[Sketch of L. Roy Papp appears here]
PAPP AMERICA-ABROAD FUND, INC.
A No-Load Fund
SEMI-ANNUAL REPORT
JUNE 30, 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>
PAPP AMERICA-ABROAD FUND, INC.
Dear Fellow Shareholder:
From a very slow beginning, marked by a pronounced weakness in our mid-sized
stocks and flatness in our technology stocks, we ended the June 30 six month
period up 4.1%. This compares with a 8.5% increase in the Morgan Stanley World
Index. Since inception on December 6, 1991 our Fund was up 273.0% while the
World Index was up 181%.
The America-Abroad Fund is designed to provide a means of participating in the
growth of the world's economies through the purchase and retention of primarily
United States multinational companies which do a large portion of their business
abroad and which receive a substantial portion of their income from oversea
sources.
The Fund invests mainly in United States companies for many reasons, not the
least of which is that they make money. Of the 100 largest companies in the
world based on sales, only 25 are American; yet these 25 companies account for
over 50% of the net income earned by the biggest 100. Other reasons for
investing American include SEC disclosure requirements, predictable accounting,
cheaper custodial fees, and social and economic stability.
Of equal importance is the fact that the United States companies are the leaders
in the areas of rapid growth while many large foreign companies are in what may
be termed "Sunset Industries" such as steel, automobiles, and heavy
construction.
We, on the other hand, believe that medical and electronic technology, along
with the inescapable globalization, will be driving forces in the growth of the
world's economy in the years to come. American companies like IBM, Intel, and
Microsoft continue to provide us with tremendous technological advances. Most
importantly, they had done so at ever lower costs which has provided a great
deflationary factor never seen before. Consequently, our nation enjoys full
employment and a strong economy without inflation. In medical technology,
companies like Johnson & Johnson, Eli Lilly, Merck, and Pfizer spend huge
amounts of money on research and development to keep in the forefront of product
innovation.
These are the factors behind our investment decisions. We believe the long-term
investor will be rewarded for understanding the major changes that are taking
place in today's world.
Warmest regards,
/s/ L. Roy Papp
L. Roy Papp, Chairman
August 1, 1999
2
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
Number Market
Common Stocks of Shares Value
- ----------------------------------------------------------- ------------- -----------------
<S> <C> <C>
Computer Equipment (17.0%)
EMC Corp. *
(Manufacturer of enterprise computer storage systems) 56,000 $ 3,080,000
Hewlett-Packard Company
(Manufacturer of printers, computers, and medical
electronic equipment) 120,000 12,060,000
Intel Corporation
(Manufacturer of microprocessors, microcontrollers, and
memory chips) 474,000 28,203,000
International Business Machines
(Global provider of information technology,
hardware, software and services) 58,000 7,496,500
-----------------
50,839,500
-----------------
Financial Services (15.8%)
American International Group
(Major international insurance holding company) 69,000 8,077,312
General Electric Co.
(Diversified financial and industrial company) 134,000 15,142,000
State Street Corporation
(Provider of U.S. and global securities custodial services) 280,000 23,905,000
-----------------
47,124,312
-----------------
Industrial Services (12.6%)
Air Express International
(Air freight forwarding) 162,600 4,125,975
Interpublic Group of Companies, Inc.
(Worldwide advertising agencies) 330,000 28,586,250
Omnicom Group, Inc.
(Worldwide advertising agencies) 65,000 5,200,000
-----------------
37,912,225
-----------------
Electrical Equipment (12.0%)
American Power Conversion *
(Leading producer of uninterruptible power
supply products) 1,245,800 25,071,725
Molex, Inc.
(Supplier of interconnection products) 340,000 10,710,000
-----------------
35,781,725
-----------------
Specialty Retailing (9.0%)
Office Depot *
(Leading retailer and direct marketer of office supplies) 1,222,500 26,971,406
-----------------
Pharmaceutical (7.2%)
Eli Lilly & Co.
(Prescription pharmaceuticals) 22,000 1,575,750
Merck & Company
(Prescription pharmaceuticals) 252,000 18,648,000
Pfizer, Inc.
(Prescription pharmaceuticals) 12,000 1,317,000
-----------------
21,540,750
-----------------
</TABLE>
*Non-income producing security.
3
<PAGE>
<TABLE>
<CAPTION>
PAPP AMERICA-ABROAD FUND, INC.
