,166,447
------------ ------------
Increase in net assets resulting from
operations 34,330,405 17,756,444
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (200,654)
Net realized gain on investments sold - (1,389,343)
------------ ------------
Total distributions to shareholders - (1,589,997)
------------ ------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 120,963,942 315,859,241
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
net realized gain on investments sold - 1,485,676
Payments for redemption of shares (93,949,197) (74,885,567)
------------ ------------
Increase in net assets resulting
from share transactions 27,014,745 242,459,350
------------ ------------
Total increase in net assets 61,345,150 258,625,797
Net assets at beginning of the period 288,249,294 29,623,497
------------ ------------
Net assets at end of period $349,594,444 $288,249,294
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(Unaudited)
(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.
8
<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 17, 1997, a dividend of approximately $.0189 a share, aggregating
$200,654 was declared from net investment income earned during 1997. A
distribution was also declared from net realized long-term capital gains of
approximately $.1093 a share aggregating $1,204,067. Also a distribution was
declared from net realized short-term capital gains of approximately $.0168 a
share aggregating $185,276. The dividend and distribution were paid on December
31, 1997, to shareholders of record on December 19, 1997.
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. The Fund
incurred fees of $17,661 and $24,038 in 1998 and 1997, respectively, from the
manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $1,000 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.
9
<PAGE>
(4) PURCHASES AND SALES OF SECURITIES:
For the six months ended June 30 and the year ended December 31, 1997,
investment transactions excluding short-term investments were as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Purchases at cost $52,895,646 $246,423,965
Sales 28,219,500 7,380,204
</TABLE>
(5) CAPITAL SHARE TRANSACTIONS:
At June 30, 1998, there were 25,000,000 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>
Six months ended June 30, 1998
Shares issued $120,963,942 4,410,092
Dividends and distributions reinvested - -
Shares redeemed (93,949,197) (3,363,224)
------------ ----------
Net increase $ 27,014,745 1,046,868
============ ==========
Year ended December 31, 1997
Shares issued $315,859,241 12,468,691
Dividends and distributions reinvested 1,485,676 58,127
Shares redeemed (74,885,567) (2,905,655)
------------ ----------
Net increase $242,459,350 9,621,163
============ ==========
</TABLE>
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Market value $344,428,600 $285,776,806
Original cost 281,883,278 260,250,479
------------ ------------
Net unrealized appreciation $ 62,545,322 $ 25,526,327
============ ============
</TABLE>
As of June 30, 1998, gross unrealized gains on investments in which market value
exceeded cost totaled $76,540,117 and gross unrealized losses on investments in
which cost exceeded market value totaled $13,994,795.
As of December 31, 1997, gross unrealized gains on investments in which market
value exceeded cost totaled $38,186,956 and gross unrealized losses on
investments in which cost exceeded market value totaled $12,660,629.
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 Year Ended December 31,
Ended ------------------------------------------------------------------------
June 30, 1998 1997 1996 1995 1994 1993 1992
------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.98 $ 20.11 $ 16.47 $ 12.24 $ 11.45 $ 11.67 $ 10.98
Income from operations:
Net investment income - .01 .01 .04 .10 .10 .11
Net realized and unrealized gain
(loss) on investments 2.81 6.00 4.48 4.52 .79 (.11) .71
------- ------- ------- ------- ------- ------- -------
Total from operations 2.81 6.01 4.49 4.56 .89 (.01) .82
Less distributions:
Dividend from net investment
Income - (.01) (.01) (.04) (.10) (.09) (.11)
Distribution of net realized gain - (.13) (.84) (.29) - (.12) (.02)
------- ------- ------- ------- ------- ------- -------
Total distributions - (.14) (.85) (.33) (.10) (.21) (.13)
Net asset value, end of Period $ 28.79 $ 25.98 $ 20.11 $ 16.47 $ 12.24 $ 11.45 $ 11.67
======= ======= ======= ======= ======= ======= =======
Total return 10.82% 29.92% 27.65% 37.05% 7.77% (.08)% 7.44%
======= ======= ======= ======= ======= ======== =======
Ratios/Supplemental Data:
Net assets, end of period $349,594,444 $288,249,294 $29,623,497 $15,988,267 $11,573,197 $10,934,293 $5,013,407
Expenses to average net assets 1.10%* 1.11% 1.25% 1.22% 1.25% 1.25% 1.25%
(B)
Net investment income to
Average net assets (C) .92%* 1.24% 1.30% 1.50% 2.07% 2.28% 2.28%
Portfolio turnover rate 16.66%* 4.71% 12.29% 26.65% 16.00% 8.00% 16.00%
Average commission rate (D) $ .0319 $ .0297 $ .0487
Period Ended
December 31,
-----------
1991 (A)
-------
<S> <C>
Net asset value, beginning of period $ 10.00
Income from operations:
Net investment income .02
Net realized and unrealized gain
(loss) on investments .98
-------
Total from operations 1.00
Less distributions:
Dividend from net investment
Income (.02)
Distribution of net realized gain -
-------
Total distributions (.02)
Net asset value, end of Period $ 10.98
=======
Total return 9.94%
=======
Ratios/Supplemental Data:
Net assets, end of period $1,369,899
Expenses to average net assets 1.25%*
(B)
Net investment income to
Average net assets (C) 4.51%*
Portfolio turnover rate 0.00%
Average commission rate (D)
</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.
(D) This disclosure was not required for years prior to 1996.
11
<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 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
P.O. Box 15508
Phoenix, Arizona 85060-5508
Telephone: (602) 956-1115
Web address: http//www.roypapp.com
Email address: [email protected]
Custodian
Founders Bank of Arizona
7335 E. Doubletree Ranch Road
Scottsdale, Arizona 85258
Shareholder Services and Transfer Agent
L. Roy Papp & Associates
P.O. Box 15508
Phoenix, Arizona 85060-5508
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.