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
Number Market
Common Stocks (continued) of Shares Value
- ------------------------------------------------------------ ----------- -----------------
<S> <C> <C>
Software (6.4%)
BMC Software, Inc. *
(Develops data and application management software) 55,000 $ 2,970,000
Microsoft Corporation*
(Personal computer software) 180,000 16,233,750
-----------------
19,203,750
-----------------
Consumer Services (5.5%)
Service Corporation International
(Funeral service, cemetery owner/operator) 260,000 5,005,000
Steiner Leisure Ltd. *
(Provider of spa services, beauty salons, and
health clubs on cruise ships) 375,000 11,367,188
-----------------
16,372,188
-----------------
Restaurants (5.5%)
McDonald's Corporation
(Fast food restaurants and franchising) 396,000 16,359,750
-----------------
Medical Products (5.2%)
Johnson & Johnson
(Healthcare products) 160,000 15,680,000
-----------------
Telecommunications (1.5%)
Cisco Systems, Inc. *
(Leading supplier of computer internetworking systems) 24,000 1,548,000
L.M. Ericsson Telephone AB
(Manufacturer of telecom systems and cellular handsets) 70,000 2,305,625
Hong Kong Telecommunications, Ltd.
(International telecommunications services) 20,000 538,750
-----------------
4,392,375
-----------------
Consumer Products (1.3%)
Gillette Company
(Personal care products and batteries) 27,000 1,107,000
Mattel, Inc.
(Toy manufacturer) 105,000 2,775,938
-----------------
3,882,938
-----------------
Total Common Stocks - 99.0% 296,060,919
Cash and Other Assets, Less Liabilities - 1.0% 2,767,632
-----------------
Net Assets - 100% $ 298,828,551
=================
Net Asset Value Per Share
(Based on 8,931,265 shares outstanding at June 30, 1999) $ 33.46
=================
</TABLE>
*Non-income producing security.
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
ASSETS
Investment in securities at market value (original
cost $190,662,131 at June 30, 1999) (Note 1) $ 296,060,919
Cash 1,850,232
Dividends and interest receivable 177,696
Receivable for securities sold 993,067
-------------------
Total assets $ 299,081,914
===================
LIABILITIES
Accrued expenses $ 253,363
===================
NET ASSETS
Paid-in capital $ 198,169,503
Accumulated undistributed net realized loss
on sale of securities (3,340,289)
Accumulated undistributed net investment loss (1,399,451)
Net unrealized gain on investments 105,398,788
-------------------
Net assets applicable to Fund shares outstanding $ 298,828,551
===================
Fund shares outstanding 8,931,265
===================
Net Asset Value Per Share (net assets/shares
outstanding) $ 33.46
===================
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, 1999
(UNAUDITED)
INVESTMENT INCOME:
Dividends $ 932,892
Interest 39,679
Foreign taxes withheld (9,894)
-------------------
Total investment income 962,677
-------------------
EXPENSES:
Management fee (Note 3) 1,549,642
Filing fees 33,562
Printing and postage 24,953
Transfer agent fees 15,511
Custodial fees 14,202
Legal fees 12,197
Directors' attendance fees 4,200
Auditing fees 4,000
Other fees 28,272
-------------------
Total expenses 1,686,539
-------------------
Net investment loss (723,862)
-------------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Proceeds from sales of securities 67,878,597
Cost of securities sold (71,215,904)
-------------------
Net realized loss on securities sold (3,337,307)
Net change in unrealized gain on investments 14,512,159
-------------------
Net realized and unrealized gain on investments 11,174,852
-------------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 10,450,990
===================
The accompanying notes are an integral part of this financial statement.
6
<PAGE>
PAPP AMERICA-ABROAD FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, December 31,
1999 1998
------------------ ------------------
FROM OPERATIONS:
<S> <C> <C>
Net investment loss $ (723,862) $ (674,216)
Net realized (loss)/gain on securities sold (3,337,307) 417,758
Net change in unrealized gain on investments 14,512,159 65,360,302
------------------ ------------------
Increase in net assets resulting from
operations 10,450,990 65,103,844
------------------ ------------------
FROM DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income - -
Net realized gain on securities sold - (417,387)
------------------ ------------------
Decrease in net assets resulting from
distributions to shareholders - (417,387)
------------------ ------------------
FROM SHAREHOLDER TRANSACTIONS:
Proceeds from sale of shares 50,953,414 168,123,001
Net asset value of shares issued to shareholders
in reinvestment of net investment income and
net realized gain on securities sold - 374,828
Payments for redemption of shares (105,390,489) (178,618,944)
------------------ ------------------
Decrease in net assets resulting
from shareholder transactions (54,437,075) (10,121,115)
------------------ ------------------
Total (decrease)/increase in net assets (43,986,085) 54,565,342
Net assets at beginning of the period 342,814,636 288,249,294
------------------ ------------------
Net assets at end of period $ 298,828,551 $ 342,814,636
================== ==================
</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, 1999
(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.
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.
8
<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 28, 1998, a distribution was declared from net realized long-term
capital gains of approximately $.0396 a share aggregating $417,387. 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 $15,511 and $40,994 in 1999 and 1998, respectively, from the
manager for providing shareholder and transfer agent services.
The Fund's independent directors receive $1,100 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, 1999 and the year ended December 31, 1998,
investment transactions excluding short-term investments were as follows:
1999 1998
----------------- -----------------
Purchases at cost $ 13,834,788 $ 80,372,065
Sales 67,878,597 92,997,025
9
<PAGE>
(5) CAPITAL SHARE TRANSACTIONS:
At June 30, 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
---------------- -------------
Six months ended June 30, 1999
Shares issued $ 50,953,414 1,619,863
Dividends and distributions reinvested - -
Shares redeemed (105,390,489) (3,359,112)
---------------- -------------
Net decrease $ (54,437,075) (1,739,249)
================ =============
Year ended December 31, 1998
Shares issued $ 168,123,001 6,037,848
Dividends and distributions reinvested 374,828 11,761
Shares redeemed (178,618,944) (6,473,298)
---------------- -------------
Net decrease $ (10,121,115) (423,689)
================ =============
(6) UNREALIZED APPRECIATION:
Unrealized appreciation of portfolio securities for both financial statement and
federal income tax purposes is as follows:
1999 1998
---------------- -----------------
Market value $ 296,060,919 $ 338,929,906
Original cost (190,662,131) (248,043,277)
---------------- -----------------
Net unrealized appreciation $ 105,398,788 $ 90,886,629
================ =================
As of June 30, 1999, gross unrealized gains on investments in which market value
exceeded cost totaled $111,959,981 and gross unrealized losses on investments in
which cost exceeded market value totaled $6,561,193.
As of December 31, 1998, gross unrealized gains on investments in which market
value exceeded cost totaled $104,546,063 and gross unrealized losses on
investments in which cost exceeded market value totaled $13,659,434.
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
----------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
--------------- --------------- --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 32.13 $ 25.98 $ 20.11 $ 16.47 $ 12.24 $ 11.45
Income from operations:
Net investment income (loss) (0.09) (0.05) 0.01 0.01 0.04 0.10
Net realized and unrealized gain
(loss) on investments 1.42 6.24 6.00 4.48 4.52 0.79
--------------- --------------- --------------- --------------- ------------ ------------
Total from operations 1.33 6.19 6.01 4.49 4.56 0.89
Less distributions:
Dividend from net investment
Income - - (0.01) (0.01) (0.04) (0.10)
Distribution of net realized gain - (0.04) (0.13) (0.84) (0.29) -
--------------- --------------- --------------- --------------- ------------ ------------
Total distributions - (0.04) (0.14) (0.85) (0.33) (0.10)
Net asset value, end of period $ 33.46 $ 32.13 $ 25.98 $ 20.11 $ 16.47 $ 12.24
=============== =============== =============== =============== ============ ============
Total return 4.14% 23.83% 29.92% 27.65% 37.05% 7.77%
=============== =============== =============== =============== ============ ============
Ratios/Supplemental Data:
Net assets, end of period $ 298,828,551 342,814,636 $ 288,249,294 $ 29,623,497 $ 15,988,267 $11,573,197
Expenses to average net
assets (A) 1.09%* 1.08% 1.11% 1.25% 1.22% 1.25%
Investment income to
average net assets (B) 0.62%* 0.82% 1.24% 1.30% 1.50% 2.07%
Portfolio turnover rate 8.87%* 24.97% 4.71% 12.29% 26.65% 16.00%
</TABLE>
* Annualized
(A) 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%
for the year ended December 31, 1994.
(B) Computed giving effect to investment adviser's expense limitation
undertaking.
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
6225 North 24th Street, Suite 150
Phoenix, AZ 85016
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
6225 North 24th Street, Suite 150
Phoenix, AZ 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.
